DYKWTFIA?!?!?!

Look, Courtenay (yeah, that's really how she spells it) - the proper usage is "Do you know who the fuck I am?"

via WallStreetFighter, from TMZ:

A security guard at Caesars Palace in Las Vegas is suing the daughter of former Yahoo honcho Terry Semel for allegedly pummeling him in a drunken stupor. In a lawsuit filed yesterday in L.A. County Superior Court, Jaroslaw Jarczok claims he was working security last August at 4:00 AM at PURE Nightclub when Courtenay was "quite intoxicated due to alcohol and/or chemical or other substances." He claims she got all foul-mouthed on him. One thing led to another and he eventually handcuffed Semel, the girlfriend of Tila Tequila. That's when she allegedly struck Jarczok in the face and uttered these soon-to-be immortal words, which deserve a separate line in bold type: "Do you even know who I am, fucking idiot?...Google me, you dumb fuck."Jarczok says he's been humiliated and "anxious about receiving harassing comments by friends..." He wants unspecified damages.

Now, in case you're missing the ultimate irony, Courtenay's dad used to run Yahoo...

-KD

Let's Not Mince Words

I wanted to clarify one thing: some of the talking heads on TV keep saying that we (and by we, I mean, the US Taxpayer, under the influence of the US Government) are investing in the banks, not bailing them out. It's very easy to see that this is a completely ludicrous claim.

Several weeks ago, I posted about Greg Mankiw's plan of having the government invest alongside private investors. "This plan would solve the three problems. 1) The private sector rather than the government would weed out the zombie firms. 2) The private sector rather than the government would set the price. And 3) the private sector rather than the government would exercise corporate control." Of course, Paulson et all got it completely backwards, by setting the price themselves, and encouraging the investment of private capital alongside his investment! Why haven't we seen any private capital investing alongside the government? Cause they got a horrendous deal!

Let's get to the numbers: When Warren Buffett invested in Goldman Sachs, before the government bailout, he struck a deal where he bought preferred stock that paid a 10% dividend, and also received warrants (options) to buy stock equal to 100% of his investment. It was a nice return for Buffett. However, when the Treasury bailed out the banks, they got preferred stock that paid a 5% dividend, and warrants to buy stock equal to 15% of their investment. Thus, we clearly failed in point #2 above: Buffett set a price for us, and we still managed to "invest" at a price that offers a fraction of the return as the market rate he set. That's a bailout, not an investment, pure and simple.

Just this morning, Barclays, the second largest bank in the United Kingdom, announced that they'd received a major investment from a group of investors from the Middle East. Barclays will pay a 14% dividend on the preferred stock they are issuing as part of the deal! The investor group also received warrants to buy more stock.

We're also starting to see problems related to point #3 above: the government bought non-voting shares, yet they think they have a say in how to run the companies! This is especially problematic because the government blundered when it tried to bailout the banking system and the stock market at the same time: instead of standing ready to take over firms that had dire liquidity issues, (as they did with FNM, FRE, AIG) the government tried to maintain stock values by NOT diluting common stock holders. They also didn't want to spook the investors in the banks by having government capital injections be a sign that the banks were in trouble, so they foisted the money on a wide swath of the major banks - such that no bank could decline the capital.

I don't think it's a great secret that I'm a free market capitalist. I'm not wholly opposed to regulation or government intervention, but I am strenuously against trying to have it both ways. If the government wants to legislate the policies of what the banks do with the money they receive, then they should buy the common equity of the banks and use the votes that come with such stock. Privatize the business and have the government run them. Otherwise, Barney Frank should keep his thoughts about compensation to himself, and Henry Waxman's oversight committee has no business commenting on or questioning the compensation structures of the big banks.

Now, on to Halloween: a shout out to the commenter who correctly guesses which costume I will see the highest frequency of tonight in NYC:

Male costumes: Pimp, G.W. Bush, Michael Phelps, out of work Wall Street employee

Female costumes: slutty nurse, slutty cop, slutty firewoman, slutty catwoman, slut

-KD

It Would Be Funny If It Wasn't True

Cartoon by Michael Ramirez, via Barry Ritholtz

STFU Barney Frank!

Barney Frank, today, called for a moratorium on all Wall Stret bonuses:

"There should be a moratorium on bonuses,'' Frank, a Massachusetts Democrat, told reporters yesterday in Washington. "They have a negative incentive effect because they are the ones that say if you take a risk and it pays off you get a big bonus,'' and if it causes losses "you don't lose anything.'' The halt on bonus payments should last "until they can get a better structure without that perverse incentive,'' he added. - Bloomberg.com

Seriously, Barney - shut the fuck up. Leave the asinine liberal populist pandering bullshit to ignoramuses like Pelosi - I thought you, sir, were smarter than this.

Let's start with the "perverse incentive" - is anyone suggesting that we should put a halt on Congressional pay, since Congress clearly has absolutely no clue what it is doing in its efforts to solve this financial crisis? Instead of acting in the best long term interests of our country, Congress is acting under the perverse incentive of pandering to constituents to get re-elected, by preaching things like "we must keep people in their homes," which is in stark contrast to the truth, which is "we should look for alternative housing options for people who cannot and never could afford their homes."

Barney - don't forget that if it weren't for all the perverse incentive risk taking on Wall Street over the last 5 years, America wouldn't have found the easy credit that allowed the constituents you tirelessly pander to to afford these homes they never could have afforded! They were allowed, thanks to the greedy bastards on Wall Street, to obtain mortgages they never should have obtained! Wall Street's ignorance of the actual risks allowed your poor ignorant constituents to bury themselves under mountains of debt - that's really the problem we have, don't forget - that people can't afford their homes. I still don't understand why your Populist Pandering Posse can't grasp this concept: that people who took out loans they couldn't afford bear (significant) responsibility as well!

This scenario has nothing to do with some risk-hungry Wall Street trader losing money. And on that note: this case is nothing like some cases in the past where individual traders lost billions of dollars by making wild bets doomed to fail - this is a case of street-wide failure to assess risk. Again, we don't need to go through the blame game - there are a number of parties at fault - to quote myself:

"The people who took out imprudent loans, the banks who made imprudent loans, the Government Sponsored Entities who guaranteed the imprudent loans, the conservative politicians who pushed for deregulation and figured the free markets would work on their own, the liberal politicians who pushed for the unreasonable goal of home ownership for everyone and exacerbated the debt problem (and who continue to suggest more debt as the solution), the ratings agencies who completely failed in their risk assessments, the people who bought the derivatives instruments and used extreme leverage to create a systematic risk to our country, and finally, the SEC - who first increased the maximum leverage allowed (At the behest of current Secretary of the Treasury Paulson, who was then at Goldman Sachs) and then failed miserably in its oversight roll and was probably most charged with preventing such abuses."

The point is - this meltdown was very much NOT caused by a handful of gung ho traders who threw all risk considerations out the window in search of big paydays - it was caused by a systematic mis-evaluation of risk and ease of credit.

Now, back to the issue - I no longer work on Wall Street, but I can shed a little bit of light on why Frank is off base here. First off, I spent many years on the sell side of a large bank. The sell side consists of multiple segments, like investment banking, sales & trading, research, etc. One reason people don't take absurd risks when they are trading on the sell side is that most sell side Wall Street trading desks get DISCRETIONARY bonuses, not QUANTITATIVE bonuses. That means that when my desk makes $500MM, I may make slightly more than if my desk makes $100MM, but no where near a multiple of 5, and probably much less than a multiple of two. Instead, the money gets spread around to pad the compensation of the other bank employees who may not have had such banner years.

After my time on the sell side, I also spent a few years on the buy side. This means I was working for a group whose job it was to take money (in my case, it was the bank's money), trade it, and make more money. I still didn't have a quantitative payout, but my group's net compensation was a quantitative pool based on how much money we made. Did we just throw caution to the wind and punt around massively risky trades? Of course not. Why? Because we wanted to be there for a while! It's absolutely true that we could have undertaken trading strategies which had higher risks: higher possibilities of large gains, and higher possibilities of large losses, and that if we had sustained the large losses we would NOT have had to repay them. We would have, however, lost our jobs, and our right to try to make annuity type income streams taking moderate, calculated risks. In addition, it would have been impossible for me to take risks which sunk my bank, let alone Wall Street and the U.S. financial system as a whole - because we, like all banks, had stringent risk controls in place. There are teams of people who looked at our positions on a daily basis, and questioned us if concentrations or risks appeared to be getting above their thresholds.

What really went wrong in the current collapse is not that one trader took a crazy bet that blew up the Street - it's that HUNDREDS of traders all had similar positions on, based on new innovation of products that capitalized on cheap money and underestimated risk assessment, and they all hit their six-sigma loss scenarios at the same time. A glut of new and innovative products where the risks could not be easily calculated in the distribution tail scenarios resulted in losses that people thought could only happen once every 1000 years. In reality, they seem to happen every ten years (LTCM, 1998). Maybe that's because the government bailout of LTCM didn't make the problem go away, it just buried it for a while! That's a discusssion for another day...

Also unfortunate for Barney Frank and the government is that in their infinite wisdom, they decided to try to prop up the stock market at the same time they were trying to help the financial system (and PLEASE - note that those two are very different things) - and instead of taking common equity voting stakes in the banks, they bought preferred equity with no votes (and a relatively crappy dividend to boot!) - so shut the fuck up! If you'd came in and given the banks the same kind of assistance you offered FNM, FRE, and AIG - which resulted in controlling interest in those firms, you'd have a big say in the compensation structures they employ. Instead, the government erroneously attempted to halt the stock slide and the credit slide at the same time - and resulted in cutting themselves a crappy deal.

Barney Frank - use your brain to educate your fellow congressmen, who, sadly, are much more ignorant than you in the ways of finance. Don't blame America's problems on the compensation of the Wall Street aristocrats - point out that the constituents you are pandering to are a huge part of the problem, and stop sugarcoating the issue that the root of the problem is their inability to pay - not Wall Street's excessive pay. The root of the problem is that people can't pay their mortgages - not that some idiot gave them mortgages. And please, whatever you do - don't subsidize the people who can't pay their mortgages by reducing their outstanding mortgage debt. If you don't allow home prices to come to a natural level, the problem won't go away. Restructure interest rates if you have to - take people out of their 5/1 ARMs and put them in 30 year 5.5% loans - but don't do something crazy like reducing the mortgages to 85% of the reduced mark to market home value. That's a horrible socialist solution that rewards imprudence and prolongs the house of cards.

-KD

Signs You're Not Ready

So I've been away from the poker tables for almost 7 full weeks now. I'm slightly bored, and have been considering making a triumphant return soon, perhaps next week. Then, last night, this happens:

5-5 NLHE, I have $500.

I open for $35 with AK and get called by an orthodox Jew and an Asian guy.

flop: A-6-3

I bet $75, they both call

turn: K. I push - overbetting the pot. They both call! (Ignore the fact that this is almost certainly a terrible push)

rio: 4.

Orthodox Jew turns over K-3, and the Asian tables 5-2 for a straight (GUTTER)! I went absolutely BALLISTIC - and at this point, I realized the Asian was none other than Chau Giang!!! He just sat there sheepishly as I ranted at him furiously. A few seconds later, I woke up, heart racing. It was just a nightmare... phew...

On the one hand, I'm thinking I'm totally fucked in the head if I'm having nightmares about Chau Giang spiking gutshots on me, on the other hand, if this is the extent of my nightmares, I guess I shouldn't complain right?

-KD

Say Hi to Your Mother For Me

So last week Saturday Night Live had a hilarious skit of Andy Samberg doing a totally random imitation of Mark Wahlberg. SnL's video embedding sucks, so watch it here.

This week, they had Mark Wahlberg himself come by and terrorize Samberg in another instant classic. Watch it here.

-KD

Vegas Indian Summer 2008 - No City For Old Men - Part III

You thought a little financial crisis would prevent me from writing the final piece of my trip report? Au contraire. You can delay and distract Kid Dynamite, but you cannot silence him. Where were we? Oh yeah - part ONE and part TWO - read them if you haven't already.

Wednesday: Big Show and I woke up and hit the sports book, so I could grab the daily racing forms and use my patented "handicap by name" method to find a winning horse. We walked across the street to Chipotle, where Big Show attempted the Guac Freeroll and failed. We settled down at a table, and I scanned the sheets.

"Hot and Swampy?" I offered out loud.

"Sounds like my pants," Big Show replied quickly, and I crossed that horse off the list.

Unable to find any jackpot ponies, we cruised over to the Palazzo, to dominate their double deck blackjack game outside the high limit salon. We crushed the game for a few hours, and then some interlopers came to crash our party. I quickly called an audible, picking up my chips without hesitation, and headed into the Salon to dominate some Baccarat and rip up some cards.

Our dealer was a young punk who chided us as clearly being poker players who just wanted to play baccarat to rip up the cards. "Nice read," I told him, and proceeded to school the Palazzo in my advanced baccarat charting abilities. The dealer told us we could do anything but rip the cards, and we quickly challenged him by ripping up the cards, which tilted him minorly DYKWTFIA?!?!

For some reason, I kept trying to be a mean reversion guy: I was betting on the Bank, figuring, the banks had to make a comeback sooner or later - they've been getting killed in the press lately. As this strategy seemed to be failing, Big Show finally asked me, "Why BANK? Banks SUCK! We need to get on the Player!" We made the momentum switch and took the baccarat table for a solid ten units in a quarter of a shoe before we were joined by a veteran griseled old Asian lady. Now, in baccarat, whomever has the largest wager on each side (bank, player) gets to handle (read: shred) the cards for that hand. Thus, Big Show and I prefer to play alone, so that we don't need to get into a bigger dick contest with the other people at the table - all we want to do is rip up the cards. Before this lady's ass even hit her chair, I had signaled to Big Show that it was time to jump ship, and we returned to our now vacant double deck BJ table 10 yards away.

"Do you need our players cards?" I asked the pit boss, but he shook his head. "HKWTFWA (he knows who the fuck we are!)" I told Big Show, who agreed that we were on the map. After pounding the double deck game for another stack of green chips, we hit the Pai Gow table, where we encountered an interesting subject: this girl, if it had been night time, would have been 100% hooker. She was alone at the table, dressed nicely, with well done makeup. I was thrown off because it was around noon on a Wednesday, and I didn't see the hooker angle making sense. She claimed she was in marketing, which of course resulted in me leaning over to whisper to Big Show, "porn," even as she was still explaining her "job."

"You play a lot of Pai Gow?" I asked, to which she responded that she did indeed.

"So you're a pro, eh?" I continued, trying not to giggle. She thought I was still talking about Pai Gow, but Big Show was choking on a laugh, knowing what I meant.

We got felted at the Pai Gow table, and Big Show wanted to throw some dice, so after he sevened out quickly, I decided to dominate the table with my dice control skills. Unfortunately, I was betting like a pussy, and despite the fact that I rolled for almost 40 minutes, I ended up about $60. Everyone else at the table loved it though, including Big Show, who cashed almost $300 from my roll, off of $10 bets with odds.

I went over to talk to Casino Credit about a dinner comp, and she wrote us up two comps for Wolfgang Puck's Postrio. I was all psyched until we actually go to Postrio, and I realized that I'd been there previously, and didn't really like it. Anyway - we were sweating a 3-team parlay throughout dinner, with updates on Big Show's Iphone, and right as we finished, our third leg was locked up, eliciting a loud "YES!" and a high five from the two of us, which turned some heads on the Postrio patio.

After dinner we were in a groove at the Palazzo, again crushing the double deck blackjack game, when suddenly an interloper sat down mid-shoe and put the mother of all kaibashes on us. I dropped 15 units in 3 hands, and was on bajungi tilt. The interloper had the sense to apologize at least, but I gave him the cold shoulder, and colored up to walk away. We cashed our big parlay ticket at the sports book, and then Big Show wanted to take on the Venetian's double deck game. I opted to hit the poker room again, and found a quick seat in the Omaha hi-low game.

It was now around 1am, and I enjoyed a tableside massage in the poker room, as I tried to tilt the guy 4 seats to my left who was next on the massage list by extending the massage. One hand, I limped in EP with 4-6-9-9, and apologized to the table as I did; "I apologize in advance for this beat I'm about to put on someone."

I managed to flop an over-full when the flop came 5-5-9. I led out, and some doucheball who clearly had a 5 raised me. I three bet, and he called. An 8 came on the turn, and I led out again. He raised me again, and I three bet. He called, and the dealer said "should I leave the bets in front of you?"

"No, I'm going to scoop this pot - you can pull them in," I told him, and he responded by painting a 5 on the river. I laughed, and check-called a bet, where I was shown the case 5 of course, and no low draw. My opponent was drawing dead to one out in Omaha 8 - that's a tough spot to get yourself into.

I grinded it out for another hour or so, before venturing back to the pit to check on Big Show, who was treading water. I borrowed his Iphone, and standing behind his chair, managed to log in to check-in for my flight home later that morning, and upgrade to first class. I marveled at how I could stand there on the Venetian's gambling floor, drunk, at 2:30 in the morning, and secure a first class upgrade on a touch screen phone - yeah technology!

Shortly thereafter, I decided to pack it in, and Big Show returned shortly after, having come back from the abyss to secure a small win.

Thursday morning we pounded out a Grand Luxe comp for breakfast, and Big Show had to leave right after that to catch his flight. I checked my bag with the bell desk, and went to lounge in a shady spot at the Mirage pool for a few hours. Right before I left to catch my flight, Chops stopped by to drop off a vintage WickedChops t-shirt for me, which made me the envy of all the chooches arriving for the weekend.

I thanked Chops and hopped in a cab, telling him "The Airport - and don't even think about taking the highway." "No sir, never," he replied, and I made it to McCarran and eventually home to JFK without further incident. I arrived home early in the morning, and collapsed into bed, dreaming of the next trip to the desert.

-KD

Bazooka?

I've been waiting for an applicable time to use my favorite quote from Gone Baby Gone, and now I think I've found it... First, the quote:

"You fat, busted cunt. You put a gun on me you better use it." - Bubba

You can see the well delivered line at 3:05 of this clip:



So how is this relevant? Well, I'm hammering Hank Paulson with this quote right now. No more talking about how "if people know you have a bazooka in your pocket you won't have to use it," and how you and the rest of the G7 will "use all available tools" and "take all necessary steps," to quell the issues in the financial system.

No more talking. Do it. You put a gun on me you better use it.

Speaking of talking - 1-2Knockout has a tremendous post, which is really just a reprint of a very accurate satirical rant from the Wall Street Journal. A taste:

And now, America, we introduce the Great Obama! The world's most gifted political magician! A thing of wonder. A thing of awe. Just watch him defy politics, economics, even gravity!...For his next trick, the Great Obama will jumpstart the economy, and he'll do it by raising taxes on the very businesses that are today adrift in a financial tsunami! That will include all those among the top 1% of taxpayers who are in fact small-business owners, and the nation's biggest employers who currently pay some of the highest corporate tax rates in the developed world. Mr. Obama will, with a flick of his fingers, show them how to create more jobs with less money. It's simple, really. He has a wand.

It's definitely worth a read.

-KD

She's Goin' DOWN Captain!

Well, my previous post predicting Dow 9000 no later than year end was way way off... It only took 3 days. Unfortunately, I'm a terrible trader and still reeling from the fact that I puked my short position of a lifetime at the interim top after the government changed the rules back on September 18th - so I never re-initiated my short position - but I've been lightening up my equity exposure all the way down.

Everyone seems to be expecting a capitulation rally of massive size and scope - and every day where the rally doesn't happen is exceedingly more of a bearish indicator. Like yesterday - when the Fed and Europe emptied their holster with one of their last bullets: a coordinated rate cut: and the rally fizzled quickly. Then today - CNBC anchors were high-fiving when the Dow was up 150 points this morning- REALLY!??!?! The Dow sells off 2000 points in a week and you think a 150 point rally signifies a cessation of fear? Good luck with that. Anyway, let's get to the real commentary:

-Greg Mankiw has a very good idea about how the Treasury could go about injecting capital directly into banks and financial institutions that would prevent conflict of interest (like Paulson giving all the money to Goldman while he let Lehman die) and lessen moral hazard:

The government can stand ready to be a silent partner to future Warren Buffetts.It could work as follows: Whenever any financial institution attracts new private capital in an arms-length transaction, it can access an equal amount of public capital. The taxpayer would get the same terms as the private investor. The only difference is that government’s shares would be nonvoting until the government sold the shares at a later date.This plan would solve the three problems. The private sector rather than the government would weed out the zombie firms. The private sector rather than the government would set the price. And the private sector rather than the government would exercise corporate control.Why would an under capitalized financial firm take advantage of this offer? Because it would need to raise only half as much capital from private sources, that financing should be easier to come by. With Warren Buffetts in scarce supply, the government can in effect replicate them, by pigging backing on what they do.

Mankiw is a professor at Harvard, so there is even a chance that the doucheballs in Washington might listen to his suggestion.

-The Gothamist has a must see picture of the Wall Street Bull's blue balls, titles "Wall Street Really Needs Relief."

-On Paul Kedrosky's blog I found the video below which does a pretty good job explaining exactly what went wrong with CDO's (Collateralized Debt Obligations)


Crisis explainer: Uncorking CDOs from Marketplace on Vimeo.

-How can anyone say our economy is fucked when the VIP Club is launching a $1,000 lap dance?

“Since the market has been going down, our business has been going up — it’s unbelievable,” said Sam Zherka, the owner of the V.I.P. Club in Chelsea, who estimates that about 80 percent of his clients are Wall Street types...A lot of guys are losing their shirts in the market, and they are coming in droves.” Business is up around 20 percent, he estimated. “We’re an upscale gentleman’s club,” he said disdainfully.

In a moment of shrewd business, perhaps, Mr. Zherka and the club decided to introduce a premium product: the $1,000 lap dance package. The package will buy a 20-minute lap dance, a bottle of Dom Pérignon and a private Champagne room. Not to mention, as Mr. Zherka did, they also “get to keep the girl’s G-strings.”

Keep the G-string... ugggh... I mean, what would you do with it? Use it as an eyepatch for a Halloween costume? Give it to your cat as a treat? Sorry - I just threw up in my mouth. It reminds me of an old axiom a former colleague of mine had: "If it smells like nova, turn her over."

-The NY Times also had a big piece on former Fed chairman Alan Greenspan. Greenspan was a free-markets believer who stuck to the basic tenet that the market would be self regulating - that the BUYERS of all these fancy products Wall Street created wouldn't be buying them unless they were worth the risk. He was flat out wrong about that. His policy of easy money supply in the wake of the collapse of the internet bubble replaced a relatively benign (outside of the stock market) internet stock boom and bust with a far from benign housing bubble of massive proportions. The problem is, when People bought AOL at $250/share and lost 90% of their money, they realized that there was nothing they could do. On the other hand, now, when people are down 30% on a house they bought with 5% down or less because someone gave them a loan which they never should have received - well, now they somehow feel that they are owed something by the System. I think I've already made it clear where I stand on that.

But please, Obama - please stop blaming the Bush Administration for the problems. They would have happened regardless of who was president, and there are a variety of people we can blame: The people who took out imprudent loans, the banks who made imprudent loans, the Government Sponsored Entities who guaranteed the imprudent loans, the conservative politicians who pushed for deregulation and figured the free markets would work on their own, the liberal politicians who pushed for the unreasonable goal of home ownership for everyone and exacerbated the debt problem (and who continue to suggest more debt as the solution), the ratings agencies who completely failed in their risk assessments, the people who bought the derivatives instruments and used extreme leverage to create a systematic risk to our country, and finally, the SEC - who first increased the maximum leverage allowed (At the behest of current Secretary of the Treasury Paulson, who was then at Goldman Sachs) and then failed miserably in its oversight roll and was probably most charged with preventing such abuses. So anyway, Barack - just say we have a problem - don't blame Bush... That's so Pelosian.

-I was talking with a friend of mine who is very in tune with the markets 2 weeks ago and she asked me, "When do you think gold and S&P will cross?" "A thousand," I replied quickly - the S&P was at roughly 1200 at the time, and gold was around 870. "Yeah - I have around 900 as the level," she replied, and BOOM - today it happened - gold crossed over the S&P 500 at roughly the 910 level. Barry Ritholtz also wrote about this tonight.

-Finally, commenter "The Bartender," who is an inside member of the Dynamite family, suggested the video below, which we had all gathered to laugh about last December at Holiday time. Seems like the US Peso could be next...






Enjoy the ride.
-KD

Contrary Indicator

My most loyal reader, Bones, emailed me this morning before the market opened, with the subject line, "I expected it sooner." The email read: Had the first (of presumably many) Hank Paulson dream last night. I think we're going to make it! Bones' hope is that if it's at the point where he's dreaming of Sweet Hank Paulson's shiny bald head, we must be near a bottom in the market.

I personally think you should hold on to your Dow 10,000 hat, and get out the Dow 9,000 hat. We'll see Dow 9k before year end (maybe before the end of this week - or the end of today!)

I look for a coordinated (US, EU) central bank emergency rate cut this week, but I'm not sure what it will do, other than provide a brief 3% rally.

While running this morning, I was listening to the dulcet tones of the Smashing Pumpkins, and their lyrics kept resonating in my head with regard to the economic situation:

first, from Bullet with Butterfly Wings:

"And what do I get, for my pain? Betrayed desires, and a piece of the game... Despite all my rage I am still just a rat in a cage. Someone will say what is lost can never be saved."

and then, from Cherub Rock, the uber-simple:

"Who wants honey, as long as there's some money?"

Indeed. Turn on the printing press!

-KD

Outrage and Accountability

It's important to understand that my present state, which is about 3 levels beyond bajungi tilt - steaming in some sort of state bordering on homicidal, really has nothing to do with the philosophy behind the Wall Street Bailout Bill. What's got me fired up is the solution methodology that the Senate came up with yesterday in their version of the bill, after the House rejected it on Monday. I feel betrayed, lied to, and completely without confidence in our legislative system.

Although there are some small improvements in the Senate's bill, like increasing the FDIC insurance for bank deposits from $100,000 to $250,000, there are a total of 451 pages of crap (commonly referred to as PORK) in the bill - roughly 300 MORE pages than the House bill had.

Instead of working to address the reasons why members of the House may not have favored the bill, the Senate instead focused on special interests insertions (wow - that sounds like a category in an adult video store) that would pacify legislators who had been opposed to the bill. The American people should be aware of the "improvements" that were made to this bill, which was described as "urgent," "essential" and "necessary to the survival of our economy."

Dealbreaker did a great job chronicling one of the most outlandish items in the bill:
SEC. 503. EXEMPTION FROM EXCISE TAX FOR CERTAIN WOODEN ARROWS DESIGNED FOR USE BY CHILDREN. (a) IN GENERAL.—Paragraph (2) of section 4161(b) is amended by redesignating subparagraph (B) paragraph (C) and by inserting after subparagraph (A) the following new subparagraph: ‘‘(B) EXEMPTION FOR CERTAIN WOODEN ARROW SHAFTS.—Subparagraph (A) shall not apply to any shaft consisting of all natural wood with no laminations or artificial means of enhancing the spine of such shaft (whether sold separately or incorporated as part of a finished or unfinished product) of a type used in the manufacture of any arrow which after its assembly—‘‘(i) measures 5⁄16 of an inch or less in diameter, and ‘‘(ii) is not suitable for use with a bow described in paragraph (1)(A).’’

THAT is what your Senate deemed crucial to include in the EMERGENCY bailout bill upon which the future of our nation's economic system depends (according to the bureaucrats). If you make small wooden arrows for use by children, you get a tax break under this EMERGENCY FINANCIAL BAILOUT BILL. Our senate even took the time to carefully legislate the exact diameter necessary for a wooden arrow shaft to qualify for this tax break extension. This is what we're paying for.

But wait, there's more... Just look at some of the other items in "Division B" of the bill, addressing clean energy:

Sec. 113. Temporary increase in coal excise tax; funding of Black Lung Disability Trust Fund.

Sec. 115. Tax credit for carbon dioxide sequestration.

Sec. 201. Inclusion of cellulosic biofuel in bonus depreciation for biomass ethanol plant property.

Sec. 211. Transportation fringe benefit to bicycle commuters.

Sec. 306. Accelerated recovery period for depreciation of smart meters and smart grid systems.

Then there's Division C - which deals with taxes:

Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico and the Virgin Islands.

Sec. 309. Extension of economic development credit for American Samoa.
Sec. 310. Extension of mine rescue team training credit.
Sec. 311. Extension of election to expense advanced mine safety equipment.
Sec. 312. Deduction allowable with respect to income attributable to domestic production activities in Puerto Rico.
Sec. 313. Qualified zone academy bonds.
Sec. 314. Indian employment credit.
Sec. 315. Accelerated depreciation for business property on Indian reservations.
Sec. 316. Railroad track maintenance.
Sec. 317. Seven-year cost recovery period for motorsports racing track facility.

Sec. 323. Enhanced charitable deductions for contributions of food inventory.
Sec. 324. Extension of enhanced charitable deduction for contributions of book inventory.
Sec. 325. Extension and modification of duty suspension on wool products; wool research fund; wool duty refunds.

Sec. 502. Provisions related to film and television productions.
Sec. 503. Exemption from excise tax for certain wooden arrows designed for use by children.
Sec. 504. Income averaging for amounts received in connection with the ExxonValdez litigation.

The New York Post quantified some of the effects of the above tax breaks in a front page article today:

* Manufacturers of kids' wooden arrows - $6 million.
* Puerto Rican and Virgin Islands rum producers - $192 million.
* Auto-racing tracks - $128 million.
* Corporations operating in American Samoa - $33 million.
* Small- to medium-budget film and television productions - $10 million.

The Post also shed some light as to why Division C, Section 504 relating to the Exxon Valdez has any realm of relevance here, in this bill which is supposed to address the urgent situation with our over-leveraged banking system:

"Another measure inserted into the bill appears to be a bald-faced bid aimed at winning the support of Rep. Don Young (R-Alaska), who voted against the original version when it went down in flames in the House on Monday. That provision - a $223 million package of tax benefits for fishermen and others whose livelihoods suffered as a result of the 1989 Exxon Valdez oil spill - has been the subject of fervent lobbying by Alaska's congressional delegation."

If that's not the definition of pure political bribery, I don't know what is. It's criminal, and we should hold our elected officials accountable. I have little doubt that this bill will pass the House vote tomorrow - and the great thing is that we will be able to see exactly which congressmen changed their vote.

We'll be able to see exactly which congressmen thought that alternative energy items and tax break extensions for the producers of wooden arrows, for the production of Puerto Rican rum, for race tracks, and for wool research (WOOL RESEARCH! I only wish I could make this up) were the key to a successful bill that will help save our banking system from doom.

The American people are having the wool pulled over their eyes by bureaucrats who have no clue, and who are passing hundreds of pages of irrelevant legislation in this time when, by the government's own admission, we need an urgent emergency relief plan to address the issues.

Hey Senator McCain - I'm a registered Republican, but if there's one thing I hate more than liberals, it's hypocrites. What happened to all that rhetoric about how when you became president you'd veto every bill that came across your desk with a single item of pork barrel spending in it? Is that vow null and void if there's something else you want that's in the bill? Perhaps I misunderstood when I just re-checked your own website and found the statement: "John McCain will veto every pork-laden spending bill and make their authors famous." Please sir, do explain.

At least the next generation should have plenty of wooden arrows to play with.

outraged,

KD

Happy New Year!

Yeah, Oscar loves the Jewish holidays.