Who Does This?

Why I Don't Use the Hair Dryer In the Gym - A Short Story by Kid Dynamite

Saturday afternoon I hit the gym to pound out some miles on the treadmill. I live about a half mile from the gym, so after I run, I pop into the locker room to remove my sweaty t-shirt, put my sweatshirt back on, and head home dry.

So I finish my 4 miles and walk into the locker room. There's a triple sink and counter there where I can put down my Ipod and throw on my sweatshirt, while busting out a most muscular pose in the mirror. Today, however, there's a very naked dude monopolizing the first sink. Now, I've never understood the phenomenon of people waggling their nekkid goods all over the locker room - especially at the sink. I mean, what do you do at the sink - brush your teeth, comb your hair, shave - basically, things that are very easily done with a towel wrapped around your waist. But no - this donkey was deliberately toweling off his head, shaking his junk all around, in my general direction.

I turned at a slight angle away from him, being careful to avoid the reflection trap of the side-mirror that I was now almost facing, and being even more careful not to stare into the sun (aka, his junk). Apparently not content that I refused to check out his package, this guy then proceeded to bang out a hip flexor stretch with his foot up on the sink. Naked. Way out of line.

As I grabbed my t-shirt and turned to exit, he executed the coup de grace - he grabbed the hair dryer and after giving his head a compulsory 5 second once over, he proceeded to blow dry his junk.

And THAT is why I don't use the hair dryer at the gym.

-KD

Run Bad

So I played the second part of the second installment of the PokerListings Run Good Challenge today. The bad news is that I finished last again. The good news is it only took one orbit for me to get bounced. Last week, my AcQc ran into Luckbox's 7-2 on a A-2-2 board where he'd 3-bet me preflop. This week I trapped Benjo with my AA vs his QQ - I raised preflop and smooth called his 3-bet. I check-called the 9-2-2 flop, and we got it all in when a jack peeled off on the turn. He spiked his 2 outer on the rio to send me to the rail. Effin' French.

Actually, maybe I shouldn't condemn Benjo and the French - what's really got me pissed off these days is Americans. Ignorant Americans lining up overnight to spend money they don't have - and killing people in the process. I'm assuming you've read that story about the Wal-Mart employee who was trampled by a mob of doucheballs rushing to scoop up dancing Elmo's for 30% off and dogshit Olevia LCD tv's for a few hundred bucks. Was it worth it so you could get those 300 thread count sheets for $19.99? Did that $39.99 electric razor assuage your guilt? People can't be bothered to be responsible for their own finances or to pay their own mortgage, but they'll camp out overnight at a fucking Wal-Mart to save $10 on a laser pointer pen they'll never use.

The mob actually ripped the doors off the hinges minutes before the store opened. Of course, this being America, people blame the store. Meanwhile, the store had called the cops several hours earlier, but the cops had to respond to more mobs of doucheballs at neighboring stores.

I'm still trying to figure out if this story is bullish or bearish for the retail season: is it a sign that Americans still want to spend money? Or a sign of pure desperation - that they have no money to spend, and will fight to the death to save twenty bucks? Seems like the latter to me...

-KD

More Credit!

As if to mock my claim yesterday that you can't solve a problem of excessive credit with MORE credit, the Federal Reserve today announced some new programs which aim to free up more credit!

The Fed said they'd buy up to $500B (that's BILLION) in mortgage backed securities, and $100B in direct debt from Fannie and Freddie. They also said they'd spend $200B on asset backed securities to ease credit to small businesses, student loans, auto loans and credit card loans.

As I've said many times, the housing bubble was caused by an over-availability of cheap credit, yet the Fed's solution to the problem is more of the same. In their own words:

“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally.”

Good luck with that. Hey, mortgage rates had their biggest drop ever today - I guess that means the Fed is brilliant (sarcasm). In the words of a commenter on the NY Times' article on the Fed program: "I guess I'm having a little bit of a problem understanding how more credit is going to help people who don't have jobs and owe $250,000 on a house that isn't even worth $150,000. Can someone kick me down some knowledge?"

I sent Bones this video today, with the subject line "insta-fav"

But he replied with this video, which is a tremendous take on the classic iconic 1980's A-Ha video: Take On Me. This is great stuff: The Take On Me Literal Video Version

-KD

Ponzi

Oh man. What to say... Today I'm not focused on the Citi bailout - let's talk about the FDIC "Temporary Liquidity Guarantee" program, and I welcome any insights from readers who trade the corporate bond markets.

Let's go over the quick facts of the program, which was announced Oct 14th, and which caught my attention because I read today that Goldman Sachs will be raising $2Billion under the program on Tuesday.

"Under the plan, certain newly issued senior unsecured debt issued on or before June 30, 2009, would be fully protected in the event the issuing institution subsequently fails, or its holding company files for bankruptcy. This includes promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt. Coverage would be limited to June 30, 2012, even if the maturity exceeds that date. Participants will be charged a 75-basis point fee to protect their new debt issues."

Obviously, if Goldman is issuing debt backed by the FDIC, it should have yields that are very close to corresponding treasury yields, which is a mere fraction of what Goldman would pay in the open market. In essence, the FDIC is attaching CDS protection to every bond issued by qualifying firms, and the firms themselves pay for this protection which is given to the buyer: 75 bps.

Now, this plan brings up a lot of thoughts smashing through my head: 1) This is basically what AIG did - they tried to guarantee everything that everyone brought them, which worked fine until it started to NOT work, then it unraveled quickly. 2) On the other hand, the US Government is clearly not AIG, and what they're really doing here is allowing companies to get cheap funding without (the government) having to pick up the tab for it - all they (the government) do is put their seal of approval on it, and buyers have no dis-incentive that I can think of - the debt is essentially risk free. Brilliant right? 3) But we never found out which banks are the "good banks" and which banks are the "bad banks" because we never marked all the crappy assets to market - so the government can very well end up guaranteeing the debt of companies that chug cock and will not be able to pay it back.

But anyway, let's move on to a specific example - because Eric emailed me and said "As a holder of CIT debt yielding 28%, this program makes me happy!" Eric owns CIT debt maturing in 2011, which yields in excess of 25%. Now, this debt was already outstanding, so it's not guaranteed by the FDIC. But why would CIT ever default on this debt? Even though they have billions of dollars of debt outstanding and maturing in the next few years, why would they default on any of it if they can issue new guaranteed debt? Well duh, they need to be able to sell the new debt to refinance the old debt - but why wouldn't they be able to sell new debt - IT'S GUARANTEED! What would discourage a buyer of the debt from owning it?

All I can think of is one thing, but it's a big thing - and it comes back to the central point of this whole calamitous cycle: deleveraging. There simply isn't enough capital available to be invest to continue to fund all the excess debt we've accumulated over the last ten years or so. If anyone doesn't know what "leverage" means, it's basically the principle where you can take $1 and buy more than $1 worth of stuff for it. For some companies, that means they can buy $5 worth of stuff, for some it means $10. For the Wall Street brokers, it was roughly $30. For Long Term Capital Management, it was $100.

But here's another question, and it's related to the crappy ass CIT debt: at SOME price, buyers will come in and buy short term debt backed from CIT that's backed by the FDIC right? I mean, if it yielded 20 bps over treasuries, maybe it doesn't sell... But if it yields 2% over treasuries, it does, right? Or if the number that it takes it 4%... at some price, buyers come in. Meanwhile, CIT avoids defaulting on their other debt - refinancing it with this new gift from the FDIC. Sure, they may default later, when this new debt comes due, but isn't that better for them than defaulting now? Don't they want to participate in the debt ponzi scheme and take the free roll that something turns around for them, they catch a miracle, and are able to pay off this new debt too? This is something I'd love to hear reader thoughts on. In short, why would CIT(or anyone else) ever default on debt that comes due before the end of the FDIC program's guarantee?

I called my account manager at Solomon Smith Barney (owned by Citigroup, of course) in the beginning of August. I told him, "I want my liquid assets invested such that when Citi goes bankrupt, I don't lose a dime." This meant I had to have them out of a Citi money market, out of the muni-money market they were in, and out of any sort of account that basically had any risk. So I'm in a Treasury money market fund, which yields somewhere around 50 bps probably. Is there any reason at all (apart from liquidity) why I shouldn't buy this new Goldman Sachs debt they'll issue tomorrow, which will probably yield around 3%? Apart from the fact that I can't sell the GS debt in two weeks if I so desire, I think the answer is "no."

The fact of the matter is that we, as a country, are broke. It's not just housing - it's credit cards, auto loans, corporate debt - we're all over levered, and that leverage has to come down. We can't just continue to roll over all of our old debt, because the amount of capital available in the system has shrunk and will continue to shrink as we continue to reduce our borrowing and leverage. We can't solve the problem of house prices being unaffordable by trying to prevent home prices from falling. We can't solve the problem of companies having too much debt by guaranteeing their new debt!

I'm thinking of a few different childhood game cliches as closing lines: don't get caught holding the hot potato, and don't be the one without a chair when the music stops... Someone will be left holding the bag when the ponzi scheme ends - and as usual, it looks like it will be we the taxpayers.

UPDATE: holy crap, speaking of my cliches - check out this quote I just found from July 2007 from former Citi CEO Chuck Prince:

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

Party on.

-KD

Not Feeling It

Seriously - I'm really not feeling the anger. Maybe this will hit the spot:

Nov. 17 (Bloomberg)
Four of the world's biggest life insurers may acquire small banks that regulators have cited for improper practices to improve their own chances of getting cash from the $700 billion U.S. government bailout fund. Lincoln National Corp. and Aegon NV, owner of Transamerica Corp., may buy savings and loan companies in Indiana and Maryland whose methods were found to be ``unsafe and unsound'' by the Office of Thrift Supervision. Hartford Financial Services Group Inc. is acquiring a Florida lender that was told by the OTS in May to curb lending. Genworth Financial Inc.'s target got a ``cease-and-desist'' order tied to potentially fraudulent loans....Lincoln National plans to buy Goodland, Indiana-based Newton County Loan & Savings, which has $3.83 million of deposits, according to regulatory data, and no branches. The lender posted a $404,000 loss for the quarter ended June 30, according to FDIC data. Newton was ordered to halt certain types of mortgages without written approval from the OTS. Lincoln may qualify for as much as $3 billion from the Treasury, company spokeswoman Laurel O'brien said today

Wow - That's even worse than the scam HIG pulled! Lincoln is buying a firm with NO branch offices, THREE full time employees, and under $4MM in deposits... and they'll be eligible for up to $3Billion of taxpayer money from the Treasury! Aiyahhh! I mean, I actually have to CALM MYSELF DOWN by watching POPOZAO!

In "more enjoyable reading" news, Doctor Pauly has a few good posts about the far reaching effects of the economic downtown; even hookers in Vegas are feeling the heat. ""It sucks," she said. "Business is bad. No one has money. Shit, I might have to actually get a real job." Pauly's inimitable observations and masterful dealings with the pro's are a must read. In another post, Emissaries From the Land of Indulgence, he echos a sentiment that the Big Show and I commented on out loud on our last two trips: the Vegas game is over. The bubble has burst, and there will be a lot of pain to come. Especially if Michaelski is standing near you when you're gambling.

And speaking of good news, Pauly and Michaelski, Pokerlistings will once again be hosting both of them, along with yours truly, in the second coming of the Run Good Challenge series, starting this Sunday.

KD

This Should Make You Very Mad

NEW YORK (Reuters) - Hartford Financial Services Group Inc, a property and casualty insurer beset by worries about capital levels, said on Friday it agreed to buy a small savings and loan, making it eligible to raise up to $3.4 billion from the U.S. government's bank bailout plan. An infusion may alleviate investor concerns about capital at Hartford, which suffered a $2.63 billion third-quarter loss, and last month raised $2.5 billion from German insurer Allianz SE. Shares of Hartford soared 20.9 percent on Friday, closing up $2.19 at $12.65 on the New York Stock Exchange.

Hartford said it agreed to buy Sanford, Florida-based Federal Trust Corp, which operates the 11-branch thrift Federal Trust Bank, for $10 million. The insurer said it plans to recapitalize Federal Trust, and has applied to the federal Office of Thrift Supervision to become a savings and loan holding company.

Hartford said the developments should allow it to sell $1.1 billion to $3.4 billion of preferred shares to the government under the Treasury Department's $700 billion Troubled Asset Relief Program.

"We are taking these actions as a strong and well-capitalized financial institution looking for maximum flexibility and stability," Chief Executive Ramani Ayer said in a statement.

To simplify what's happening here: Hartford Insurance, an insurance company that made a lot of bad bets, needs money. They aren't currently eligible for funds under the government's program, so they are spending $10 Million to buy a little savings and loan bank in Florida. They will then take advantage of the system, reclassify themselves as a Savings and Loan, and be eligible for up to THREE BILLION DOLLARS from the treasury's fund. Spend $10MM, file some papers, get $3B in government handouts.

Oh - by the way - Hartford isn't the only company that's trying this scam. Aegon, Genworth and Lincoln Financial also did the same thing, and last week American Express morphed into a "bank holding company," as did GE Capital and CIT group - all just to try to get their hands on the money the government is parcelling out.

This should make every American taxpayer FIGHTING mad.

-KD

"If You Love America, You Throw Money In Its Hole!"

Via WallStreetFighter: President Bush Gives Nation "The Shocker"

I love this video from the Onion - you really have to appreciate how accurate a parody it is of these multi-panelist news debate shows:

In The Know: Should The Government Stop Dumping Money Into A Giant Hole?

My favorite is definitely the black lady: "My father worked two jobs so he'd have money to put in the money hole, and HE never complained!" and "If you love America, you throw money in its hole."

If you believe that people who took out mortgages they couldn't afford should have their outstanding loan balances reduced, well, then, you like Hitler:

Finally, I actually wasted about 90 minutes with Yahoo Chat support last night while I was watching the Jets-Pats game. All I could think of the whole time was the classic "I accidentally the whole fleshlight" prank... But I really had a problem with my email attachments.

Please wait for a Yahoo! agent to respond.

You are now chatting with Julie

KidDynamite: hi julie

Julie: Hi! Welcome to our Yahoo! Mail Live Chat service. I'm glad you'vejoined us.

Julie: Thank you for providing us the details of your issue.

Julie: In my understanding, you are unable to open your attachments.

KidDynamite: yes

Julie: Is that correct?

KidDynamite: yes

Julie: I apologize for the inconvenience this might have caused you.Please be assured that I'm more than willing to assist you with your concern.

Julie: Are you getting any error message?

KidDynamite: i get an "internet explorer cannot display the webpage"

KidDynamite: if someone sends me a file (.doc, .pdf) i can't even save it to my desktop... for some reason Yahoo Mail treats it like an HTML document

Julie: Thanks for the details.

Julie: Is "KidDynamite1" the Yahoo! ID you are having issues with?

KidDynamite: yes

Julie: Thanks for the details.

Julie: Please hold while I check on your issue.

Julie: Sorry for the delay, KidDynamite.

Julie: Let us clear your browser's cache and cookies first to see if theissue will go away.Julie: I'll be glad to walk you through the steps.

KidDynamite: ok

Julie: Before we proceed, close all your windows except this chatwindow. Make sure you're signed out of your Yahoo! Mail account.

KidDynamite: ok done

Julie: Thanks. Please open a new Internet Explorer window.

KidDynamite: done

Julie: 1. Click on "Tools" at the upper right of any Internet Explorer window.

Julie: 2. Choose Internet Options from the drop down menu.

KidDynamite: yep

Julie: 3. Click on "Delete" under "Browsing History".

Julie: 4. Click on "Delete All" at the bottom, and choose "OK" ifprompted.

Julie: 5. Click the OK button at the bottom of the Internet Optionswindow.

KidDynamite: ok

KidDynamite: done

Julie: Click here to access your account.

Julie: Let me know of the results, KidDynamite.

KidDynamite: 1 sec

Julie: No worries.

KidDynamite: still have the same problem

KidDynamite: it didn't fix it

Julie: Thanks for checking.

Julie: Let us try another troubleshooting step on your account to see ifthis will work.

Julie: Let us try enabling your Java Script.

KidDynamite: ok

Julie: Are you ready with the steps now?

KidDynamite: y

Julie: 1. From the "Tools" menu, click "Internet Options."

Julie: 2. Click on the "Advanced" tab and then in the "Settings" list,scroll down to the "Security" section.

Julie: Let me know if you're done.

KidDynamite: done

Julie: 3. Select the "Allow active content to run in files on MyComputer" check box.

Julie: 4. Click "OK."

KidDynamite: ok

Julie: 5. Click "Apply."

Julie: 6. Click "OK."

KidDynamite: done

Julie: 7. Close and relaunch your Internet browser.

Julie: Click here to logged back into your account.

Julie: Let me know if you are still having the same issue.

KidDynamite: yes,. still same problem

KidDynamite: as i said, it works from my GMAIL account. so i don't think it's aproblem with my PC settings

Julie: Okay.

Julie: Please temporarily disable your anti virus and fire wall client.

Julie: For most security software products, you can right-click on the security software icon in the bottom right-hand corner of your screen,by the system clock.

Julie: This will usually pop up a menu with "Preferences" or "disable"as an option. Julie: Try to change one of those options to see if the issue goes away.

KidDynamite: i have no interest in disabling my antivirus and firewall

KidDynamite: as i've said, it works in ANOTHER email client

KidDynamite: it's a YAHOO problem

Julie: Please understand that we need to check first all your settings.

KidDynamite: i looked on Yahoo answers and it seems i'm not the only person with this problem... this can't be the first Yahoo has heard of it...

KidDynamite: julie - let's just pretend i disabled my firewall and antivirus,and it still didn't work.

KidDynamite: then what?

Julie: My apologies for that, KidDynamite.

Julie: You should check it first before we proceed with the next step.

KidDynamite: ok 1 sec

KidDynamite: turn them off and retry it?

Julie: Please try to turn off your anti virus so we could check if this caused the issue.

Julie: Yes, after turning it off, you may close and restart yourbrowser.

KidDynamite: done. (note: I didn't turn off my anti-virus - I was bluffing Julie here)

KidDynamite: checking...

Julie: Then, try accessing again your account.

KidDynamite: still doesn't work!

Julie: Hi, I'll be right with you.

Julie: Sorry to keep you waiting.

Julie: Let us proceed with the next troubleshooting step on youraccount.

KidDynamite: ok

Julie: Let us disable your Internet Add Ons and Plug Ins.

Julie: 1. Close out of all instances of the Internet Explorer internetbrowser.Julie: 2. Select "Start", "Settings", then click "Control Panel".

KidDynamite: julie - are you a real person or an automated system?

Julie: Let me know if you're finish.

Julie: I am a real person, KidDynamite.

KidDynamite: :-)

Julie: :-)

Julie: Are you done with the first two steps?

KidDynamite: yes

Julie: 3. Double-click on "Internet Options".

Julie: 4. Select the "Advanced" tab.

KidDynamite: ok

Julie: 5. Under "Browsing", remove the "Enable third-party internetbrowser extensions" check box.

Julie: 6. Relaunch the Internet Explorer internet browser.

Julie: Please access your account here.

Julie: Let me know if the issue still persists.

KidDynamite: 1 sec

Julie: No worries.

KidDynamite: yep. still have the same problem

Julie: Alright.

Julie: Thanks for checking.

Julie: To check on your issue further, I need ermission to access your account and duplicate your issue at our end.

Julie: *permission

KidDynamite: ok

Julie: Thank you, before proceeding I'd like to verify your account information so I can confirm your account ownership. We take this precaution to ensure the security of your account.

Julie: Just to verify the Yahoo! ID that you are having problem with is"KidDynamite1". Am I correct?

KidDynamite: yes

Julie: What is your Date of Birth? (mm/dd/yyyy)

KidDynamite: 01/11/1976

Julie: What is the answer to your secret question: "what kind of pet doi have?"

KidDynamite: dog

Julie: Can I have your Alternate Email Address?

KidDynamite: for what purpose?

KidDynamite: it's the only email address i have that gets no spam... so i'm reluctant to give it out

Julie: Please understand that these requirements exist only to protectthe privacy and security of your account.

KidDynamite: sorry julie, but that has nothing to do with the privacy and security of my account

Julie: Let me provide you a link where you can add an alternate email address on your account.

KidDynamite: i do'nt want to add an alternate email address

KidDynamite: lets just pretend i don't have one

Julie: Please understand that I cannot access your account and duplicateyour issue without proper verification process.

KidDynamite: i dont understand.. do you want to send me an email? or do i have an alternate address already listed on my account?

KidDynamite: if i have an alternate address on my account its:KidDynamite@alum.edu

Julie: Let me provide you the link on how you can update your account information page, KidDynamite.

Julie: Click here to update your account information.

Julie: You may access the link and add the alternate email address thatyou have provided.

KidDynamite: ok. i do not have an alternate email address to add

Julie: You may add any alternate email address.

KidDynamite: i understand

KidDynamite: no thanks

Julie: I am sorry but I cannot access your account. This is ourstandard procedure in accessing one's account and we are all required to follow this procedure.

KidDynamite: so if someone only has a yahoo email address you cannot accesstheir account!??!?!KidDynamite: i have no idea what you are talking about

KidDynamite: how will ANOTHER email address help you access my account?

Julie: In depends on the verification process, KidDynamite. I need youralternate email address because the first data that you have provideddoes not match on our record.

KidDynamite: KidDynamite@alum.edu

Julie: Please access the link and add the alternate email address onyour account information page.

Julie: Let me know if you're still there.

KidDynamite: yes i am

KidDynamite: i did not get an email

Julie: Thanks.

KidDynamite: what information that i gave you was wrong?

KidDynamite: wait.. got the email

Julie: Let me check again your account.

KidDynamite: 1 sec

KidDynamite: ok

KidDynamite: i added the email adddresss

KidDynamite: now what

KidDynamite: and please tell me how to update my security quesitons - cause i created this account a long time ago when i didn't even have a pet - so i have no idea what the answer to that question is. i have a dog now.

Julie: Let me address your issue one at a time.

KidDynamite: go for it

KidDynamite: i'm still here

Julie: Thanks.

Julie: To answer your question regarding the information you have given,our system automatically identify the answers that you have provided andto update your "security questions" let me provide you a link on how you can update it.

KidDynamite: please do

Julie: Please click here to update your "Secret Question".

Julie: For the meantime, please log out from your Yahoo! Mail before I can access it.

KidDynamite: i am out

Julie: Thank you, please give me 2-3 minutes while I access youraccount.

KidDynamite: ok. by the way, there is no way i can change my secret question if i don't even know what my current secret answer is

KidDynamite: so that's useless

KidDynamite: but anyway....

KidDynamite: you've confused me into submission...

Julie: Alright. In that case, you will have to contact our AccountVerification Team.

Julie: Let me provide you their contact details now.

KidDynamite: forget it

Julie: Please call 1-866-562-7219 for AV Department.

KidDynamite: lets just see if you can fix the email problem

Julie: Please hold while I check your issue.Julie: Could you tell me what subject of the attachments are you trying to open?

KidDynamite: can i log back in to check?

KidDynamite: re: FAMILY CHANUKAH PARTY

KidDynamite: third one down in my account

KidDynamite: from Mom Dynamite

Julie: Alright.

Julie: Let me log out first from your account.

Julie: You may check now your account.KidDynamite: i did already

KidDynamite: i told you already

KidDynamite: re: FAMILY CHANUKAH PARTY

Julie: Alright.

Julie: Thanks for the details.

KidDynamite: did you find it?

KidDynamite: can you open it?

Julie: Yes, KidDynamite.

Julie: One moment please as I further check on it.

Julie: I was able to download the attachment, KidDynamite.

KidDynamite: are you on Windows Vista?

KidDynamite: actually - i'm on a laptop now that's not running Vista - so that's not the problem

Julie: Let me try that again.

Julie: I was able to download again the attachments. Have you try downloading the attachments in another browser?

KidDynamite: nope

KidDynamite: what browser are you using?

Julie: I am using Mozilla Firefox. Let me provide you a link where you can download another browser.

KidDynamite: no thanks

KidDynamite: hold on.

KidDynamite: i have Safari

KidDynamite: trying it...

Julie: Okay.

KidDynamite: doesn't work in Safari either (i was using IE before)

KidDynamite: here is the error from Safari:KidDynamite: Safari can't open the page"http://68.142.200.12/us.f342.mail.yahoo.com/ya/securedownload?clean=0&fid=Inbox&mid=1_534017_AHqyo0IAANW%: "unknown error"(CFURLErrorDomain:302)

Julie: Thanks for trying.

Julie: But I could open your attachments here on my end.

KidDynamite: ok. i guess i'll just have to stop using yahoo

KidDynamite: are you coming to the Chanukah party?

Julie: If you will invite me, KidDynamite.

Julie: My apologies for the inconvenience.

KidDynamite: there are clearly problems julie - why don't you download IE and see if it works?

Julie: I would suggest that try accessing your Yahoo! Mail account from another computer at a different location. You should also try adifferent ISP to eliminate that as a possible factor.

Julie: I will try to open the attachments on IE browser.

Julie: Please hold for a while.

KidDynamite: ok

Julie: Thanks.

Julie: I was able to open the attachment using the IE browser.

KidDynamite: come on

KidDynamite: you're kidding

KidDynamite: what's it say?

Julie: Thank you for waiting. I'll be with you in just a moment.

Julie: I'm sorry for the delay. I'll be with you as soon as I can.

KidDynamite: i thought we were in the middle of a conversation...

Julie: Sorry to keep you waiting.

Julie: Please let me check again your issue.

KidDynamite: julie... i'm starting to think you're really a computer

Julie: I am still here.

Julie: I am still investigating your issue.

Julie: Just to verify, the attachment is a word document, right?

KidDynamite: yes

KidDynamite: what version of IE did you use?

Julie: Alright.

Julie: It says that "It's time for latkes, dreidel games, Yankee swap,time together, and more".

KidDynamite: i have IE 7.0.5730.11

KidDynamite: correct... you passed the test!

KidDynamite: i believe you are a human now...

KidDynamite: and i can't believe you were able to open the attachment

KidDynamite: jeez...

KidDynamite: so what IE version?

KidDynamite: and also, about that party - do you think it sounds like fun?

Julie: Yes, KidDynamite.

Julie: The version I am using as of now is IE 6.

KidDynamite: ok. i give up.

Julie: Yes, I think that was fun.

Julie: I am sorry for the inconvenience, KidDynamite.

KidDynamite: yeah yeah

Julie: Anything else of the moment?

KidDynamite: can you please remove the other email from my account?

KidDynamite: it will not let me delete it now

KidDynamite: it says i must have another email...

KidDynamite: which is ridiculous, because i didn't before

Julie: You will have to contact our Account Verification Team regarding that issue.

KidDynamite: oh man. you duped me

KidDynamite: you got me to add another email for no good reason!

KidDynamite: all that account does is forward to yahoo anyway

Julie: Let me provide you their contact details now.

KidDynamite: i have no interest in calling them

KidDynamite: or wasting any more time with Yahoo

Julie: Please call 1-866-562-7219 for AV Department.

KidDynamite: julie - i appreciate your help, but it's clear there are problems with yahoo email you can see it in the Yahoo questions and answers forums

Julie: My apologies for any inconvenience.

KidDynamite: it's not just me... your teams should be looking into the solution

KidDynamite: i know you guys change the versions all the time... well, my current version sucks - it doesn't work.

Julie: You may visit our Yahoo! Mail Blog site about the updates onYahoo! Mail, KidDynamite.

KidDynamite: plese forward my complaints up the yahoo technology food chain

KidDynamite: where is the yahoo mail blog?

Julie: Click here for Yahoo! Mail Blog site.

KidDynamite: do you see what it says there?

KidDynamite: the post from November 11th?

Julie: Yes, rest assured that I will take note of your issue and we willtry to investigate all the possible causes.

KidDynamite: they are already aware of the problem!!!!

KidDynamite: please make sure they know it's not fixed

Julie: I will take note of that.

Julie: Is there anything else I can help you with?

KidDynamite: nope

KidDynamite: thanks

this is my life...

-KD

Versatility

Before I explain the title of this post, I want to revisit my post from yesterday by adding Clusterstock's John Carney's lessons we've learned from the AIG bailout bailout:

"First of all, don't worry about the promises you've made to the government about dividend payments. When the going gets rough, just explain to the government that you can't afford to make them.

Second, don't worry about restrictions on bonuses. You'll be able to re-cut this deal later. Just tell the Treasury you'll lose your key people if you can't pay them well enough.

Third, don't worry about limits on dividends to shareholders. Simply claim that those restrictions are preventing you from raising necessary private capital.

Fourth, don't worry about restrictions on what you can do with the money. Don't make loans under pressure from the government. Don't sell off troubled businesses. Make acquisitions. Invest in Chinese infrastructure. These Treasury guys are spineless. They'll never stop you. What's more, government officials have no upside incentive to police you. This is basically unencumbered cash.

Fifth, there's always more money. Once the government has invested billions in your business, the marginal cost of adding additional dollars compared to the loss from your failure guarantees that you'll always be able to get more money from the government.

Congratulations to everyone on your future ability to re-cut the deal with the government. And when we say "everyone" we mean everyone except the taxpayers. You're out of luck."

Now, on to my versatility. It's not everyday you'll find a blog that offers you a link to a good detailed recap of the history of modern American finance, and also a link to the evolutionary impacts of monkey sperm. Fortunately for you, my dear readers, THIS IS THAT BLOG.

Vanity Fair's Niall Ferguson penned a long but worthwhile read that explains in fairly simple terms what led to this cycle of financial boom and bust we are currently in. Although he makes one claim I don't understand the logic behind: "If stock-market movements followed the normal-distribution, or bell, curve, like human heights, an annual drop of 10 percent or more would happen only once every 500 years, whereas in the case of the Dow Jones Industrial Average it has happened in 20 of the last 100 years," I still think that readers who are still trying to figure out what caused the current crisis will enjoy Ferguson's piece.

If you're looking for something quicker and funnier, I have the link for you. I think this is the Post of the Year, from Holy Taco, about how we've evolved from monkeys slapping their sperm in the faces of potential mates, to other forms of seduction. If it doesn't make you laugh out loud, I'm not sure why you're reading this blog.

edit: this just in: another must read post, this one from Michael Lewis, titled "The End of Wall Street." relevant quote (emphasis mine):

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

-KD

Bailout Squared

In case you missed it, today we (and by we, I mean, The Taxpayers of the United States, acting against our will) bailed out the bailout of AIG. Almost 8 weeks ago, the government bailed out AIG to the tune of $85 billion dollars. Very shortly thereafter, the Fed loaned AIG another $37.8 Billion dollars. Today it was announced that the terms of the bailout were being re-written, because they were too tough on AIG. Now, our elected officials have been telling us that we're "investing" in the future of companies, not bailing them out. When the AIG deal was announced, I actually liked it - we (the government) were charging AIG a rate of 850 bps (that's 8 1/2 percent) higher than the prevailing LIBOR rate at the time. Super - that's a fine rate of return for us, and it's very much NOT just giving AIG money.

There was only one problem - AIG can't pay back the loan at that rate - it's too high for them! So, we've extended the term of the loan from 2 years to 5 years, cut the interest rate from L+850 to L+ 300 (that's a 5 1/2 percent reduction !!!!!) and oh yeah - thrown in another $50Billion or so. It doesn't sound like so much of an investment anymore...

I'm too despondent about what's going on to rant about it, but there are a few good pieces out there: Yves Smith wrote a composed and detailed piece explaining why this newly structured bailout is complete crap. Karl Denninger wrote a little about AIG today, but I prefer the piece he wrote this weekend about the general effects of all the money our Treasury is pissing away. As I've said before, Denninger indeed rants, but his thesis is accurate and quite relevant.

I thought the most succinct analysis of the AIG change of terms was from Dealbreaker, who incorporated Darth Vader's famous quote: "I'm altering the deal - pray I don't alter it any further."

(AIG CEO) Liddy: "Paulson, take the $60 billion in 5 year LIBOR+300 bonds and $40 billion in preferred shares and put them in my account."
(Treasury Secretary) Paulson: "You said it was $85 billion in 2 year, LIBOR+850 bonds!"
Liddy: "I am altering the deal. Pray I don't alter it any further."

Oh - one more thing: the bill ($150B+) for our "investment" in AIG alone now exceeds 1% of the annual GDP (roughly $14Trillion) of the United States. Staggering. To put that another way: we are spending one penny of every dollar of every single good and service produced in the United States this year on AIG.

-KD

April Fools Day Is In April Right?

First thing this morning, I read this, emphasis mine: (thanks to Clusterstock)

Michael Alix has been named a senior vice president in the Bank Supervision Group of the Federal Reserve Bank of New York... Most recently, Mr. Alix worked for the Bear Stearns Companies, Inc., where he served as chief risk officer from 2006-2008 and global head of credit risk management from 1996-2006...

I mean, really?!?!?! I don't even know what to say, other than, THIS is why you shouldn't trust the Fed to get us out of the mess we're in... Hopefully, this hiring announcement will appear on Failblog.

Then, I saw this:

At a time when many investors are hoping for a bottom in this year's plummeting stock markets, Direxion Funds says it's ready to come out with eight new leveraged and inverse exchange-traded funds. But these ETFs won't just offer a bit more juice. They're set to become the first to offer three-times the leveraging power of their underlying benchmarks.

300% leveraged ETF's?!?!?!? Really?!?!? This is what we need to restore order and responsibility to our markets in the wake of an ORGY of leverage?!?! MORE leverage?

Anyway... I'm hearing Dean/Flair absolutely KILLED it in Troy, New York:

-KD

It Shouldn't Be That Hard To Understand

I've tried to sit down and write a post about how absolutely asinine it is to try to maintain inflated home prices - which is what our elected officials are advocating when they say "we need to keep people in their homes," or "we must stop foreclosures." Every time I tried to write the post though, I either ended up with a 10,000 word rambling diatribe, or something that was just plain angry. The concept is actually very simple, and two bloggers I read regularly hit it pretty well recently:

First, Barry Ritholtz, put it pretty simply and eloquently today (emphasis mine):

There seems to be this idea going around — both parties, both candidates, lots of economists — that the way to “fix” the economy is to stabilize home prices. This is incredibly misguided. Prices are still terribly elevated, and until they revert back to levels that are affordable and clear out the massive excess inventory of new and existing homes, there can be no stabilization. Of all the wrong lessons to take from the mortgage, housing and credit crises, this remains the very worst one. If you remotely believe in a free market — even one where players are regulated to prevent their own worst instincts from getting the best of the them — the last thing one should be doing is targeting asset prices. That is what Greenspan did throughout the 1990s and in the early 2000s, and it one of the primary causes of our present woes. Yes, you can regulate behavior; No, you cannot regulate prices.

Also, this weekend, the angry and maniacal Karl Denninger ranted on the topic:

There is no solution to this financial crisis that includes keeping home prices above parity value, which is defined as approximately three times median income vs. median home prices. NONE. Any such attempt prevents worthy potential homeowners from being able to afford to buy and keep a home. This makes it impossible for a healthy economy to be maintained, as the excessive home price pressure destroys disposable income for American Families. The result of such an intentional distortion is a demand for "bubblenomics" to prevent an all-on depression, as spending 50% or more of one's pre-tax income on housing cannot possibly work for all but the most wealthy of Americans; absent taking on more and more debt to cover the gap such a policy inevitably bankrupts all middle class and lower American families. This claptrap was precisely what led us into The Depression and now you advocate policies that would repeat these mistakes, covering your own personal culpability in creating the economic conditions that led us to this point.

Transferring such bad debt to the taxpayer does nothing; the taxpayer is the one who is already being hung by the neck as a direct consequence of the pernicious and outrageous fraud that was necessary to create the housing bubble in the first place. Transferring something from and to the same persons does nothing and America has wised up to the incessant lying you promote as "pro middle-class." The entirety of the bad debt written as a consequence of this fraud must be defaulted in order to clear the system.

The misconception that the key to resolving our problems is to maintain home prices and keep people in homes they cannot afford is an error that really shouldn't be hard to understand. The cure for a hangover is NOT more alcohol, although that's what our populist elected officials are trying to sell the people - and the problem is, the people are buying it... But the way to solve a collapsing bubble in housing prices is not to maintain the bubble in housing prices.

In light of tomorrow's election, I think it's appropriate to revisit one of my all time favorite Youtube videos, which really depicts what a proper political ticket should look like:

I'm not going to pimp one candidate or another here, but I will say I think I'm going to vote against every incumbant on my ballot.

-KD