Citi's SEC Fine - You Should be Perturbed By This

Something has been bugging me today about Citi's recent fine and settlement with the SEC.  From the NY Times:

"Citigroup agreed on Thursday to pay $75 million to settle federal claims that it failed to disclose vast holdings of subprime mortgage investments that were deteriorating during the financial crisis and ultimately crippled the bank."

What exactly did Citi do?  

"According to the S.E.C. complaint, the bank made a series of disclosures to investors during the summer of 2007 suggesting it had roughly $13 billion of exposure to subprime mortgage-related assets that were losing value. But Citigroup excluded roughly $43 billion of exposure to similar assets that bank officials deemed ultrasafe. Instead, they turned out to be among the most problematic investments on Citigroup’s books. 

Citigroup did not disclose the position until early November 2007, after a downgrade of those securities by the major credit ratings agencies in mid-October."

For those out there in the cheap seats, Citi erroneously thought that $43B of subprime related super senior CDO tranches were "money good," as they say, and thus didn't disclose the details of the exposure to shareholders,  and ended up losing more than THIRTY BILLION dollars on the positions.

So, what's bugging me is how this compares to the Goldman case.  At first, the answer seems somewhat obvious - while Goldman was guilty of misleading investors, Citi was guilty of ignorance of risk, which led them to mislead their shareholders.   Said differently, stupidity isn't a crime.  The NY Times puts it thusly:

"This month, Goldman Sachs agreed to pay $550 million in a settlement over the S.E.C.’s claims that the bank misled investors in a complex mortgage deal. The Citigroup settlement differs from that, because the S.E.C. is basically asserting that Citigroup misled its own shareholders, whereas it said Goldman misled its customers. And unlike Goldman Sachs, Citigroup resolved fraud accusations that it acted negligently without acknowledging it made a mistake."

Now wait just a second... It's ok to mislead your shareholders, I guess, as long as you're doing it out of gross incompetence,  (CUE SACASM FONT)  see as long as your screwup is due to incompetence, it means you probably weren't acting deviously, as Goldman appeared to be.  

It also doesn't matter that Goldman's customers positively should have been able to do the work to see the facts, while Citi's shareholders almost positively were largely NOT equipped to do the work to see the facts (although I'm not making excuses for them!)

But wait another second, the Times gives us more info:

"The evidence in the case centers on the preparation of an unusual announcement Citigroup prepared for investors in the fall of 2007, warning of a lower earnings outlook for the quarter as markets were deteriorating. 

The bank’s executives decided to record an audio announcement about the change, according to the complaint. In preparation, Mr. Tildesley and other staff members reviewed a script over e-mail. An investment bank officer then raised concerns that the script mentioned only a $13 billion position that was considered vulnerable and did not give investors a clear picture of the bank’s total subprime exposure, the complaint said. 

The officer subsequently suggested removing a discussion about the highest-rated portion of the subprime assets, a $43 billion position that had not been previously disclosed to investors, to avoid investors’ questions about them, according to the complaint. 

The commission said that Mr. Tildesley “took no action” on that matter, resulting in a script that only characterized the larger exposure but did not quantify it. Mr. Crittenden, who had not participated in the e-mail exchange, made a recording using that script, and it was distributed to investors on Oct. 1."

They removed a discussion about the bulk of the assets to avoid questions about them?!?  And Citi gets off light here?!?

To review:  Citi was 1) at best, grossly incompetent in their ability to diagnose the risk of their assets but in ADDITION, 2) also tried to cover up the positions (implying that they knew they weren't riskless!).  And they get slapped with a $75mm fine!!!

Strangely, the public is much angrier about the Goldman Sachs case, which blows my mind, because while Goldman was busy non-disclosing data points to sophisticated big boys, Citi was busy non-disclosing much bigger facts on much biggers sums to much less sophisticated market players (yeah - equity purchasers are less sophisticated than synthetic CDO buyers.).  People should be FURIOUS about this Citi case and settlement, but you've probably hardly heard a whisper about it. 

“Citigroup’s improper disclosures came at a critical time when investors were clamoring for details about Wall Street firms’ exposure to subprime securities,” said Scott W. Friestad, associate director of the S.E.C.’s enforcement division. “Instead of providing clear and accurate information to the market, Citigroup dropped the ball and made a bad situation worse.”

Yes! Why no consequences then?  Director of enforcement, Robert S. Khuzami noted: 

“The rules of financial disclosure are simple — if you choose to speak, speak in full and not in half-truths.”

Ignorance and incompetence are bad enough, but ignorance combined with willful witholding of information, which it seems clear that Citi did, is inexcusable, and this fine, ESPECIALLY when considered in relation to the Goldman fine, is puzzlingly small.

 disclosure: no positions in GS, long C

-KD

WYNN: Q2 2010 Conference Call Tidbits

As I like to do every quarter, I'm about to sit down and read the transcript of Steve Wynn's quarterly earnings conference call.  Like David Einhorn's quarterly letters, I think Wynn's calls are indispensable for the knowledge he usually disperses simply and eloquently.  Let's see what we find this quarter:

Steve Wynn: "the nightclub and younger-person recreational market represented by Tryst, Blush, XS, Surrender and the Beach Club. That's a business that could do over $150 million for us, with a profit margin in the mid-40s. So we're really happy about that."

In case you were wondering exactly how much money the clubs made...  $150mm gross, almost $70mm net.

Wynn then begins to expound on a politically tinged "rant."  I'll let him explain:

"We hope for continued improvement in Las Vegas. Or let me put it differently. We hope that we'll get smarter in Las Vegas in dealing with the peculiarities of this market and this very, very mercurial national economic economy that we're living with. The national economy and the political environment in the country as we head up to the elections is very, very touchy. And it is impacting all businesses.

Today, we got a report at a -- various of our board committees meetings about the impact of the bill, the Financial Reform Bill that the President signed, with its hundreds of new committees and regulations to be formed, bodies and government bureaucrats to be created who will then tell us what we should be doing or what standards we have to live up to, both at the SEC and in other bureaus that have been created by this Financial Reform Act that the President was so enthused about. There isn't one single person in the United States of America that has a clue of where the Financial Reform Act will lead and what it really means. In spite of the fact that there are undoubtedly some good things in it, it has the potential of being a catastrophic interference with business, very much like the Healthcare Bill. So we're living through this along with the rest of America. And you can decide whether you want to be pessimistic or optimistic. You can decide whether the glass is half full or half empty. I'm at the point where I hope we just don't tip the glass over."

Later, responding to a question:

" We began -- this is more a third quarter than second, but we began the remodel of the 2,700 rooms that is Wynn Las Vegas because they're five years now since it opened. And thank goodness, the rooms were fully utilized, with high-90s occupancy. And it's time to remodel them. And consistent with our personality, we've upgraded them. And I think between the regular rooms, the suites and the villas, we’re going to spend $99 million between now and January and February -- April"

I found it surprising that they're renovating already - after only 5 years.

"We're also remodeling the baccarat game starting in October. It’ll be ready for Christmas, New Year's. And we're making our baccarat pit much sexier."

 Sexier baccarat!  

"One of the things that's happening here as the market softened and many of these companies with very bad capital structures neglected their properties rather severely. And the properties are all showing the wear and tear. They're showing the lack of capital expenditures. And the public, of course, takes note of this immediately. There's no secrets. The minute the place is not clean or it's getting threadbare, it has a very bad effect on your clientele. We go in the opposite direction, take advantage of our capital structure and make sure that we're pretty and all fluffed up all the time."

well - there you go - that's why he's renovating Wynn already.

Joseph Greff - JP Morgan Chase & Co

It’s Joe Greff from JPMorgan. Two questions, one is on Las Vegas, and it's great hearing you're raising room rates here. Are you seeing any improvement in spend per occupied room outside of room rates?

Stephen Wynn

I'm going to let Andrew answer that, but I want to point out that at the time when we decide to raise room rates and it’s happening successfully, within three weeks after making that decision, we also reduced the available inventory associated with this remodel, which gave us a perfect opportunity to do it. Because under normal circumstances, we're going to take 15% or 16% of the inventory out until we're done. And so that gave us some more leverage why we could lean on the rate. Andy, you can talk about the spend per room.

Andrew Pascal

And the short answer is no, no material change.

I highlighted this portion just to illustrate that Wynn is careful to point out that reason they were able to raise room rates in Vegas is because they reduced supply, by taking rooms off the market to remodel.  In other words, higher rates, lower numbers.

Later, responding to a question about Cotai:

" I got everybody that had anything to do with customers and the business in a big conference room and went around the room one person at a time and asked the very same question that you ask. Who are we? And what are we doing in Cotai? Where are we going? How are we going to present ourselves? Where do we fit in? What should the public expect? Because consistency and -- is very important to business, just as it is in life, so -- and I was really excited and very gratified that there are very diverse personalities in the group. And they were relaxed and comfortable enough to express themselves. And what was really fascinating was that to the man and woman that were in the room -- there were men and women. Every one of them, in their own way, said the same thing. Dance with the girl that you brought to the party, or dance with the guy that brought you, whatever that old anecdote is. We know who we are. We know what we do best. Stick to what we do best. Take advantage of Cotai, and do it better than anybody's ever done it, including us, in history."

"We're going to be Wynn Resorts, Cotai. Wynn Cotai. We're not going to look like Sheraton or a Hilton or a different company. We're going to look like us. And you know what to expect when I say that."

Bill Lerner, who I think is the finest gaming analyst out there, then asks this interesting question, and gets in interesting response from Steve Wynn, probing a bit before moving on:

"William Lerner -Union Gaming Group

Question for Steve, and then Andy, just a follow-up or a quick second follow-up. The first one is, Steve, you, of course, talked about the beginning of the room remodel in Vegas. What about the new rooms or the design of the new rooms in Vegas do you think will encourage folks to pay more per night, besides you charging them more, ultimately?

Stephen Wynn

Yes, it’s a good question, simple answer, Y-E-S.

William Lerner - Union Gaming Group

Yes, meaning...

Stephen Wynn

Well, they’ll like it more, they’ll pay more.

William Lerner -Union Gaming Group

And that’s a -- there’s nothing structurally changing about the rooms, it’s just...

Stephen Wynn

No, no. It's reragging, reaccessorizing."

I didn't get the sense Lerner was satisfied with the answer.

"William Lerner - Union Gaming Group

The last one here, and maybe this is for Andy. What are you seeing -- are you seeing anything reflective of the euro weakness? By that, I mean the currency now? I know, of course, those trips -- Europeans book trips further out than folks from regional places around the U.S., of course, and I would think that strength in the euro over time takes some time to play out. What are you seeing, if anything, Andy?

Andrew Pascal

We're not seeing anything. It's not materially affecting our business in any way.

Stephen Wynn

There was a period when the euro was really up there around $1.58. There were some guys from Europe that were coming over here and thought they were playing with pesos. They were playing with dollars. And I can’t say that we didn't get a little lift from that. Some of the Europeans really liked the cheap dollar when it came to gambling, because they were paying off at -- they thought $0.67 on the dollar. Now that has tamed, I don't know that it will hurt us or anything. But we had a lot of customers from the United Kingdom, so we get the pound sterling as an item, now and then."

I love the "playing with pesos" line to describe Europeans coming to Vegas when the Euro was at $1.58.

Later:

"Now there was one of our neighbors, who's got a great ambition and doing a big job is Sands. They released earnings yesterday, and they had a $300 million number in for three or four places in Macau, three places. And we had $215 million or $216 million. EBITDA has as much meaning as snow on top of Mount Everest. It's a worthless number, because you've got to pay interest, you got to pay taxes, and depreciation’s as real as the payroll. I just got through telling you what it cost to change the rooms and keep them fresh. So you ask yourself, what really is going on? So you subtract the cost of ferry boats, subtract the interest payment on the first quarter of both companies, subtract the...Whatever the depreciation is that both companies use. And just make it equal, whether it’s on a forty-year schedule or a ten-year schedule. Makes no difference to me. And you'll get to the fact that the money left over afterwards is greater with the smaller company, in terms of Macau. Bigger ain’t better. Better is better. Because when you borrow all that money, you got to pay it back. And when you build all of those facilities, you got to depreciate them and take care of them. So you better damn well make sure that they carry their weight. Now I'm a big fan of the development in Cotai and the things that my competitors have done. And they're making the future bright for Macau, and I'm proud to be part of it and proud to be their neighbor. But when you're analyzing what's going on, don't get confused. So we're a younger company than the Sands and MGM. And we are a little bit more, oh, steady, or a little slower. And it's the old hare and the turtle story. We're a little bit more like a turtle than a hare. But at the end of the day, we're going to build Macau, and it's going to be the Cotai project. And it's going to be a big increment to the wealth of our company. And we'll go somewhere else at that same time. And when you take the four- or eight-year difference in age between us and the Sands or the 20-year difference between us, 16-year difference between us and MGM, we'll catch all those guys. We'll catch all those guys. But we'll do it in a very steady, processional way. And each of our properties’ll have the kind of characteristics we're describing now. And we wouldn’t do as well if it wasn't for them. Don't misunderstand. I'm not deprecating them. But I am pointing out that we’re a different kind of company. And we’re going to stay that way. And maybe we don't move quite as fast as the other guys, but we don't borrow money quite as flagrantly. We don't take on projects that we can't really control down to really fine point. And maybe that disadvantages us competitively on occasion. And I'm willing to accept that myself in exchange for having security for my employees, predictability for my investors. I’m willing to make that exchange. I'm willing to take longer to get where I want to go. And where I want to go is where we dominate the gaming industry in terms of quality and performance."

That right there is the reason to read the conference call transcript.  A big long statement that sums up Wynn's philosophy on running his company, and comes back to the line I quoted last quarter:  "Bigger isn't better, better is better."

"Robin Farley - UBS Investment Bank

Yes, I got a question on Vegas and one on Macau. In Vegas, I wonder if you could give us a little color on -- your table drop was down slightly after being up nicely in Q1....

Stephen Wynn

Robin, the reason the table drop is off is because there's so many more tables around here, even though they're not doing a very good job for their owners. And secondly, the reason our customer acquisition cost is up is that when companies, namely, our competitors, get desperate, there’s two things happen. They stop taking care of the building, and they increase their promotional allowances, to no avail, I might add. It's a one-way street to oblivion. But that's the natural knee-jerk reaction when they get desperate. They don't take care of their building, and they grasp for customers. And then it has an effect in the marketplace, and it takes everybody down. The person who starts this kind of stuff doesn't do themselves a bit of good. It takes awhile before they wake up to it, and then they get new executives or something. It's been the oldest story in the history of Las Vegas. We go through this cycle all the time with inexperienced help and unsophisticated management. They spend too much. They over-comp. They do all this stuff. This is as old as Methuselah around here. Maybe I'm getting old. I've been doing this for 42 years. But I’ve seen this about 11 times. And then there's a new group of young, inexperienced managers. Again, they fire the other guys, and the people, okay, well, we can’t do this anymore. Stop -- we can’t comp people that don't play that much. We can’t afford this. There’s no margin in this business. They got Blackjack at some of these hotels down to where the game isn’t worth it, the space it takes up on the floor. But what the hell? They got the tables. They got the dealers. They want to protect the jobs. They go and give the joint away. If their rooms are empty, they figure they've got nothing to lose, even if they’re new rooms."

"Robin Farley - UBS Investment Bank

In other words, the competitive situation that you saw in Q2, it sounds like it's continuing here into the second half of the year in terms of customer acquisition costs and table drop being down.

 

Stephen Wynn

In a word, yes. But we've got these nightclubs, and there, we're able to get an advantage because it's the management of atmosphere. And so there, knowledge and experience really matter. A Blackjack game’s a Blackjack game. Unfortunately, a slot machine’s a slot machine. They're all a commodity. When we get into the areas where there's a difference that matters, like the way we treat people, how beautiful the places are, the management of environment, then the competition can't run with us, and we're safer. And that's where Linda's customers come in. They're brand-oriented. They’re very conscious of the little things, the quality of their experience, how clean the place is and how they're cared for. Nightclubs, believe it or not, in a strange way, it's a similar kind of thing. So those are the two segments where we hold our own."

Interestingly, there wasn't discussion in either the prepared remarks or the Q&A of the fact that Wynn's numbers were actually helped this quarter because they were a little lucky in Macau - their hold % was slightly higher than expected.  Contrast this with last quarter, where they were slightly unlucky.

disclosure: I have no positions in LVS, WYNN or MGM.

-KD

On Big Government - Or Not

I couldn't decide what sort of title to give this post, so I just went with the catch-all "Big Government."  Barney Frank, while no hero of mine, has been a leading advocate of re-legalizing (including taxing and regulating) online gambling after the UIGEA was passed several years ago, surreptitiously tacked onto a safe ports bill that was supposed to protect us from terrorists. 

Yesterday, the House Financial Services Committee passed a bill that would "effectively legalize online poker and other nonsports betting, overturning a 2006 federal ban that critics say merely drove Web-based casinos offshore."

Of course, one main motivation is taxes - money that's desperately needed by the states:

"The bill would direct the Treasury Department to license and regulate Internet gambling operations, while a companion measure, pending before another committee, would allow the Internal Revenue Service to tax such businesses. Winnings by individuals would also be taxed, as regular gambling winnings are now. The taxes could yield as much as $42 billion for the government over 10 years, supporters said."

I don't really want to get into the debate about gambling (online or otherwise) being good or bad, although I was pretty surprised at how negative the comments on NY Times article were, considering how liberal their reader base usually is.  Supporters of legalization also point out that the activity is already happening - the revenues are just going to offshore companies.  The legalization most impacts the companies' abilities to market to US customers, while it's already easily possible for US players to get online and gamble via foreign sites.  Also, legalization and regulation could result in a safer (less rip-offs) environment for users.

But there's a much bigger moral picture here.  I don't think it would surprise anyone to learn that I'm in the "let people do what they want camp,"  which favors allowing online gambling.  (side note: the issue I care most about, despite the fact that I play online almost never, is online poker - which is a game of skill.  Still, this doesn't mean that there won't be a large number of people who, if online poker is legalized, wouldn't lose a large amount of money playing poker online - there would be.  In other words, even though it's a game of skill, there will be many unskilled participants who will still feel ill effects, just like they would playing online blackjack, because they don't have the skills required!).  The quote I want to discuss is Barney Frank's:

“Some adults will spend their money foolishly, but it is not the purpose of the federal government to prevent them legally from doing it.”

Now, I'd be hard pressed not to agree with that statement.  The problem I see comes when the next step is that people who DO spend their money foolishly are then rewarded with money from the federal government (I don't think it's really up for debate - this happens).  See, if the government is going to compensate people who demonstrate lack of judgment / stupidity / ignorance / "foolish spending of money," then, I'd rather the government tried to prevent those people from doing it in the first place.  Of course, this isn't really practical - you can't ban only gambling addicts and people who have no clue about money management from online gambling.  Herein lies the problem:  I want to protect my own right to gamble online, while at the same time preventing other people from losing all their money gambling online and then going to the government (aka: ME, the taxpayer)  for assistance. 

-KD

disclosure: long PYGMF (PartyGaming stock)

Hussman on Bernanke, Fannie and Freddie

Last month I wrote about Bernanke's Guaranteed Box Full of Crap, where he somehow justified the Fed's purchase of a trillion dollars of Fannie and Freddie securities on the grounds that his left hand man at Treasury was guaranteeing the assets.  Today I read John Hussman's weekly piece, where he points to an important exchange last week between Bernanke and NJ Congressman Scott Garrett:

Hussman, first, reiterating the point I made in the blog article linked above:

"Last week, Ben Bernanke appeared before Congress for his regular Humphrey-Hawkins testimony. For most of that testimony, it fascinated me that every time the Bernanke said that the Fed has taken no losses on its operations, there was absolutely no remark that the reason the Fed has not lost money is that the Treasury, directly (Fannie, Freddie) or indirectly (AIG) has made the liabilities held by the Fed whole."

then, the back and forth between Garrett and Bernanke:

"SCOTT GARRETT: You bought over a trillion dollars of GSE debt, and to that point, under normal circumstances, on the Fed's balance sheet what you have on there are Treasuries, or if you had anything else on there, I assume you would have a repurchase agreement for those securities on your balance sheet. Now of course around two-thirds of that are in GSE debt. 

BEN BERNANKE: Correct. 

GARRETT: So right now, those are guaranteed - whether they're sovereign debt or not, we don't know - but they're guaranteed by the U.S. government. But they're only guaranteed to when? 2012, right? After that, Congress may in its wisdom make another decision, and at that point in time, you may be holding on your balance sheet - two thirds of your balance sheet - something that is not guaranteed by the Federal government. First of all, you don't have a ... do you have a repurchase agreement on those with anyone? No. 

BERNANKE: I don't know what you mean by a repurchase agreement. We own those securities. 

GARRETT: You own those securities. Right. So there is no repurchase agreement outside to buy them back. You own them. 

BERNANKE: Right. 

GARRETT: So after 2012, if they're no longer guaranteed, is it fair to say that you may at that point in time actually engage in fiscal policy, because you basically are creating money at that time? And I know that you'd agree that it would be an unconstitutional role for the Fed to engage in fiscal policy - so where will you be at 2012 if they had to take a haircut on those because they're no longer guaranteed? 

BERNANKE: Well, first from the government's perspective, I, uh, such an act would, uh, there would, the Federal Reserve would lose money which the Treasury would gain. There would be no overall change to the position of the U.S. government. Secondly, the Federal Reserve act explicitly gives.. 

GARRETT: How would we be gaining? How is the Treasury gaining? 

BERNANKE: Well, if there's a bad mortgage and the Treasury.. it requires $10 to make it good, if the Treasury refuses to do that then the Fed loses $10, so one way or another the government's going to lose $10. But I would just say two things, one is that I think, uh... 

GARRETT: But if you didn't purchase them in the first place, it would just be a total - then what would have occurred? There would not have been the creation of that $10. Now that you've purchased them, and in essence if we don't back them up, then you will have created that additional $10. 

BERNANKE: Well, I hope that doesn't happen, because I think it's very important for financial stability and confidence that we, that we guarantee... 

GARRETT: Let's play out that hypothetical that it does happen. 

BERNANKE: Well, then the Fed would lose money there. But let me just point out that the Federal Reserve Act, that we did not invoke any emergency or unusual powers to buy those agencies. It is explicitly in the Federal Reserve Act that we can buy Treasuries or agency securities and so we did not do anything unusual there. 

GARRETT: In what status were they when you bought them? Were they in conservatorship at that point? 

BERNANKE: Um, yes. 

GARRETT: Is it normal practice for the Fed to buy agency securities when they're in conservatorship? Was that ever done before? 

BERNANKE: It's never been in conservatorship before. 

GARRETT: Well, there you go. So the normal practice is not what was followed here. It just seems to me that we may have gone down a different road than we've ever gone down in U.S. history, where the Federal Reserve has engaged in buying a security, it's not Treasury, it's not guaranteed by the full faith and credit of the United States for its lifetime, nor is there any repurchase agreement from any other entity that you purchased - that you have a trade with an agreement with - and that the Fed in essence could have created money if the government does not guarantee them. At least, that could be the situation we could find ourselves in 2012."

Hussman even explains why it matters:

"It's important to understand that historically, the Fed has never actually "created money" out of thin air. What it has always done is purchase Treasury debt, paying for that debt by creating "Federal Reserve Notes" (see the top of your dollar bill). When it has purchased other types of securities, it has historically done so using "repurchase agreements." These enable the Fed to sell those securities back at a known price, even if the security itself was to default. By restricting the vast majority of its purchases to U.S. Treasury securities, the Fed has always operated under a budget constraint: Congress has always had the sole, Constitutionally enumerated power to authorize the spending that creates government liabilities, and the Fed has merely affected whether those liabilities were held by the public in the form of Treasury debt or in the form of Federal Reserve Notes (money). 

For example, if Congress votes on a billion dollars of spending, and the Treasury issues debt to finance this spending, the Fed might buy that billion dollars of Treasury debt and create a billion dollars of currency to pay for it. But notice that from the standpoint of the public, the end result is still a billion dollars of government liabilities, that was explicitly authorized by Congress. The Fed was never involved in spending decisions, which is fiscal policy. 

Contrast this with what the Fed has done in this instance. It has taken its balance sheet up from about $800 billion two years ago (almost exclusively in Treasury securities) to over $2 trillion today, mostly in Fannie Mae and Freddie Mac liabilities. The government's backing of Fannie and Freddie debt was always implicit - they do not have the full faith and credit of the U.S. for their full maturity. If Congress chooses to restructure that debt after 2012, the Federal Reserve will have created money without an offsetting asset of equal value on its balance sheet. It will have spent money out of thin air to pay off the holders of Fannie and Freddie securities. This would constitute a fiscal policy decision that was not actually voted on by elected representatives in Congress."

-KD

It's All In The Reporting

The durable goods report came out this morning - so how was it?  Let's go to the spin:

Bloomberg: "Capital Goods Orders Rise, Showing U.S. Spending Gain"

"July 28 (Bloomberg) -- Orders and shipments for non-military capital goods excluding aircraft climbed in June, signaling investment by U.S. businesses picked up heading into the second half of the year. 

Such bookings increased 0.6 percent after jumping 4.6 percent in May, more than previously reported, figures from the Commerce Department showed today in Washington. Total orders for durable goods, those meant to last at least three years, unexpectedly dropped 1 percent, depressed by a decrease in demand for aircraft which is often volatile. 

Eaton Corp. is among manufacturers benefiting from a pickup in demand as companies in the U.S. and abroad update equipment that is helping to support the recovery. The gains will partially compensate for a slowdown in consumer spending that is causing the world’s largest economy to cool heading into the second half of the year. 

“Businesses are, in general, still investing,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, who projected a decline in durable goods orders excluding transportation. “If they want to compete, they have to invest. The recovery is continuing.”

Bloomberg even managed to conjure up a bullish comment on the numbers from an economist!  I guess they were good numbers, right?  Well, maybe not...Let's read the next one:

AP:  Stocks Set to Retreat After Weak Orders Report

NEW YORK (AP) -- Stock futures fell Wednesday after another disappointing economic report called into question the pace of recovery.

This time the Commerce Department's durable goods orders report indicated growth is slowing. Orders for goods expected to last at least three years fell 1 percent last month, well short of the 1 percent gain that economists polled by Thomson Reuters had forecast.

Orders dipped 0.6 percent when the volatile transportation sector was excluded. Economists had expected a small gain without those orders."

Again, the lesson here, apart from the fact that you need to be ultra-careful with everything you read from the mainstream media,  is that you need to make sure you aren't guilty of confirmation bias:  only seeking out opinions that reinforce your own view.  It's always wise to try to understand the other side of the trade, and other interpretations of the data.

-KD

Jersey Shore Cast Rings the NYSE Opening Bell

As usual, I couldn't make this stuff up if I tried:




Bull market, bayyyyy-beeee!  Have no fear.


(h/t Clusterstock)

-KD

Another Guaranteed Box Full of Crap - via FDIC

This is now the EIGHTH time I've used the Tommy Boy analogy on my blog (type Tommy Boy in my search box for the others):

"Because they know all they sold ya was a guaranteed piece of shit. That's all it is, isn't it? Hey, if you want me to take a dump in a box and mark it guaranteed, I will. I've got spare time."

Today's reference comes courtesy of a Barrons article (h/t Barry Ritholtz)

"Before the financial crisis is unwound, the Federal Deposit Insurance Corp. expects to have taken over some 300 failed banks. The rapid closures have drained the agency's cash reserves.

The FDIC must sell assets to continue the closings. It has about $37 billion of bad-bank assets to sell, but the stockpile would bring only 10 to 50 cents on the dollar.

Enter the FDIC's Securitization Pilot Program, the sale of U.S.-guaranteed FDIC senior certificates. This enables the FDIC to push much of the losses off its books, thanks to the U.S. guarantee of principal and interest. The program starts with a $500 million issue.

And who makes up the losses? The notes are backed by loans that are bundled into agency-administered pools. But ultimately, the losses could be absorbed by Uncle Sam"

To summarize - the FDIC has been taking over the crappy assets of tons of failed banks.  There is a problem - they are running out of money (or ran out, long ago) with which to do this.   Thus, they need to sell the assets they've taken over to raise more funds to take over more failing banks.

Problem: the assets aren't worth much - 10c-50c on the dollar, according to Barrons.  Solution?  Mark that box full of crap GUARANTEED!  Remember, the FDIC is supposed to be funded by the banking industry.  How then, do they get a government guarantee?   Of course, with the guarantee, the assets will sell for a price much higher than 10c-50c, after all, it's GUARANTEED by the USA!  So, the FDIC gets paid a much higher price, and who eats the losses?  Uncle Sam, of course.  The FDIC is supposed to be an agency that is self-funded by the institutions it insures.  From an old Bloomberg article:

“Our operating budget does not come from taxpayers,” Bair said during the meeting. “We are completely self-funded in that regard.”

And yet, here we see that the FDIC is looking to benefit from a guarantee by the taxpayers!  That doesn't quite meet my definition of "self-funded."  

Even more absurdly, unless you believe that the "market" is crazy in pricing these assets at 10c to 50c on the dollar, and that they are really worth more but are somehow depressed due to liquidity or other fantasy nonsense, this government guarantee is GUARANTEED to result in payouts from the government to the purchasers of these assets who will be overpaying for them (knowingly, but not caring so much because they are guaranteed!).

Back to the Barrons article:

"They aren't really selling the bad assets. They're selling the equivalent of a Treasury bond without congressional approval," says William Black, a former thrift regulator. "It hides the economic substance of what's really happening—an unlimited taxpayer bailout."

and the final word from the FDIC:

"The FDIC contests the characterization, saying it doesn't expect a claim on the guarantee because of an equity cushion to absorb the losses, and the use of only performing mortgages in the pools. The agency says a lot of resources stand between it and the taxpayer."

Wait wait wait... The FDIC doesn't expect a claim on assets trading at 10c on the dollar because of an equity cushion to absorb the losses?  Where have I heard this before... thinking... scratching my head... furrowing my brow pensively.  OH YES!   Collateralized Debt Obligations!  The equity tranche and the diversification made it impossible for higher rated tranches to lose money!  (SARCASM ALERT!)  There was only one problem: "impossible" turned out to be "absolutely certain."

Jeezus.  The scam goes on.  Government subsidies of the FDIC, which of course, is another indirect bailout of the banks who are the ones who are supposed to be funding the FDIC.

-KD

The Week That Was

Upon returning from my sojourn to New York City to see God Street Wine, I banged out a bunch of posts this week.

-God Street Wine @ Irving Plaza recap.  I received comments on this post from show organizer Michael Weiss, and lighting director Jeff Volckhausen, who I emailed back and forth with a few times talking music, Phish, GSW and life - which was cool.  I's great to know that people are finding this stuff I write.

- Cardboard Gods : If you like good writing, buy this book.  If you ever collected baseball cards and like good writing, buy this book even faster.

Two garden posts:

-Battling tomato hornworms

-My super cute dogs

-I do not think Bernanke's tough talk matters much anymore, here at the boundary scenario (ZIRP).

-KD

Quote of the Day - PIMCO's Rich Clarida

"Positioning for mean reversion will be a less compelling investment theme in a world where realized returns cluster nearer the tails and away from the mean." - Rich Clarida

-KD

Garden: Secret Weapon

I have a secret weapon in my fight against garden pests:  a highly specialized working dog - the Brussels Tomato Hound:

Just try sneaking by Mr. Griffey and getting anywhere NEAR my tomatoes - he will sound an alarm that will scare you 1/2 to death.  Unfortunately, he has proven to be nearly useless in finding and destroying horn worms

Although Oscar did dig up one of the hornworm carcasses I had stomped on, and was playing with it and nibbling on it.   Oscar and Griffey are very funny outside.  Griffey has learned to eat blueberries right off the bush, and Oscar does the same with snap peas!  They are like cattle, grazing on grass and munching on the crops.  In this picture below, I think they are hatching a plot to overwhelm me and take my cucumber harvest:

Fortunately, they got distracted, and decided to attack each other instead.  Note the air-born attack from Oscar, and the evasive maneuver from Griffey:

In the end, though, they settle down and bask in The Life (also note: summer haircuts):

Last night Mrs. Dynamite and I made pesto from our garden basil, and we also made pan fried eggplant (from the garden eggplant, of course) with a chipotle mayo that we made using some chipotle peppers in adobo sauce that we had in the fridge.  Good stuff.

-KD

GM - You Can't Make This Stuff Up

"DETROIT (AP) -- General Motors Co. says it will acquire auto financing company AmeriCredit Corp. so it can increase leasing and make more loans to buyers with low credit scores..."

"GM CEO Ed Whitacre said Thursday the deal will make GM more competitive in auto financing. GM executives have said their sales have been hurt by a lack of subprime and lease financing."

No comment necessary.

-KD

Reality

Oaktree's Howard Marks writes one of the must read quarterly letters (embedded below).  This one is a bit lengthy, including many extended quotes from mainstream sources, but there are a few tidbits that resonate soundly with me.

First of all, page 5, which describes the basic unsustainable characteristics common in many global economies.  More importantly, Marks's conclusion, on page 17, where he notes:

"bottom line: anyone who invests today in a pro-risk fashion out of belief in the recovery must be confident that he'll be agile enough to take profits before the long term realities set in."

I've used the term "reality" many times to answer the question "why are markets down today?"  And Marks's quote perfectly describes why I'm not going to be majorly long stocks any time in the near future:  1) I think reality is much lower, and 2) I don't think I am agile enough to pass the grenade once the pin is pulled.

Its Greek to Me

-KD

Fear Not: Bernanke Will Talk The Markets Back to Health

Fear not, Helicopter Ben's soothing prose will act as a policy tool.  Courtesy of Clusterstock comes Ben Bernanke explaining that he is not in fact "out of bullets" in terms of monetary policy:

“We have not fully done that review and we need to think about possibilities. But broadly speaking, there are a number of things we could consider and look at; one would be further changes or modifications of our language or our framework describing how we intend to change interest rates over time — giving more information about that, that’s certainly one approach. We could lower the interest rate we pay on reserves, which is currently one-fourth of 1%. The third class of things has to do with changes in our balance sheet and that would involve either not letting securities run off — as they are currently running off — or even making additional purchases."

So let's review this real quick:  the first method Bernanke describes is changing the wording of the FOMC's policy statements in such a way that, well, I have no friggin' clue what Bernanke is thinking.  He's going to make it even MORE clear that rates are not going up soon? As a reminder, the current statement about the interest rate outlook is this:

"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period."

How exactly will Bernanke alter that statement?  Will he say that the FOMC has no plans to raise interest rates any time before hell freezes over?  Does he really think that the market isn't getting the message: "things suck, and there is no chance that we're raising rates any time soon, but I can't say that things suck because my job is political and people in my position just don't say that."  Not even Josh Wilker could rewrite the FOMC statement in a way that would make me feel any better about the prospects for sustained low interest rates.

The second method BB describes is lowering the interest paid on reserves.  As a former colleague of mine put it in a research note yesterday, 

"Interest on reserves was really a tool to help the Fed get overnight Fed Funds back to the top end of their range because GSEs had been taking their excess reserves and putting it to the street driving down Fed Funds. Currently 10day Fed Funds effective rates (FEDL01 index) are 18bps down from Apr/May avg of 20bps, LIBOR isn’t up, there isn’t any stress, so this excess cash will do little."

The important point here is that there is no stress indicated in the LIBOR markets - we aren't seeing the problem we saw when Lehman blew up: that banks don't want to lend to each other and are parking money at the Fed out of desperation. 

Of course, there's always method 3:  when all else fails, print money and use it to support asset prices.  Eventually, things magically get better.  (sarcasm!)

-KD

Garden - The Good, The Bad and The Ugly

My wife harvested a bunch of cucumbers yesterday... No - that's not a setup for a joke - she really did.  I mention it only because I want to explain that this massive harvest we picked today came on the heels of the fact that she already picked everything else that was ripe yesterday!!!

The good:

Yep - about 20 cucumbers, 1 eggplant and 1 green pepper.  I made three more batches of pickles, trying a new recipe for some half-sours, but the cucumbers are piling up.  Pretty soon I'll have to go on Craigslist and see if I can barter for something else.  Have: cucumbers.  Want: Ipad.

Now, the bad: my tomato plants fell over while I was away this weekend,

and then my cucumber plants did the same thing.  It wouldn't be a problem for the cukes except they fell onto the eggplants.  No damage done though, like the tomatoes (fixed by Mrs. Dynamite in my absence) I propped them back up and pounded wooden stakes inside the cages for additional support.

Finally, the ugly.  This morning I got out to the garden for the first time since Thursday and saw the telltale signs of tomato hornworm damage.  After a few seconds, I spotted two of these monsters.  One is easy to see in this picture, the other is a little harder:

These monsters are voracious. They love tomato plants like a fat kid loves cake.  You can tell you have them on your plants somewhere because it looks like a weedwhacker came and chopped the tips off all your branches.  I spent 20 minutes looking for another one, knowing he was there because I saw piles of worm poop, along with snipped stems, before I finally found him, and then 15 more like him.  These things have friggin' FANGS, and they turn on you like a cobra if you try to grab them!  Sources on the interwebs say that they don't bite, but I'm now taking any chances - yes - I'm a worm pussy ok? 

I put my hand in the picture for size context.  Let me put it this way - when I stepped on the bigger ones, tomato worm guts shot all the way up onto my shorts.  Big, juicy, tomato plant eating monsters.  These worms are so big that, I kid you not, you can find them by LISTENING to them chew!  Yes - you can actually hear them eat your tomato plants.   Here's a different one:

As I was taking this picture, my wife asked me, "why do you have callouses on your hand?"  (I actually have basically one callus, which is under the worm's head, and thus hidden).  "Because I labor in the garden without gloves like a REAL MAN!"  I thrust my chest out, but she wasn't impressed, probably on account of me jumping like a scared rabbit when the worm turned to take a bite out of my hand.  Finally, here's the first pile of tomato worms I made:

Mmmmm. Juicy.

My wife has declared war on the other key enemy of the moment: green cabbage worms, attempting to nip their life cycle at the source: the white moths that fly around and lay the eggs. She bought a butterfly net (Amazon Prime, of course) and goes out there to frantically chase the moths every few hours. I can only imagine our neighbors observing this ritual, thinking, "ahhh, those city folk - so whimsical..."

Here's a question for the readers:  We have a PLETHORA of small brown butterflies in the garden. Not moths, butterflies (is there even a difference?).  These things are currently really loving the mint plant, but also congregate on the broccoli and anything that's flowering.  Will they eventually lay some sort of evil larvae that will eat my garden veggies?

Second question, while I'm at it:  Broccoli  - if I want to grow fall season broccoli, do I have to plant all new plants? Or can I prune back my current plants and induce them to bloom again?

-KD

Baseball, Nostalgia, Life - A Book Recommendation

It's very very difficult to write emotionally poingnant, simply worded, nostalgic prose.  Many people try, and often times the harder one tries, the more garbage-esque the output is - metaphor-ridden schlock that sounds like, well, a student in a writing class trying to write fancy sounding stuff.  I am very confident in my writing ability, but I'm not writing prose - I'm not writing novels, be it fiction or non-fiction.  I'd like to, but I don't think that's what I do.  Josh Wilker, however, does - effortlessly - in a new book, Cardboard Gods.

I don't know how else to describe this book other than remarkable.  Wilker narrates through his childhood, seamlessly tying stories about his awkward learnings of the world to baseball cards he had in his collection - the one thing he was passionate about.  He notices subtle little wordings on the back of the cards, and expertly dissects their true hidden intended meanings.   In my favorite passage of this nature, he picks up on the back of Eddie Leon's card, which notes:

“Leon has been among Chisox’ leaders in Sacrifices in ’73 & ’74.”


Among the leaders? On a single team? In bunts? I don’t know how you could say any less about a guy without saying nothing at all. It suggests that when the White Sox really needed some bench guy of slight build and twitchy middle infielder reflexes to go up there and lay down a bunt, they looked first to somebody other than Eddie Leon, but if their top bunting specialist was for some reason otherwise occupied (perhaps he’d been entrusted with the more important task of going into the clubhouse to fetch a cold drink for one of the RBI guys such as Dick Allen or Beltin’ Bill Melton), well, then it was Eddie Leon’s time to go up there and intentionally make an out by tapping the ball as softly as possible."

 His way with words is amazing - inimitable.  As the cover blurb from ESPN's Rob Neyer describes it: "Josh Wilker writes as beautifully about baseball and life as anyone ever has."  I absolutely agree with that.   My only regret is that Wilker is a handful of years older than me, so the baseball cards he's referencing are just a few years earlier than the ones I spent all the money (and much of the time) of my youth collecting.  Still, Wilker writes so perfectly that even though these specific cards didn't evoke specific nostalgic memories from my life,  you can feel Wilker's memories and struggles in the pages.

If you ever collected baseball cards (or are a fan of beautiful writing), this book is a MUST.  It's an easy read, and for a change, I appreciated the hardcover version because it's coated in a material that's supposed to evoke the wax-pack wrapper feel of old school baseball cards.  

Cardboard Gods instantly vaults itself into elite company on the list of books I have found to be written in a style that is pure beauty. (Life of Pi, Water for Elephants, to name a few others). 

-KD

Please see my Amzon.com affiliate disclaimer on my right sidebar.  If you buy this book, or anything else, after clicking through the link above, I'll get a tiny commission while you still pay the same price for the book; but as usual, that has absolutely nothing to with my rave recommendation.

World Series of Poker Final Table

Yep - it's finally set - the 2010 "November Nine,"  aka, the Final Table of the Main Event of the 2010 World Series of Poker.  In case you missed it, a few years ago the WSOP made the decision to halt play for several months (from July until November) once the final table was reached.  Although it completely disrupts the flow of play, it allows the players ample time to attain lucrative marketing deals for themselves (yes, they get paid to wear patches or gear at the final table), as well as prepare for their specific opponents, get coaching, and more importantly of course, for ESPN and the WSOP to market the televised coverage of the event.  Each year I tell myself I'm going to try to qualify for a main event seat by playing poker online, but each year I don't even try.  Maybe next year - now that I'm up in the woods of NH.

As usual, two blogs have done a tremendous job covering the proceedings.  Pauly at Tao of Poker has an index featuring all his lengthy coverage in one place.  Also, the guys at WickedChopsPoker have been thorough in their coverage, including their photography, and have a nice one page writeup of bios of the final table participants.

-KD

God Street Wine - NYC Reunion

I remember the first time I listened to God Street Wine.  My sophomore year in college, Slutzie lent me his "$1.99 Romances" CD, and I was hooked immediately.  Princess Henrietta, Wendy, Crazy Head - pure genius.    I'd manage to catch GSW live in tiny venues around Boston and New York several times over the next 10 years, including a free outdoor show at Harvard University that actually proved to be much tougher to sneak into than I had expected, where I eventually ended up seeing the band in front of about 100 other fans hanging out on a sunny day outside at Harvard. 

Like most of my other favorite bands, God Street Wine would then break up - going their own ways to do grown up things - I guess.  When the legendary Wetlands Preserve in downtown Manhattan was closing however, in 2001, God Street Wine was there to send one of their hometown staple haunts out in style, and I was there with them.  I remember this show for a few reasons - first, it was the week before September 11th, 2001, and second, I was living in the suburbs at the time, but crashed on the couch of my friend Lee, who lived in the City.  I got back to his place around 3am and had to get up at 6am to go to work.  It was worth it, of course.

Nearly 10 years later, when I heard that GSW was back, I immediately called Lee, and we made plans to catch the second of two consecutive weekends of benefits shows.  As I noted in a previous post,  GSW has decided that they have made enough money off their music, and is making everything available for free download.  These shows were benefits for the National Multiple Sclerosis Society.  We got tickets for both nights, and I ventured down to NYC -  by car, bus and train - for a weekend of searing heat and nostalgic jammy rock.

GSW opened the first show with a song, Epilog, which makes me think a lot about what the bands' goal is or was.  

The refrain, "I didn't get where I wanted to go, but I did enjoy the ride,"  evoked roars from the crowd, but I'm still debating where exactly the band wanted to go.  Was it super stardom?  Did they want to be U2?  I am pretty sure it's not about money, as evidenced by their decision to allow and encourage the free spreading of their music.  Perhaps family obligations became more important?

Here's what troubles me - these guys clearly LOVE doing what they do.  That's what made these shows so special.  I don't think either night at Irving Plaza was sold out - it was plenty crowded enough to create an energetic vibe, but not so crowded that you had to elbow through wall to wall people to get to the bathroom.  Everyone there was like a participant in a grand celebration - a reunion, which is basically what these shows were after a nine year layoff.  I would guess that well in excess of 90% of the fans saw more than one of the 4 shows in NYC this month - it's that kind of fanbase.  So back to my thought - why walk away?  Maybe other obligations have become more pressing to the band members than toiling 150 nights a year in little bars (after all, lead singer Lo Faber would note on Saturday night that back in the day they wouldn't be able to fill Gramercy Theatre for two nights and Irving Plaza for two nights), but I think - I HOPE  - that I saw a spark in the band that indicated that they still do bask in the rock star glory - the stage lights, the adoring roar of the crowd, and the memories that their music rekindles - and I hope that they'll at least play a few shows each year.  I don't think that's an unlikely scenario either.

Anyway, the shows were special.  A happy gathering of fans so familiar with the band and each other that I recognized many fans on Saturday night from the previous night's show.  On Friday, the highlight for me was a searing Goodnight Gretchen.  Tight, jammy, driving - perfect.  Of course, I also loved Wendy, one of my top 5 favorite GSW songs, which evoked the roaring anthem from the crowd which I quoted in my prior post:  "Well we're drivin' into town, mom, but don't let it trouble ya - my girlfriend's drivin' and she'll stay straight.  We're all going in to see G-S-W, don't expect me home 'till late."   We were situated in the thick of the action, dead center on the floor, about 8 people back.  Another special moment occurred during Waiting For the Tide, when the crowd began singing the ending refrain before the band did (around 5:40 on the link below), and the band could do nothing but smile at each other and enjoy.    You can download and listen to the Friday July 16th show on Archive.org for free.  I really noticed drummer Tom "Tomo" Osander on Friday night - he was, in a word, GLUE, holding everything together incredibly tightly, but I guess he was also a tugboat, pushing and driving the band forward at all times.  Tomo was the standout for me by a long shot.

On Saturday night, we prepartied at Pete's Tavern, right near Irving Plaza, and Ginger Ted joined us for his first GSW show.  Right after we sat down outside, band bassist Dan Pfifer walked by, and we exchanged hellos.  20 minutes later, Lo Faber and Aaron Maxwell, the two frontmen for the band, walked by on the other side of the street.  I noticed them immediately and shouted "Hey - Aaron!"  He stopped and turned, and I spurted out, "Awesome show, we'll see you tonight."  Aaron raised his hand, said "thanks," and walked toward the venue with Lo.  Later, I was thinking to myself what I'd say to the band if I had those 15 seconds back, and if I wasn't yelling across the street.  If I had that one line back, I'd simply tell Lo and Aaron, "Thanks for coming back," and if I could have a drink with them, I'd ask them the question I asked above in this post: Why walk away?  You guys still love this, and the fans still love it. 

Saturday night we avoided the floor and were in the corner to the left of the balcony if you were looking out from the stage. This offered us a unique perspective of the role of the lights guy, in this case:  Jeff Volkhausen, who was a few feet away from us, raging at the lighting controls, pumping his fist and singing along to every word, and playing the switches to control the lights like Bevo playing the B3 organ.   It was tremendous to watch - being able to see his fingers flutter on the lighting keys like he was another member of the band.

The band set the tone for the show by opening up with an all time fan favorite, Nightingale.  Snake Eyes into Princess Henrietta (a KD personal favorite) ripped up the second set.  Eventually, the band returned for multiple encores, which included a speech by frontman Lo Faber.  Lo said "If you guys want us to play more shows..." But then the crowd cut him off with a roar that drowned him out.  The ovation extended for more than a minute, as Lo smiled at Aaron, before continuing, asking people to share the music - to spread it around.  This again begs the question - does GSW feel like they need more exposure to keep doing what they are doing?  Do they only want to commit to continuing the band if they can do it on a larger scale?  Is an annual celebration with their fans not enough for them?  Who knows - we will wait and see.

Being a part of the Irving Plaza shows was awesome.  The venue is so small, it was impossible not to notice the interplay between the band members, and between the band and the crowd.  When Lo flubbed lyrics, Aaron would try to guide him back on track and the crowd would applaud.  Lo and Aaron couldn't suppress grins to each other as they wallowed in the spotlights and the screams from the crowd.  I could see Tomo lean forward and nudge his chin up toward the balcony, saying hi to his family, I think.  You just don't get that stuff at big market venues.

Hidden Track  has a tremendous series of reviews about the shows, and I think that this picture they published really sums up the relationship between the God Street Wine fans and the band.  A letter from a fan:

-KD

Anecdotes - and Catching Up

I'm back from a mostly-internetless weekend where I saw a bunch of old friends and saw God Street Wine in concert twice.  Two quick stories from the weekend while I catch up on the goings on, and work on a GSW trip report:

1) Ice Cream Store in Rumson, New Jersey (very very wealthy town):

I went out for ice cream with Lee and his wife on Sunday night.  We ran into a huge line at Crazees (big biz!) and eventually I obtained a cherry vanilla cone with brownie bites.  As we stepped outside to sit down and eat our ice cream, we encountered a woman presiding over a cute King Charles Cavalier Spaniel as well as her three daughters who were running back and forth into the store. The girls looked to be about 6, 8 and 10 years old.  The dog tried to lick one of the girls' cones while she wasn't looking, but the mom chided the pup, "No, Caymus, you'll get your own."  Dad then brought out a soft serve vanilla cup for the dog and placed it on the ground.  I couldn't resist, asking, "Won't that make the dog sick?"  "Oh no - she eats a lot of French cheese,"  the woman replied, and immediately another woman sitting on the other side asked the same question, wondering if it would upset the dogs stomach.  All I know is that I'm pretty sure I'm not giving MY dog a full serving of ice cream unless I feel like mopping up diarrhea.  Boom!  See - you didn't think I could work diarrhea into a blog post first thing on Tuesday morning did you?

So the mom puts the cup of ice cream on the ground, and says "Here you go, Caymus" (by the way - CAYMUS!!!!)  Caymus takes two licks and then WALKS AWAY! I couldn't believe it - I was in awe.  This pooch must have quite a life.  Immediately, all three little girls spout, "I'LL EAT IT!" and one of the girls, the youngest, promptly drops her ice cream cup right on the ground, face down, but immediately implements the 5 second rule, scooping it off the ground and re-engages it without a spoon.   Great stuff.

2) I had a little Amtrak trouble yesterday coming home from NYC to Boston.  When our train (the regional - aka LOCAL) pulled into Old Saybrook, there was an Acela Express waiting there already on the adjacent track.  "Uh oh," I said out loud, and the conductor immediately explained that there was a "serious situation" with storm damage to the tracks ahead which was currently being diagnosed, but that we "be here a while."  I got off the train, found out that the Express had already been there for 90 minutes, and realized that they'd get the go-ahead before us.  I politely negotiated my way onto the Express, after asking the conductor if the train was crowded, and if I could hop on. "Are you gonna pay the difference in fairs?"  He asked me.  "Nope."  I replied.  He shrugged and smiled and said "ok - we're trying to be accommodating - but don't go talking in a loud voice telling everyone on that other train that you're coming over here."   It ended up taking me 7 hours to get from NYC to Boston, even on the "Express,"  and then I had to take a bus back to Concord.  As the bus pulled into the station, I got totally soaked by a raging rain storm as I ran to my car, and my wife called to tell me that the power was out!  

Anyway, the power is back, and I'm catching up on the weekend's reading...

-KD