"Loss Aversion and the Stock Market"

I thought a lot of the share transfers now occurred automatically following a set algorithm. If that is true, how does that amplify loss aversion? Sell! Sell! Sell!

The Frontal Cortex : Loss Aversion and the Stock Market

Over the next few days, lots of people are going to be poring over their investment portfolio, trying to figure out which stocks to keep and which stocks to sell. Unfortunately, many of these investors will make the exact same mistake, causing them to lose vast sums of money over the long term.

The problem is loss aversion. Kahnemanandtversky stumbled upon loss aversion after giving their students a simple survey, which asked whether or not they would accept a variety of different bets. The psychologists noticed that, when people were offered a gamble on the toss of a coin in which they might lose $20, they demanded an average payoff of at least $40 if they won. The pain of a loss was approximately twice as potent as the pleasure generated by a gain. Furthermore, our decisions seemed to be determined by these feelings. As Kahneman and Tversky put it, "In human decision making, losses loom larger than gains."

Loss aversion also explains one of the most common investing mistakes: investors evaluating their stock portfolio are most likely to sell stocks that have increased in value or, during a week like this, have gone down the least amount. Why? Because it hurts to take a loss. Unfortunately, this means that people end up holding on to their depreciating stocks. Over the long term, this strategy is exceedingly foolish, since it ultimately leads to a portfolio composed entirely of shares that are losing money. (A study by Terrance Odean, an economist at UC-Berkeley, found that the stocks investors sold outperformed the stocks they didn't sell by 3.4 percent). Even professional money managers are vulnerable to this bias, and tend to hold losing stocks twice as long as winning stocks. Because selling shares that have decreased in value makes the loss tangible - and losing sucks - we try to postpone the pain for as long as possible. The end result is more losses.

Take a hint: refuse to panic

“You don’t make the biggest financial decision in the history of this country in a few days’ time without hearings.”

-Rep. John Yarmuth, KY(D)

And in case anyone missed it:

European shares were mixed Tuesday, following a similar pattern in Asia, as investors refused to panic about the failure of American lawmakers to pass a financial bailout and were encouraged by gains in futures contracts on Wall Street indexes.

So nice of them to "refuse to panic." What a joke.

Seriously, the bailout sucks

Uncle Joe Stiglitz has an awesome break-down of the bail-out at The Nation. (Awesome because I agree with it. Nice to have someone of his stature backing me up on this.)

. . . the banks realized that they were about to get a free ride at taxpayers' expense. No private firm was willing to buy these toxic mortgages at what the seller thought was a reasonable price; they finally had found a sucker who would take them off their hands--called the American taxpayer.

The administration attempts to assure us that they will protect the American people by insisting on buying the mortgages at the lowest price at auction. Evidently, Paulson didn't learn the lessons of the information asymmetry that played such a large role in getting us into this mess. The banks will pass on their lousiest mortgages. Paulson may try to assure us that we will hire the best and brightest of Wall Street to make sure that this doesn't happen. (Wall Street firms are already licking their lips at the prospect of a new source of revenues: fees from the US Treasury.) But even Wall Street's best and brightest do not exactly have a credible record in asset valuation; if they had done better, we wouldn't be where we are. And that assumes that they are really working for the American people, not their long-term employers in financial markets. Even if they do use some fancy mathematical model to value different mortgages, those in Wall Street have long made money by gaming against these models. We will then wind up not with the absolutely lousiest mortgages, but with those in which Treasury's models most underpriced risk. Either way, we the taxpayers lose, and Wall Street gains.

Here are the reasons Congress should not hand the Treasury $700 billion.

There are four fundamental problems with our financial system, and the Paulson proposal addresses only one. The first is that the financial institutions have all these toxic products--which they created--and since no one trusts anyone about their value, no one is willing to lend to anyone else. The Paulson approach solves this by passing the risk to us, the taxpayer--and for no return. The second problem is that there is a big and increasing hole in bank balance sheets--banks lent money to people beyond their ability to repay--and no financial alchemy will fix that. If, as Paulson claims, banks get paid fairly for their lousy mortgages and the complex products in which they are embedded, the hole in their balance sheet will remain. What is needed is a transparent equity injection, not the non-transparent ruse that the administration is proposing.

The third problem is that our economy has been supercharged by a housing bubble which has now burst. The best experts believe that prices still have a way to fall before the return to normal, and that means there will be more foreclosures. No amount of talking up the market is going to change that. The hidden agenda here may be taking large amounts of real estate off the market--and letting it deteriorate at taxpayers' expense.

The fourth problem is a lack of trust, a credibility gap. Regrettably, the way the entire financial crisis has been handled has only made that gap larger.

Paulson and others in Wall Street are claiming that the bailout is necessary and that we are in deep trouble. Not long ago, they were telling us that we had turned a corner. The administration even turned down an effective stimulus package last February--one that would have included increased unemployment benefits and aid to states and localities--and they still say we don't need another stimulus. To be frank, the administration has a credibility and trust gap as big as that of Wall Street. If the crisis was as severe as they claim, why didn't they propose a more credible plan? With lack of oversight and transparency the cause of the current problem, how could they make a proposal so short in both? If a quick consensus is required, why not include provisions to stop the source of bleeding, to aid the millions of Americans that are losing their homes? Why not spend as much on them as on Wall Street? Do they still believe in trickle-down economics, when for the past eight years money has been trickling up to the wizards of Wall Street? Why not enact bankruptcy reform, to help Americans write down the value of the mortgage on their overvalued home? No one benefits from these costly foreclosures.

The administration is once again holding a gun at our head, saying, "My way or the highway." We have been bamboozled before by this tactic. We should not let it happen to us again.

Instead, put the gun down, and consider these simple ideas for how to structure the bailout:

The objective of the bailout should not be to protect the banks' shareholders, or even their creditors, who facilitated this bad lending. The objective should be to maintain the flow of credit, especially to mortgages. But wasn't that what the Fannie Mae/Freddie Mac bailout was supposed to assure us?

There are alternatives. Warren Buffet showed the way, in providing equity to Goldman Sachs. The Scandinavian countries showed the way, almost two decades ago. By issuing preferred shares with warrants (options), one reduces the public's downside risk and insures that they participate in some of the upside potential. This approach is not only proven, it provides both incentives and wherewithal to resume lending. It furthermore avoids the hopeless task of trying to value millions of complex mortgages and even more complex products in which they are embedded, and it deals with the "lemons" problem--the government getting stuck with the worst or most overpriced assets.

Finally, we need to impose a special financial sector tax to pay for the bailouts conducted so far. We also need to create a reserve fund so that poor taxpayers won't have to be called upon again to finance Wall Street's foolishness.

Praise the Lord, I finally found someone who looked at what this might mean for the debt. Stiglitz asserts our debt is now $9 Trillion, so my earlier figure was on the board. Looks like NYT was looking at an outdated figure?

If we design the right bailout, it won't lead to an increase in our long-term debt--we might even make a profit. But if we implement the wrong strategy, there is a serious risk that our national debt--already overburdened from a failed war and eight years of fiscal profligacy--will soar, and future living standards will be compromised. The president seemed to think that his new shell game will arrest the decline in house prices, and we won't be faced holding a lot of bad mortgages. I hope he's right, but I wouldn't count on it: it's not what most housing experts say. The president's economic credentials are hardly stellar. Our national debt has already climbed from $5.7 trillion to over $9 trillion in eight years, and the deficits for 2008 and 2009--not including the bailouts--are expected to reach new heights. There is no such thing as a free war--and no such thing as a free bailout. The bill will be paid, in one way or another.

Hat tip to Rdan. Check out the comments if you have steel stomach.

Cutting off one's nose? House rejects Wall St. bailout!

The House just voted down the bailout. Bam! Luckily, I had Veuve Clicquot on ice for just such an occasion.

TV punditocracy is saying the Leadership didn't work hard enough to sell the bailout, and people don't understand this will affect their ability to get loans, etc. While few people truly understand the bailout (I don't), I think most understand there is a serious crisis looming. People are pissed at these fat cats who have been gorging themselves the past eight years, and I think many feel the satisfaction I do at cutting our nose to spite the gluttons' face. We'll see if businesses can't meet payroll because of this, but gauging from Drew Pooters, unpaid labor doesn't cause enough of a stir in this country.

Two cents: there's no guarantee this thing would have worked. If the system stinks, why would this do the trick? And if it didn't, how many more trillions would we throw in the hole? And what about inflation? And the debt?

Congress should cancel its vacation and take the time necessary to figure this thing out. The markets will wait for them.

Buckley's got his grin on

News Flash: Washington Mutual collapsed after Hispanic Business recognized its commitment to diversity.

At least the National Review doesn't consider me a spic. Excuse me while I go smash Krikorian in the goddamn face.

No comment

By the early-trading's light

So it looks like there's finally a bipartisan agreement, reached just in time before our Masters began early trading in the Asian markets, but, fingers crossed, it still has to get voted on.

A part of me still wants the deal to fall through, but not to feed my schadenfreude. I'm not the only one. Kos has been railing about the lack of transparency in the plan, and underhandedly praising Republican roadblocks. Here's the latest:

The congressional leadership has some sort of deal, 110 pages long (or so), that people are supposed to digest and vote on tomorrow. Whatever the details of the bill might be, the fact that the leadership of both parties have refused to take a breath and explore alternate and less costly (to the taxpayers) options is a disgrace. The only question is whether the rank and file will vote for this thing, and given that the voters aren't happy, we'll see what happens.

And it's always nice to see The Editors on one's side:

Yes, their reasoning was cynical at best; yes, they eventually moved from Devil’s Advocates to Satan’s Assholes; and, yes, there was always the suspicion - since confirmed a few billion times over - that, were they actually put in charge of things, they’d fuck it all up just for the hell of it. But, while annoying, there can be a certain value to being the asshole who responds with a dismissive “O RLY?” to everything you say. I generally valuate this in inverse proportion to my ability to understand the assertion being made; in the case of throwing $700 billion dollars at some kind of fancy Wall Street clusterfuck, for example, I actually value it pretty highly.

It looks like one of my biggest concerns might actually becontemplated in the bail-out plan:

The final version of the bill included a deal-sealing plan for eventually recouping losses; if the Treasury program to purchase and resell troubled mortgage-backed securities has lost money after five years, the president must submit a plan to Congress to recover those losses from the financial industry. Presumably that plan would involve new fees or taxes, perhaps on securities transactions.

Today's NYT had the following nice graphics on the national debt and the bailouts, and they stated it stood at $5 Trillion. On the one hand, that's half what I thought, but on the other that means the debt would be growing by 20%, not a measely 10%. Really, I will not be satisfied until the national debt is in a snug lock-box so it can't grow another penny.

I joined a virtual book club on vaccines and autism

I've been slowly absorbing this whole autism and vaccine controversy through osmosis, mostly by poking fun of the people I'm told to at the science blogs I frequent. One of those blogs just roped me into joining a book discussion on the subject, since I was one of the fifty first lemmings to sign up and win a free copy of the book. We're going to be reading Autism's False Prophets: Bad Science, Risky Medicine, and the Search for a Cure, and I have to post a minimum three comments, or somesuch. It feels like homework, but on the up side, I'll also get to post here about what I learn.

Feel free to join the book club discussion here. I will be posting as douchashov.

To start, let me say that although I am biased towards the anti-vaccine movement, I am also floored by the non-chalant attitude towards vaccination in the medical establishment.

I just had to take my daughter to get medical clearance for pre-school and they wanted to give her six vaccines! What? I said no way, and so they called a doctor to negotiate. "Well the Hep-A booster isn't really needed right away", etc. etc. Turns out, two of the six vaccines she had already been given on previous visits but they are apparently too lax about updating their records to keep track of this. Luckily I was a hard-ass and made them look over everything twice. As it is, she got four vaccines and I had to hold her down while two personnel worked her arms (one on each side.)

I don't think this is a unique phenomenon since I got a notice through school administration that my account was on hold since I wasn't up to date on my shots. I went in and they didn't have a record that I'd gotten my second MMR. (One of the shots my daughter got was also the MMR--Mumps, Measles, Rubella--and this appears to be one of the main vaccines of contention in the anti-vaccine movement). I made them order my charts from medical records, a process that took TWO WEEKS, and yup, I'd already had it. They just hadn't marked the appropriate check-box on their computers. How sweet and fleeting those moral victories.

Which primate's on top?

I wanted to live-blog the debate, but my wireless router wasn't working properly. I changed the DNS addresses and got back online but surfing molasses. Currently mobile blogging. I don't know that I would have added anything useful to the mass of punditry out there, so just as well. I'll link to an overview soon as I can.

I was trying to gauge if one of the candidates was dominant over the other, but not that much stood out. There's some talk that McCain made NO eye contact with Obama, indicating repressed anger and/or primate submission. I've read complaints about Obama offering too much praise to earlier McCain decisions or stances, and this might prove useful to future McCain ads, but for the unfiltered debates it seemed a dominance display. Patting McCain on the head while putting him in his place. I didn't feel Obama held back on criticizing the other Senator. If this was McCain's area of expertise, then young sizzle owned the old coot.

Let them sweat a little

Whatever their motives, I am so glad those elephant humpers put a halt to that charade of a thumbs-up photo-op they had planned for yesterday afternoon. I called my two Senators and Rep (PA) to complain about the damn bail-out, and I was shaking with anger. That probably had to do with low glucose levels, but it certainly added to the effect. Probably need to see a doctor about that. On the upside, my blood pressure is A-OK.

I certainly wasn't the only one calling blinded by rage. I had to try several times to reach the Senators--lines were busy or went to voicemail, and the inboxes were full. The staff for Casey and Specter were like zombies, completely flat, listened to what I had to say, and said nothing in return. I think they've been taking a serious beating. It pisses me off when I hear on TV that only conservatives are complaining. My district's Rep seems a lot more relaxed. I had a long conversation with staffers who discussed their support for Barney Frank's proposals. Helped calm me down a bit.

What is our GDP? $13 Trillion? Our debt is $10 Trillion? Just throw another Trillion on there. Can't hurt. Except there are no guarantees any bail-out will work, and if it gums the system up even more adding a Trillion in debt is going to help who exactly? At this point, I see no way that the faith in the greenback can be maintained, which means we will be forced to live within our means as we watch GDP slowly decline over the short term. Why do I see no discussion of the debt in all of this?

I know Germanicu$ is sure these "unpriceable" assets are worth so much more than the confused market claims, and the NYT printed this crap to back him up, but if the going rate is zilch you don't rush in offering a premium. Chrysler is no example. That was one company that produced durable goods. Here you're looking at a systemic problem, and I don't see how it can be solved through a rapidly appreciating I.O.U.

There's other reasons why I think this whole thing smells funny:

Here's one from Devilstower, at DailyKos, asking, Why can't the good assets be sorted out from the bad ones?:

Now the real question: how many of those loans are in trouble?

Foreclosures were up a steep 79% in 2007, reaching just over 1% of mortgages. The numbers are up again so far in 2008 (though not as steeply). We could top 2% in default this year or next. There are some expectations that foreclosures could triple from today's historically high levels, meaning ultimately 3% of mortgages could be in trouble.

And that's where we get that math problem. 1% of all mortgages -- the amount now in default -- comes out to $111 billion. Triple that, and you've got $333 billion. Let's round that up to $350 billion. So even if we reach the point where three percent of all mortgages are in foreclosure, the total dollars to flat out buy all those mortgages would be half of what the Bush-Paulson-McCain plan calls for.

Then we need to factor in that a purchased mortgage isn't worth zero. After all, these documents come with property attached. Even with home prices falling and some of the homes lying around unsold, it's safe to assume that some portion of these values could be recovered. In the S&L crisis, about 70% of asset value was recovered, but let's say we don't do that well. Let's say we hit 50%. Then the real outlay for taxpayers would be around $175 billion.

Which, frankly, is a number that Wall Street should be able to handle without our help. After all, the top firms on Wall Steet payed out $120 billion in bonuses alone between 2000 and 2006. If they've got that kind of mad money, why do they need us to step in now? And why do they need twice as much as all the mortgages that are even likely to implode?

In going for $700 billion, what the Bush administration is saying is:

Our pals on the street have been very creative in coming up with instruments in which they've entangled bad mortgages with good mortgages, and rather than untangle them, would rather we keep them from all that difficult paperwork.
Oh, and while we're at it, we might as well buy up a chunk of the swaps and derivatives that were created in an unregulated shadow market so they could double-triple-quadruple dip on the value of these loans.

There's a few more reasons in this mortgage protest from economists, including several from my own grizzled institution of higher learning:

To the Speaker of the House of Representatives and the President pro tempore of the Senate:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

Just to make sure no one thinks I'm letting Republicans off the hook, Ken Houghton at Angry Bear, explains why golden parachutes and bankruptcy protection do matter:

Let me say this slowly, so even a NYT reporter can understand it: If you are taking an equity stake in a firm, one factor is how much cash the firm will have on hand. Cash paid to executives is not cash on hand, nor can it be used to produce future capital, investments, and free cashflow, or even "the miracle of compound interest." So executive pay is very much a factor in equity calculations.

Changing the bankruptcy laws is more tangential, but let's again explain this slowly. Mortgage-backed securities are, well, backed by mortgages. Their value depends directly on those payments. If it becomes easier to workout a mortgage in bankruptcy court, the holders of those MBSes are liable to (1) receive a higher value and (2) know sooner how severely their securities are impaired. So changing the bankruptcy law will, again, make the value of the assets clearer sooner. Which is especially important if we're all going to pretend that this thing is going away after two years.

Let Wall Street stew in its juice a little bit longer, and figure out a way to get it to pay for the bulk of this mess.

Pity Poor Connecticut

Is this Greenwich's Katrina?:

Greenwich collected so many rich bits in recent years that its small population of about 60,000 contributed nearly $600 million in state income taxes in 2006. In other words, Greenwich pays 13% of all state income taxes in Connecticut with only 1.8% of the population.

According to an article by Christopher Keating in the Hartford Courant, the town and state are bracing for lower tax revenue. There are no signs yet that Greenwichers are hurting–Saks, Tiffany and Brooks Brothers are still busy and the local Rolls Royce dealers (there are two) say their clientele is largely immune.

Yet local residents like Lehman Brothers’ Dick Fuld – he of the $700 million stock loss – just won’t be writing the big tax checks that they used to. Charities are expecting a lighter haul this year.

There also is the human cost to the financial floods, the collective psychological breakdown that occurs when Greenwich’s billionaires become mere millionaires.

“It’s the human toll that is frightening,” said State Rep. Livvy Floren, a friend of Mr. Fuld. “Dick Fuld has spent 39 years of his life doing this. It’s more than just money. They’re not going to be in the streets starving….I think the man worked 24/7. His family and Lehman are his life.”

A deeper analysis was offered by local Democrat Ned Lamont, who in one fell swoop compared Greenwich’s money woes to the Japan malaise, Asian tsunami and the New Orleans flood.

“It really is a financial tsunami, and it could go either way,” said the multimillionaire telecommunications mogul who ran for the U.S. Senate in 2006. “It took Japan 20 years to recover from their buying binge. How long does it take us to work through excessive leverage? That could take years not months. This is our Katrina.”

Leave it to "Red Ned" Lamont to remind people why they voted for Lieberman.

I'm seeing black helicopters

When Bush entered office, he quickly got rid of a budget surplus, arguably to prevent Congress from doing anything productive--such as solving the health care crisis. Now, the bookend, he's in crisis mode asking for a massive increase in the national debt with a figure the Treasury admitted it pulled out its ass. Any chance this is a ploy to prevent the next Congress doing anything useful for the foreseeable future? No one's going to support additional expenditures once this boondoggle passes.

McCain Suspends Campaign to Fix the Economy

It only sounds like the lede to an article from The Onion. John McCain, plummeting in the polls, is suspending his campaign to work on the economy in Washington. The last thing "the economy" needs right now is McCain--forgetting which is the gas and which is the brake--driving headlong into it.

Man, he thinks the American people are even stupider than I do. Time will tell which of us is right.

Nut Cutting Time

Too busy spit-polishing my douche-boots to blog, so I'll just crib the tubes.

A good friend posted this to my facebook in response to my Cranky McCrank (and no, you can't friend me):

cranky? how about fuckin pissed. the trick is either that the $1 trillion is enough, or they don't have a fuckin clue and it is just the tip of the iceberg (not to mention the $30 billion bear stearns bailout, the $150 billion "stimulus" checks) - either way, I hope the lesson isn't lost that there is enough money out there to cover real human demands (if the iraq occupation didnt already let us know that). universal health care should be right around the corner, free college? infrastructure development? rehabing neighbor schools?

but really, if they knew for sure that $1 trillion was enough that suggests the firms know how much bad debt they have, which in turn means they have been straight up lying about their write downs- in a post-Enron/ sarbane-oxley world, we should be seeing a bunch of CEOs in cuffs. which of course won't happen either way...but if they don't know, $1 trillion should just be the tip of the iceberg.

Capitalism is bad- idiot capitalism seems to be worse

And Paul Campos at LG&M had the following awesome left hook. If the Dems bend over for Bush on this, I'm voting Barr:

Bush's approval rating has sunk to 19% in the latest ARG poll. That's lower than Nixon's the week he resigned. Probably the most telling stat in the breakdown is that Dubya has an 8% approval rating among self-described independents. Basically every Democrat and almost every independent voter in the country hates him. His remaining support consists of slightly more than half the GOP, and Joe Lieberman.

As Matt Stoller points out, you could probably impeach him and nobody would notice.

So the question becomes, is Bush sufficiently weakened for the Democratic leadership in Congress to tell him thanks, but we'll be drafting any bailout legislation we consider necessary, and you'll be signing it? After all there are about five GOP senators that are no position to be backing the president on anything if they want to live to fight another day.

This is what LBJ used to refer to as "nut-cutting time." Somebody needs to remind Pelosi and Reid and the rest of them just who has the knife now.

But my absolute favorite comes from Angry Bear. Apparently this is making the rounds on Wall Street. I love you Angry Bear:

SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

After you're done emptying your wallet for Paulson, consider signing this petition: Main Street before Wall Street.

At the very least, this can't be a handout. Since the fundamentals are sound, lets get that perpetually preferred stock at a 10% rate of return that Buffett's getting.

P.S. If the following is correct, Bear Stearns bailout actually cost $290 billion, not $29 billion, meaning we can't print any of the Trillion the Treasury requests. Is Buffet going to pony up for that also? China, please save us! Assholes.

Dominance Has Its Perks

Here's another splashy study that's all over the news but not yet available in print: sexist men make more money than their non-sexist counterparts. A study in the Journal of Applied Psychology appears to find that men who feel women should stay at home and take care of the kids make around $8000 per year more than men who feel a woman's place is where she deems it. Most of the speculation centers around the idea that sexist men are more assertive; entitlement is persuasive.

As soon as I get my hands on the study, I'll say a little more about it. Until then, I'll leave this little tidbit from a previous study by the same authors:

traditional individuals experienced more guilt from family-interfering-with-work, and egalitarian individuals experienced more guilt from work-interfering-with-family.

The authors seemed to have controlled for all the right factors, so I assume that sexist men don't simply work longer hours, but if they put more effort into their work it seems they might be deserving of higher wages. Stay tuned.

Fatties

It was only a matter of time:

Overweight Americans Sink Old Boat-Safety Rule

The growth of America's waistline has hit the waterways. Since it's not polite to throw a man overboard, the U.S. Coast Guard is revising a standard that commercial boat owners use to determine how many passengers they can safely board and still meet weight limits.

The agency, trying to protect more than 6,000 sightseeing, water taxis and ferries from being overloaded, proposes increasing the assumed weight of adult passengers to 185 pounds, from the 1960s-era standard of 160 pounds. The action was spurred by boats sinking in Baltimore and New York in 2004 and 2005 that killed 25 persons.

``This regulation has the potential for being the most challenging rule for our industry in a long time,'' said John Groundwater, executive director of the Passenger Vessel Association in Alexandria, Virginia. The trade group supports the weight increase if owners are given credit for a strong safety record and practices such as not filling their boats to capacity.

Cakewrecks

As someone who doesn't particularly care for cake, I was filled with that indescribably warm and fuzzy feeling of satisfaction when I found this blog devoted solely to making fun of decorated cakes gone horribly wrong. As long as these sites exist, I will never need to buy any schadenfreude offsets.

On Your Own, Buddy

There's been a lot of talk over the weekend about how foreign firms successfully lobbied the Treasury to be included in the impending Mother of All Bailouts, so it was nice to see the NYT report that overnight G7 govts. told the US: "Good luck with that bailout, there. You're on your own, buddy."

Europe and Japan turned a cold shoulder on Monday toward a American request that they bail out banks in the manner now being proposed in the United States.

The German chancellor, Angela Merkel, also took the opportunity to criticize the United States and Britain for opposing German efforts to put greater regulation, or at least reviews, of the financial sector on the international agenda last year, when she was chairwoman of the Group of 7 industrialized nations.

“Everyone who produces a real product knows what it looks like and what standards it is up to,” Ms. Merkel said. “One also needs to know with a financial product what’s involved. Otherwise, these sorts of things happen that we then all have to pay for”. . . The German finance minister, Peer Steinbrück, said, “None of the other six G-7 members will adopt a similar program to the U.S.”

Apart from a manifest lack of sympathy for a crisis they view as created by American banks and regulators, European governments are also constrained by rules within the 27-nation European Union that limit budget deficits and public debt . . . The Association of German Banks hinted that it would oppose the emerging bailout scheme if it gave American competitors a sudden advantage.

“We need to assure that disadvantages for foreign institutions do not arise from the U.S. program,” said Manfred Weber, executive director of the association. “It was, after all, American products that created the crisis and that created the contagion effects."

Nice. I especially like those furein banks crying that we got them into this mess. The takeaway message for me is that this crisis is way more manageable than Paulson and Bush have been letting on. Sure, there will be plenty of pain all around, but if those socialist G7 govts. feel there's no need to intervene to prop up the financial system, things aren't all that bad. Bernie, please, please, please stick it to them.

"From Louis XIV to George W. Bush"

What!? $700 billion with no oversight? Vomit bucket, stat!
Did anyone miss my preference for replacing golden parachutes with the guillotine?

---

Lawyers, Guns and Money

From Louis XIV to George W. Bush By Paul Campos Here, in just 32 words, is a summation of the state of American democracy in our time: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." Translation: Congress will take $700 billion from the pockets of ordinary Americans, and hand it to Henry Paulson. Paulson then has absolute, unreviewable authority to do with this money what he thinks best. Many people have pointed out in the past day or so that this is bad. What no one seems to be raising is the question of whether it's even legal. Of course after eight years of George W. L'etat, C'est Moi Bush, the question of whether the biggest financial rescue operation in American history is actually legal is considered nothing more than a bothersome technicality, if that, to be dealt with by the administration's lawyers to the satisfaction of Very Serious People everywhere.

A Strong Argument Against the Unitary Executive

Watching Ariel's Beginning now ten going on twenty times with my daughter has strengthened my conviction that la décapitation c'est trop propre pour le roi. Banning music? Because your wife died? WTF? What's that got to do with the rest of us? Reminds me of going to war because of a father complex.

First Triton bans music, then he imprisons the entire court for going to a speakeasy, then he imprisons the evil power-hungry female archetype for doing his bidding. It's not her fault Ariel interfered with the capture of a fugitive. Stupid Triton.

"Palin Can Be VP, Unless Her Husband Says Otherwise"

That first dude's such a liburel. From Right Wing Watch:

Palin is allowed to serve as Vice President because the Bible doesn't say she can't.  But if her husband decides he doesn't want her to be VP, then she can't:

Land's wife works as a psychotherapist, but he said he couldn't see himself as "first dude" (a term used by Palin's husband). Still, he thinks decisions about roles are up to each husband and wife -- including Sarah and Todd Palin.

"The only thing that would disqualify Gov. Palin from being governor or vice president, in my opinion, would be if her husband didn't want her to do it," he said.

Is Porn Adultery?

The Frontal Cortex : Is Porn Adultery?

This is a great post on the bunk idea that porn is akin to adultery. Although Tipper Gore must be creaming herself with the idea that violent entertainment is akin to murder. Also got to love the Jesus reference.

Swallowing the Moral Hazard Chowder

I am no longer crashing Germanicu$'s party (hope you finished those pork rinds), which means I no longer have daily access to the FT. The upside is that I have my NYT sub back, but neither has really explained the urgency of the frantic last minute bailouts and nationalizations, or who ultimately pays for the wave after wave of moral hazard. Some people see irony in the current administration handling the largest financial intervention since the Great Depression, but I just see rich assholes continue their practice of wealth-transfers straight from the public trough to their pig friends and golf partners. Floyd Norris, writing in Friday's business Times, makes the point that the bailouts are not based on size, but recklessness: too big to fail, has been replaced by too reckless to fail.

If the government is forced to decide whether to save another firm, it will face the same question it faced with A.I.G. and Lehman Brothers. Would this failure cause systemic damage to the financial system?Lehman did not measure up because its chief executive, Richard S. Fuld Jr., simply was not reckless enough as he ran Lehman into the ground.Had he had the foresight to make a lot more bad bets in the derivatives market, the government would have feared financial chaos and might have nationalized Lehman, just as it nationalized A.I.G., Fannie Mae and Freddie Mac. Or it would have subsidized a takeover, as it did for Bear Stearns.

The Paulson-Bernanke Doctrine is not “too big to fail.” It is “too reckless to fail.” If you get your company into enough trouble to threaten the financial system, Ben Bernanke, the Federal Reserve chairman, and Henry Paulson, the Treasury secretary, won’t let you collapse.

It may be that they miscalculated. Lehman’s default caused a money market fund to suffer losses, and scared investors into pulling their money from similar funds. If those funds cannot find buyers for their assets, there could be more defaults, and perhaps more failures.The Paulson-Bernanke Doctrine was born not of theory or ideology, but instead from improvising as each new crisis erupted. The Fed’s briefing on the nationalization of A.I.G. did not start until 9:15 p.m. on Tuesday night, which is not a sign of carefully thought-out decisions. When they met with Congressional leaders Thursday night to seek a plan to get cash to banks before they fail, it was almost as late.

If these nationalizations smack of socialism, it is closer to the Marxism of Groucho than of Karl. The Cox Proviso to the Paulson-Bernanke Doctrine is that the rules will change, and change again, if that is needed to avoid another failure.

From unnecessary tax breaks[1], to gobs of lost cash handled by personal friends, to the Blackwater and Halliburton scandals, and the publicly-funded army of golden parachutes now unfurling across the sky, the keystone-cops style bailouts in progress really don't seem so surprising. Pride yourself on removing all oversight, then get all generous with OPM when the chips are called in. 

Still, I'm utterly confused about what's going on. And, I'm not the only one. The bailouts seem to be happening because no one has any idea what is actually going on. The ever chipper Mr. Brooks asserts that Freddie and Fannie were over-regulated, while the dismal dudes at Freakonomics assert the opposite:.

The Fannie and Freddie situation was a result of their unique roles in the economy. They had been set up to support the housing market. They helped guarantee mortgages (provided they met certain standards), and were able to fund these guarantees by issuing their own debt, which was in turn tacitly backed by the government. The government guarantees allowed Fannie and Freddie to take on far more debt than a normal company. In principle, they were also supposed to use the government guarantee to reduce the mortgage cost to the homeowners, but the Fed and others have argued that this hardly occurred. Instead, they appear to have used the funding advantage to rack up huge profits and squeeze the private sector out of the “conforming” mortgage market. Regardless, many firms and foreign governments considered the debt of Fannie and Freddie as a substitute for U.S. Treasury securities and snapped it up eagerly.

Fannie and Freddie were weakly supervised and strayed from the core mission. They began using their subsidized financing to buy mortgage-backed securities which were backed by pools of mortgages that did not meet their usual standards. Over the last year, it became clear that their thin capital was not enough to cover the losses on these subprime mortgages. The massive amount of diffusely held debt would have caused collapses everywhere if it was defaulted upon; so the Treasury announced that it would explicitly guarantee the debt.

But once the debt was guaranteed to be secure (and the government would wipe out shareholders if it carried through with the guarantee), no self-interested investor was willing to supply more equity to help buffer the losses. Hence, the Treasury ended up taking them over.

Paul Wilmott--unlucky fellow just invested in A.I.G.--says the cancer has metastasized, meaning it don't matter where you cut.

That’s what makes the question of whether to rescue each institution such a difficult one. Sure, people have to learn a lesson. But, and this is my final surgical analogy, would that be cutting off one’s nose to spite one’s face? . . . The moral hazard is so obvious you can almost taste it.

Since no one knows what's going on, and the risks appear too great to sit on our hands, I find these proposals sensible:

• Volcker et al's, proposal to create a new federal agency to buy up bad paper, enforce regulations, and hopefully  solve the crisis
  
• A failure tax, so these assholes have to pay for their own mistakes
  
• And, my own idea, strengthen and expand anti trust regulations so no company can grow too big to fail. Once a company reaches a certain size, it should reorganize or risk nationalization. SEMCO in Brazil is a great example of what this might look like[2].

Per Norris:

If an activity is important enough to justify a government nationalization to prevent a default, it is important enough to be regulated.

Update: On Friday, the hammer finally came down, and now we're all in with another Trillion dollars. But Paulson is proposing not an independent agency, a la Volcker, but more analysts working at the Treasury. Our country is run by a band of stooges.

Ben White, in Saturday's business Times:

Among the dangers cited by economists on Friday, as word of the plan began circulating: an explosion in federal debt, higher financing costs, an escalating reliance on foreign capital, higher inflation and a further erosion of American economic sovereignty. All of these dangers, these experts stress, are hypothetical — except for the cost, which by many estimates could exceed $1 trillion.

I'm sorry, what hypothetical country are these assholes living in? Explosion in federal debt? Check. Higher financing costs? Check. Escalating reliance on foreing capital? Check. Higher inflation? Check. Further erosion of American economic sovereignty? Check. This is a list of administration priorities, not a new-found risk. What a fucking joke.

1. Paying fewer taxes while enjoying all benefits of federal insurance and services is the same as welfare.
2. Of course, SEMCO spins off companies as it grows because it's the smart thing to do, not because they have to.

McSpain

Here's one of those great campaign stories that hits all the requisite anti-McCain memes:

1. He's too old and confused
2. He's pig-headed and can't admit when he fucks up
3. He's a liar
4. The people around him are morons
5. He has a recklessly expansive view of who our "enemies" are

Although the story itself is too complex and nuanced to get into the McCain narrative directly through soundbites, the campaign's hilarious response has done some serious damage to his image amongst the scions of the elite media, who have always been his head cheerleaders, and who have been jumping ship lately at an alarming (for McCain) rate. In the words of John Aravosis, at the sublimely titled Americablog:

What's going on is that McCain is so egotistical and so reckless that he'd rather risk major damage to our relationship with a lead US ally than admit that he misheard a series of questions during an interview. Somebody is seriously paranoid about giving voters any impression that his mind is slipping. And that only makes us wonder all the more if it is.

How the mighty have fallen

Wow! GM ViceChair Bob Lutz went on the Colbert Report to promote the new Chevy Volt, and was left absolutely speechless on  global warming. To his credit, he did answer that you can charge a Volt off a Hummer, but it would take a lot of gas. They needs some serious PR training. 

Grand Masters of the world economy no more.

She's got legs

Where would we be without the Guinness BWR? Russian Sveta Pankratova's got the longest legs in the world, 4'4", here posing with Pin-Pin, the world's smallest dude. More pics at KP.RU.

What are the intertubes for, if not for this?

Too Many Monkeys Jumping on the Bed

It’s been a few weeks since the cheatin’ gene AVPR1a made a splash, and I finally found a little time to write about it, so I hope the story hasn’t gotten too stale. I put Dr. Phil as a placeholder to force me to write this, and I was getting really sick of looking at his ugly mug. What he says isn’t that bad, though. In general, the coverage is better than I would have expected, with a fair number of caveats, but the headlines—Oy Vey! Language Log compiled a great list of AVPR1a gene headlines:

"Is monogamy genetic?"; "Baby, my genes made me do it"; "Some men carry 'commitment-phobia' gene"; "Is Lover Boy a Louse? It May Be Genetic"; "Infidelity: It's All In the The Genes"; "Would you abort George Clooney?"; "Study: For men, genetics might untie marital bonds"; "Marriage Woes? Husband's Genes May Be At Fault"; "Marriage problems? Husband's genes may be to blame"; "Study Finds Fear of Commitment May Be in a Man's Genes"; "Commitment phobes can blame genes: A man's reluctance to marry may be down to a genetic 'flaw', say researchers"; "Marital crisis? Blame it on male genes"; "'Bonding Gene' Could Help Men Stay Married"; "Divorce gene linked to relationship troubles"; "Scientists Discover the Monogamy Gene"; "Gene Variant Holds The Key To A Long And Happy Marriage"; etc., etc.

Nuanced soundbites just don’t have that zing!

The Today show had the following piece, which reached the right conclusions, but for all the wrong reasons. My favorite part was their resident expert asserting that the "one-night-stand gene" was necessary for cave-men to raise armies. The video includes two women-on-the street encounters, one pro-genetic testing "to be sure", the other opposed because, "relationships have to be founded on trust so you just have to trust your partner.” Yeah, but what if your partner has the lying gene along with the cheating gene? Bet you’d wished you’d done the genetic vetting then. The correct takeaway message from the video is that it is the phenotype, meaning genes plus environment, that determines behavior. So if you use AVPR1a as an indicator of future behavior you're gambling either way.

What the study really found was that there was a small but statistically significant correlation--this was an observational, not an experimental study--between the presence of the RS3 polymorphism (allele 334) on the AVPR1a gene and reported satisfaction in a relationship. The AVPR1a gene codes for vasopressin (or AVP) hormone receptors in humans, and is the equivalent of the V1aR gene in voles, those cuddly rodents that get so much attention because they form monogamous pairs. Well, some do. There are three highly related species—prairie, montane, and meadow—that are almost identical but behave in radically different ways. Prairie vole males form long-lasting pair bonds and help take care of the roost, whereas meadow and montane voles are known for their slutty dead-beat dads. Turns out if you give prairie vole males a V1aR antagonist, to block the vasopressin hormone from binding they start acting like their meadow and montane brethren, and if you give meadow or montane voles a nice big hit of vasopressin they start acting like true gentlemen scholars. So it is not extraordinary that they found this effect associated with AVPR1a.

The researchers looked at 552 same sex twin pairs and their partners participating in the Swedish Twin and Offspring Study, TOSS. I wish I could have a sample size like that. (As soon as I can get NIH to cough up millions of dollars . . .) So all these twins and their partners filled out several questionnaires and gave up saliva samples, and then the mathemagicians went to work looking for associations between gene length and self-reported behavior.

The authors were pretty slick in calling their main questionnaire the Partner Bonding Scale, stating that it was derived from “behavioral patterns observed when measuring features of pair-bonds among nonhuman primates,” which is a smooth way to try to influence scientists who have been doing research on this topic. Tell people on the street that you are doing research on pair-bonding and you are going to get a lot of blank stares, but it means a socially monogamous relationship, when two individuals cooperate to raise offspring or share resources over an extended period of time.

The questions in the Partner Bonding Scale included questions such as: 

• You and your partner are involved in common interests outside the family.
  
• You and your partner have a stimulating exchange of thoughts.
  
• You and your partner calmly discuss something.
  
• Have you ever regretted getting married/moving in?
  
• Do you kiss your partner?
  

You can evaluate for yourself if they correlate to pair-bonds for monkeys (IK, IK, and apes). I get the impression that some of these came from the back of a Cosmo magazine. Not that there’s anything wrong with that. I am actually very impressed by the strong association between the presence of the 334 allele and kissing.

Mean scores on the Partner Bonding Scale were associated with the presence of the RS3 polymorphism (bonferroni corrected P<0.01, and the mean PBS score was significantly lower among men carrying copies of the 334 allele (corrected P<0.001). RS3 was not significant for women. Further, the PBS score was dose-dependent, meaning that relationship satisfaction decreased as the RS3 polymorphism grew from one to two 334 alleles.

The study authors then cherry-picked two questions to look at incidence of behavior, and found that 15% of the study participants with no copies of the 334 allele reported marital crisis or threat of divorce, compared to 34% of the men with two copies of the 334 allele. The authors claim this suggests that the presence of the 334 allele doubles the risk of marital crisis. They don’t discuss if it simply doubles the risk of honesty. Even though all participants had been in a relationship for five-plus years, many of the couples in the study were unmarried, and they found this common law status associated with 32% of 334 homozygotes, compared to 17% among those with no copies of the 334 allele. Put another way, 334 homozygotes still exhibited a 68% risk of being married. But they ONLY looked at couples who had been together at least five years, so it is an open question if any of this translates to a general population. Although almost all couples in the study had children, they don't discuss controlling for age or number of children.

If you have the TOSS at your disposal, why not examine unattached individuals as well? This is either a piggy-back study—a crippling limitation, or they are not reporting all results. There is a lot unstated in this article. The only variables they report examining are sex, marriage status, and recent relationship distress. Either the peer reviewers fell asleep at the wheel on this one, or the editors were too excited about all the press this would generate for PNAS. That’s not to say the study isn't important, but too much was left unsaid. For example, why is there no mention of OTXR, the oxytocin receptor gene? Oxytocin and vasopressin are both protein hormones composed of nine amino acids, with a two amino acid difference between the two. The vole literature on vasopressin is significant, but dwarfed by the oxytocin literature. And, although vasopressin might have a stronger role in males than females, oxytocin has a clearly established and causal effect on social relationships in both sexes and across species. If they did not find a relationship between OTXR and the PBS, that would be important to know and replicate. Also, what about genes such as CD38 that play a role in oxytocin expression? Receptors are one thing, endocrine expression is another. What if the reported differences in the PBS are also tied to differences in endocrine expression? If you aren’t getting enough peptide to the receptor it won’t bind and make you want to kiss your partner, regardless of how many receptors you have. There is growing evidence of the environmental role played by early stressors in the development of the oxytocin delivery system, including human evidence, and presumably the vasopressin delivery system as well, but the effect this might have isn't discussed. Genetic determinism is the sexy deus-ex-machina of the day, but even if these findings are correct, one in six couples with no 334 alleles to get in the way still won’t be in fairy-tale land, and two out of three with the 334 allele will still finish each others’ duet.

I’ll give these guys the last word, since they did temper their findings:

The relatively small effect size of the AVPR1A polymorphism on traits tentatively reflecting pair-bonding in males observed in this study clearly does not mean that this polymorphism may serve as a predictor of human pair-bonding behavior on the individual level. However, by demonstrating a modest but significant influence of this gene on the studied behavior on the group level, we have provided support for the assumption that previous studies on the influence of the gene coding for V1aR on pair-bonding in voles are probably of relevance also for humans.

Walum, H., et al., Genetic variation in the vasopressin receptor 1a gene (AVPR1A) associates with pair-bonding behavior in humans. Proceedings of the National Academy of Sciences, 2008. The article is open access at PNAS.

Mr. Fixit

I am happy to join the VivosVoco team, and hope that my contributions will prove accretive to shareholder value.

Sort of like John Thain, the CEO of Merrill Lynch. His contributions to his prestigious and storied company's bottom line include a 70% drop in the company's stock's value since he took over. But what he'll really be remembered for is keeping Merrill out of bankruptcy, by selling it to Bank of America.

Or maybe he'll be remembered for his solid-gold parachute:

Thain, hired last December following the ouster of Stan O’Neal, stands to collect about $11 million on the vesting of free shares if he doesn't stay after the sale.

Any payouts triggered by a change in control are on top of a $15 million signing bonus awarded to Thain last December.

The payouts wouldn't be much of a raise compared with the $20.2 million Thain got during his last year at Goldman Sachs in 2003.

That should buy him a solid gold house and rocket car, and leave him enough left over to eat salads made from $50/hr lettuce.

"I doubt Thain understood the magnitude of risk and exposure on the Merrill's balance sheet,'' Bove said. "I don't think anyone could have done a whole lot.''

Yeah, he probably didn't really understand the whole "balance sheet" thing when he signed on to this job - it's pretty tough to get your head around all those acronyms and stuff. But I'll bet he understood to the penny the part of his contract detailing the compensation he'd receive when he left.

Lettuce

I don't think I would want to pick lettuce for $50 an hour. But if that were the going rate, everything would be so bloody expensive, I'd have no choice but to pick lettuce.

When's Obama going to Alaska?

Keeping with this idea of Obama walking a Boeing picket line, he should also go hold a rally with USW Local 8888 in Alaska. Palin's been up-playing her down-home roots by proudly mentioning that her hubby's a member of USW, so this seems a natural opening to highlight the McCain ticket's stance on unions. Here's Leo Gerard, USW President, at theAFL blog:

Ms. Palin needs to stop trotting out her husband as an exhibit until she explains her positions on workers’ issues. Just exactly where does she stand on the Employee Free Choice Act?
Her family has benefited from her husband’s ability to be part of a labor union. Workers in labor organizations earn higher wages and are more likely to have pensions and health insurance. Because he works for BP and is a member of the USW, which collectively bargained a good contract for workers at BP, Todd Palin earns a good wage and has good health insurance. The Employee Free Choice Act would make it easier for other Americans to join unions and earn better money and obtain health insurance. Polling shows that 60 percent of Americans support the Employee Free Choice Act.
Inquiring minds want to know, Ms. Palin. Where do you stand on Employee Free Choice? Where do you stand on privatization of Social Security? Where do you stand on job-killing free trade?
Are you with McCain—and against workers—on these issues? If so, you need to stop using your husband’s membership in the USW as a prop, because then his union card cannot possibly cover up your or John McCain’s worker-savaging positions.

Ted Palin's USW card is a good tool for the McCain campaign, which I bet is why they haven't made an issue of Palin's dues supporting Obama. It would be so awesome if they made a public stink about that.

Boeing Strike and Requisite Obama

PilsenProle has a good quick take on why to support the strike at Boeing. It's about time there was a major strike to stop outsourcing to China. Reading some of the comments on the tubes, I'm amazed that people can blame current economic woes on unions. I guess it's easier than knowing how dangerously unregulated financial markets are. Luckily there's a few IAM members out there posting some knowledge, but the funniest thing is this idea that Airbus should get Pentagon contracts because Boeing's workers are unreliable and won't let the company outsource jobs. So workers should shut up so the Pentagon can pay a higher premium on high-skilled jobs sent overseas. What?

Is Airbus/Northrop-Grumman a back story to the IAM and Obama relationship? Remember, IAM's President Buffenbarger deserves a lot of the blame for the meme that Obama is an elitist--him and all his latte sippin' supporters. (I like my coffee black and strong, thank you.) It seems IAM was slow to back Obama because he wasn't vocal enough on the Airbus contract. They didn't endorse him until their convention last week, with Hillary at the helm. But was Obama lukewarm on the Airbus deal because of Buffenbarger, or vice versa? What comes first, Airbus or the latte?

Obama should be filmed walking a Boeing picket line--that would get the Republican attack machine going and help put all those blue collar Palin moms back in line, as well as get the strike some added media attention.

Palin/McCain

What Would a Maverick Do?

My Friends, now is the time to renew our discussion about transferring the low-return Social Security trust fund into the capable hands of Wall Street bankers--people who know something about money, not just government bureaucrats.

Giants.

Giants!
All Internet Traditions Awareness moment.

Because the internets suck.

Georgia on China's Mind

In response to Mockrates, it's no doubt Obama gave up all leverage on attacking McCain's gun slinging efforts to start a war with Russia, which is dumb, but I figure it's because Obama was in his swimming trunks at the time and McCain was getting way too much play off the crisis. We are all Georgians made great soundbite. Obama's position is as believable as his pledge to re-negotiate Nafta. As the mock stated in an earlier discussion:

Obama would be wise to hold a press conference and say "welcome to the world of a completely ineffectual US in international affairs, courtesy of Bush/McCain's diplomatic and military disasters and overstretch." Instead, he'll probably come at him from the right, using some unsightly, incoherent Frankenstein's monster of a position.

Since counters seem the order of the day, we should start an Obamastein counter. His health-care plan should be at the top of the list.

I am more and more certain that there is zero chance of a confrontation with Russia, even with a President Palin. The reason is that Russia's military is still too weak to confront the US military in open battle, and they've made it pretty clear that any attack on Russian territory will be immediately answered by a nuclear strike. Even though they successfully copied US tactics in their swift strike into Georgia, they suffered relatively heavy losses from anti-aircraft fire.

Congress has started hearings into what role the US played in instigating Georgia to move forces into S. Ossetia, as well as investigating who drew first blood, and Iran was a huge part of the discussion. With this in mind, check out this crazy assertion that Bush goaded Georgia as cover for a limitednuclear strike on Iran. On a sidenote, I just learned that the price of oil rose dramatically in June following rumors of a thwarted nuclear strike on Iran.

Everything the US is doing pretty much plays into Russia's hands. So keeping with the meme of watching the actions of our new Chinese overlords, I think the real action is in the Asian response which has been politely negative. Russia can't be too happy about that.

Draft Drew Pooters Now!

This is how Obama can completely and utterly wash out the bullshit lying and propagandizing of the McCain campaign. Get Drew Pooters on the stump, out there telling his story--flood the airwaves with ads of this guy doing nothing but telling this heartbreaking, infuriating story about getting repeatedly screwed by corporation after corporation. You don't even need to mention John McCain's name.

And do it quickly--before this stupid fucking ad about John McCain not knowing how to send an email is completely destroyed by ridicule and becomes its own story about Barack Obama hating seniors, or whatever the fuck.

In Defense of Appeasement

Perhaps Douchashov can enlighten me on this one: Obama/Biden also support the entry of Georgia and Ukraine into NATO, so where's their leverage on hitting Palin/McCain on this absolutely batshit insane policy of proto-military confrontation with Russia?

Let's get Realpolitik for a moment and ask ourselves what the US gains by steadily encroaching on the Russian sphere of influence. The NeoCons, idealistic college freshmen that they are, will tell us that the enlightening spirit of free market democracy urges us towards a stand against Putin--they smell historical absolution for the crimes of Yalta here. But is the authoritarian threat of Russia serious enought to justify embroiling us in a war them?

The buffer zone against the west that the Russians have always sought has decreased in size since the Cold War: I don't think anyone seriously believes that the Western Slavs are in any danger of being pulled back into their orbit (except for the older generation of Western Slavs themselves--and Republicans, who will believe anything, including that Osama bin Laden will revive the Caliphate in Washington DC unless we stick it out in Iraq). As for the FSRs, it would be great if we could envelop them all in our warm, loving embrace of commercial democracy, but we just don't have the resources or will, period. Georgia acted rashly and stupidly, and if that's what the other FSRs are going to be doing as members of NATO (taunting the lion in the cage because the big strong bars stand between them) they would be putting us in a precarious security situation--and I thought that was a situation NATO was designed to avoid.

The Russians are pissed off at perceived and real slights (Kosovo and missile defense), hyper-nationalistic, and keen on winning propaganda victories by getting us to puff up and then back down. And now we've got Russian fighters on training missions in Venezuela--I think we can all see where this is going.

The only way to play this one is to not puff up in the first place. This sounds senseless and cowardly to Republicans, for whom the notion of actual consequences disappeared in a puff of smoke eight years ago (or was it a mushroom cloud?), but it's the smart play of a leader with some degree of self-confidence, as opposed to one who feels that his codpiece is constantly under threat.

Presidentiality to believe in

In her first kid-gloves interview, Palin goes to war with Russia and with her next breath dissolves NATO. Its schadenfreude times at VVHQ.

GIBSON: Would you favor putting Georgia and Ukraine in NATO?

PALIN: Ukraine, definitely, yes. Yes, and Georgia.

GIBSON: Because Putin has said he would not tolerate NATO incursion into the Caucasus.

PALIN: Well, you know, the Rose Revolution, the Orange Revolution, those actions have showed us that those democratic nations, I believe, deserve to be in NATO.

Putin thinks otherwise. Obviously, he thinks otherwise, but...

GIBSON: And under the NATO treaty, wouldn't we then have to go to war if Russia went into Georgia?

PALIN: Perhaps so. I mean, that is the agreement when you are a NATO ally, is if another country is attacked, you're going to be expected to be called upon and help.

But NATO, I think, should include Ukraine, definitely, at this point and I think that we need to -- especially with new leadership coming in on January 20, being sworn on, on either ticket, we have got to make sure that we strengthen our allies, our ties with each one of those NATO members.

We have got to make sure that that is the group that can be counted upon to defend one another in a very dangerous world today.

GIBSON: And you think it would be worth it to the United States, Georgia is worth it to the United States to go to war if Russia were to invade.

PALIN: What I think is that smaller democratic countries that are invaded by a larger power is something for us to be vigilant against. We have got to be cognizant of what the consequences are if a larger power is able to take over smaller democratic countries.

And we have got to be vigilant. We have got to show the support, in this case, for Georgia. The support that we can show is economic sanctions perhaps against Russia, if this is what it leads to.

It doesn't have to lead to war and it doesn't have to lead, as I said, to a Cold War, but economic sanctions, diplomatic pressure, again, counting on our allies to help us do that in this mission of keeping our eye on Russia and Putin and some of his desire to control and to control much more than smaller democratic countries.

His mission, if it is to control energy supplies, also, coming from and through Russia, that's a dangerous position for our world to be in, if we were to allow that to happen.

The full transcript is here.

Today's newsfeed from Komsomolskaya Pravda on this was:
"Sarah Palin: Russia's agression must be answered with military actions, but first there need to be economic sanctions."

To be a fly on the wall in a Nato meeting today.

No Need to Panic

First, hope everyone noticed Vivos Voco has a couple of new posters. Mockrates and Germanicu$. The mock is on!

Now, I'm sorry, but the McCain camp has to be in utter and absolute panic. How else to explain an ad accusing Obama of supporting sex-ed for five year olds? Rachel Maddow seems besides herself looking for negative adjectives to describe this ad.



What is the demographic McCain is trying to reach? The coveted pedophile demographic? Maybe this ad appeals to the black helicopter crowd--I can't think what other group might have an average IQ under 80--but those guys are going to vote for McCain anyway. Anyone with half-a-brain sees right through this.

Now that the Palin honeymoon is over--oh, those intertubes!--and the MSM is starting to call McCain out on the sheer torrent of lies, they've got nothing left. They're just going to keep scraping the slime from the bottom of the barrel, and that indicates to me that they're done. They're just going to blindly fling poo and hope some of it sticks, but they're going to turn off everyone that isn't part of the Palin fanclub.

A clear goal is to create the appearance that Obama's in trouble, but the only place I sense that is working is on liberal ADHD-blogs. Stop eating McCain's shit, okay! It doesn't taste good.

I originally thought that Obama was in trouble if he'd put out word for the "cavalry" to come to the rescue, but no, now I think the plan is to stay on topic, maintain an aura of presidential inevitability, and let the 527s get in the mud to give McCain some of his own, certainly, but also to placate the hand-wringers who fly into a rage with each new McCain excreta. It's a useful escape valve, and can also serve to reclaim some of those Reagan Dems throbbing for Palin.

The Republicans are looking at how Obama won the nomination, and he won it by staying on top of the numbers and not getting in the mud with Clinton. But they have no alternative. The Republicans are following the Clinton strategy to a T, but cranking the decibels to 11. They've laid out this gorgeously fetid puddle of muck, and they're hoping one of Obama's own pushes him into it. It ain't gonna happen.

That being said, I agree that Obama does need to tone down the cerebral musings and be more direct: "Lipstick on a pig! Of course we stand by that. Have you heard what they say? We're surprised they think this is about Palin, but they must know something we don't. If the shoe fits, wear it." At least they've learned to stop apologizing every other day.

The Longest 1 Minute, 30 Seconds of the Campaign

Either I haven't been paying attention, or the Republicans missed a fantastic opportunity to bash the shit out of Obama for the prize-winningly dickheaded answer he gave to Shepherd Rick Warren and his Saddleback Herd of Shep, about whether evil exists and how we should deal with it. I just had a conversation about this with Douchashov and Germanicus (neither of whom is usually know as a political retard, but both of whom have made exceptions in this instance), and both seemed satisfied with the long-winded, poor-postured, stammering ejaculation of sophistry that Obama saw fit to counter with. First, judge for yourself:

If I were one of the subhuman mongrels working for the McCain campaign, I would have commissioned an ad that went roughly like this: "In response to a question about how best to fight evil, Barack Obama said we should be more worried about America becoming evil in our fight against terrorism and to keep America safe from our enemies abroad."

Or something like that, with a cheap punchline, and it would be a lot more polished because I'd be getting paid to think about it all day, instead of sneaking in blog posts about it between the work I'm actually being paid to do. But the point is that Obama actually has the right policy on this, but the dumbfuck Democrats, as usual, don't know how to frame it. Here's what I would have counseled Barack Hussein Obama to say:

"Of course evil exists. Now, my Republican opponent always has an easy answer to the question of how we confront evil: we destroy it, he says, because there's no room for nuance when we're talking about evil--unless it involves following evil into Pakistan, which I have said I would do as president, and which my opponent has called me naive for. But let me ask you and your congregants this: Do we see evil in North Korea? In the oppression of people of faith in China? In Myanmar? In Darfur? In Pakistan? Well then, should we invade all of those countries tomorrow? After all, there's no excuse for failing to stop evil, right?

If you don't think that's a good idea, it's probably for reasons having to do with resources, the military being stretched too thin, lack of preparation, excessive danger to our troops, the possibility the we could do a lot more harm than good, any number of things. And if that sounds reasonable to you, then you and I agree on this issue of principle.

The difference between me and my opponent on this question is simply one of judgment, of what the right time and place are to fight evil in order to best protect the interests of the United States. Just days after 9/11, he thought we should be invading the one country in the world we absolutely knew that Osama Bin Laden was NOT in, whereas I chose to focus on the one that was harboring him. That's the difference between me and John McCain"

Now how hard would that have been? He's going to be in a fucking evangelical church, David Plouffe--do you think you might want to prepare him for a question about evil? My statement hits like six different points of winning political psychology, and does it with logos, pathos, AND ethos, motherfuckers! Instead, Obama comes off sounding like a chin-stroking intellectual who is dodging the actual point of the question, which was obviously al-Quaeda.

You make me sick. Sick. Now get out of my sight.

Another Bad Idea

Lawyers, Guns and Money has a new post today on how certain defense analysts think the Georgian Army should be rebuilt along a Hezbollah model. Nice. The Georgians should just admit they have a failed state, dismantle the military, and start funding local militias. Putting aside the nihilism of this argument--including the fact that this would condemn Tbilisi to rubble--it wouldn't work because the Russians already have paramilitaries operating in Abkhazia and South Ossetia, and incursions by Georgian paramilitaries would only provoke an organized Russian response. Tbilisi needs greater regional stability, not instability, and the bigger threat is that irregular South Ossetian forces will continue to operate in the region. Hezbollah is also not a good example because Israel is way more sentimental than Russia. I've seen some examples of criticism for Russia's handling of the Beslan massacre--a botched rescue operation--but I've seen nothing but praise for their handling of the Nord-Ost siege, when Russian forces responded to Chechen fighters taking a Moscow theater hostage by gassing the place, killing all the Chechens along with well over 100 hostages.

I especially like how they cite Grozny as a positive example:

Downtown Grozny , Feb 2000. Via Cobb.

Deep Thoughts

I like girls who eat pork rinds, because a girl who eats pork rinds probably likes to eat chicken feet too. And girls who eat chicken feet are alright.

Dr. Phil on the Cheating Gene

The fun starts at 4:05, or you can listen to 4 minutes of chatter on Bristol Palin.

Stuck in Immigration Hold

Apparently the Chicago Police Department thinks they need to detain Mexicans on metric time.

After being cleared of charges or posting bail . . . ICE has 48 hours to take custody of a detainee; otherwise the person should be released. [According to a CPD spokeswoman,] "We were using a broader interpretation of the 48-hour rule.

You know, the interpretation of the rule where you convert 48 hours to 504 hours.

Glad Chicago passed that sanctuary ordinance, otherwise the CPD would be converting hours from fahrenheit to celsius.

Hat tip to Efren Paredes for this story.