Wednesday, July 23. 2008
Our man in Athens, Yiannis Mostrous, sent along the following comment on recent events in Europe: The capture of Radovan Karadzic, the former Bosnian Serb leader accused of the deaths of 20,000 people, has been celebrated in the Western media as a great victory were a war criminal will be brought to justice. This may be so. What’s silly, though, is the idea that the Serbian government didn’t know where he was and that he had “reinvented” himself as a healer!! Unfortunately, it’s been known for some time in the southeastern part of Europe that the Serbs were ready to “trade” Karadzic in order to achieve a fast track position in their desire to join the European Union. People in this part of the world are also speculating that pretty soon Ratko Mladic, his lieutenant, will also “be discovered” and handed over to the international court. As Karadzic isn’t useful to anyone anymore while Serbia is in a hurry to join the EU, trading him while offering justice is being viewed as the best approach. Appeasing the international community while working toward achieving one’s goals is the great balance of international relations.
Generally, I love Alexandria, Virginia, the city I live in just outside Washington DC. Perhaps, it’s because I am a ninth generation Alexandrian. But, as much as I might like my home, I loathe city politics.
Typically, my issue of "FYI: Alexandria", the city’s newsletter, is confiscated long before I have a chance to read it. This is a good thing as it keeps my blood pressure down and generally improves my quality of life. Unfortunately, this past weekend, as I was returning from Japan, the postman spotted me in the corridor of my flat and handed the recent issue of FYI directly to me along with a box of mail.
Then, I made the mistake of opening that same issue and ruining my Saturday morning. Apparently, the most important thing that has happened in Alexandria in my absence is that the city has decided to spend some of my real estate tax dollars on trying to close a Norfolk Southern (NYSE: NSC) ethanol transloading facility located on the extreme western edge of the city. The city has made a point of highlighting the term transloading, I suppose with the intent of scaring people. But, transloading is nothing more than the process of taking ethanol out of railcars and putting it into tanker trucks for transport locally.
Continue reading "NIMBY Nonsense"
I was corresponding with Silk Road Editor Yiannis Mostrous, discussing the capture of Bosnian Serb butcher Radovan Karadzic earlier this week. And even having read the stories posted out of London and various other European sources, Yiannis penned a quick line that explained why Karadzic hadn't been nabbed before now--there have been stories going back years that Karadzic and his thug ally Ratko Mladic had a box and season tickets at their local soccer stadium and attended regularly. Yiannis wrote: "Obviously a gift to the EU for early inclusion of Serbia in the family. Once they have further assurances, they will produce [Mladic] too." Of course. Yiannis is meeting with a journalist friend today and promises more on this from the pragmatic perspective in coming days.
Tuesday, July 22. 2008
It's as easy as one-two-three. Shop. Swipe. Sign. Nowadays practically everyone uses a debit card to make purchases. It's easy. It's fast. It's convenient. The money you spend is taken directly from your bank account. But now there's a new kid in town, and it's raising red flags left and right: the 401(k) debit card. The danger is that the money you spend with this card is directly debited from your retirement account. Much like a 401(k) loan, the debit card allows you to pay yourself back over time. But the increased ease and convenience of the debit card is a bit too unsettling. Now it's become much too easy to jeopardize your entire future with one swipe of plastic.
Continue reading "Debiting Your Future: I.O.ME."
Today the Congressional Budget Office (CBO) released a research letter calculating the potential cost of the administration's plan to backstop the government-sponsored housing enterprises, Fannie Mae and Freddie Mac. The report estimated this cost at $25 billion over 2009 and 2010. Although this is a round number that's easy to digest, the CBO concedes that the ultimate cost depends on a number of contingencies. Such uncertainties include the performance of Fannie Mae and Freddie Mac's mortgage portfolios, the amount of capital the enterprises raise from other sources, and the Treasury Dept's criteria for determining whether or not to inject funds under its temporary authority. Needless to say, this situation is quite fluid. At the same time, as a recent Mortgage Note released by the Office of Federal Housing Enterprise Oversight makes clear, Fannie Mae and Freddie Mac are absolutely integral to sustaining the nation's housing and mortgage markets. The image below demonstrates the enterprises' importance following the collapse of the market for mortgage-backed securities issued by private firms: 
Friday, July 18. 2008
Back in February, a survey conducted by American Banker found that almost 60 percent of banking executives believed that financial services companies faced a "crisis of trust" among their customers--the worst housing crisis since the Great Depression tends to have that effect on people. Last Friday, that crisis of trust intensified. The sight of irate IndyMac customers gathered around closed branches in an effort to access their money did little to inspire confidence in the US banking system. In fact, the highly-publicized run on deposits at IndyMac bank continued even after the FDIC had reopened the branches under its auspices. Mattress companies salivated over a potential bump in sales of "cash storage models," while banks and regulators fretted that IndyMac's failure could prompt a jump in withdrawals at other institutions--particularly among customers with account balances in excess of the $100,000 limit on the FDIC's deposit insurance. The FDIC should be commended for its efficient handling of IndyMac's failure; however, a new FDIC rule designed to "maintain public confidence in the banking system" by making future resolutions go much more smoothly only makes me more confident that more bank failures are on the horizon.
Tokyo, Japan At the Summit this year world leaders of G8 countries resolved to cut carbon dioxide emissions by 50 percent by 2050. One of the biggest planned contributors to that cut: promoting better energy efficiency. But while politicians discuss energy efficiency, the markets are forcing change. At this time, it really has little to do with carbon dioxide; rising energy prices are forcing companies and consumers to make changes. Consider that General Motors truck and SUV sales for the US are off more than 21 percent since the beginning of the year. Car sales are down because of the economic slump but only by around 9 percent. That's a sure sign that consumers are changing their behavior in response to higher oil prices. It has absolutely nothing to do with fuel efficiency standards or any other government regulations, rather it's the invisible hand of higher prices at work.
Thursday, July 17. 2008
T. Boone Pickens was an oilman, but in the midst of an energy crisis he's now a windman. He's not blowing hot air, but rather hoping we can take advantage of moving air no matter what the temperature. He's started his own website, on which he's proposing the Pickens Plan, a plan based on wind energy. According to his site, "The Plan calls for building new wind generation facilities that will produce 20% of our nation's electricity and allow us to use natural gas as a transportation fuel. The combination of these domestic energies can replace more than one-third of our foreign oil imports. And we can do it all in 10 years."
Some folks think it's a pie-in-the-sky idea, but he's made a believer out of several people thus far. Even with the possibility of the offshore drilling ban being lifted, T. Boone Pickens and many Americans recognize the need for alternative energy solutions.
Now, the state of Texas has given the go-ahead on $5 billion worth of transmission lines for the nation's largest wind-power project.
Watch the Pickens Plan:
Wachovia Securities' St. Louis office, part of Wachovia Corp's operations, was treated to a special investigation this morning after failing to comply with requests made in April by Missouri Secretary of State Robin Carnahan for documentation regarding the sales practices, internal evaluations of the auction-rate securities (ARS) market and marketing strategies. The original request was made after Carnahan received more than 70 formal complaints by Missouri investors who were unable to reach money they'd invested in ARSes; investments involved total more than $40 million. Although Wachovia filed a notice in May with the Securities and Exchange Commission that it had received the request, the fact that regulators found it necessary to drop in today seems to fly in the face of its promise to "cooperate fully" in that same notice. No word yet on what was turned up in the investigation. Wachovia and Wachovia Securities are also under investigation in New York, where they face a class-action lawsuit regarding misrepresentations concerning the quality, risk and characteristics of ARSes. Although the company plans to defend such allegations rigorously, its noncompliance in Missouri certainly doesn't seem to help its case much--at least not from a public standpoint.
After mortgage-related losses placed IndyMac in a precarious capital situation and a run on deposits delivered the final coup de grace, share prices of regional banks and other financials took a sharp hit in the next trading session.
Two days later, the slate was wiped clean as Wells Fargo hiked its dividend and posted second-quarter earnings that exceeded analysts' expectations. Here was a study in contrasts: Many commentators attributed the bank's success to its strong underwriting standards and limited exposure to the riskiest subprime mortgages--for example, interest-only and payment-option adjustable rate mortgages.
Although Wells Fargo deserves plaudits for avoiding these "innovative" mortgage products, this restraint should not be confused with so-called responsible lending practices.
Continue reading "Wells Fargo and Responsible Lending"
Wednesday, July 16. 2008
Kaput lender IndyMac Bancorp could be in a heap of trouble. The FBI is investigating the mortgage lender's practices for fraud regarding home loans given to less-than-creditworthy borrowers. The FBI is keeping details of the investigations under wraps, but for more on the story, click here.
They're baaaaaack. Remember Jib Jab's satire of the 2004 elections? Check out the new 2008 lampoon, Time for Some Campaignin', as well as commentary from the creators. It's politico absurdity as its best. For more jib jabbering fun, click here.
Tokyo, Japan
It’s annoying how often the concept of reserves and production are used interchangeably by the media. After all, we have all heard the statistics about how many barrels of oil are to be found in Brazil’s deepwater fields or locked in Canada’s vast oil sands. Most recently, the focus has turned to how much oil and gas can be found in offshore US oil reserves currently closed for drilling.
Don’t get me wrong, I am all for opening up the US Outer Continental Shelf (OCS) and the Alaska National Wildlife Refuge (ANWR) for drilling. After all, modern oil and gas drilling techniques are actually low-impact from an environmental standpoint and it makes perfect sense to try and increase domestic energy supplies in the current market.
But temper your enthusiasm slightly; reserves can be a misleading concept. The basic misconception seems to be that the world consumes about 83 million barrels per day of oil or 30 billion barrels per year. Therefore, some conclude that a 30 billion barrel reserve is enough to replace a year's worth of the world's oil.
Continue reading "Production Not Reserves"
Tuesday, July 15. 2008
Last week erstwhile McCain advisor Phil Gramm imprudently suggested that the US is merely in a "mental recession." With a reduced role in McCain's campaign, Senator Gramm now has plenty of time to bolster the weakening US economy by rereading The Secret and thinking positive thoughts. Better yet, perhaps taxpayers should use their stimulus checks to pick up a copy of the book and use their newfound understanding of the "Laws of Attraction" to repair their ailing attitudes and balance sheets. Speaking of balance sheet repair, taxpayers must be cringing over the government's proposed bailout of the beleaguered government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.
Continue reading "Always Historicize"
In a previous post, I noted the increasing interest in online advertising, how companies obtain data to target ads to the appropriate audience and Internet companies' desire for regulation of such data. Looks like Congress is now getting in on the game.
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