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August 2007 Archives

The Saga of Sub-Prime Loans

Don't Buy Stuff



Steve Martin circa 2006

Commentary by Michael Lewis
Sept. 5 (Bloomberg)

So right after the Bear Stearns funds blew up, I had a thought: This is what happens when you lend money to poor people. Don't get me wrong: I have nothing personally against the poor. To my knowledge, I have nothing personally to do with the poor at all. It's not personal when a guy cuts your grass: that's business. He does what you say, you pay him. But you don't pay him in advance: That would be finance. And finance is one thing you should never engage in with the poor. (By poor, I mean anyone who the SEC wouldn't allow to invest in my hedge fund.)

That's the biggest lesson I've learned from the subprime crisis. Along the way, as these people have torpedoed my portfolio, I had some other thoughts about the poor. I'll share them with you.


Read More »

Posted August 28, 2007 09:18 AM    Permalink
Read more on Economics and Business

The Fed, as an Institution, is Lost

The Panic of Ought-Seven

Tardive Diskinesia is a condition caused by long-term use of antipsychotic medications, usually in the treatment of schizophrenia. Diskinesia refers to "an impairment of voluntary movement," usually tics of the face, but other extremities can be affected as well. Tardive refers to the fact that the tics usually persist long after the drugs are no longer taken.

Haldol (Haloperidol) was hailed as a miracle drug in the sixties for patients with schizophrenia. It was the first drug truly effective in controlling psychotic episodes. But sadly, after years of use, many schizophrenics developed Tardive Diskinesia - which doesn't go away. Some Benzodiazepines, such as Valium, Ativan, or Klonopin may improve the situation, but Benzodiazepines have their own set of issues.

Having been gone last week (on vacation in the Islands), I sort of feel like the guy that walks in on the middle of a conversation (about the current market action) and thinks he knows what everyone is talking about. After a few minutes, I can't help but observe that the Federal Reserve is acting to forestall any further damage from an unwind of a speculation that occurred partly as a result of Fed action taken in 2002, which was taken to forestall any further damage from an unwind of a speculation that occurred partly as a result of Fed action taken in 1998. Et cetera.


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Posted August 20, 2007 10:03 AM    Permalink
Read more on Financial Market Commentary

Cotton-Pickin' Liberals

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Democrats have been calling Republicans "the party of the rich" for half-a-century now. True conservatives would normally have taken that as a profound compliment. Unfortunately, the majority of Republicans in the 2004 Congress were wolves in sheep’s clothing and had no idea how to profit from their election windfall. After all, they were liberals - not conservatives. As a result, many Republicans were unceremoniously asked to go home (sent packing) in 2006. The national elections in November, 2008 will likely see even more repudiation of faux political conservatives. When the time comes that terms expire, Arizona Senators John McCain and Jon Kyl will never be elected again to public office, unless illegal aliens have something to say about it.

Undaunted, the Republican National Committee (RNC) continues to send out surveys. The latest was entitled "Ask America, 2007 Nationwide Policy Survey." The document was boldly marked "CONFIDENTIAL DOCUMENT," implying that it contained something of special importance or national intelligence suitable for the New York Times to share it with our nation's enemies. The survey was inscribed with an important-looking registration number "P7G31105-F33178835" and was due September 1, 2007. Of course, cash contributions were solicited. Detailed instructions on the cover page read, "Return the Survey along with your most generous contribution in the envelope provided."

After 55 questions, I returned my survey annotated, in the small space of only three lines that were provided for comments, "No fence, no dollars, no votes."

Was that too subtle?


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Posted August 18, 2007 10:14 AM    Permalink
Read more on Political Thought

Jobs - The American Future

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In the recent article, "Jobs - Have They Become the American Myth?", we learned that the expense of holding inventory is being avoided by most businesses - and employees in the United States, unlike China and India, have become inventory. Why is this important? Because, on the other side of the globe are China, India and other emerging nations. Most Americans mistakenly think their economic situation is unrelated to China. Americans should be asking, “How do China and India figure as a serious competitors in the world economy and how does that affect me?”

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China is both a serious and a potentially dangerous competitor. The most important economic reason is that China has millions and millions of laborers. Almost half of its 300+ million farmers are under-employed labor, not actually needed to work the land, according to the Chinese Ministry of Agriculture. There are around 80+ million more redundant workers in government and government enterprises, not to mention another 100+ million squatting in the coastal regions looking for work, all trying to survive. And what about the soon-to-be employable Chinese youth? A quarter of the Chinese population is under the age of fifteen, representing another 500-million new workers waiting in the wings. None of this discussion of China takes into account the human resources of India and other emerging nations.


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Posted August 10, 2007 11:25 AM    Permalink
Read more on Economics and Business

Rush Limbaugh, are you the White Rabbit?

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Rush, you chose to share in a limited fashion your experiences as a guest at the White House on your Friday, August 3rd radio broadcast. While en route a dentist appointment, I felt compelled to pull over and take notes. Some of what I was hearing did not ring with the pure tone of your lead crystal I’m accustomed to hearing. It sounded and felt more like a cavity being drilled prior to an unavoidable filling. Now, freely using many of your own words, with the disclaimer that I am a simple man who feels unconstrained by who said what to whom, what follows is the average man’s reply. Please accept my comments as a personal viewpoint counter to those you expressed.


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Posted August 5, 2007 07:16 AM    Permalink
Read more on Domestic Issues and Politics ~ Media and Entertainment

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