Category Archives: Commentary

Dear Jamie, Shut Your Piehole

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I don’t know what’s worse, being lectured by a bailout recipient on tax policy or realizing that one of the largest bank ceo’s doesn’t have a clue about what he’s talking about and is proving his stupidity in public to boot. Regardless, Reuters has the story of our brave and intrepid ceo blasting away blithely about something he obviously knows nothing about.

“I for one have no problem, as a well-off American… paying taxes,” Dimon told the annual spring meeting of the Council of Institutional Investors.

“I think those well off should pay a lion’s share, I have no problem with that,”

I think the cover story for Bloomberg may have gone to his head. Now he believes he’s a politician who can ignore the facts as he sees fit to promote, well, I’m not sure what the hell he’s promoting.

Let’s start with some facts for the factually challenged ceo of one of the largest banks in the US. The National Taxpayers Union has stats from 2008. The top 1% of taxpayers, as measured by AGI, paid a little more than 38% of ALL taxes. The top 10% of taxpayers, again by AGI paid a little more than 69% of ALL taxes. The top 25% of taxpayers, by AGI paid a whopping 86% of all taxes.

Seriously Jamie, how much more progressive do you want or do you not know the facts?

This seems to be one of those canards that liberals seem to spout off. This country does have a fairly steep and progressive tax regime. We really do, even though you don’t want to believe the facts of the matter.

The rich, contrary to your beliefs do pay their fair share. Since you were so famously described by the NY Times as wanting all the facts, including the raw facts, you may want to take these facts and understand them before opening your mouth.

Goldman Announces Trading Losses After FinReg Passes

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I find it awfully convenient that Goldman announces that they did poorly, for them, in their trading over the last quarter. I wonder if there was anything going on in the last quarter?

Losses on Goldman Sachs’s trading desks exceeded $100 million on three days during the period that ended on June 30, according to a filing today by the New York-based company with the U.S. Securities and Exchange Commission. The firm also disclosed that trading losses surpassed its value-at-risk estimate, a measure of potential losses, on two days.

Not only did they start losing money, but they did it while surpassing their VAR. Why, that’s pretty undisciplined for a firm that did not have a losing day the previous quarter. If I was a cynical suspicious type, I’d believe they’ve been rigging their books and now that the tide is going out against them, they want to make themselves look better.

There was that little ugliness that they’ve just finished up.

Goldman Sachs agreed last month to pay $550 million to settle a fraud lawsuit filed by the SEC over Goldman Sachs’s 2007 sale of a mortgage-linked investment.

And of course the Financial Reform bill was passed and signed into law. They were definitely a target in that and have already responded to the bill.

It’s just a funny coincidence that they all of a sudden start losing money and do so in such an undisciplined manner that it looks like they’re reporting to the SEC what they want the SEC to see. Of course this is how all public companies report, which is an issue in its own right, but it certainly does look like Goldman is making a mockery of the reporting rules and the SEC.

And no, I of course do not expect anything to happen as Goldman and the other big boys pony up a lot of cash to their lobbyists.

The Things I Don’t Know

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Since I’ve decided to try other platforms than WordPress, I believe I’ve found the Achilles Heel for any non PHP platform. It’s damned hard getting a platform set up on a shared hosting. I have a small site that I’m using that has Python. I’ve followed the instructions pretty easily and I’m screwing it up.

How?

Damned if I know. It’s obviously something I don’t know.

The good thing is, that’s learning and soon I’ll know it. But until then, I still don’t know and still can’t get my Django site up and running. Hopefully soon.

The GOP Did Not Destroy The Economy By Itself

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I’m going to go out on a small limb here and criticize one of the big boys in the financial blogging world. And I’m going to venture into politics, which I refuse to get into on this blog and will do so sparingly, if at all. Look, I realize I’m an amateur at finance. One of the reasons for creating the blog was to chronicle my venture into finance. But, Barry is wrong with his glee.

I can sum it up thusly: Whereas the Democrats have no economic policy, the Republicans have a very bad one.

The details are what makes Stockman’s take so astonishing. Here are his most important observations, of which I find little to disagree with:

I’ve pretty much stopped reading Barry’s blog because it’s become all about him. He pretty much knows it all and it’s all the republicans fault. But he’s wrong on this part. Barry knows a lot about finance. He’s showing some ignorance about politics though.

Yes the piece he is quoting from is a hit job by David Stockman, but he notes that he pretty much agrees with David Stockman on his points.

I’m sure Barry knows this but spending and tax policy is created by Congress.

Let’s go over that again. Budgets and spending are created and controlled by Congress.

The house was controlled by Democrats for more than 40 years before the Republicans came to power in 1994. Other than 1981 thru 1986, the Democrats controlled the Senate.

Other than those early years in the 1980’s, Congress was controlled by Democrats. All that spending and any tax cuts were done with the approval of Democrats. It’s a lie to say or imply that Republicans did this all by themselves. They didn’t. They couldn’t because they didn’t control Congress.

And I note, when the republicans did control congress starting in 1994, we ended up with a surplus.

I am not defending Bush. He was, from a fiscal standpoint, a bad president. However, he’s not even close to how horrible the current president is. Of course regardless of the president, spending is controlled by Congress. And the republican controlled Congress did a crappy job. And they were rewarded for their crappyness with being voted out of office, which they deserved.

It really bothers me when people who should know better, want to bash people for things they can’t do. Congress is wholly to blame for the budget debacle that we have. They have not cut spending when they should and they still refuse to do so. Neither party has shown the courage to do the right thing. They both are equally bad, from a fiscal standpoint. They have and are continuing to ruin this country with their spending plans.

Regardless of the Republican bloodletting that the NY Times is eager to see, until and unless Congress cuts spending, this country has a serious problem. Hopefully both parties can wake up before we’ve become a third world country with no future.

My Problem With WordPress

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It’s really simple actually, Matt.

Well, no, Matt isn’t causing any actual problems with the software. I have problems with Matt and his running of WordPress. In case one doesn’t know, even though WordPress is open source and many people submit code and help fix it, Matt controls it. If he doesn’t like something, it doesn’t happen, even if it would be for the better for WordPress.

Don’t get me wrong. Matt, up to know, has done a wonderful job. He forked the original software and created WordPress and has made it to what it is. The problem is now Matt=Wordpress. He would like to say that’s not true but, I’ve been using WordPress for a long time and there have been all sorts of little things pop up that really show that Matt runs WordPress like Bill Gates ran Microsoft.

That sort of command is a good thing for open source projects, I believe, because it can give a project focus. It can give a project drive. The downside is that, well, if you don’t like what Matt wants, you’re shit out of luck. For the vast majority of people, and up until now, me, it’s been ok.

So what’s my problem? Here’s my problem.

After a heated debate between the founder of WordPress (Matt Mullenweg) and the creator of the mighty Thesis theme (Chris Pearson), it looks like cooler minds have prevailed with Pearson finally embracing GPL for Thesis via a split license.

There is no doubt that Pearson would have lost in court had Matt actually sued. The problem is that Matt threatened to sue in the first place. My problem with that is that he only gets like this when there is someone that doesn’t, for lack of a better phrase, bow down to Matt. This isn’t the only case. It’s happened before and I expect it to happen again. That’s really my problem with WordPress. Matt is turning into a bully and throws his weight around.

Don’t believe me?

As I said on Twitter, if there’s another premium theme you’d like to try out I’m happy to buy you a copy, just send a link and your info to my contact form. It’s better to choose a solid platform now rather than put it off until later. (Matt Mullenweg)

He was willing to cut Pearson off at the knees and threaten his income by offering this bargain. Granted a lot of people probably wouldn’t take Matt up on it but that’s the part that’s sucky. Hey, you want to go on about GPL, just sue the bastard. He had it coming. But instead, Matt decides to try and gut the guy’s business instead of focusing on the GPL issues.

And as for the GPL issues, I still don’t not believe, not agree that the GPL was ever meant to be viral like Matt and Mark Jaquith state. Both Matt and Mark are infinitely smarter about their software and it’s licensing. But I’ve been around Slashdot and Reddit enough to have read about other people who’ve had GPL issues. Pretty much they all prove, that, well, because WordPress is GPL does not necessarily make themes or plugins automatically GPL.

So how does this directly affect me?

Not at all.

I neither make plugins nor themes, for myself or others.

But.

And it’s the but that’s the issue. Do I really want to invest any more time or effort to a platform that is controlled by one person who can decide to ruin you if he chooses? Not really. It’s not helping Microsoft, not sure why it’s ok with WordPress.

While I think WordPress has so far, been a decent publishing platform, I believe it’s time to start looking around and see what else is out there.

About Sums Up My Problems With Credit Scores

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Joe Nocera has an article in today’s NY Times. A mortgage broker called him to complain about credit scores and how they are hurting more than helping. It’s a good article and it pretty much sums up my issues with the whole credit scoring industry.

A FICO score, he patiently explained, is merely a tool that lenders use to help manage their risk; criticizing it is akin to criticizing “a saw because the construction job turned out badly.” With big banks making thousands of credit decisions every day, they couldn’t possible do it without some standardized benchmark; a credit score provided that benchmark. Over the years, he added, the algorithm had gotten very good at predicting the odds of a borrower defaulting.

In fact, FICO scores are not the best predictor. The amount of equity a person has in his home, his debt-to-income ratio, his job stability and his cash reserves are all better predictors than credit scores, according to Dave Zitting, the chief executive of Primary Residential Mortgage, a leading mortgage lender. And yet, he said, “The credit score has become the line in the sand for the banks.”

So even though a credit score is not the best way to predict how people will be with loans, the lending industry doesn’t care.

And that doesn’t even get into the question of whether the prospective borrower is someone who once had credit problems and has now cleaned up his act — and his score is improving — or someone whose credit is in decline.

It’s a great point. You can have 2 people with the same score and yet be in completely different phases of life. They can have completely different jobs and opportunities but because they have the same score they are treated the same. This is a large downside to the credit scoring industry.

In the old days, you would be a customer of a bank. The bank would know how things are with you. They would work with you on your bank business. They would be able to tell whether or not you were are good credit risk or not. The credit scoring, wrongly, gives lenders the ability to say, hey, this score means X. In reality, it may or may not. But because they’re able to sell of their loan they don’t care.

It’s a bad way to do business and it’s also a large part of the reason that we have the subprime problem. If bankers actually knew their customers, they would know whether or not they were good credit risks regardless of any credit score. Yes it would take a lot more work on the part of banks. But, since banks supposedly have risk management groups, you’d think they would be all for this sort of risk mitigation. But they aren’t because they just sell the loans to the federal government.

It’s a good article by Joe and you really should read the rest of it. It neatly sums up my problems with credit scoring and one of the problems with modern finance in America.

The Newspaper Industry Doesn’t Get It Either

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You’d think, if you were an industry from the 18th century, you’d look at other industry’s that successfully moved into the 21st century and copy them. Instead, like the luddites of the RIAA and the MPAA, the newspaper industry has decided to sue their readers into oblivion.

Since Righthaven’s formation in March, the company has filed at least 80 federal lawsuits against website operators and individual bloggers who’ve re-posted articles from the Las Vegas Review-Journal, his first client.

Now he’s talking expansion. The Review-Journal’s publisher, Stephens Media in Las Vegas, runs over 70 other newspapers in nine states, and Gibson says he already has an agreement to expand his practice to cover those properties.

And, in my opinion, the newspaper, cowardly, declined to comment as to why it was suing its readers. I’m sure we know why they declined, because it’s damned awkward explaining how suing your users is a good business practice.

After the complete and utter waste of money that the RIAA has wasted, you’d think these other luddite industries, would get a clue. And boy has the RIAA wasted their cash.

The RIAA’s lawsuits weren’t a money maker, though — the record labels spent $64 million in legal costs, and recovered only $1.3 million in damages and settlements.

Gee, imagine if the RIAA had spent that on developing talent. Or putting out music that people like. Just think of how much money they could have made with an investment like that. Instead, they tossed that money down a rat hole. They could have done something positive for their customers, instead they made a bunch of lawyers even richer. Genius move for the RIAA.

Nice to see someone’s copying them than the other way around, right?

Why Is Anyone Surprised At the New Home Number?

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Seriously, is there any rational being alive that wasn’t expecting the home numbers to go down?

Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.

The bleak report from the Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation’s housing market.

I guess I don’t get how any “professional” would ever think, especially after the way the car credit did the same thing, that new home sales weren’t being goosed by the tax credit.

“We all knew there would be a housing hangover from the expiration of the tax credit,” wrote Mike Larson, real estate and interest rate analyst at Weiss Research. “But this decline takes your breath away.”

It only takes your breath away if you were buying the jive the realtors are selling. How do any of these “analysts” and “economists” feel good about themselves? Look, we just saw the same thing happen with the car credit. As soon as that credit stopped, car sales plunged. Why would anyone on the planet earth think this would be different?

Paul Dales, U.S. economist with Capital Economics,” wrote in a note. “After all, unemployment remains high, job security is low and credit conditions are tight.”

Exactly.

Look, I’m an amateur. But even I could see that the housing numbers were being driven higher only because of the tax credit. If I can see this, why can’t the professionals? It also shows you that you shouldn’t trust the professionals either. They’re as surprised at this as they were the dot-bomb era too. Do your own research. Learn to see what is in front of your eyes and use your head.

Bernanke:Liar Or Fool?

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I saw the story first from Dr Duru’s tweet earlier today about Helicopter Ben testifying before congress.

“Gold is out there doing something different from the rest of the commodity group. I don’t fully understand movements in the gold price, but I do feel that there is a lot of uncertainty and anxiety in financial markets right now; and some people believe that holding gold will be a hedge against the fact that they view many other investments as being risky and hard to predict at this point.”

I don’t know about anyone else but, I find it amazing that the guy in charge of the Federal Reserve actually testified that he’s stumped about gold. Is he serious? Or is he playing a game with congress?

I agree with DrDuru as to his thoughts on Helicopter Ben.

So, when gold is just another commodity, Bernanke is confident he understands gold. But when it diverges to the upside and makes new highs, it becomes a conundrum. Bernanke can certainly point to current inflation numbers and insist that buyers of gold are simply “uncertain and anxious.” His claim that other investments appear “risky and hard to predict” to other people is useless.
…
Bernanke cannot speculate much further on other fundamental reasons for gold’s rising popularity: more and more people are looking into the future and realizing that many Western governments can only afford to pay (service?) their tremendous loads of debt by printing money. Maybe not today or tomorrow, but eventually, the world will be awash in even more massive amounts of paper. This is always an available option in a world of near-zero interest rates.

So either Ben Bernanke is truly lying when he says he doesn’t understand the rise in gold and is a moron and shouldn’t be anywhere’s near the levers of power or he’s just lying through his teeth but won’t say anything as that would be a political bombshell. Neither option sounds good to me.

US Is Greece… Blah Blah…

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I always love it when central bankers try to wax poetic. Oh yeah, usually they don’t which is why this one is supposed to be interesting, but really, he’s not saying anything really new.

Mervyn King, Governor of the Bank of England, fears that America shares many of the same fiscal problems currently haunting Europe.

No shit. Really. How much money do you get paid to figure that one out? Hell, I could have told you that for free. Of course I don’t have any political power or any money to buy political power but really, would it have been that hard to look around and see that all the developed countries have been promising too much for too long and the bill is finally coming due?

And being the Euro type, he then promptly falls into the typical pol mode by wanting to raise taxes.

within the Euro Area it’s become very clear that there is a need for a fiscal union to make the Monetary Union work. But if that is to happen there needs to be also a mechanism to enable other countries that have lost competitiveness to regain competitiveness. That requires actions, probably structural reforms, changes in wages and prices, in the countries that need to regain competitiveness. But it also needs a solid and expansionary state of domestic demand in the stronger economies in Europe.

Dude, it’s not the income side of the ledger that’s the problem, it’s the expense side. Stop spending so much money. It’s really not rocket science.

And that of course is my biggest problem with the US. Most pols, and that includes quite a few republicans, believe that if we raised taxes we’d be all set. From where I sit, having watched government program after governmet program always get larger, the problem is all the programs to begin with. If you create a new program, I’m looking at you health care reform, then we will always have a spending problem.

Always remember, you can raise income, ie taxes, or cut spending, to get a balanced budget. 99% of all politicians, would rather try to increase taxes than be responsible and cut spending.

All in all, a rather unremarkable interview with a central banker. Hell, he could have been any moderate/liberal US politicians by his stands. A pox on all their houses. Now then, where’s the beer.