Mutual Fund investors fleeing for exit - time to invest in Real Estate mortgages

Canada’s national newspaper - The National Post - ran this article on Tuesday November 4th in the Financial Post section.  Perhaps you read it too and found yourself asking, “what should I do if mutual funds aren’t the most effective place for my RSP investments?”

If this thought crossed your mind, you’ll want to learn more about AltaPacific Mortgage Investment Co.

Please don’t hesitate to call or email us for more details on investing in Real Estate mortgages.

Annual return mutual fund

Mutual fund gives investor dividend or distribution of capital. Dividend may be required from company, which gives dividend periodically. Moreover, your sponsor invests in blue chip stocks. It can raise your return by high dividend. Your sponsor will give dividend to you. Fixed income funds that invest your fund to fixed income will get interest semi-annually except your sponsor invests in Zero Coupon Bond.

Your return is the difference of today NAV plus capital gain then divided by initial NAV. From information in first paragraph we can count our return are ((25-16) + 0.4) / 16 = 0.5875 or 58.75%. This mutual fund gives you very high return.

Is 58.75% your total real return? No, is not yet. You must calculate you return with other fees. Sponsor will charges you with some expenses. Sponsor charges you front end load at least 6% but may not exceed 8.5%. When you redeem your fund, sponsor charges you back-end load for 5 % or 6%. Operating expenses include company operation like administrative, advisor etc. SEC allows your sponsor to charge for 0.2 – 2 % fee. Meanwhile, 12b-1 is cost for advertising and marketing expenses. Suppose your total fee is 15%. Your total return is return rate minus fee or 43.75% (58.75% - 15%).

Sometimes we find mutual funds with high return charges us by high cost, other side mutual funds with low return charge investor with low returns too. E.g., mutual fund A gives you return 30% and charges you fee for 15%. Meanwhile, mutual fund B gives return just 23% but charges you fee for 9 %. You must careful to find your sponsor. Before start investing mutual funds, you must consider the reputation and cost of investment. You must read prospectus of mutual funds carefully. The prospectus of sponsor contains information about fee as your consideration.

NAV of mutual fund

Mutual fund usually called for open-end investment company. Open-end mutual fund is most favorite’s investment company in US. At the end 1999, there are more than seven thousand mutual companies in US. Fidelity, Vanguard, Putnam, Dreyfus etc is the most well-management mutual fund company.

Which one is the best? It is depend on your view. Your aim investment may determine which funds fit with you.

There are types based on mutual fund investment policies are:

Equity funds, Mutual funds that invest in equity funds like stock. This fund is suitable for investors who like capital gain and dividend. Sometimes investment manager buy little portion fixed-income securities. Fixed income securities support mutual fund company to steady when investor liquidate the funds suddenly.

Equity funds differ on income fund and growth fund. Income fund refer to company stock with dividend, other side growth refers to focusing on capital gain.

Fixed income securities, Investment manager use fixed income securities for investing investor money. This mutual fund is ideal for medium term and long-term investor who want to avoid risk like pension, old officer, etc. Some companies invest their assets to specific fixed income securities like Municipal Bond, Government Bond, Debentures, Commercial Papers, Corporate Bond, T- Bills, etc.

Money market funds, Investment manager invest funds at highly liquidity money market instrument. They may put money at foreign currency certificate deposit. This fund is liquid. This fund is suitable for short-term investor like corporate and other business organization.

Balanced and Income Funds (hybrid), mutual funds that invest money at various investment vehicles likes bond, stock, money market, index, etc. Investment manager construct best portfolio to get higher profit. This fund fit with moderate investor. This fund is ideal for medium and long term.

Assets Allocation funds, Similar with balanced and Income Funds. Investment manager find to design high investment vehicle.

Index Fund, This fund buys index. Index represents index performance in capital market. E.g., S&P 500 Index fund is mutual fund represent S&P 500 Index. There is also other index like Dow Jones, NASDAQ, Wilshire 500, etc.

Newspaper provides information of mutual funds. Open-end mutual has obligation to publish NAV daily at newspaper. Meanwhile, close-end has obligation to publish NAV weekly at newspaper. You can see table noted NAV or Net Asset Value. You can notice that NAV of one mutual fund is different day by day. Sometimes NAV rise, other day NAV descends.

NAV should changes because the difference between NAV can result capital gain. Investor expect NAV rise after they buy mutual fund. The best performance manager will provide good capital gain. Suppose, three months ago, you bought mutual funds for $ 25. Today your mutual fund price is about $ 30. So you can get capital gain for $5 ($30 -$25).

So, what is NAV? NAV is price of shares mutual fund. NAV price is similar with company stock price. You can buy mutual fund at NAV that effective that day. Today, information announced a mutual fund NAV is about $25 so you can buy mutual fund for $25.

How can NAV count? NAV is total assets of mutual funds minus liabilities divided by total number shares of outstanding. Suppose one mutual fund has stock that has market value $ 125 million. They have liabilities $25 million including owe to advisers, rent, wages due etc. That mutual fund offers 5 million shares to investors. NAV of mutual funds are: ($ 125 million - $ 25 million) / 5 million = $ 20.

Mutual fund has some assets from investment vehicle. They invests investor money to stock, bonds, index, etc. The assets vary day by day because stocks, bonds, index move volatility. Stocks that invested may give dividend periodically especially blue chip stock. Meanwhile, bonds pay interest semi-annually except zero coupon bonds. Money market mutual fund also invests in certificate deposits so they can get interest periodically. This is explaining that NAV can change day by day. A mutual fund has liabilities too. Liabilities can reduce NAV value. Sometimes mutual fund has liabilities. They owe money to others financial institution and they owe for salary officer, office rent, miscellaneous expenses etc.

I choose investing stock than mutual fund

Investing in stock will give you higher profit than investing in mutual fund moreover blue chip stock. Even there is no one guarantee your risk, investing in blue chip stock is safely and profitable. Center for Research in Security Prices[1] has research that stock will give you rate of return about 13.11% for large stock and 18.81 % for small stock.

Investing in stock has means that you construct portfolio by yourself. You can choose your stock that will give you more profit. You can fit your risk with the stock. Aggressive investor may choose speculative stock that may give you spectacular return. Meanwhile risk avoid investor can buy blue chip stock or defensive stock.

Stock Investing give you new experience. You can feel the fear the investment. You can learn investment in real world. Learning by doing is the best learn method.

Stock Investing will sharpen your intuition. You can appraisal the stock for a moment. The result you will gain more money.

Both mutual fund and stock are risk fully. You must suffer the risk even your mutual fund company is the best mutual fund company in the world and have good reputation for over 20 years. You can deny the risk even though you investing in risk-free asset like Certificate Deposit. Your money in Certificate Deposit may loose if country in the war.

Investing in mutual fund is expensive. You must pay much fee. When you buy mutual fund, you will be charged with Front End Load. The Security Exchange Committee (SEC) limits Front-end load for 8.5%. In practical, Mutual Fund Company usually charge investor more than 6%. When you liquidate your mutual fund, you will be charged with Back-end load. The SEC allow mutual fund to charge operating expenses. Operating expense is including administrative expenses and consultation fee. Last, invests mutual fund charge you for 12b-1 charges. At least you must pay four fees in investing mutual fund. Remember, high-risk high return.

[1] Bodie. Z, A. Kane and Marcus A.J. 2002. Investments. 5th edition. Mc Graw-Hill Irwin. New York.

ETFs vs. Mutual fund: which is best for you?

In my opinion, ETFs is better than mutual fund. ETFs have many advantages than mutual funds. ETFs are newer product than mutual fund stock index. ETFs are more liquid than mutual fund. Investor can buy and sell ETFs anytime they want like stock. You can trade ETFs through day. You may buy ETFs in the morning and sell it afternoon. This will give you chance to gain profit at short time. On, contrary, mutual fund can sell after sponsor finish counting Net Asset Value (NAV).

Even, ETFs are cheaply than conventional mutual fund. ETFs charged investor with few management fees. E.g., Barclays charges annual expenses for nine basis point (0.09 %) of net asset value per year on its S&P 500 ETF, whereas Vanguard charges your annual expenses for 18 basis points on its S&P 500 index mutual fund. On Contrary, Mutual fund will charges you with so many fees. When you buy mutual fund you will be charge with front-end load. The sponsor is usually charges you for 6% invested funds. You need to expend money for redemption too. The sponsor will charge you for 5% or 6% invested funds. Others fee that must you pay are operating expenses and 12b-1 charges.

ETF have also potential taxes advantages. When investor sells their ETFs, the sponsor does not have to sell their share. Therefore, the government does not charge tax to your ETFs. On contrary, when investor redeem mutual fund, sponsor must sell their stock. Consequently, the investor must pay taxes for capital gain taxes.

Philam, co-ops form special mutual fund

The mutual fund will have an authorized capital of P400 million, said Isfani Daba, chairperson of the First Community Cooperative (Fico), which will have a 45-percent stake in the fund.

The other cooperatives investing in the mutual fund are Amkor Technology Philippines Employees Cooperative, Peace and Equity Foundation, Coop Life Insurance and Mutual Benefit Services, Cebu CFI Multi-Purpose Cooperative, Novaliches Development Cooperative, San Dionisio Credit Cooperative and the United Sugar Cane Planters of Davao.

Although local financial markets are in the doldrums, Daba said the mutual fund offered a good opportunity for cooperatives to participate in a fund that could pick up securities at bargain prices.

The minimum investment in the cooperative mutual fund has been set at P100,000.

Roa said the new mutual fund will be a balanced fund or invested in a combination of stocks and bonds.

“Many people still view investing as the province of financially well-off individuals. Nothing could be farther from the truth—individuals, both the high net-worth and the regular Juan dela Cruz, must be able to maximize opportunities in the financial markets, and mutual funds certainly assist in leveling the playing field for all client types,” said Jose Cuisia Jr., president of PAMI’s parent company, Philippine American Life and General Insurance Co. (Philamlife).

Through its partnership with the National Cooperative Movement, Cuisia said the Philam group would like to encourage larger investments in mutual funds.

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Mutual Funds - Feel the Heat

Mutual Fund investment in India is a pick up. Mutual funds are collective investment schemes that clubs money from investors and invest in securities like stocks and money market instruments. For investment in Mutual Fund, there are a number of mutual funds in the country, both domestic as well as international players.

One of the most important reasons why mutual fund investment is preferred investment tool in India is because they offer the investors the ability to easily invest in complex markets. According to a survey, mutual fund investment in India constituted around 40 per cent of stock investment plan in 2007. But these are certainly bad times even for mutual fund investors. The worst sufferers in the present market are those funds that have investment portfolios of small and mid-cap stocks. Moreover, tax-saving mutual funds too have performed badly with Principal Personal Tax saver witnessing losses of 80 per cent from its high.

Investors looking for impressive returns from mutual fund investment in India are also disappointed by balanced funds (having equity exposure of around 65-75%). Balanced funds invest both in stocks and fixed income securities as per the prescribed proportion in their offer documents. For the four-month period (July-October), there has been 30 per cent drop in values of average balanced funds.

Mutual Funds

Mutual Fund is an investment alternative for investors, especially for small investors and those who have less time and skill to count the risks of their investments. Mutual Fund is designed as tool to gather fund from public that have the capital, will to invest, but only have limited time and knowledge. Beside that, through Mutual Fund, it is expected that the number of local investors in the Indonesia’s Capital Market can increase.

Generally, Mutual Fund is defined as a mean to collect fund from the investment society to be invested in portfolios by the fund manager. This definition is also written in the Capital Market Law No.8/1995 section 1 clause (27) regarding Mutual Fund. There are three points shown on this statement. First, Mutual Fund collects fund from the society. Second, the fund is then invested in the securities portfolio. Third, the fund is managed by an Investment manager.

Therefore, the fund put in the Mutual Fund is investors’ collective fund, and the Investment Manager is the person trusted to manage the fund.

Second, Mutual Fund helps the investor to invest in capital market easier. Determining which good stocks to buy is not easy. It needs specific knowledge and experiences, which some investors don’t have.

Third, time efficiency. Since the fund invested in the Mutual Fund is managed by a professional fund manager, investors do not need to monitor their investment performance all the time.

Like other investments, besides giving the investor the opportunity of profit, Mutual Fund has possibilities of risks. Such as:

From the investment portfolio, mutual fund can be categorized as follow:

Different kinds of mutual funds: which is suit for you?

Different kinds of mutual funds

Mutual fund usually called for open-end investment company. Open-end mutual fund is most favorite’s investment company in US. At the end 1999, there are more than seven thousand mutual companies in US. Fidelity, Vanguard, Putnam, Dreyfus etc is the most well-management mutual fund company.

Which one is the best? It is depend on your view. Your aim investment may determine which funds fit with you.

There are types based on mutual fund investment policies are:

Equity funds, Mutual funds that invest in equity funds like stock. This fund is suitable for investors who like capital gain and dividend. Sometimes investment manager buy little portion fixed-income securities. Fixed income securities support mutual fund company to steady when investor liquidate the funds suddenly.

Equity funds differ on income fund and growth fund. Income fund refer to company stock with dividend, other side growth refers to focusing on capital gain.

Fixed income securities, Investment manager use fixed income securities for investing investor money. This mutual fund is ideal for medium term and long-term investor who want to avoid risk like pension, old officer, etc. Some companies invest their assets to specific fixed income securities like Municipal Bond, Government Bond, Debentures, Commercial Papers, Corporate Bond, T- Bills, etc.

Money market funds, Investment manager invest funds at highly liquidity money market instrument. They may put money at foreign currency certificate deposit. This fund is liquid. This fund is suitable for short-term investor like corporate and other business organization.

Balanced and Income Funds (hybrid), mutual funds that invest money at various investment vehicles likes bond, stock, money market, index, etc. Investment manager construct best portfolio to get higher profit. This fund fit with moderate investor. This fund is ideal for medium and long term.

Assets Allocation funds, Similar with balanced and Income Funds. Investment manager find to design high investment vehicle.

Index Fund, This fund buys index. Index represents index performance in capital market. E.g., S&P 500 Index fund is mutual fund represent S&P 500 Index. There is also other index like Dow Jones, NASDAQ, Wilshire 500, etc.

Specialized sector fund, your investment manager invest in industry like biotechnology, utilities, telecommunication, precious metal (Gold & Silver), etc.

Assured returns in Mutual Funds!!

ET pointed to this development in India’s Mutual Fund Industry which came as a rude shock.

Assured returns?? How can Mutual Funds give assured returns to big ticket investors and penalise small investors (r’ber the difference is accounted an expense deducted from the NAV of other investors over a period of time). Is this a mutual fund concept at all?

Reminds of John Bogle who often says, there is nothing mutual about mutual fund industry. Agreed MF industry is under severe stress but you can’t penalise small investors. Instead of cutting expenses, what investors might get is higher expenses and moreover they may not be aware of it all. As it is the investments in Mfs have halved and this might be lower going ahead as well.

[...] exit packages for employees and below par returns for investors! I had pointed that in these times small time MF investors loose out (for whom Mfs are designed) and big ticket [...]

Index ETFs Gather Steam As Mutual Funds Give Up Assets

Since we are talking about ETFs and mutual funds, it would be an appropriate time to briefly tackle the subject of taxes. Mutual fund investors will be in for a surprise. Not only are funds down 30, 40% or more, poor investors will get a big, fat tax as well. Even if your growth fund lost money, you’ll owe taxes, something that wouldn’t happen with growth ETFs or most any ETFs.

For many, ignorance is bliss. Few will do something about it and join the movement towards ETFs away from mutual funds. Even though September saw ETF assets decline, the ICI reports net creation of $52 billion worth of ETFs This is outstanding and the largest number I remember seeing. Even though investors lose money everywhere (Russia ETF, Commodity ETFs, Energy ETFs, you name it) they’ve come to trust ETFs more. More power to you.

Time to Buy Mutual Funds

With the market finally hitting a lower daily volitility it is time for you to consider buying mutual funds again. In order for you to make a good decision on who to get a proper mutual fund purchase you should consider shoping around at different Mutual Fund Store. Shop around and take your time before making a decision.

Criticism of Mutual Funds

Mutual Fund investing has exploded over the past 50 years to become one of the most popular forms of investing anywhere, there are still possible pitfalls that you can run into if you’re not very careful. Investing is still a very risky business, even if people are doing it. Here are a few tips to help you through any problems you might have.

One common criticism of mutual fund investing is that they don’t have a high enough return on their investment and that index funds, which aren’t as popular have historically returned a higher investment than the much more popular actively managed mutual funds.

A second common problem that some have with mutual fund investing is the use of load funds. You have probably seen the phrase “no-load mutual fund” in the newspaper or on television. The reason the no-load type of fund is preferred is because load funds come loaded with fees.

The fees can cost anywhere between half a percent, all the way up to 8.5 percent of however much you chose to invest. It’s thought that these fees are a clear conflict of interest as they clearly benefit the people making the sale and hurt the person making the investment. Load mutual funds are also thought to have your broker recommend funds that will maximize his fee, and not your investment portfolio.

A few investors also look to a perceived conflict of interest in regards to the size of the mutual fund. Most companies that manage the mutual fund charge a fee of between half a percent up to two and a half percent of the total amount of the funds assets. It’s thought that this fee could cause a fund to spend more on advertising than is actually needed so that they can get more people to invest in the fund and maximize their fee as much as possible.

The mutual fund market isn’t immune to scandals, either. In 2003, a scandal involving the practice of unethical and underhanded trading practices. Many funds were found to have participated in late trading and market trimming, both of which are illegal practices. You obviously don’t want to invest in a mutual fund that is engaged in illegal activities.

Mutual fund investing is really gaining in popularity on an almost weekly basis, and a few bad eggs in the business won’t ruin it for everyone. However, it is always good advice to enter into any kind of investing with your eyes open, and if you feel your mutual fund is behaving improperly, there are authorities you can report them to.

Author: Michael Carey is a online marketer and blogger join his mailing list at bigmike@freeautobot.com visit his webpage at http://www.peoplesearch922.com

Mutual Funds Demystified!!

Mutual Funds

Mutual Funds
By Ankit Agarwal

A mutual fund is a company that pools investors’ money to make multiple types of investments, known as the portfolio. Stocks, bonds, and money market funds are all examples of the types of investments that may make up a mutual fund. The mutual fund is managed by a professional investment manager who buys and sells securities for the most effective growth of the fund. As a mutual fund investor, you become a “shareholder” of the mutual fund company. When there are profits you will earn dividends. When there are losses, your shares will decrease in value. Mutual funds are, by definition, diversified, meaning they are made up a lot of different investments. That tends to lower your risk (avoiding the old “all of your eggs in one basket” problem). Because someone else manages them, you don’t have to worry about diversifying individual investments yourself or doing your own record keeping. That makes it easier to just buy them and forget about them. That’s not always the best strategy, however since your money is in someone else hands, after all.So,a little bit of research always comes in handy. Since the fund manager compensation is based on how well the fund performs, you can be assured they will work diligently to make sure the fund performs well. Managing their fund is their full-time job!

High Expenses Involved in Mutual Fund Investing

Every mutual fund has expenses and can have a negative effect on your returns. If you’re like me, and the rest of the stock market investors who have lost (on paper at least) vast sums due to the market’s downturn, you need to be invested in mutual, or better yet, index funds with low expense ratios. Check out the following pdf that we share with clientele.

mutfundexpenses

Tax Trap: Mutual Funds

Let me start first by saying that my intent today is not to add to the confusion of the past few months, but facts are facts. The stock market has been on a “roller-coaster” ride, and people are reacting to it. Many investors are seeking cover because of the damage done to their portfolios, and others sense buying opportunities due to the historic lows in the market.

Whichever boat you may be in, now is the time to carefully consider ANY financial move you might be thinking about. Bearing that in mind, let’s talk about capital gains derived from mutual funds. They get paid out annually, generally in December. For those of you who have suffered losses in your mutual fund portfolio, you may have an income tax hit looming as well.

Huh? What? How is that possible? My portfolio has suffered huge losses in asset value, and now I capital gains tax to look forward to? What gives?

Well, a mutual fund (by law), has to distribute its income to its shareholders. The funds don’t get taxed, you do.

A mutual fund derives income from its various holdings stocks, bonds, etc. and pays that income out to its shareholders. This generally occurs twice a year and is known as income distribution.

Capital gains are accumulated throughout the year and are generally paid out in December.

Many investors assume that they couldn’t possibly incur any capital gains because their funds have lost too much money. Unfortunately, that isn’t the reality of the situation. A decline in a mutual fund’s share price has more to do with losses in the value of its assets, not from losses in its portfolio due to stock transactions.

One of the reasons that a person buys a mutual fund is portfolio diversity, and another is to have a money manager running their portfolio. Most managers don’t operate like the general public, i.e. buying high and selling low. A lot of managers are holding assets in anticipation of a comeback, or even buying to take advantage of value. So, the end of the year comes along, and it’s time to distribute all of those capital gains that have been accumulating inside of the fund.

What does this mean to you? This might be a good time to consider dumping some of those funds that are not performing so well. If it suits your situation, you could sell now and avoid any potential tax hit. If you are considering buying a fund, you might want to wait until after the distribution date.

Before you anything, get a hold of the fund in question and ask them if they are going to have a taxable capital gains pay out. That should help you make a decision that’s right for you, and when in doubt, consult with a trusted advisor.

For more reading on the subject, consult the following article:

http://www.filife.com/stories/fund-investors-face-risk-of-tax-hit

Potential in mutual funds

Despite the declining demand in equities which causes downward movement in most bourses, there is potential in mutual funds. This type of investment is most suitable to balance risk and return in medium to long term plan. Thus, invest with objective, and maximize wealth accumulation.

Potential is always there … continue read the excerpt from AsianInvestor.

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Mutual fund AUM in Asia will drop by 20% this year, but Korea and India will lead a quick rebound, according to consultancy Cerulli Associates.

Consultancy Cerulli Associates predicts mutual-fund assets under management in Asia ex-Japan to revisit their 2007 peak by 2010, and remain on track to hit $1.6 trillion by 2012.

AUM in the industry peaked at $1.13 trillion at the end of 2007, thanks to strong stock market performance, the increasing shift from savings into investments, and the expansion of wealth management services.

The picture hasn’t been so rosy since. China, the biggest contributor to growth through 2007 (when AUM grew 86% over 2006 levels), has seen total fund AUM contract by 34% in the first half of 2008; a reduction sure to be worse in the second half.

But Cerulli argues most of these losses are due to market valuations, rather than redemptions. Net redemptions have been few, in stark contrast to markets in Europe, where investors have fled from mutual funds, particularly equity products.

Cerulli says, over the next five years, the funds industry will return to high growth rates, although not the 33% compound annual growth rates (CAGR) experienced between 2003 and 2007. Rather, CAGR will be 7% for the 2007-2012 period. The markets of Korea and India should lead the charge, with growth rates of 13% and 9% respectively, thanks to the proliferation of bank-led regular savings plans into funds.

Those growth rates may lack the fireworks of the mid-2000s, but are respectable, and reflect the ability of foreign bank distributors – which have experienced downturns before – to recover more quickly than local ones, which are still novices in wealth management.

Why is Cerulli optimistic? The consultancy notes that year-to-date net flows to Asian mutual funds are still positive, at $105 billion, versus an outflow from European funds of $90 billion. Moreover, a CAGR of 7% is decent but hardly rose-tinted, compared to the extremely strong growth experienced in the mid-2000s. Cerulli also notes that this 7% is expected to amortise over a five-year period – and most of that growth won’t emerge until late 2009 or early 2010.

Cerulli expects revenues should also remain healthy, growing at 9.2% over the next five years, outstripping AUM growth rates by 2%.

As of June 2008, Asia ex-Japan mutual fund AUM stood at $991 billion (comprising Hong Kong, Singapore, Taiwan, South Korea, China and India), and Cerulli predicts it will end the year around $915 billion. As much as 80% of these assets are onshore funds, invested locally. Domestic banks and securities companies make up 49.6% and 18.7% of fund distribution, respectively. Cerulli also suspects insurance could become the fastest-growing distribution segment, albeit from a low base, in the coming years.

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You are not alone in your frustration with Mutual Fund performance

A couple rather shocking yet insightful reads on the current state of Mutual Fund companies; including the peril of a few.

We will not be so sweeping in our statement that investing in real estate is the only choice for investors, but we sure feel more comfortable with our own investments (RSP and direct placement) invested in AltaPacific Mortgage Investment Corporation.  Contact us if you’re like more details on investing in Canadian Mortgages.

More negative data on the costs of actively traded mutual funds

Chuck Jaffe brainstorms on structural change to bring down the fees and costs of mutual funds. He begins with recent data from the ever-growing class of overwhelming evidence against the notion that investors can beat the market with actively traded mutual funds.

The cost of doing poor business

Fund companies have raked in billions of dollars from investors, despite what can only be described as miserable, below-expectation performance.

Latest research consistent with history: Most actively managed mutual funds beaten by the S

Here are the statistics regarding investors’ ongoing willingness to pay money managers for losses greater and gains smaller than the market itself.

S&P index bests most actively managed funds

The Standard & Poor’s 500 stock index outperformed most actively managed mutual funds for the past five years, according to the New York-based firm’s latest research.

For the five-year period ended June 30, the S&P 500 outperformed 68.6% of actively managed large-cap funds.

In addition, the S&P MidCap 400 outperformed 75.9% of actively managed mid-cap funds and the S&P SmallCap 600 outperformed 77.8% of actively managed small-cap funds.

The results were announced as Standard & Poor’s Index Services introduced a new version of its Standard & Poor’s Indices Versus Active Funds Scorecard yesterday.

The firm also reported on international returns.

The S&P Global 1200 outperformed 70.1% of global equity funds over the five-year period.

The S&P International 700 outperformed 86.5% of international equity funds and the S&P IFCI Composite outperformed 73.9% of emerging market funds.

In the fixed income area, more than 75% of actively managed domestic bond funds were outperformed by indices.

Emerging-market bond funds was the only category where a majority of active managers beat the benchmark, the firm reported.

DLF Pramerica Mutual Fund

End of last month India Infoline received an in-principle nod from SEBI for sponsoring a mutual fund. Recruitments for the asset management business began a few months ago with the hiring of Deepesh Pandey, (ex-Deputy CIO of Mirae Asset, Singapore) and Manish Srivastava (ex-Fund Manager of Halbis - HSBC Global Asset Management- Singapore).

Ironically, the times could not have been worse. October recorded a massive liquidity and confidence crisis that sent fund houses reeling. Consequently, many fund houses are rethinking their strategy and business models.

The massive redemptions in liquid funds coupled with a tumbling equity market resulted in Assets Under Management (AUM) crumbling. Reliance Mutual Fund lost Rs 15,400 crore in its assets from the previous month (September), ICICI Prudential Mutual Fund, Rs 10,594 crore and HDFC Mutual Fund, Rs 6,519 crore. The highest percentage fall in assets was seen in Mirae Asset Mutual Fund (57%) and AIG Global Investment Group Mutual Fund (44%).

Mutual Fund Buyer Beware

Are you considering buying mutual funds in a taxable account (as opposed to an IRA or 401K)? Then you should be aware that most funds distribute capital gains this time of year. These distributions are taxable to you as long-term capital gains, even if you just bought the fund.

Retirement Planning: The Fate of Your Mutual Fund

It is sad that these kinds of question are surfacing. The problem (of fund defaults) may come from the numerous layers of management that publicly traded mutual fund families face along with performance expectations by the shareholders of those companies.

Funds fail because of a lack of value perception. Fees don’t seem nearly as high when the fund is performing at its peak. But once those returns are jeopardized, even if, as in the current market it was not your fund manager’s fault, those fees look some much more ominous. And couple that sudden realization with a long market downturn and redemptions skyrocket. After that, the weak (and too expensive) funds fall like dominoes.

Secondly, in the future, take the time to explore diversity in your investing, the cost of fees and now, how well the fund manager navigated these brutal times.

For the Record: SEC Improves Disclosure for Mutual Fund Investors

Release here.

Washington, D.C., Nov. 19, 2008 — The Securities and Exchange Commission today voted unanimously to improve mutual fund disclosure by requiring that funds provide investors with a concise summary — in plain English — of the key information they need to make informed investment decisions. The new summary prospectus will appear at the front of a fund’s prospectus.

The Commission also approved amendments to encourage funds to make greater use of the Internet so investors can receive more detailed information in a way that best suits their needs.

“Today’s action will help mutual fund investors more easily obtain the key information they need — such as the description of the fund’s investment objectives and strategies, fees, risks, and performance,” said SEC Chairman Christopher Cox. “The summary prospectus will quickly give investors a basic understanding of the fund and will permit them readily to compare one fund to another. Investors will also have access to more searchable information about mutual funds on the Internet — an important improvement in their ability to comparison shop.”

Andrew J. Donohue, Director of the SEC’s Division of Investment Management, added, “Many investors often find current fund prospectuses to be lengthy, legalistic and confusing. This mutual fund disclosure framework will provide information that is easier to use and more readily accessible, while retaining the comprehensive quality of the mutual fund information available today.”

Specifically, the Commission adopted the following improvements to mutual fund disclosure:

Summary Information at the Front of the Prospectus

The Commission adopted amendments to Form N-1A, the registration form for mutual funds, to require that every mutual fund include key information at the front of its statutory prospectus about the fund’s investment objectives and strategies, risks, and costs. The summary will also include brief information regarding investment advisers and portfolio managers, purchase and sale procedures, tax consequences, and financial intermediary compensation. Funds will be required to provide the summary information in plain English and in a standardized order.

New Prospectus Delivery Option for Mutual Fund Securities

The Commission adopted a new rule that permits sending a summary prospectus to satisfy prospectus delivery requirements provided that the mutual fund’s summary prospectus, statutory prospectus, and other specified information are available online. The summary prospectus must have the same information in the same order as the summary at the front of the statutory prospectus. In addition:

* The online materials must be in a user-friendly format that permits investors and other users to move back and forth between the summary prospectus and the statutory prospectus. This will allow investors and others to efficiently access particular information that is of interest to them.

* Investors have to be able to download and retain an electronic version of the information.

* The statutory prospectus and other information must be provided in paper or by e-mail upon request so investors can choose the format in which they receive more detailed information.

The full text of the Commission’s new disclosure requirements will be posted to the SEC Web site as soon as possible.

It took a meltdown: SEC finally improves mutual fund disclosure

These basic disclosure guidelines have been suggested for ages yet reasons for delay and continued study seemed unending. Not anymore.

The Securities and Exchange Commission has voted unanimously to improve mutual fund disclosure by requiring that funds provide investors with a concise summary – in plain English – of the key information they need to make informed investment decisions.

The new summary prospectus will appear at the front of a fund’s prospectus.

The commission also approved amendments to encourage funds to make greater use of the Internet so investors can receive more detailed information in a way that best suits their needs.

“Today’s action will help mutual fund investors more easily obtain the key information they need – such as the description of the fund’s investment objectives and strategies, fees, risks, and performance,” SEC Chairman Christopher Cox said in a statement.

SEC improves disclosure for fund investors

Mutual Funds

We do not have much retirement, but we had started putting back a little. And some of it has gone down almost 50%. I recognize that it will go back up before we retire, but it is still painful to watch and it makes me feel so terribly bad for people who are closer to retirement who don’t have decades to wait for everything to recover.

I feel so so lucky in this economy. To have an income. To have some savings. To be able to buy heat and groceries. And it breaks my heart for those who are in such a different place. And it makes me furious that this has happened and that those who caused it probably aren’t suffering that much and that the government has not found a reasonable way to help people struggling to eat and pay bills.

This is not super insightful or anything. Just a thought. My heart goes out to those who are struggling. May friends, and family, and the divine be with them in some way that makes a difference for them.

Please.

Cheney Indicted, Given that Vanguard is among the top mutual fund managers in the US, millions of Americans will be complicant in the lawsuit.

Cheney Indicted

http://www.bartcop.com/cheney-arrest.jpg

A South Texas grand jury has indicted Vice President Dick Cheney and former Attorney General Alberto Gonzales on charges related to the alleged abuse of prisoners in Willacy County’s federal detention centers.

The indictment criticizes Cheney’s investment in the Vanguard Group, which holds interests in the private prison companies running the federal detention centers. It accuses Cheney of a conflict of interest and “at least misdemeanor assaults” on detainees by working through the prison companies.

Gonzales is accused of using his position while in office to stop an investigation into abuses at the federal detention centers.

Another indictment charges state Sen. Eddie Lucio Jr. with profiting from his public office by accepting honoraria from prison management companies.

Yikes … I own some Vanguard Funds. I’d better call my attorney. Sheesh!

Oh … It appears DA Guerra’s had his own problems. (http://www.themonitor.com/onset?id=4370&template=article.html)

A South Texas grand jury has indicted Vice President Dick Cheney and former Attorney General Alberto Gonzales on charges related to the alleged abuse of prisoners in Willacy County’s federal detention centers.

The indictment criticizes Cheney’s investment in the Vanguard Group, which holds interests in the private prison companies running the federal detention centers. It accuses Cheney of a conflict of interest and “at least misdemeanor assaults” on detainees by working through the prison companies.

Gonzales is accused of using his position while in office to stop an investigation into abuses at the federal detention centers.

Another indictment charges state Sen. Eddie Lucio Jr. with profiting from his public office by accepting honoraria from prison management companies.

Yikes … I own some Vanguard Funds. I’d better call my attorney. Sheesh!

Oh … It appears DA Guerra’s had his own problems. (http://www.themonitor.com/onset?id=4370&template=article.html)

Given that Vanguard is among the top mutual fund managers in the US, millions of Americans will be complicant in the lawsuit.

How to play the Mutual Fund Market

How to play the mutual fund investment in India, especially when it is a no brainer that rate cuts are nearby? Impending rate cuts have also opened up a great opportunity in a particular segment of mutual funds in India: gilt funds.  If you are looking at equity, banking stocks or bank ETFs also look a good bet now.

In fact, the Reserve Bank of India is behind the curve in slashing rates than other central banks. Now, it is a question of when the Indian central bank announces the rate cuts.  Already, investors have anticipated this move. News reports say that in October mutual funds in India saw a net inflow in gilt funds while equity funds saw a heavy outflow.

Gilt mutual funds invest in government securities. Since government securities carry the lowest rate of default, gilt mutual funds are secure. But gilt funds are subject to interest rate risks. If interest rate goes up, then values of securities in the portfolio of gilt mutual funds go down, thus negatively impacting the gilt funds. On the other hand, if interest rates go down, values of bonds go up, thus positively impacting the gilt funds. If you like to play in the gilts market, prefer short-term mutual funds in India that let you play at different stages of rate cut.

Science - Stock regulator

Yao Jun

Yet another trouble with mutual funds: When assets go down, costs go up

Fund expense ratios headed up in 2009

Mutual funds fees will be going up next year, with market turmoil likely to be the main culprit.

Stock funds could experience an average increase in expense ratio of 0.05 to 0.1 percentage points, said Jeff Tjornehoj, a Denver-based senior research analyst at Lipper Inc. of New York. And bond funds could go up slightly, maybe 0.01 to 0.02 percentage points, he added. In addition, as assets have declined this year, some funds that operate with break points may have dipped below that level, causing management fees to rise.

“I absolutely expect fees will go up,” Mr. Tjornehoj said. “A lot of fund complexes work on a sliding fee scale. There are break points where there is a margin where costs go down. Unfortunately, costs go up when assets slide back down below those break points.”

“This is the worst year on record for equity mutual funds,” Mr. Tjornehoj said. Returns for the average equity fund are down about 40%, he said.

Equity mutual funds have been particularly hard-hit, with record outflows of $48 billion in September and $69 billion in October, according to Chicago-based fund tracker Morningstar Inc.

Worse still, investors are not even aware of the rising costs the funds may already be incurring. Shareholders get less of a return as a result of fee increases.

“Fees are usually constantly being assessed,” Mr. Tjornehoj said. “So incremental changes are already being made.”

The shift continues: Net take for actively managed mutual funds to plummet over next 3 years

Over the next tree years, the mutual fund industry will begin to resemble a distressed telephone company, making up for a loss of volume by charging more to the shareholders who fail to flee.

Meanwhile, it looks like the post-meltdown investment dollar will be increasingly likely to seek out low-cost, passive investment alternatives.

Fund Fees Expected to Tumble $38 Billion by 2012

November 25, 2008  —   Fees on actively managed mutual funds in the U.S. could fall as much as 26%, or $38 billion, by 2012 due to investors’ renewed preference for fixed income and passive investments, Bloomberg reports, citing a report from Boston Consulting Group.

This year alone, actively managed fund assets in all classes around the world will decline from $58.9 trillion to $50 trillion, representing a 15% decline, according to Boston Consulting.

Worldwide, the declines through 2012 could reduce the proportion of mutual funds’ revenue out of the total asset management pie to 36%, down from its current 49%.

Last year, active mutual funds took in $147 billion in fees, about the same amount as hedge funds, private equity funds and real estate funds—combined.

The popularity of alternative investments is expected to shoot up to 61% of total fees, and index funds’ share could reach between 3% and 4%.

“Investors have wised up to the fact that the performance of classic active funds has failed to live up to benchmarks,” said Boston Consulting Partner Michael Spellacy. “There’s a shift by consumers to allocate to more passive, lower-fee products, and to the pursuit of alpha, or market-beating performance,” Spellacy said.

Tax Saving Mutual Funds in India

When people invest in Mutual Funds, the general objective is yearning for long term capital growth and gain. Even though Mutual Funds doesn’t provide you with the same kind of financial security like an insurance policy, it still gathers the interest of a million of investors, solely because of the fact to provide richer dividends compared to other investment modules. Under the Income Tax Section of Government of India, Mutual Fund Investments are subjected to tax exemptions. Hence during an investment, most investors include tax-saving funds or ELSS (equity linked saving schemes) in their portfolio to get the added benefit of income-tax deduction.

Prior to opting for a tax saving mutual fund, it is important that the investor consider certain important factors such as performance, investment style, expenses(entry load & exit load) and other critical parameters. This is done to ensure that the investor will start treating the fund at par with regular diversified equity fund which could lead to improper asset allocation. Despite of the current financial crisis that the market is going through, investors are advised to invest in funds where the underlying assets are mainly equity funds. If you invest in a rising market, the more risk you are willing to take will get you more returns. It means if you have more equity funds in your investment portfolio or if you invest in more aggressive Mutual Fund, you are bound to make money compared to a moderate investor.

The prime criteria that an investor will have to consider prior to opting for a tax saving mutual fund will be the performance of that particular fund in the recent past. Performance is critical parameter, through which a fund must re-deem itself before it could be considered to for investing. Practically all equity linked investments are considered with a 3-5 year period investment horizon. While evaluating the performance of a fund importance on premium on consistency across market phases is to be kept. Opting for tax-saving funds that have put in a reasonable show during the upturns and downturns of the market consistently during the last 5 years (approximately) is a good idea. Volatility and return along with proper investment planning is another important aspect of a mutual fund. Usually it is a fund manager, who determines the performance of a fund in the market. Good returns on Mutual Fund NAV’s (net asset values) can be achieved by pursuing an aggressive investment strategy. Investing in tax-saving funds that have rewarded investors more per unit of risk taken by them is suggested. Managing other costs and expenses like a fund manager’s salary, marketing/advertising costs, administering costs is to be maintained. The cost of investing in a mutual fund is measured by the expense ratio. The ratio represents the percentage of the fund’s assets that go purely towards the cost of running the fund.

According to SEBI (securities & exchange board India), taxes that are implied on your annual salary will be exempted if you invest in tax saving mutual funds. Moreover the returns that you earn aren’t taxable. Tax Saving Mutual Funds in India generally maintain the following rules while granting tax benefits on their schemes: 1) Any special tax benefits for the mutual fund company and its shareholders (only section numbers of the Income Tax Act and their substance should be mentioned, without reproducing the text of the sections). 2) Tax benefits are to be declared under the column of “objects of the offering”. Some excellent tax saving mutual funds in India are: a) SBI Mutual Funds, b) Prudential ICICI, c) Franklin Templeton Mutual Fund India, d) Standard Chartered Mutual fund India, & e) Bajaj Capital. As stock markets turn more volatile, and the choice of funds increases, it will become pertinent to make the right investment decision to start with. Going forward, & opting to invest in a fund that not only provides you tax relief but also good returns is advisable.

Mutual fund industry loses over 20% of assets under management

The mutual fund industry has never seen these kinds of losses before;, in additiion, the marketplace has never offered so many popular, transprent, and low-cost alternatives to mutual funds. These two novel factors make it reasonable to suppose that a good portion of this capital may never come back.

After seeming to weather the worst of the credit storm, the mutual-fund industry has been getting walloped, losing more than 20% of assets under management in just five months.

Data from research firm Lipper show that as of Oct. 31, mutual funds of all types — stock funds, bond funds and money market funds — had $9.5 trillion in assets. That’s a 20.8% drop from where the industry stood on May 31 when it sported a record $12 trillion under management.

Mutual funds have lost 19.3% of their assets in the first 10 months of the year after closing 2007 with $11.7 trillion under wraps. This puts the industry on pace for one of the worst years in its history.

According to Lipper, since 1959 — the first year for which it has data — the largest year-on-year asset declines came in 1973, when assets dropped 20.4% to $3.4 billion, and 1974, when assets fell by 21.4% to $2.7 billion.

Mutual Funds Description

We are wanting to discuss mutual fund performance in recent months and talk about the flows and trends the managers are seeing. Please feel free to add comments.

Just Give

So you want to make a donation to charity for a family member but you’re not sure where they would want to donate?  Well you could just take a gamble and see how it turns out or you could get them a gift certificate to justgive.org

Just Chillin

Spending the day away from Carol. Me, Rufus, Cari and our lonesomes all together as usual. Having a good time and not worrying about much at all. Trying to figure out who to bring along when we head out a little later. Seen this mutual fund companies investments info before?

Capital Gold Group Report: SAVING CITI MAY CREATE MORE FEAR

Published: November 24, 2008

While Citigroup’s second multibillion-dollar rescue from Washington hit Wall Street like a shot of adrenaline on Monday, many analysts worried that the jolt would soon wear off. Citigroup has been stabilized, but the outlook for the financial industry as a whole is bleak.

With the red ink deepening, other banks may eventually turn to the government to soak up some of their losses. Taxpayers could end up guaranteeing hundreds of billions of dollars of banks’ toxic assets. Indeed, Treasury Secretary Henry M. Paulson Jr. is expected to announce a new plan on Tuesday to bolster the consumer-finance market.

“When all else fails, government does come in,” said David A. Moss, a public policy professor at Harvard Business School.

On Monday, Wall Street put aside its worries, at least for a day. Citigroup’s share price, which had plunged to a mere $3.77 on Friday, shot up to $5.95. Shares of its biggest rivals — banks which, with the government’s help, are emerging to dominate the industry — also soared. Bank of America jumped 27 percent, JPMorgan Chase leapt 21 percent and Wells Fargo gained nearly 20 percent.

In the short term, the latest effort to steady Citigroup has removed the risk that a sudden failure of the giant bank would send losses cascading through the financial industry.

But longer term, the new bailout could haunt regulators and taxpayers. The move ultimately may encourage banks to take more risks in the belief that the government will step in if they run into trouble.

With a recession looming, if not here already, banks big and small are bracing for more loans to sour, particularly those related to commercial real estate, autos and credit cards. Many are making fewer loans, even though the industry has received nearly $300 billion from the government.

Before long, anxious investors may start wondering which banks will be vulnerable next. If confidence fades, other big lenders will probably seek deals like Citigroup’s, in which the government has pledged to pick up potentially $290 billion in additional losses. Regulators drafted the plan with an eye to using it as a template for future bailouts.

There are other worries for Citigroup’s big rivals. Almost overnight, Citigroup went from being the sick man of the industry to an institution with an edge over its competitors. The government is guaranteeing $250 billion of risky assets and pumping an additional $20 billion into the bank.

With the government behind it, Citigroup may now be able to borrow money in the capital markets at lower interest rates than its peers.

“Citi has a decided advantage over them because of the loss-sharing agreement,” said John Kanas, the former chief executive of North Fork Bank of Long Island. While banks may hold out for now, it may be only a matter of time before they too line up, several analysts said.

Indeed, a big question is how Bank of America, JPMorgan Chase and Wells Fargo will respond. Spokesmen for Bank of America and JPMorgan Chase declined to comment on Monday. A Wells Fargo spokesman did not return telephone calls.

Each of these giant banks, like Citigroup, is sitting on piles of residential mortgages, credit card debt, and corporate and commercial real estate loans that are rapidly losing value. Each is trying to absorb new businesses that were recently acquired.

“Everyone is in the same soup,” said Meredith A. Whitney, a banking analyst with Oppenheimer who has been bearish on the industry for more than a year. “Citigroup has a host of problems, but Citi’s problem assets are not dissimilar from its rivals.”

Smaller banks could be even more disadvantaged. Depositors now have stronger incentives to put their money in bigger banks, given the government’s demonstrated willingness to intervene.

“It’s got to be frustrating for small banks. They don’t get special treatment,” said David Ellison, a mutual fund manager who specializes in financial companies. “If you are a big bank, you get special treatment. That is why everyone wants to be so big.”

To level the playing field, some analysts say, the government may be forced to guarantee hundreds of billions of dollars of assets on all banks’ balance sheets. That would be the third iteration of the government’s financial rescue.

“It looks like TARP 3.0,” Ms. Whitney said, referring to the Treasury Department’s $350 billion bailout fund known as the Troubled Asset Relief Program. “TARP 1.0 was buying illiquid assets from banks. Now, they are backstopping assets and really putting taxpayers on the line for much of this.”

Even though the American government can secure a nearly 8 percent stake, overtaking an Abu Dhabi investment fund and a Saudi prince as Citigroup’s largest shareholder, it will not have any seats on the board.

Other strings that the government attached are not onerous.

New limits on executive pay still leave Citigroup with room to maneuver, even though regulators must approve compensation. A required program to modify home mortgages is similar to an effort that Citigroup voluntarily announced earlier this month.

But Citigroup faces bigger problems down the road, especially if it needs additional capital. The company was forced to turn to the government again because it could not raise capital from private investors.

“If you look at the track record for raising equity, it has been a difficult exercise” for financial institutions, said Gary L. Crittenden, Citigroup’s chief financial officer, in an interview on Monday.

And Citigroup still has many problems. Vikram S. Pandit, the chief executive, is making some progress in controlling costs and managing its sprawling operations, but the environment is tough. Executives say they have no plans to change their strategy.

Mr. Crittenden said that the bank intended to keep itself intact and stay on the course it had been pursuing since at last spring and even longer under prior management, but that as a matter of practice the bank did not rule out any options.

Bo McCarver’s weekly housing news compilation - 11/25/2008

Among the many daunting tasks for the Obama Administration is the revamping of HUD that has languished under poor leadership and neglect for eight years. The muddling of missions was also repeated by federal oversight agencies that assumed roles of consultants.

Meanwhile, sales of existing and new houses hit new lows as nervous lenders freeze funds or direct them toward more profitable investments.

While press attention has focused on Hurricane Ike’s devastation of the Texas coast, volunteers in flood-ravaged Wichita Falls methodically toil to restore 86 partially destroyed homes.

For a pdf version of the full stories, plus contextual articles in environmental, social and legal areas, contact Bo McCarver at bmccarver@austin.rr.com

This is tantamount to evaluating the American Community Survey, Home Mortgage Disclosure Act (HMDA) data, sales data, and labor statistics, and concluding that the weakest parts of the weakest markets are the weakest parts of the weakest markets. What sort of genius it took to figure this out is anybody’s guess, but it’s a good bet that it was gestated in the womb of a community development field and movement quite unwilling to separate the affordable housing needs of low-income households from the negative impacts that concentrations of poverty impose on markets our own practices birthed and perpetuate.

Fannie Mae and Freddie Mac said the hiatus on foreclosures — which will run from November 26 through January 9 — will give mortgage servicers more to work out easier borrowing terms for troubled homeowners.

Regulators and lawmakers have leaned harder on the two companies to help stabilize the crumbling U.S. housing market since they own or control about half of residential mortgages outstanding.

Department of Housing and Urban Development Secretary Steve Preston announced changes that aim to expand participation in the new “Hope for Homeowners” program.Launched Oct. 1, the program is off to a slow start, with the government receiving just 111 applications during the first month.

The benefits were clear: Countrywide’s new regulator, the Office of Thrift Supervision, promised more flexible oversight of issues related to the bank’s mortgage lending. For OTS, which depends on fees paid by banks it regulates and competes with other regulators to land the largest financial firms, Countrywide was a lucrative catch.

But OTS was not an effective regulator. This year, the government has seized three of the largest institutions regulated by OTS, including IndyMac Bancorp, Washington Mutual — the largest bank in U.S. history to go bust — and on Friday evening, Downey Savings and Loan Association. The total assets of the OTS thrifts to fail this year: $355.7 billion. Three others were forced to sell to avoid failure, including Countrywide.

In the parade of regulators that missed signals or made decisions they came to regret on the road to the current financial crisis, the Office of Thrift Supervision stands out.

Adding to the gloom for the U.S. economy, a separate report from the Federal Reserve Bank of Chicago showed its National Activity Index contracted again in October, staying mired in negative terrain for 15 straight months.

Existing-home sales have been down every month so far this year compared with sales last year. New-home sales were down through September, data from First American CoreLogic show. It has not yet released October new-home sales data.

But at least one national economist thinks the Houston-area housing market will see price appreciation of as much as 10 percent in 2009.

Mr. Perry will reiterate that Texas needs the federal agency to cover all of the hurricane debris removal costs for the next 18 months, or risk bankrupting the state’s hard-hit coastal communities.

The Federal Emergency Managment Agency installed it but must remove it after the city said no trailers were allowed.

Two months after the storm devastated major chunks of the county, though, an estimated 900 residents who look to live in those temporary homes are still weeks away from moving in.

The program was designed to provide temporary housing alternatives to eligible applicants who need a place to stay because their houses are uninhabitable due to Hurricane Ike damage.

Around 240,000 people were eligible for TSA, although only 25,000 used the program, including 4,700 people who are currently check into participating hotels. Another 5,000 have been moved to longer-term disaster housing under the Disaster Housing Program-Ike, and 7,700 are receiving rental assistance grants from FEMA.

TSA-eligible applicants staying in hotels are reviewed every two weeks. The program runs through Jan 15.

The Federal Emergency Management Agency and the Small Business Adminstration have extended deadlines to Dec. 12 for those affected by Hurricane Ike.

As soon as they can sell the damaged house on the bay side of island’s East End, he and his wife plan to buy another one somewhere on the mainland, McCoy said. The McCoys are among dozens of property owners swept off the island by Ike, which made landfall Sept. 13, flooding 75 percent of Galveston houses.

“The work has been consistent so far. We started a little early with five houses the weekend of Nov. 8 and have been doing three to five houses per week,” said Bob Johnston, member of the Wichita Falls Area Disaster Recovery Committee.

It used to cost about $600 per month to live at the Stoneridge Apartments, what many consider the last affordable apartment complex near downtown. About a year ago a developer bought the property and demolished it.

New Teaser photo of new Volvo S60 Concept

Volvo has confirmed that they are developing a new car with Swedish glassworks Orrefor to attend as a mold for the next generation Volve S60. The Swedish carmaker enlisted the help of Orrefor to come up with an imaginative interior that uses a schooner-rock pivot panel to give the bungalow a light-focused target.

The wineglass-sparkler interior hand crafted and very work intensive to make. The crystal panel is integrated into the dashboard and forms a center panel that flows all the way to the rear seat backrest.

Volvo planed to show their new car for the first time at the Detroit international Motor Show in January 2009. Read more information in official press release bellow.

UPDATED: Volvo released new teaser image of their S60 Concept (click to enlarge):

Volvo Cars has engaged world-famous Swedish glassworks Orrefors in the work with the company’s next concept car, which will be a first taste of the next-generation Volvo S60. The joint creation, a floating centre stack of hand-made Orrefors crystal, will be shown for the first time at the Detroit international motor show in January 2009.

In the concept car, the graceful, crystal-clear centre stack forms a gentle, calm wave from the instrument panel all the way to the rear seat backrest.

“It almost looks like a waterfall from the instrument panel, flowing through the centre of the car,” says Volvo Cars design director Steve Mattin.

The crystal panel appears to float above the centre console’s smart functionality. It rests softly on rubber pads and with the help of invisible light sources the crystal’s shimmering glow can be tailored to match the driver’s mood.

“If you want to explore the full scope of Scandinavian design, Sweden’s glassworks are a natural source of inspiration. Large glass areas are also very much part of modern Swedish architecture, creating the special, light transparency,” says Steve Mattin.

The experts at Orrefors were keen to accept the challenge and the result is one of the most unusual and handicraft-intensive objects in the company’s 110-year history. Producing the stack was in itself a challenge beyond the ordinary - even for the experienced experts at Orrefors.

Traditionally, the moulds for the crystal are first chiselled by hand from thick planks of alder wood. After casting, the glass is carefully polished to produce its final, crystal-clear lustre.

In order to meet the relevant strength standards, the finished piece consists of three sections joined together at the Volvo Cars concept car workshops.

“The full-size crystal piece in the concept car will not be a production feature. However, it does open up opportunities to use crystal on a smaller scale in the future. We’ll have to see how our customers respond,” says Steve Mattin.

Creativity and functionality

At the Volvo Cars design centre, exploring the glassworks in the deepest forests of southern Sweden has been a stimulating adventure.

“The clean lines of the Orrefors products have been a true source of inspiration for many years. This was perfect timing for using crystal as a material in a concept car too,” says Steve Mattin. For the Orrefors glassworks, the debut as a supplier to the car world has also served as a new creative inspiration.

“Volvo’s thin centre stack is an industrial product with an artistic yet at the same time functional form. It immediately inspires you to think of other application areas. Why not an elegant hanging ceiling light or a table-top ornament of some sort? We’ll just have to see,” says Gunilla Arvidsson.

Trading Trends For Profits

In the financial markets, a trend is generally understood to be the current market direction. Markets can be trending higher, trending lower, or trending sideways.

But defining a trend so that it can be profitably traded is something else entirely.

Many would say the S&P 500 Index is currently in a bullish trend. But at the same time, the Nasdaq Composite and Nasdaq 100 Index have been trading sideways for months. So trends can obviously exist for one sector while another is going nowhere.

Just saying that a trend consists of “rising” prices, or “declining” prices is not enough. Every day is different. A trend must be clearly defined in order to be profitably traded.

And what about time frame? Are we talking about a trend on a 5 minute bar chart where it could last an hour? Or is it of longer duration; days, weeks, years?

It is easy to determine trends on a chart of prices that have already occurred. Developing a trading strategy that will keep you on the right side of future trends is needed to profit from trend trading (market timing).

Successful market timers know and use several facts about trends that give them an edge in trading them:

1. While financial markets may spend time in consolidation (sideways trends), they are more often moving up or down for sustained periods of time.

2. A timing strategy that defines trends can be used to take advantage of continued momentum in the market place.

3. Trends tend to go higher, or lower, than most investors expect. So correctly identifying and trading a trend can be very profitable.

4. Profitable trends occur only once or twice a year. The rest of the time the markets trend sideways. The Nasdaq, for example, would have to be considered as being in a sideways trend over the past several months.

Because tradable trends only occur once or twice a year, market timers must be prepared to sometimes wait months before catching that one highly profitable trend.

a. To be consistently successful over time, market timers must have clear rules telling them when to enter, and when to exit.

b. When in a sideways trend, market timers often have multiple trades that result in small losses, or small gains. These small losses and gains “must” be accepted because timers “must” trade every identified trend change. There is no way to know “ahead of time” which trend will be the highly profitable one.

c. Market timers usually make the majority of their profits in only one or two trades a year. If you don’t take every trade, you will likely miss the one that makes most of your profits.

d. When the markets are in a bullish or bearish trend, trading position changes may not occur for months at a time as the trend progresses. Exiting early to lock in profits can cost you dearly. The trend must be allowed to play out without making unnecessary trades because of volatile short term conditions.

e. A profitable trading strategy will “not” allow a market timer to miss that trade!

Correctly identifying and trading financial market trends with mutual funds, ETF’s and even carefully selected stocks, is doable, profitable, and with a well tested trading strategy can achieve results far above “buy-and-hold” investing.

Market timing, when following a well thought out trading strategy, is actually “less” risky than a buy and hold approach.

The active investing style used in FibTimer’s market timing strategies (identifying and trading trends) prevents huge losses in the inevitable bear markets (or any large decline that is of substantial duration).

If bearish strategies are used in the timing strategy, declining markets actually add to profits.

Market timers, when following a well defined and tested timing strategy that identifies market trends, will consistently beat the market over any fair time frame.

Author: Frank Kollar

Happy (bank) Holidays!

Monday he wrote a special piece for his subscribers. Here are some highlights:

Note from Scott: I disagree with Dr. Weiss on the safety of US Treasuries. I believe that, within as little as two to six months we will see the US government default (go bankrupt). This is unthinkable to virtually everyone with any extensive financial background. Nonetheless, I think it will happen. Will US Treasuries be safe?

I don’t know.

I dunno.

I do know physical gold and silver are stores of real wealth, and have been since Jesus was a toddler. US Treasuries are still just a “promise to pay.”

Please do what you think is in the best interests of you and your family. Please be safe.

The PRC

The Wall Street Journal reports on Hu’s visit to America’s backyard. The Russian president is also in the region, but is facing a less receptive audience.

By William Ratliff | Nov 26, 2008 | The Wall Street Journal

Last week Chinese President Hu Jintao pledged that China will make a “concerted effort” to “establish a comprehensive cooperative partnership of equality, mutual benefit and common development” with Latin America, according to China’s Xinhua news agency. The Chinese president made his comments in Lima just before the 16th Asia-Pacific Economic Cooperation summit. Mr. Hu’s words — and other recent developments — warrant careful attention because they clearly signal a relationship that will expand greatly in the years ahead.

APEC was the last stop in Mr. Hu’s journey to the West, a 10-day trip which shows how much Beijing’s relations with the Western Hemisphere have changed from the “lie-low” strategy of Deng Xiaoping. This was Mr. Hu’s first trip to South America since November 2004, when he visited Brazil and Argentina en route to an APEC summit in Chile. That trip raised China’s profile in the region, but this latest trip, in a period of international financial crisis, confirmed China’s intention to play a more open, active, permanent and constructive role in the Americas, though some Latins have become doubtful or jaded.

The first-ever official policy paper on China and Latin America was released just before Mr. Hu’s trip. It outlines a range of programs in the region, including cooperation in science, technology and education, and political exchanges at all levels.

Each side has a lot to gain. China’s interests in Latin America include buying raw materials and foodstuffs, ranging from oil and copper to soybeans; helping to develop Latin infrastructure to produce and deliver those products; and selling (some countries have charged “dumping”) manufactures. Latin countries hope to sell raw materials and manufactures to develop their historically unstable economies; draw investments without the strings attached by Western powers; reduce dependence on the United States; and perhaps get ideas on how to develop national economies under elitist leadership, still the norm in Latin America.

In a talk to the Peruvian Congress, Mr. Hu proposed ways to boost Sino-Latin ties, including increasing high-level exchanges of personnel to improve dialogue, trust and cross-cultural understanding. He also spoke about cooperation on overlapping international objectives and mutually beneficial cooperation on economic issues. Cultural differences, ignorance of each other and logistics are constant challenges.

The rise of populist governments inspired by Venezuela’s Hugo Chavez is a burden as well as blessing to Beijing. Chinese leaders know that Latin America’s populist leaders and their economic policies are bound to fail. Still, China has pledged billions of dollars for Venezuelan oil while diplomatically distancing itself from Mr. Chavez’s self-proclaimed “Maoist” campaign against Washington. In fact, in Lima Mr. Hu praised President George Bush for his active efforts to improve Sino-U.S. relations.

Other recent events that demonstrate China’s greatly increasing role in the hemisphere include Beijing’s new donor membership in the Inter-American Development bank, which for decades was considered a key weapon in the “U.S. imperialism” arsenal. Almost half of China’s initial contribution of $350 million is earmarked for the micro-enterprises, and small- and medium-sized businesses, the Chinese for so long excoriated.

Mr. Hu also played a major role in the G-20 meeting in Washington at the beginning of his most recent trip. China’s active cooperation, which Mr. Hu promised again in Lima, is critical in efforts to work out the current financial crisis. China now has much to gain from helping Washington survive and from funding the World Bank and International Monetary Fund.

China also has a political agenda in Latin America. Mr. Hu’s trip took him also to Costa Rica, which last year switched its diplomatic recognition from Taiwan to Beijing, which it did not recognize before. Since half of the countries in the world that recognize Taiwan are in Central America and the Caribbean, China hopes its attention to Costa Rica, including the launch of FTA negotiations, will encourage others to follow suit.

In recent years, China has been second only to Venezuela in propping up the Castro brothers’ regime in Cuba with trade, investments and aid. On a visit to Havana, Mr. Hu contributed generously to Cuba’s hurricane reconstruction and met with Cuba’s new leader, Raul Castro. He talked at length with Fidel, seen as an old “Marxist” whose ideas are wrong but who stood by Beijing in 1989 and must somehow be venerated for his stubborn refusal to give up.

Some around the hemisphere are concerned about China’s increasing attention to Latin America, but on balance Beijing’s expanding links are largely in line with what the U.S. has said China should do to become an active “stakeholder” in the modern world. Besides, China’s trade and investments in the U.S. dwarf its links to Latin America.

China’s expansion into the Western Hemisphere is an inevitable development that must be watched carefully but cultivated as much as possible for everyone’s benefit. Indeed, if China has to seriously reduce its purchases of commodities from Latin America, many countries there will feel real pain. Mr. Hu’s trip to Lima shows that China can be an active force for good in the world’s economy. Especially today, in times of financial distress, its influence is a welcome one.

The Key To Marketing New Ideas!

Author: Daniel A. Levis

Imagine tossing a pebble into a crystal clear pond on a still day, & watching the ripples make their way to the shore. A tiny cause has a massive effect.

But on a windswept stormy day? You could hurl the largest boulder into the same pool, and the effect would be felt for no more than a few feet.

So it is with marketing new ideas.

Your prospects are in a trance that is like a still pool of awareness. They are in an “I’m worried about money” trance. They are in an “I wish I could finally find that somebody special” trance. They are in an “I’m sick of my dead end job” trance, & so on.

If you enter that trance with your words, your prospects will follow you. They will accept your suggestions. They will give those suggestions power, like the pebble that makes its presence felt on the shore, because receiving your message is effortless.

On the other hand, any striving on the part of your prospect to maintain their attention on your message, because it fails to harmonize with their trance, & no power will be granted.

“Belief Is All-Powerful!”

To enter the buyer’s trance, begin your sales message by showing where your position agrees with their accepted beliefs.

As you move forward, make a logical connection between that which is accepted, & another conclusion that is a step closer to the new conclusion you wish to promote.

This act of mental agreement creates momentum.

For example, let’s say your target market believes that Guaranteed Investment Certificates are the best way to invest for their retirement. Are they likely to listen to you if you boldly proclaim the superiority of Mutual Funds?

But would they give you some attention if you began with, “Would you be interested in more of the kind of money growth you’ve enjoyed through Guaranteed Investment Certificates?”

And then, “If there were a low risk strategy for using GICs, together with Mutual Funds to increase your returns by 53% or more, would you want to find out about it?”

And then, “Give me just 15 minutes, & I’ll show you the failsafe secret to an earlier retirement!”

By establishing empathy in your sales message, you enter the trance. And you can begin marketing new ideas.

Each successive point or question should do three things.

1) Echo accepted belief.

2) Introduce a new element that when logically combined with the previous conclusion, creates a new hypothesis.

3) Raise the level of commitment to the new idea.

You begin pursuing small yes responses, & gradually grow those agreements into bigger YES responses, until your final call to action.

Do you see how this works?

Use questions, statements, & logic that get your prospect thinking YES & OK!

Why Does It Work?

To be human, is to have unlimited freedom of choice. We are able to consciously decide our response to every stimulus. This is our god given gift.

However, we forget this. Instead, we are a bundle of conditioned responses. We hypnotize ourselves into believing that external circumstances give rise to our thoughts.

For instance, if I were to say to you that you are stupid, you would probably become angry. You would think I was a jerk for saying so. That is a choice you make.

You could just as easily make a choice to ignore my remark. You could make any choice you wish. You could even decide to think that I am a jealous fool, & feel sorry for me. The choice is all yours.

On the other hand, if I were to say to you that you are brilliant, you would no doubt feel pleased with yourself. Again, this is a choice. You could just as easily decide to pay no attention to my opinion.

But you forget you are making a choice. You automatically become angry or flattered, depending on the stimulus. You are in a trance of your own making.

To be human, is to be filled with such conditioning.

When we accept a logical conclusion that contains our own beliefs, we are conditioned to accept another one, & then another. Until without even realizing it, we have before long accepted a new belief that we would not have accepted, had it been forced on us in the first place.

Such is the judo of persuasion, & marketing new ideas.

Daniel Levis is a top marketing consultant & direct response copywriter based in Toronto Canada. Recently, Daniel & world-renowned publicist & copywriter Joe Vitale teamed up to co author “Million Dollar Online Advertising Strategies - From The Greatest Letter Writer Of The 20th Century!”, a tribute to the late, great Robert Collier.

 

Let the legendary Robert Collier show you how to write words that sell…Visit the below site & get 3 FREE Chapters! http://www.Advertising-Online-Strategies.com/ad-strategies.html

THREE STUPID GENIUSES: GREENSPAN, RUBIN

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Mr. Krugman is halfway smart: he is an economist who understands some of the dangers of the Floating Currency. But he doesn’t go after ‘free trade’ or he would lose his perch at the NYT, I guess. But yesterday, he took off after the ‘Three Musketeers’: Greenspan, Rubin & Summers. This is because the dumb trio pretended to be too stupefied to foresee the very obvious housing and buy-up bubbles. In his editorial, Mr. Krugman mentions a very interesting Time Magazine article from 1999.

 

Krugman - Lest We Forget - NYTimes.com

Consider, in particular, what happened after the crisis of 1997-98. This crisis showed that the modern financial system, with its deregulated markets, highly leveraged players and global capital flows, was becoming dangerously fragile. But when the crisis abated, the order of the day was triumphalism, not soul-searching.

Time magazine famously named Mr. Greenspan, Robert Rubin and Lawrence Summers “The Committee to Save the World” — the “Three Marketeers” who “prevented a global meltdown.” In effect, everyone declared a victory party over our pullback from the brink, while forgetting to ask how we got so close to the brink in the first place.

In fact, both the crisis of 1997-98 and the bursting of the dot-com bubble probably had the perverse effect of making both investors and public officials more, not less, complacent. Because neither crisis quite lived up to our worst fears, because neither brought about another Great Depression, investors came to believe that Mr. Greenspan had the magical power to solve all problems — and so, one suspects, did Mr. Greenspan himself, who opposed all proposals for prudential regulation of the financial system.

 

During the 1990’s, the US stock market rose over 18%. The only decade where this grew even better was the decade when the US recovered all the losses from the Great Crash of 1929. Stocks rose nearly 18% in the 1980’s and even more, the next decade. The Dot Com Crash hit the US in 2000: the NASDAQ began to collapse in March. The rest, right BEFORE 9/11, not after. Bush’s popularity was crashing after March, 2000. He wanted to boost it and the tax cuts were supposed to assure a crashing stock market.

 

The world was sliding into a bad recession back then. In Japan, all economic indicators, especially exports, were falling swiftly. The Bush mega-tax cuts poured money into the world economic systems. The consumer economy in the US took off again. After 9/11, Greenspan dropped interest rates far, far below the rate of inflation right when the US increased military spending to record levels.

 

Two things took off for the skies: the US trade deficit ballooned right as all our housing values ballooned. These were part of the outcome of the tax cutting coupled with military overspending and let us not forget the ‘free trade’ business which ground onwards, eliminating nearly all US trade protections.

 

I remember that time well. Bush pushed for emergency tax cuts to ’save the economy.’ I was disgusted. Clinton and the GOP, due to hating each other and snarling up Washington, DC’s massive debt machine, balanced the budgets for the first time since President Kennedy. It was obvious, by 1999, the US was in the middle of a very disastrous and energetic inflow of foreign funds driving up stocks. iTulip.com was launched in 1999 during the Dot Com stock market madness.

 

iTulip is a great way to find information that seems to be obscured from the eyes of the Three Marketeers:

 

The Three Marketeers - TIME Feb. 15, 1999

 

The Asian collapse of 1998-1999 was fixed in two very interesting ways: the nations that either went through the collapse or who anticipated runs on their own finances all began to amass gigantic FOREX reserves. Before the Asian Currency Crisis, virtually no one had FOREX reserves bigger than $80 billion. Afterwards, Asian and then, in the last three years, nearly all our trade partners ran up their FOREX reserves. In Asia, these grew from less than $80 billion to $2 trillion or more in size.

 

One thing that our brainless Three Marketeers should think about is exactly this: the sudden surge in FOREX reserves after a series of bubbles popped in Asia. After all, the Federal RESERVE is supposed to be the entity holding our dollars, eh? And instead of changing direction after Asia and then the world, changed direction, the US stubbornly kept the old reserve levels. We should had been buying and holding euros and yen. We didn’t. And so our trade deficit shot upwards to nearly a trillion in losses a year by 2007.

 

Greenspan, Rubin and Summers were supposed to be MONETARISTS. This means, the manipulate the CURRENCY. To do this, they use tools and one of these is the FOREX reserves! Duh! Why on earth don’t they understand this simple story?

 

According to Krugman, the semi-sane economist, these nutty guys claim they have no idea what went wrong here. They couldn’t see bubbles forming. This, of course, is a lie. At the point where Krugman talks about this pretense of ignorance, he should have gone off to see why this is so. Why do our leaders always profess stupidity when messes they made are obvious to anyone?

 

HAHAHA. They are a bunch of very naughty little boys, aren’t they? They don’t want anyone to know their dirty deeds. So, once they drop the cookie jar, they hold up their hands and yell, ‘I didn’t touch it!’

 

I still remember the Asian crisis. Note how the article from back then, clearly states that this was due to too much real estate and useless factories being built. And the value of all existing systems suddenly shooting upwards as FOREIGN money flowed suddenly into Asian lands!

 

OK: here is where it gets most interesting. WHOSE MONEY WAS FLOWING INTO ASIA???? Ah! This is the key. We know how these bubbles form. Someone is very reckless with lending money to someone else. That someone else takes these stupid sub-1% loans and dumps them all over everything on this planet, seeking someone to be trapped into paying interest rates forever and ever.

 

And what bank dropped their interest rates to nearly zero in 1996? This, incidentally, is when the bubbles began to suddenly form and grow rapidly, in Asia, in South America. Well, I look around and I spot someone who is probably the guilty party: the Bank of Japan!

 

The carry trade began in 1996. By 1998, it was a roaring business in Asia. This tsunami of easy credit pouring out of the Bank of Japan was carried offshore. It was Japan’s greatest export product! On top of this, Japanese exporters and Japanese savers needed to park money offshore and have it earn a higher interest rate since rates in Japan were at 0%. So a flood of savings and profits from the world’s #2 economy flooded all of Asia and sluggishly flowed over South America. And the US itself. Housing values in these places began to balloon nearly instantly.

 

Bloomberg.com: Latin America

 

Why is that? HAHAHA. Mortgages are for 30 years! Guaranteed income for life. The Time Magazine 1999 article left this dynamic out. Indeed, no one in the media mentioned the words ‘Japanese carry trade’ back then. It was a devil of a time for me to figure this out during the last decade. A real educational experience.

 

The Three Marketeers - TIME

The initial downturn didn’t surprise the Fed or the Treasury too much. For the better part of two years, Greenspan and Rubin had been quietly fretting about the narrowing “spread”–the difference in interest rates–between U.S. bonds and emerging-market bonds. By 1996 banks were lending money to countries such as Malaysia at interest rates just a few percentage points above what the U.S. Treasuries commanded. The implication: Malaysia was not a much riskier bet than the U.S. This was nonsense, and the committee knew some correction was in order.

But the speed of the collapse, when it came, was breathtaking, and proof that world markets had entered a new and much more volatile phase. Summers has a favorite analogy: “Global capital markets pose the same kinds of problems that jet planes do. They are faster, more comfortable, and they get you where you are going better. But the crashes are much more spectacular.”

 

Summers and Rubin didn’t run the Bush train off the tracks. But Greenspan obviously was the main driver in this present crash. But Summers and Rubins are meddlers who were VERY active in dealing with the previous Bank of Japan-engineered crashes. Since they ran around the world, ‘fixing’ things, they bear a lot of responsibility for the present mess. Because they didn’t fix what was really wrong. Instead, we are all striving now to ape the Bank of Japan!

 

Namely, all the INDUSTRIAL NATIONS are dropping interest rates to 0%, fast. And all the COMMODITY nations are raising interest rates! Isn’t that rather queer? Especially since the US market is rather a big more a commodity exporter compared to Japan or England, just for example.

 

Bloomberg.com: Exclusive

“I’m in the middle of shifting my cash holdings to hedge funds,” Sagami, 48, said in an Oct. 14 interview at his Hisashi Kobayashi-designed house on a 3,300 square-meter (0.8 acre) lot. “This is the beginning of the biggest bargain sale.” He confirmed last week he is still investing in the funds….Department Chief Hiromitsu Nakagawa said he offers mutual funds that include hedge funds to individuals with more than 500 million yen in financial assets. He said many clients want to diversify portfolios that are mostly made up of inherited properties and securities.

 

Whenever an economic system develops whereby a large upper class simply sits back and collects wealth via inheritance and clipping coupons, we get long, long depressions. Japan is in the grip of this epic depression and like Victorian England, the upper classed don’t mind this one bit. Indeed, they work very hard to prevent it from ending. The benefits of seeing their holdings grow steadily while the prices fall at home is a lot of fun.

 

On the other hand, it kills economies. The dead hand of debt accumulation eventually grinds commerce to a halt. In Japan, this is deliberate. The ruling LDP is made up of these sorts of people who want money to flow steadily into their laps. They do NOT want a consumer surge that might encourage imports. Once a country has an ‘inheritor class’ in charge of things, it is all downhill. This is why we had such high inheritance taxes here. It was a sociological experiment at trying to prevent depressions due to a nation being run by people who inherit their wealth.

 

It is now set at 0%. The rich can happily accumulate wealth without working, for infinite lengths of time. It is also part of our budget crisis. Money is no longer flowing in like it used to. I remember when the inheritance tax was first reduced: it was to save ‘the family farm.’ Instead, ‘family farms’ are dying as they are turned into vast estates that are worked by foreign stoop-labor of mostly illegal aliens from the South.

 

Since the repeal of the inheritance tax, nearly all the small family farms in my community have vanished. Now, mega-rich people like the McCain family can hand off their wealth intact to their children. Couple this with the drop in the number of babies produced by these rich families and we get an accumulation of wealth that is very dangerous. If rich families marry each other and then have one or at most, two children, this ‘old wealth’ will accumulate into fewer and fewer hands! This is bad. Very bad. Nowhere on earth do democracies thrive when there is this sort of passive wealth accumulation at work.

 

The Three Marketeers - TIME

The three men trying to cope with these mid-ether collisions of dollars and expectations are an unlikely team. Greenspan, the data-loving analyst with government roots sunk back into the financial and moral chaos of the Nixon Administration, and a shaman-like power over global markets. Rubin, the Goldman Sachs wonder boy who ran the firm’s complex and dangerous arbitrage operations and then led it to rocket-ship international growth. And Summers, the Harvard-trained academic who is invariably called the Kissinger of economics: a total pragmatist whose ambition sometimes grates but whose intellect never fails to dazzle.

What holds them together is a passion for thinking and an inextinguishable curiosity about a new economic order that is unfolding before them like an Alice in Wonderland world. The sheer fascination of inventing a 21st century financial system motivates them more than the usual Washington drugs of power and money. In the past six years the three men have merged into a kind of brotherhood, with an easy rapport.

 

All Goldman Sachs people should be permanently banned from working in the government. Especially the Treasury or the Federal Reserve. Ditto, JP Morgan. These clowns have, as the article in 1999 points out, invented this financial system! And it truly is an ‘Alice In Wonderland’ world: the Mad Hatter’s Tea Party as well as the Queen of Heart’s court. These guys eat a meal and then move down the endless table, leaving us, Alice, to eat off of their dirty plates.

 

When she suggests they ALL move forwards to clean dishes, the Mad Hatter and the March Hare regard her as insane. The criminal brotherhood of these three guys has prepared a global feast where 90% of humanity gets to eat the crumbs off of their dirty dishes! While they dine on clean dishes. I will note here that there are many ‘widdershin’ aspects to both ‘Alice in Wonderland’ and ‘Through the Looking Glass’ stories.

 

 

The three men have a mania for analysis that has bred a rigorous, unique intellectual honesty…. This pragmatism is a faith that recalls nothing so much as the objectivist philosophy of the novelist and social critic Ayn Rand (The Fountainhead, Atlas Shrugged), which Greenspan has studied intently. During long nights at Rand’s apartment and through her articles and letters, Greenspan found in objectivism a sense that markets are an expression of the deepest truths about human nature and that, as a result, they will ultimately be correct….they all agree that trying to defy global market forces is in the end futile….In the same way that the threat of mutually assured destruction helped Kissinger replace Washington ideology with Realpolitik, the shadow of a massive economic meltdown has helped the committee sell a market-driven policy that could be labeled Realeconomik.

 

Ayn Rand is like any number of demons in the Cave of Wealth and Death. She knew that there is a connection between sex and money. She exploited this information. Note here that this toxic trio viewed the collapse of the Japanese-carry-trade flood of lending to Asia is a motivation to INCREASE danger by pursuing a MARKET-DRIVEN policy. Misnamed as ‘Realeconomik’.

 

How about ‘Realcrash’? For this was obvious by 1999: flooding any nation with lots of easy lending leads to bubbles and terrible crashes. So why did the US immediately volunteer to be the new destination of all this Japanese carry trade loot? It was obvious, back then, this was a very bad thing!

 

And if the ‘markets’ are correct, then why interfere with them? The markets are obviously screaming, ‘This was a BAD BUBBLE! RUN AWAY!’ And off, we go, seeking shelter in gold or bonds, classic depression items. Instead, everyone is struggling to restart this goofy lending business that failed so abruptly in 2007.

 

The Three Marketeers - TIME

The IMF has taken particular heat because even as these nations suffer, the U.S. and Europe continue to grow. The committee believes that the IMF remains a key international tool, especially as it works to clean up the abuses that led to the current mess and makes it easier for investors to get back into those developing markets.

That means trying to reduce volatility where possible. Many countries are at the mercy of international lenders who can decide, if they feel nervous, to jerk billions of dollars from country to country. This would be like having your bank pull your mortgage because your banker heard you’d had a bad day. The solution to the problem, the men believe, is more honesty on the part of borrowers–so banks know what they are getting into–and more caution on the part of banks. While some economic thinkers–notably Soros and Malaysia’s Mahathir–have lobbied for more dramatic controls, Rubin warns that simply locking capital in place can often become a substitute for much needed reform, delaying an inevitable correction. As for the impact of speculators, who have been torched by politicians around the world, Rubin says they are a part of the crisis but a much less important factor than the real economic problems of the countries they hit.

 

No nation has more economic problems than the US. No nation is running so huge a deficit in government spending, so huge a trade deficit. These two things doom our nation to destruction. Yet, no one is trying to stop either. Only after inflation of necessities sucked dry, nearly everyone’s bank accounts in the US, has the spending on imports slowed down.

 

Capital being ‘locked in place’ is not the problem nor the solution. Preventing floods of easy lending: that is the problem. The IMF forbade countries undergoing collapse to spend on social services or increase public debt. Yet, as the US spends to infinity, probably doubling our government debt obligations in ONE YEAR! Well…the IMF is silent, of course. All the smaller nations who were hammered by the US officials in the IMF in the past are steamed that the US gets a free ride.

 

But international powers like China and Russia are quite happy about letting the US continue to build up debts! They want us to go bankrupt. This is called ‘revenge.’ And is best eaten cold. And the leaders of Russia and China can be quite cold-blooded.

 

Note also, in the old Times article, the writers mention that banks should be more cautious. And borrowers shouldn’t lie about their incomes! HAHAHA. Both did the opposite here in the US when the flood of Japanese carry trade lending hit our own shores! Money was ladled out like there was no tomorrow. And when tomorrow came, everyone began to default. Fast.

 

The Three Marketeers - TIME

To operate effectively in this new world, Rubin has remade the Treasury into an organization that is “more like an investment bank,” says Tim Geithner, the 37-year-old Under Secretary for International Affairs….And fresh thinking has been crucial in the new economic order. One legacy of 1998 has been the destruction of some of academe’s and Wall Street’s most cherished models of the world. More data and faster markets, says Greenspan, mean more opportunities to make money.

They also mean more chances to lose your shirt, something he calls “the increased productivity of mistakes.” Computers make it possible to push a button and destroy a billion dollars of wealth. The chairman was warning about the problem long before Long-Term Capital Management vaporized $4 billion, but that debacle silenced any skeptics of the new risks.

 

All our investment banks are bankrupt. They all changed their names to ‘regular banks’ and are struggling to recapitalize themselves AT GOVERNMENT EXPENSE. They can’t attract wealth anymore. They are negative wealth machines due to the Derivatives Beast eating anything they park inside their banks. Instead of giving up and having all our systems nationalized, we are trying to use future taxes to recapitalize these stupid banks that are bankrupt.

 

The Treasury has no money. Our government has run in the red nearly my entire life! How can a Treasury be an ‘investment bank’ if all it has is epic red ink? It is a NEGATIVE system. All such systems eat capital, not create capital. Right now, everyone wants treasuries only because we are in a NEGATIVE FLOW situation thanks to the investment bankers! Selling our debts, cheap, isn’t productive. It still increases our net out-flow. It still destroys, not makes, our nation. Here is the latest news about US Treasuries:

 

Bloomberg.com: Bond

 

The Three Marketeers - TIME

The problem, the men say, is that the markets are encumbered by all kinds of imperfections. Even tiny flaws create problems. A Thai banker who breaks the rules by passing $100,000 to his brother-in-law puts the whole system at risk.

To help resolve the riddle of imperfect markets, the committee has spent six years working on an experiment. It’s called the U.S. economy. The current boom is as much a part of the committee’s legacy as is its battle to stem global turmoil. It was Rubin–via the 1993 deficit-reduction plan–who navigated the Clinton Administration into budgetary agreements that helped create the first surplus in 29 years. This fiscal responsibility helped lower interest rates, which kicked off a surge in business spending. Greenspan, who dovetailed his own monetary policy with those goals, let the economy build up its present head of steam. The men don’t get all the credit for the boom–they’re the first to say all they did was let the markets work–but on both Wall Street and Pennsylvania Avenue, they get the bulk of it.

 

The flood of corruption that flows through the Washington, DC sewer is far worse than some Thai banker giving his goofy brother some loot. I have pointed out in the past, the ‘imperfections’ are exactly where wealth is created. The investment bankers, hedge fund geniuses and other people restlessly roam about, seeking loopholes, creating loopholes via bribing politicians, they seek imperfections and hammer away at them, turning them into mega-abuse opportunities for free funny money.

 

Another lie here: constricting US spending does NOT cause lower interest rates! When we were overspending merrily by 2001, Greenspan dropped rates due to 9/11. Then kept them at a ridiculous 1% as energy costs soared. As the budget deficit grew, rates remained low.

 

Then, in a hurry, Bernanke tried to raise them again. Only to panic and drop them BELOW 1%, heading to 0% by December.

 

The Race to Zero Interest Rates - Seeking Alpha

When a central bank runs out of room to cut interest rates, it resorts to Quantitative Easing. This term was coined by the Bank of Japan in 2001 when interest rates were already at zero and the central bank stopped targeting the overnight call rate and turned to targeting a current account level. Their goal was to flood the Japanese financial system with liquidity by buying trillions of yen of financial securities including asset-backed instruments and equities.It can be argued that the US has already engaged in Quantitative Easing as the government has recently announced plans to spend $800 billion to unfreeze the consumer and mortgage market.

They have agreed to buy mortgage backed securities backed by government sponsored entities and could accelerate that if interest rates hit zero. Excess reserves have also increased significantly, driving the effective fed funds rate well below 0.5 percent. This would have been one of the desired outcomes of quantitative easing. Last week, Fed vice chairman Donald Kohn said quantitative easing measures were under review at the central bank as normal contingency planning.

The goal would be to encourage banks to lend more aggressively by coming in as a buyer at specified rates. Even though quantitative easing drove Japan into deflation, it was the key to turning around the economy and this is a risk that the US central bank may have to take.

 

I have pointed out in the past that the US cannot do what Japan has done: run eternal depressions that benefit mostly the coupon-clipping inheritors of wealth. We cannot imitate Japan’s 0% system because we run a trade deficit. We import far too much energy products to run a Fortress Japan situation. This is due to Japan restricting the use of energy going to workers and the poor.

 

This is why Japanese workers must toil in colder or hotter offices, for example. And live in homes that are uncomfortable. The US loves climate systems even though we need to import fuel to run our delightful McMansion energy systems. And of course, how can the US be doing ‘quantative easing’ when the stated result is supposed to be no depression but a light form of inflation?

 

Either this will boomerang badly and become mega-inflation or it will do what it did to Japan: kill the lower classes off. Guess which system the very rich who have children, want?

 

 

Of course! The Japanese system whereby they can clip coupons and marry each other and concentrate wealth more and more in the hands of fewer and fewer people.

FEEL FREE TO EMAIL ME AT emeinel@fairpoint.net

Own Your Own Piece of History

Because I’m unemployed or because it’s the Thanksgiving holidays, I’m watching more television than usual. This commercial reminds me of something Dave Chappelle would have produced on his historic comedy show:

Although I’ve got the USA Today from November 5 and the Newsweek from November 17, heralding Obama’s victory, stashed away in a drawer, I won’t be buying any limited edition, historic plates. I equate buying something such as this as investing in Beanie Babies or a six-pack of commemorative Coca-Cola bottles heralding a college football team’s national championship.

Have I ever fallen victim to a scam such as the Obama Commemorative Plate? Oh, yes, I purchased the commemorative Jimmy Carter Presidential Coin, after his election in 1976. What is it worth today? $10.99. A few years after I purchased it, I realized that it wasn’t worth much, so I gave it as a gift at a White Elephant Christmas Gift Exchange. I don’t think that Andy Miller, who got stuck with it, appreciated it very much.

And that six-pack of commemorative Coca-Cola celebrating the 1998 National Championship of the Tennessee Volunteers? After collecting dust for a few years (along with the coach of that team), it was discarded.

Since falling victim to buying those worthless commemorative gifts, I now invest only in mutual funds.

Make Us Green:Arnold Schwarzenegger,Environmental Hero

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They’re also doing big things. Specifically, they’re doing big things that Washington has failed to do. In a time of federal policy paralysis, when partisanship-on-crack has made compromise almost impossible, when President George W. Bush’s political adviser is a household name but his domestic policy adviser was unknown even in Washington until he was arrested for shoplifting, cities and states are filling the void. Bloomberg and Schwarzenegger happen to be the best examples of this phenomenon as well as the best known. Bloomberg is 65; the Last Action Hero is turning 60; they’ve got better things to do than bicker and posture. “These are two exceptional and forceful guys who don’t need the job at all; they had pretty damn good lives before they got into politics,” says their mutual friend Warren Buffett. “They’re in office to get things done. And they’re doing that a lot better than anyone in D.C.”

Look at global warming. Washington rejected the Kyoto Protocol, but more than 500 U.S. mayors have pledged to meet its emissions-reduction standards, none more aggressively than Bloomberg. His PlaNYC calls for a 30% cut in greenhouse gases by 2030. It will quadruple the city’s bike lanes, convert the city’s taxis to hybrids and impose a controversial congestion fee for driving into Manhattan. And Schwarzenegger signed the U.S.’s first cap on greenhouse gases, including unprecedented fuel-efficiency standards for California cars. (He’s already tricked out two of his five Hummers, one to run on biofuel and another on hydrogen.) The feds have done nothing on fuel efficiency in two decades, but 11 states will follow California’s lead if Bush grants a waiver. After signing a climate deal with Ontario — on the same day as his stem-cell deal — he said he had a message for Detroit: “Get off your butt!” He had a similar message for Washington. “Eventually, the Federal government is going to get on board,” he said. “If not, we’re going to sue.”

But they’re tackling not just the climate. Bloomberg is leading a national crackdown on illegal guns, along with America’s biggest affordable-housing program. He also enacted America’s most draconian smoking ban and the first big-city trans-fat ban. And he’s so concerned about Washington’s neglect of the working poor that he’s raised $50 million in private money, including some of his own millions, to fund a pilot workfare program. Meanwhile, after the Bush Administration rebuffed California’s appeals for help repairing the precarious levees that protect Sacramento, Schwarzenegger pushed through $42 billion worth of bonds to start rebuilding the state’s infrastructure. He’s also pushing a universal health-insurance plan and hopes to negotiate a deal with Democrats this summer. “All the great ideas are coming from state and local governments,” Schwarzenegger told Time. “We’re not going to wait for Big Daddy to take care of us.”

So they’re not exactly playing politics as usual. But their model of crossing party lines to act where Washington won’t is increasingly common. As D.C. politics has become more of a zero-sum partisan game, Mayors and Governors in both parties have taken on predatory lending, obesity, energy, health care and even immigration. “It’s innovation by necessity,” says Stephen Goldsmith, a former Republican mayor of Indianapolis who oversees Harvard’s Innovations in American Government awards. This year hardly any federal programs applied. “Very unusual,” Goldsmith says.

“Nature abhors a vacuum,” says Bruce Katz, director of metropolitan policy at the Brookings Institution. “And the vacuum at the national level is immense.”

After Bloomberg was ousted from Salomon in 1981, he used his $10 million payout to start Bloomberg LP, which now includes Bloomberg News, Bloomberg Radio and Bloomberg Television as well as the ubiquitous Bloomberg terminals that have served as the company’s cash machines since they started appearing on desks everywhere financial information was needed. In his autobiography, he called his name “a synonym for success,” describing his branding strategy thusly: “I was Bloomberg — Bloomberg was money — and money talked.” In 2001, after the lifelong Democrat joined the Republican Party because the Democratic mayoral primary was too crowded, he self-funded his way to city hall. An endorsement from Mayor Rudolph Giuliani helped, but mostly, money talked.

Bloomberg inherited a tough situation. The city was hemorrhaging jobs after the Sept. 11 attacks, and Giuliani’s second-term spending spree had left the city in a financial hole. Bloomberg raised property taxes 18% to attack the deficit, and he made some modest but politically difficult spending cuts, including the closing of several firehouses. He also engineered a hostile takeover of the city’s troubled schools and banned smoking in the city’s restaurants and bars. His approval ratings sagged into the 20s; his constituents booed him at parades. “They’ll come around,” he told aides.

They have, because the city has. Bloomberg hasn’t etched his personality into the city’s soul, but major crime has dropped 30% in New York in the Bloomberg era, without the racial antagonisms of the Giuliani era. Test scores and graduation rates are up, unemployment is at a record low, welfare rolls are at a 40-year low, construction is booming, the deficit has become a surplus, and the city’s bond rating just hit an all-time high of double-A.

As a candidate with no political base, no political history and no political debts, Bloomberg came into office beholden to no one. Even when they don’t agree with his decisions, New Yorkers seem to sense that he’s set aside his conglomerate and his four vacation homes for public-minded reasons; his approval rating has hovered around 70% for nearly two years. His administration has made mistakes — an ill-fated stadium plan, a school-bus snafu — but it’s been scandal-free, and every major media outlet endorsed his re-election. Bloomberg likes to think big: as a businessman, he aimed to make financial markets transparent; as a philanthropist, he’s funding research designed to eliminate malaria by building a better mosquito. “I was hired to solve problems,” told Time. “Yes, I’ll fix potholes, but that’s not why I wanted this job.”

There’s a good view of Bloomberg’s problem solving from the roof of the 123-unit building Ken Haron just developed in Harlem. That neighborhood was once a national symbol of urban decay — drugs, violence, all the classic inner-city problems — but now its main problem is that it’s so desirable, its housing is unaffordable. And in recent decades, the feds have stopped building subsidized housing. So Bloomberg has leveraged private money for a $7.5 billion effort to create 165,000 affordable apartments, enough to house the population of Atlanta. It’s already one-third complete. Haron charges some tenants market rents of about $3,000 a month, but he has to reserve 80% of his building for lower-income families that won lotteries to pay as little as $700 for apartments with the same granite countertops. On the roof, Haron points out similar mixed-income projects in every direction: “That one’s in the program. So is that one. That one’s condo; it’s ours too.” Its penthouse is for sale for $1.7 million, but moderate-income families will pay $250,000 to live in the same building. “There’s stagnation at the federal level, so we had to get creative,” says Bloomberg’s housing commissioner, Shaun Donovan.

To Bloomberg, Washington means gridlock, extremism and pettiness. It’s the place where homeland-security funds were “spread out like peanut butter” for political reasons, so that rural states got more per capita than New York. And it’s the place that’s blocking him from cracking down on illegal guns. In 2005, after a rash of shootings, Bloomberg’s aides told him that 90% of the illegal guns used in local crimes came from out of state and that 1% of U.S. gun dealers supplied 60% of its crime guns. And the Bush Administration had stopped tracking the problem; in fact, the G.O.P. Congress had enacted N.R.A.-backed language restricting federal officials from sharing gun-trace information with local police. Bloomberg appealed to Attorney General Alberto Gonzales but got the brush-off. So the mayor hired investigators to run stings in gun shops nationwide and sued 27 of the shadiest dealers; a dozen are now under court supervision. He also started Mayors Against Illegal Guns to fight the information-sharing restrictions; the group has recruited more than 220 mayors in a year, but Congress has not reversed the policy. “Ultimately, you have to blame the public,” Bloomberg says. “They’re not holding Washington accountable.”

Politicians aren’t supposed to blame the public. Or fly their own planes or pepper their autobiographies with sentences like “I dated all the girls.” (He’s now divorced with two daughters; he’s dating New York’s former banking commissioner.) But Bloomberg isn’t typical. He’s a press mogul who seems perpetually annoyed with the press. He broke with 200 years of tradition by rearranging city hall into a bullpen modeled on a trading floor, with his desk in the middle of 50 aides. (Perhaps transparency breeds loyalty, because his senior staff has barely changed in six years.) And now he wants to charge $8 to drive into busy parts of Manhattan on weekdays.

Bloomberg was initially skeptical of congestion fees because he feared the effect on outer-borough New Yorkers. But the data showed that few of them drive into Manhattan, and most who do will be served by the transit improvements the fees will subsidize. “What good is a 70% approval rating if we don’t take risks?” he asked his aides. So far, that rating hasn’t budged, which has given political cover to New York Governor Eliot Spitzer and even the Bush Administration to support his efforts to reduce emissions. “The naysayers who think global warming is too big a problem just don’t have any vision,” he says.

Schwarzenegger turned out to be a very good politician. He considered running for Governor in 2002, even though his only prior public service had been chairing President George H.W. Bush’s fitness council. Instead, he decided to sponsor a wildly popular ballot initiative to fund after-school programs. The next year, when a fiscal crisis and an electricity crisis fueled an effort to recall Democratic Governor Gray Davis, Schwarzenegger jumped into the chaotic race to replace him. After a two-month campaign too quick to get deep into policy specifics, he had a new job in Sacramento.

If Bloomberg is a technocrat, Schwarzenegger is a populist; he’s never stopped trying to give people what they want. In fact, he’s never really left the campaign trail, spending much of his time pushing ballot initiatives. The most prominent was the stem-cell measure. The $3 billion referendum was a clear rebuke to President George W. Bush, and some Schwarzenegger advisers warned him that supporting it would alienate his Republican base. But he adopted the initiative as his own, named the Democrat who wrote it to be his top stem-cell adviser and became a global spokesman for California’s medical-research industry.

“I like to do everything big,” Schwarzenegger says. But he’s not a superhero anymore. He’s still got that incredible jaw, but he looks almost life-size, and he seems to have inherited Strom Thurmond’s hair dye. He’s still an enthusiastic salesman — everything is “fantastic” or “terrific” or “greatgreat” — but his constituents didn’t want what he was selling in 2005, rejecting all four of his initiatives. He recovered in time to get re-elected by apologizing and reaching out to the Democrats who run the legislature. If the Bloomberg administration’s symbol is the bullpen where the mayor manages, the Schwarzenegger administration’s symbol is the smoking tent outside the state capitol where the Governor schmoozes while he lights up his cigar. “Our Founding Fathers would still be meeting at the Holiday Inn in Philadelphia if they wouldn’t have compromised,” he said in a blistering anti-Washington speech in February. “Why can’t our political leaders?” He suggested that Bush should get himself a smoking tent.

Schwarzenegger made his most important compromise last September, when he signed a Democratic bill capping greenhouse-gas emissions. With his Hummers, his private plane and his conspicuous delight in conspicuous consumption, Schwarzenegger is an unlikely environmentalist, but he’s become a global salesman for the war on carbon. His message, as usual, is that the naysayers are wrong: you can clean up the environment and still have a growing economy with big houses and big cars. He talks about green technology as California’s next gold rush, its next Internet boom: “One plus one can make three!” He scoffs at environmental buzzkills who want Americans to drive wimpy cars and live like Buddhist monks. “Guilt doesn’t work,” he says. He sees the future in the Tesla, a hot new electric car that goes from 0 to 60 in 4 sec. His model cost a mere $100,000.

It’s not exactly the Sierra Club message, but he’s a powerful messenger. He was in Vancouver to sign another climate deal when news broke that Bush would reject Europe’s push for climate caps at the G-8 summit and would propose a meeting instead. “We don’t need another meeting on global warming,” Schwarzenegger told a crowd of reporters. “We need action.” Action, of course, is Schwarzenegger’s thing. He was never much for dialogue. In an interview, he marveled at Bush’s notion that America shouldn’t cap its own emissions until China and India agree to do so. “That’s not what leadership is about,” he said. “We don’t care if Arizona is going to do the right thing; we take action ourselves.”

That love of action is the real link between Schwarzenegger and Bloomberg, and the real source of the recent Bloomberg-for-President buzz. There’s no obvious niche for a candidate who supports gay marriage and gun control while opposing the death penalty and deadlines for withdrawing troops from Iraq. But there is an obvious appeal to a businessman who can work across party lines to get things done — and could drop $500 million on a campaign without even noticing it was gone. Buffett thinks it’s a great idea, and when he first heard it, he turned to the Constitution. “I wanted to see if Schwarzenegger could be his Vice President,” Buffett said. “I think he could.” It states that the President must be native born, but it’s silent on the Vice President. “That would be one hell of a team, wouldn’t it?”

Experimenting with Democracy

Twice in recent weeks, the Balochistan Assembly couldn’t hold its winter session due to lack of quorum. This happened on two consecutive occasions as 15 assembly members out of 65 turned up in the first session while only six were present in the second. This was despite the fact that 63 MPAs are part of the PPP-led coalition government in the province and sit on the treasury benches. It is certainly a cause for alarm that the 45 provincial ministers and the rest, almost all of whom hold some official position, are unable to ensure quorum of the provincial assembly so that its sessions are held in time, the grave issues confronting Balochistan and Pakistan are debated and legislative business is conducted.

There could be a reason as to why the Balochistan Assembly failed to meet due to absence of the required number of its members. It is argued that the MPAs on one occasion had to attend a function of Prime Minister Syed Yusuf Raza Gilani, who finally found time to visit Balochistan to belatedly console the unfortunate victims of the Ziarat earthquake. On the second occasion, the MPAs found it more exciting to attend the wedding of the son of federal minister Syed Khurshid Shah in Karachi than staying back in Quetta and taking part in the normally lacklustre proceedings of the provincial assembly. However, the assembly speaker and the parliamentary leaders of the political parties making up the ruling coalition should have figured out in advance that it would be inopportune to convene the assembly’s session when such momentous events such as the prime minister’s visit or a royal wedding were taking place.

The way the Balochistan Assembly is functioning and the manner in which the provincial government is being run cannot inspire confidence among those who were hoping for a change following the installation of democratic governments in keeping with the verdict of the voters in the Feb 18 general elections. It is business as usual, with the lawmakers once again indulging in their familiar pastime of seeking and enjoying the perks of power at the cost of public interest.

It would not be fair to single out Balochistan for its poor state of governance, but the purpose of highlighting the shortcomings of Chief Minister Nawab Mohammad Aslam Raisani’s unwieldy provincial government was to show how Pakistan’s latest experiment with democracy was already causing disappointment to all those who had attached so much hopes with the February polls.

Of the 65 assembly members in Balochistan, only one sits on the empty opposition benches. Sardar Yar Mohammad Rind, a former federal minister, cannot join the government due to tribal disputes with Chief Minister Raisani. He reportedly attended just one session of the assembly, to take oath as MPA, and that too in the company of heavily-armed guards. Being powerful tribal elders, the two Baloch chieftains have been running a feud and are, therefore, constrained to remain in opposite camps. Sardar Bakhtiar Khan Domki, son of the late Nawab Akbar Khan Bugti’s son-in-law Sardar Chakar Khan Domki, could be classified as an independent MPA as he isn’t part of the coalition government despite reposing trust in the chief minister at the time of Mr Raisani’s election. One could well imagine that there is practically no opposition in the Balochistan Assembly, and, therefore, no check on the working of the government. In the absence of any real opposition, some PPP lawmakers took it upon themselves to oppose their own government in Balochistan recently when they staged a walkout from the assembly to show solidarity with a party MPA and minister, Ghazala Gola; she was upset at the portfolio of minority affairs being taken away from her and given to a minister affiliated with the PML-Q, Basant Lal Gulshan. Three PPP ministers and an MPA, led by parliamentary party leader Sadiq Umrani, staged the walkout in protest and held a press conference in which they expressed reservations on the affairs of the coalition government headed by their own party member, Sardar Raisani, who otherwise has an honest reputation and is admired for his straightforward nature.

This is something familiar not only in Balochistan but also other provinces where coalition governments are in place. Protests at allocation of ministerial portfolios is an old story. Political parties without ideology lack discipline as its leaders and members seek personal glory and are driven by self-interest. A coalition government cannot have direction because the ruling partners tend to pull it in different directions. Balochistan suffers more due to its coalition governments as its electorate, belonging to different ethnic and political groups, always gives a split mandate in elections. Secular, progressive and nationalist politicians have no qualms joining hands with Islamists and centrists to form coalition governments in Balochistan even though they make strange bedfellows.

Like Balochistan, the federal government too is an amalgamation of political parties espousing conflicting causes and ideologies. It was, therefore, not surprising that the federal cabinet’s strength has already risen to 55 and is poised to become even larger once Altaf Hussain’s MQM and Maulana Fazlur Rahman’s JUI-F are accommodated. The coalition partners, from the PPP to the JUI-F and the ANP to the MQM, are already pulling it in different directions. Prime Minister Gilani, by now known more for his interesting and often meaningless statements than anything substantial in terms of his administrative skills, watches helplessly while he panders to the wishes of the leaders of the coalition parties, and at the same time take orders from the his party boss: President Asif Ali Zardari doesn’t want to step down as the head of the PPP and become the president of all Pakistanis irrespective of their political affiliation.

In Sindh, the PPP has entered into a coalition with the MQM, a party with which it shares little owing to the two parties’ mutual distrust. Sooner or later, the two might encounter serious disputes and the only way they could stay together is to allow each other a free hand in running their respective ministries.

The situation in the NWFP isn’t much different. The PPP and ANP always make uneasy coalition partners and this time is no exception. Paralysed by the rising militancy and violence, the coalition government enjoys an unassailable majority in the NWFP Assembly and the JUI-F-led opposition too is largely a friendly opposition. The PML-N hasn’t taken up the insignificant ministerial berths that were offered to it by the ANP and the PPP but it doesn’t want to sit in the opposition as this would deprive its MPAs of government patronage and funds.

However, the provincial government cannot function normally due to the serious law-and-order problems afflicting the province. The expectations attached to it by the voters cannot be fulfilled and public trust in the coalition government’s ability to deliver is gradually diminishing. Add to it the familiar problems that arise between coalition partners in our country and there is this growing feeling that the ANP and the PPP could in due course develop problems of mutual mistrust.

Punjab probably is the best-administered province at present, primarily due to Chief Minister Shahbaz Sharif’s sincerity of purpose and governance skills. But Governor Salmaan Taseer would not let it work smoothly and the PPP doesn’t want to remain out of the provincial government even if Nawaz Sharif wants it to quit the coalition in Punjab. Coalition politics in Punjab too is causing frustration and could even undo the delicate balance of power now in place in Pakistan’s biggest province.

It would be unfortunate if Pakistan’s latest experiment with democracy falls by the wayside due to the lust for power among our politicians.

Look before you leap

After doing some research and investigation, I have come to realise that portfolio management is essential for every individual investor to create wealth. With a long-term investment horizon and balanced medium- to high-risk, I would like to seek an appropriate asset allocation strategy in my mutual fund portfolio. How should I do this allocation on a monthly basis? Can you suggest some other investment avenues apart from mutual funds?

Profile of the Investor Name: Sundara Kumar Age: 26 years Risk Appetite: Balanced Medium to High Investing Amount: Rs 22,500 per month

It’s impressive to see that you have a pre-planned set of strategies before you set out. You are definitely headed towards the right direction in building a diversified portfolio.

Managing your Health Savings Account

The world of health care is enormous and confusing. “Consumer-Directed Health Care” (CDHC) must empower consumers, not leave them to figure it out for themselves.  Most HSA administrators only provide a Visa/Debit card and an interest bearing account for your funds.  However, some will offer mutual funds after your account reaches $2,000 balance.  Remember, this account is portable/individually owned and the money rolls over year after year creating a nice tax advantaged account for eligible medical expenses - no “use it, or lose it” clause.

As a member of Consumer Care Solutions (CCS) our HSA Administration offers an exclusive Visa/Debit card to pay for your medical costs from your HSA, so that’s easy.  The card even knows which expenses are HSA-approved and which aren’t.  You get control and convenience, while CCS does the math!

Until now, most CDHC options have been structured and sold simply as a different way to fund health care; the problem is that in doing so, they perform the way traditional health plans perform.  To fulfill the promise of major savings, Consumer Care Solutions can deliver 30% - 40% savings on your annual health care costs.

www.consumercaresolutions.comis a web portal delivering a comprehensive collection of integrated products designed to launch consumers into this new era of health care.  Whether or not you have health insurance, a CCS membership provides important savings on prescriptions, dental care, hearing, vision and chiropractic care.  It instantly expands your network of doctors and health care providers far beyond what any individual health plan may offer.  And it gives your the power of a revolutionary web portal to manage your family’s health care, compare costs, and take advantage of the most powerful wellness site on the Internet. 

Best of Breed discounts available to all members = Better care, lower costs. Now within reach.

debt relief, bailout and economic stimulus

Okay so I know I should be writing about culture and stuff. I just got back last Sunday from ten days abroad and have been digging out from under a heap of emails and huge massive piles of backlog work. I was in Tel Aviv for awhile, which is amazing. It is like Paris with Palm Trees. I saw tons of cool art, partied with the Batsheva dance company at the Susanne Dellal center and much, much more. It was hard to come back to cold, cold, NYC. But I’m getting back in the swing of things.

And what with the holidays and all, my thoughts turn to credit card debt. According to Wikipedia (and their sources):

It just seems to me that if the government can bailout AIG to the tune of some $85 billion and Citi to the tune of, what, $45 billion? And a total bailout plan to all the fatcat investors of nearly $1 trillion dollars - that maybe it would be a really great idea to bailout more regular american who are burdened by credit card debt. Many people have accumulated debt that they’ve had since they were in their 20’s. The credit card people target students, we live in a culture that saturates common consumers with overwhelming messages to get into debt for a better life, etc. etc. Wages have remained stagnant at the  price of living has gone up, etc. etc.

Imagine the financial stimulus if people who are spending significant parts of their annual budget trying to pay down credit card debt - and never being able to get out from under it - could actually start over? What if they could have the opportunity to restructure their personal finances to get ahead and become a more robust and healthy part of the economy? Surely someone could figure out a way to distinguish between the chronically malfeasant and the redeemable but burdened debtors?

How about a bailout plan for the little guy?!!!

New England Wealth Strategies -

The first official Jobwhore post concerns a run of the mill cesspool called New England Wealth Strategies.  Jobwhore recently sat down with an employee of this organization and received an earful.  This person is a new rep for this organaization.  For purposes of this article this rep will be known as “Rep Z”.

Background

This company has three offices - Uniondale Long Island, New York City and Westport, CT.  They are a franchised financial services firm, affiliated with New England Financial a wholly owned subsidiary of Met Life.  New England Wealth Strategies is a franchise run by two managing partners.  If it sounds a little convoluted, it is.  It’s one of the early indications that this is a bit of a sloppy, poorly conceived outfit that is resting on its laurels as a division of Met Life and New England Financial, both of which have solid reputations.  New England Wealth Strategies, does not share the sterling reputation of Met Life and is actually an all together different animal.

There are two primary hiring tracks for New England Wealth Strategies, experienced producers and newly licensed reps.  The producers are overwhelmingly male, perhaps up to 95%, although one of the managing partners is a woman.  If you are an experienced producer, you can make an agreement with the owners to bring your existing clients into this company.  This happens infrequently, as most top producers can write their ticket with their own firms.  Occasionally, however a rainmaker type gets dissatisfied with his current affiliation and wants a change.

Far more frequently, however, the organization hires inexperienced reps.  These are either recent college grads or seasoned professionals seeking a career change.  New England Wealth Strategies will require you to gain FINRA licensing before you are hired.  This includes the passage of the State Life and Health Exam, as well as the Series 6 & 63 exams.  From all accounts, however, this the bare minium licensure you can receive in order to become a so called financial advisor.  A financial advisor is someone who actually has a series 7 which allows you to be a broker.  With just a 6 & 63 you can sell life insurance, annuities and mutual funds.  Passing these three exams will take you approximately three months and will be known as a “financial representative”.  It’s not that the tests are particularly difficult, but you have to wait for your “window” from FINRA to take the 6 & 63.  The life and Health exam is adminstered by each state.  Many people cannot pass the life and health exam and can go no further.

The New Rep Hiring Process

Generally, most people are recruited by New England Wealth Strategies from an internet job site.  Typically the firm employee responsible for this task will download dozens of resumes and call 50 - 100 potential new recruits per day.  They make contact with just a handful of these individuals and have a brief conversation.  If all goes well, they are offered a chance to interview.  At the interview the applicant meets with recruiting manager as well one of the rep managers.  If there is any kind of interest (”a pulse”) an invitation is given to take an aptitude test.  If the aptitude test is passed, then the applicant is called back to complete paperwork and arrange for the Life and Health Exam.  Background and credit checka are performed.  Once this threshhold is passed, the Life and Health Exam is arranged and taken.

Once the applicant has completed the application they can become what is known as an unpaid intern.  S/he is given the opportunity to come to meetings and learn the business.  Mondays are essentially filled with meetings, from 8:00 a.m. to 12:00 p.m. or later.  So the new reps often attend these meetings for 2 or 3 months before they are officially hired by the company.  Only after one has passed the three licensing exams will the company offer to “contract” or hire you.  You also have to attend an upaid week of class in the NYC headquarters, called “Induction School”.  Essentially it will be extremely difficult to have another full time job in this time period as you be asked to come in every monday and sometimes on other days, to work without pay or “intern”. 

The main selling points for working at New England Wealth Strategies are that, “you will get teamed up with a senior producer”, “we don’t just hand you the phonebook”, “don’t make cold calls”.  These however, are not accurate and according to Rep Z, believe them at your own peril. 

There are iron clad call requirements, call nights and little guidance on prospecting is given to the reps.  In fact, there is virtually no guidance whatsover in how to prospect, except to “make calls” or “grab the phonebook”.  Most people will not be provided lists of potential customers to call, none but the chosen few will.

Inaugural BS

I turned 30 today. Fucking scariest day of my entire life. I’ve been dreading it since the day after I turned 29. For a few months during mid-2008 I managed to forget, but come the end of August it hit me full force. I would be 30 in a few months and had nothing to show for myself.

No career. No house. No vehicle. No partner. No kids.

I earn 10$ an hour processing mutual funds. When I want people to think I have a ‘real’ job, something that’s not just over-glorified data entry, I tell them I manage RESPs. Not quite a lie, but not quite the full truth either.

I still live with my parents. I moved back home a few years ago to help out with some Stuff…and have yet to leave. Now that the economy’s taken a nose-dive, it looks like I won’t be able to for at least another six months. I refuse to rent when one month’s rent is the same as what a mortgage payment could be.

Long story short, this has had me effing depressed for a while now. Blah blah, some days I don’t want to get out of bed, blah blah emo blah. But when I can see past the depression, I have been seriously thinking about it. If I haven’t gotten my shit together by the age of 30, is it even worth trying to pull it together, still? Am I past the point of no return or can I still go on to live a happy, productive life and have something to show for myself?

I have no clue. It’s possibly possible that I can get my shit together, but as the old saying goes, only time will tell.

Today

Taking some time off work to be at home today. Me and the family having a most excellent time. Stealing a little bit of shuteye on the sly I have to admit - but that ain’t so bad. You know, I’m beginning to think that there’s something pretty amazing in my future. By the way check out this interesting mutual fund financial investing site.

Just Chillin

Here in the kitchen and wondering if I belong. Parents are going to be visiting so thinking about that. Getting things ready for the long weekend coming up next week - Yahoo! Can’t help but wonder if everything will be the same next month . . . And check this mutual fund analysis research stuff out.

Fund Managers Investment Strategies

S Naganath,CIO, DSP Blackrock

For stock-picking, we do pretty much the same thing that everybody else does – a combination of fundamental analysis, liquidity analysis and macro analysis. I don’t believe that bottom-up stock-picking alone works. The future price of a stock is influenced by a variety of factors. To focus only on the stock’s fundamentals would be to take a very narrow view. So, we have a mix of top-down and bottom-up approaches. If I had to look at one parameter, I would focus more on return on equity (RoE).

Tushar Pradhan, CIO, AIG

I simply look at growth at a price. India is in- herently a growth market. If you are looking for value here, you are likely to underperform for many years. Look at Procter & Gamble. It’s a wonderful business and it doesn’t require any capital. It makes sanitary napkins and it makes Vicks Vaporub. Both are perennial businesses in India. But the stock price just doesn’t move. None of the open-ended mutual funds has the patience to buy this company’s shares. On the other hand, growth can be very dramatic when the cycle is rising. For instance, look at the kind of growth the capital goods sector enjoyed in the past five years. When the cycle turns down, it doesn’t mean that the rate turns negative. The rate of growth goes down for a while before turning up again. So that is my focus – growth at a price, which will give you good returns.

Anoop Bhaskar, CIO (Equity), UTI Mutual Fund

If you are buying a company for growth and you expect it to double in size in three years, it cannot have free cash flow. My only criterion is that its cash from operations should be free. I think, the other thing is experience. You have to keep on meeting companies every week and in their offices and plants so that you know how their offices are and can observe other small things which tell you a lot about how they are managed – whether the guy serving the tea has a stained uniform; whether he greets you properly. Usually, in good companies, the lowest-level guys are very keen to work and keen to help. They are very proud to be in that company. If you didn’t like the tea and didn’t have it, they would notice and ask if they should make it again. All this tells you how the company is managed. This information is not there in the balance sheet.

Meeting companies management gives you a lead. You tend to understand what exactly is happening structurally in the industry. The key is not to have a meeting to discuss the next quarter numbers. The key is to spend time with the promoter and the management team. So I have meetings where I don’t discuss any numbers with them; some of my colleagues are very amazed – how could one have a meeting and come back without asking anything about the numbers? I say, we can call the right brokers and we will get the numbers but the point is we have just 45 minutes and let’s find out from him where he sees we could be three years from now. Is it really going to be different from what it is today? That is the key.

There is one rule (of investing) which is that, if the intensity of the working capital is lower than the sales intensity, then the company is a fraud.

Nilesh Shah, Deputy MD, ICICI Prudential MF

Selecting the right business is taking a call that, if the economy moves in a particular direction, then sector X would do well. Then you have to select the right company. The definition of a right company for us is a company which has a vision, which has an execution plan to back that vision and where promoters will not take the minority shareholders for a ride. The third important factor is to see if the price is right. Here again you try to analyse past trends, global benchmarking, some emerging market experiences and do some future analysis, to figure out if the price is right or not.

Source: Moneylife

Related link: http://deveshkayal.wordpress.com/2007/12/03/fund-managers-investment-strategy/

When Lutherans turn bad

The Charlotte Observer reports…

“The phone rang at 8:30 on a chilly Friday night at the woman’s Hickory home. Her caller ID showed the number for J.V. Huffman Jr., who managed her $130,000 retirement account – but there was a different voice on the line.

“This is agent Shawn Pruett with the N.C. Secretary of State’s office,” the woman recalled hearing. “Do you have money invested with J.V. Huffman? We’ve got him for fraud.”

“I started shaking so bad, it was like I was having a seizure,” said the woman, who asked not to be named for fear it would compromise plans to consolidate her loans. “It turned my life upside down. It was the money I was going to live on the rest of my life.”

Claremont, a blink-and-you-miss-it town of 1,100, has been jolted by accusations that Huffman, one of its best-known residents, cheated hundreds of investors out of millions, spending the money on fancy cars and his sprawling home.

Interviews with about a dozen friends, associates and investors paint a complicated portrait of the former school board member and church leader. Those who know him say they’re torn between images of the man they know – a soft-spoken hometown boy who quoted scripture, donated to charity and threw parties for college students – and the man they’ve read about in the papers recently.

Some say they feel foolish for getting caught in the web or angry that they’ve lost their savings; others say they’ve forgiven Huffman and are praying for his family.

Huffman, who remains in jail in Catawba County under a $1 million bond, confessed the scheme to state investigators after they raided his house, seizing documents and computer equipment, authorities said. Huffman could not be reached for comment, and family members did not return phone messages or answer their doors in recent weeks.

State authorities arrested Huffman on Nov. 7 on four felony counts of securities fraud. A few days later, the SEC filed a civil suit in federal court, saying Huffman and his company, Biltmore Financial Group, sold $25 million in investments to more than 500 people across the country, many of whom were part of the Lutheran community in Claremont, 50 miles northwest of Charlotte.

Court documents say Huffman spent investors’ money on vacation houses, a home movie theater and an Aston Martin convertible, among other lavish purchases.

Associates say he used his small-town connections and strong reputation – plus the promise of high returns – to persuade strangers, friends and family members to invest.

In the 17 years since it launched, Biltmore Financial collected clients nationwide, from Claremont to Colorado. Huffman didn’t advertise; most investors found out about the company through church members or relatives.

 

Friends and family say his parents are God-fearing, honest people, and that Huffman was a mild-mannered young man. His father, who lives in a two-story Claremont home, worked as a furniture upholsterer and later opened S&H Pools Inc., a swimming pool construction company.

Huffman Jr. attended Bunker Hill High School and Lenoir-Rhyne College, friends and relatives say. After college, he worked as an insurance salesman for the Aid Association for Lutherans.

In November 1991, Huffman launched Biltmore Financial Group. Authorities say he has not been registered to sell securities since October of that year, and a check with the Financial Industry Regulatory Authority confirms Huffman has not been licensed as a broker anywhere in the United States for the past two years, the oldest records available.

Huffman was plugged into his community. He won a seat on the Catawba County Board of Education in 1996 and was elected at least once again, serving until he lost a bid for re-election in 2002.

He donated to his church and charities and served on Catawba’s Board of Adjustment, where fellow members say he was respected and did a good job.

Huffman was successful in business. He moved into his house on Wishing Well Lane, which friends say his father built, in 1993, gutted it and added on, installing the movie theater with reclining leather seats, among other upgrades.

The house, whose tax value is $765,000, unfolds along a winding ribbon of asphalt in the Claremont foothills, surrounded by mobile homes and modest brick houses, chain-link fences and barking dogs. There’s a circular driveway with a fountain in the center, bright sprays of flowers outside and a long, low porch with rocking chairs and fans.

No one answered the door on a recent day – friends say Huffman’s wife and four children have left town.

Public records show Huffman owns almost a dozen other properties, including vacation and rental homes. Court documents allege he spent investors’ money on a $1 million recreational vehicle and other luxuries, and friends say he wore expensive clothes and took frequent trips to the islands and, about a month ago, to Alaska.

Court records and clients detail how the business worked:

Initially, he told investors his company operated like a mutual fund, but he changed his pitch after Sept. 11, 2001, to ease fears about market volatility. He would say Biltmore profited by pooling investors’ funds to buy and sell mortgages.

Huffman promised interest rates as high as 16.5 percent and told investors their money was insured by the FDIC, Securities Investor Protection Corp. and other groups.

As worries mounted about the subprime mortgage crisis, Huffman reassured investors, saying he only bought mortgages “with a good five- to seven-year history and a minimum equity position of 20 percent,” the SEC said.

In a recent letter to investors, Huffman promised higher interest rates to clients who increased their account balance by Nov. 15 and said if investors transferred money from a declining mutual fund or stock into a new account with Biltmore, “I will restore your balance back to the level on your last quarterly statement or as of Sept. 30, 2008.”

Investors say they never had trouble withdrawing money; some received monthly interest payments; others took out $5,000 or $20,000 whenever they needed it. They said they didn’t suspect anything until news broke about the arrest.

The Hickory woman who got that Friday-night phone call said she invested $130,000 with Huffman after her ex-husband introduced her to him. She remembers plaques in his office with Bible verses and the promise of higher returns than the BB&T account she had her money in previously.

The woman, 63, has been retired about two years, and wonders what she’ll do now. She’s negotiated with her insurance company to lower her monthly payments, is trying to consolidate bills – and is waiting for whatever happens next.

“What else can we do?” she said. “I’m running on pure emotion right now.”

Another investor, Vickie Drum of Newton, is Huffman’s second cousin and saw him about once a year at family Christmas parties, she said. Drum said Huffman’s clients were mostly frugal, hard-working folks who saved their whole lives. Her money came from selling property passed down through generations in her family, she said.

“(Investors) pinched pennies,” Drum said. “They did without to put this money aside to live off of for the rest of their lives. It’s kind of a slap in the face.”

 

“I only think of good things when I think of J.V.,” said Harrison Smith, a junior from Clayton, who’s known Huffman since his freshman year. “… Everything he did was geared around someone else.”

The Huffmans invited students to their home for Thanksgiving, for instance, offered to let students do laundry there and often hosted parties for students, where Huffman would grill burgers and make smoothies. He used his RV for church mission trips and drove it to college football tailgates, offering a spread of pizza and other snacks.

Huffman would often speak on campus, too, dressing casually in Abercrombie pajama pants and slippers and carrying a bag of CDs and T-shirts to give away. He was friendly and inspiring – but never slick, students said.

Samantha Quave, a junior from Winston-Salem, said she and the others have talked about the situation with their pastor and friends.

“We certainly don’t try to excuse it,” she said. “For me, it’s just confusing. It’s really just very hard to put the J.V. we know with the horrible picture the press has painted of him. He taught us so much about grace and forgiveness. … We want to extend that to him.”

Huffman is scheduled to appear in court Monday. He’s requested court-appointed attorneys.

Kit Addleman of the SEC said she has never investigated a Ponzi scheme where investors have gotten all their money back.

“They will be lucky to get between 30 cents and 50 cents on the dollar,” she said.

Even that could be good news for investors, some say.

One investor, a 63-year-old former race car driver, said he might have to sell his vacation home and rental properties to cover his losses. The man, who asked not to be identified because he grew up with Huffman’s father and is close to the family, said his extended family had invested close to $750,000.

“We were so confident, and he led us to believe everything was so healthy,” he said. “For somebody I have known his whole life, I can’t believe he could look me in the eye and tell me that.”

From http://www.charlotteobserver.com/597/story/383186.html

Professional Blogging

So far, I havn’t done any “professional” blogging, although I do have personal one where I give about beauty and health product reviews; products I personally use. 

I do have a LinkedIn account where I could post a resume and work that I’ve done, but haven’t done so yet. I have about 140 contacts and try to keep the number fairly low with people whom I know or are in the same field I’m in. 

Here’s a general summary of my career and what I’ve found I’m good at and want to pursue:

I’m a communications professional with expertise in marketing, training and project management. I have been recognized by peers and managers for my strong organizational abilities, interpersonal skills and resourceful, out-of-the-box thinking and actions. My background is diverse and can bring in-depth experience to increase effectiveness of projects of all types and new aspects to existing and proposed products. When a project is completed, I don’t sit back and say “that’s enough”; I continue to look for ways that processes can be improved and content can be freshened.

Kristin

JASPER JOTTINGS Week 48 - 2008 Nov 30

JASPER JOTTINGS Week 48 - 2008 Nov 30

Jasper Jottings - The achievement journal of my fellow Jaspers, the alumni of the Manhattan College

http://www.jasperjottings.com/2008/jasperjottings2008WEEK48.html

INDEX

POSITRACTION: Overcoming a horendous accident

JEmail: Quinlan, Liam (MC1985) updates us on Kinnally, Rev. Robert M. [MC1982]

JEmail: Louis Menchise (MC1985) agrees with cards for vets in Wally World

JFound: Muller, Mark (MC????)

JNews: Desposito, Joseph (MC????) remembers “Get wrong answer, bridge fall down!”

JFound: Cicuto, Sarah (MC20??) uses consumer choice for good

JBlogger: Gibbons, Patti (MC1986) thinks Churches should be open!

JOY: Katkocin, Matthew [MC????] engaged

JHQ: Manhattan College To Honor John V. Magliano ’66, Chairman Of Syska Hennessy Group, Inc., At 2009 De La Salle Medal Dinner

MFound: A pic of Cheerleaders and Dancers is on Flickr site

JEmail: Jack Raidy (MC1961) seeking John Fisher (MC1961)

JFound: Ryan, Tom (MC1985) identified

JNews: Pfaff, Mark [MC????] promoted at New York Life Insurance Company

JFound: Sposito, Peter J. [MC????] is a banker’s banker

JObit: DeMicco, Bonnie M. [MC1984], husband of Emil [MC1979]

MNews: Manhattan College Christmas Lessons And Carols Singers Jazz Band

QUADRANGLE: “Missing Professor Now Deceased”

JFound: Eskridge, Honora Nerz [MC????] at NCSU Libraries

JFound: Dupper, Thad [MC1979] P+CEO of Evolving Systems

JOY: Finch, Bernadette Kelly (MC1995) gives us something to be thankful for. Among other things.

MFound: Jack Taylor (19th century baseball player)

JFound: Romero, Dennis O. [MC????] in 2006 was … …

JObit: Coyne, Robert T (MC1970) reports the obit for Jackman, Frederick [MC1945]

JEmail: Breen, Jerry (MC1971) shares Obama calligraphy portrait

JUpdate: Hughes, Gerry [MC1982] seeking Microsoft Business Intelligence position

JFound: Schermer, Dolores [MC????]

JNews: Kelly, Ray [MC1963] was going to run for NYC mayor?

JEmail: Dandola, John (MC1970) celebrates 60 with … …

Comment on MObit: Eugene J. O’Brien, Eugene J. [MCattendee] by Peg O’Brien

ENDNOTE: Lincoln wasn’t the worst President, but close!

# - # - #

POSITRACTION: Overcoming a horendous accident

http://www.nytimes.com/2008/11/03/nyregion/03long.html?ex=13

83454800&en=0c00edc864f96127&ei=5124&partner=fac

ebook&exprod=facebook

http://tinyurl.com/6jsfwv

After Serious Accident, His Time to Beat? 3 Years

Published: November 2, 2008

*** begin quote ***

On Sunday, Matthew Long, 42, finished the New York City Marathon in 7 hours, 21 minutes. He was well back in the pack of tens of thousands of entrants, yet his finish was, in its own way, a first.

*** end quote ***

What was that famous quote … … I learned it back at MC … … in Brother Barry Austin “measurements” class … … did we ever learn any “measuring”? … … it went something like “If you think you can or you can’t, you’re right!”

Here’s a little inspiration, when you think you “can’t”, maybe this might convince you’re wrong!

# # # # #

* Posted on: Sun, Nov 23 2008 12:37 PM

JEmail: Quinlan, Liam (MC1985) updates us on Kinnally, Rev. Robert M. [MC1982]

From: Quinlan, Liam (MC1985)

Date: November 23, 2008 9:56:30 AM EST

To: Distribute_Jasper_Jottings-owner@yahoogroups.com

Subject: JFound: Kinnally, Rev. Robert M. [MC????]

John–Fr. Kinnally is the class of 1982, English Major with a minor in French.

[JR: Thanks, Liam. Much appreciated.]

# # # # #

* Posted on: Sun, Nov 23 2008 3:32 PM

JEmail: Louis Menchise (MC1985) agrees with cards for vets in Wally World

From: Louis Menchise (MC1985)

Date: November 23, 2008 12:08:40 PM EST

To: Distribute_Jasper_Jottings-owner@yahoogroups.com

Subject: Re: [Distribute_Jasper_Jottings] JASPER JOTTINGS Week 47 - 2008 Nov 23

I “went through” Walter Reed twice in my life. First, for chemotherapy in 1994-5 and the second time in 2003 when my left inner ear was damaged by a virus in Iraq that required vestibular rehabilitation. In the six weeks I spent at Wally World (Walter Reed) in 2003, I saw three times more amputees than I had in my previous 38 years on Earth. So - especially in this Holiday season - I can tell you that a letter to a veteran at a military or VA hospital would do a world of good. Please thank all veterans. I had it relatively easy in 2003. I only served one year on active duty. WW II and Korean (The Forgotten War) servicemembers were gone for years. Vietnam veterans had no support from the people back home, much less well-wishing stickers/magnets on cars. In fact, upon their return from Hell, they were spit on and called baby-killers. So, when you see a veteran - any veteran - thank them.

Louis Menchise

‘87B

US Army 1994 -2004

[JR: As a USAF vet of the 70-73 era, I am probably overly sensitive to how the American People "mistreat" veterans. And, how we allow politicians to pander to the people on the dead and broken bodies of vets. (Calm down, or this will have to be an end note!) Sorry, but I agree with Robert Heinlein's proscription that only veterans should be allowed to vote. In "Starship Troopers" and his other writings, he makes the argument that: Only those have fought for their country and risk death should be allowed to vote. I still agree with that. With a very practical corollary, from "A Few Good Men", "... I suggest that you pick up a weapon and stand a post. Either way, I don't give a damn what you think you are entitled to." Only those called on to fight need to be consulted. Those, that won't fight, won't revolt anyway, so they shouldn't vote either. Old politicians send young men in harm's way and turn their backs when the "check comes due". The VA medical care system should be a crown jewel. And, it's not by a long shot!]

# # # # #

* Posted on: Sun, Nov 23 2008 4:02 PM

JFound: Muller, Mark (MC????)

REPORTING LIVE FROM THE SPOCK NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

Muller, Mark (MC????)

http://www.iatp.org/iatp/experts.cfm

Director, Environment and Agriculture Program

Since starting at IATP in 1997, Muller has worked on a wide variety of issues, including agricultural diversification, nutrient management, agricultural transportation, regional food systems and renewable energy production. He has been involved in both regional project-based efforts and national policy development. He has had opinion pieces on agricultural policy appear in newspapers throughout the Midwest. Muller has a B.A. in physics from the State University of New York at Geneseo and a M.S. in environmental engineering from Manhattan College. Prior to joining IATP, Muller worked as an environmental engineer and high school science teacher.

# # # # #

* Posted on: Sun, Nov 23 2008 6:37 PM

JNews: Desposito, Joseph (MC????) remembers “Get wrong answer, bridge fall down!”

Desposito, Joseph (MC????)

http://electronicdesign.com/Article/ArticleID/17392/17392.html

Engineering Bridges Isn’t Just Civil Anymore

Joseph Desposito | ED Online ID #17392 | November 5, 2007

*** begin quote ***

During my days as an engineering student at Manhattan College, my calculus teacher used to say, “No partial credit! Get wrong answer, bridge fall down!” This was the first thing that flashed through my mind back in August when I heard about the I-35W bridge collapse in Minnesota. My very next thought was that an error in calculations couldn’t have been the cause of this disaster. So what was the cause?

The day after the collapse, Michael J. O’Rourke, a professor of civil and environmental engineering at Rensselaer Polytechnic Institute, said in a New York Times article that the bridge’s renovations likely caused the collapse, not general decrepitude. “It is more common for a bridge to have problems during renovations than before or after,” he said.

I travel over two bridges to get to my office in Paramus, New Jersey, from my home on Long Island: the Throgs Neck Bridge and the George Washington Bridge. A statement like this gives me pause, since these two bridges are under constant renovation. In fact, I often wonder how long it will take to remove the copious rust from the towers of the Throgs Neck.

*** end quote ***

[JR: Automated searching is uniquely frustrting. Here's a "recent" alert I received today. I guess it was a long way from hither to yon. And, I'll quibble with the quote. I received the admonition many times: "Ohhh, wrong sign, bridge fall down! Nooooooo partial credit." This from the guy who gave a final exam of one question. That was pressure! Argh. Still agravates me to THIS day.]

# - # - #

[JR: This Jasper has been doing a lot of that authoring stuff!]

http://electronicdesign.com/Authors/AuthorID/914/914.html

# # # # #

* Posted on: Sun, Nov 23 2008 6:37 PM

JFound: Cicuto, Sarah (MC20??) uses consumer choice for good

Cicuto, Sarah (MC20??)

http://fairtrade.crs-blog.org/fairtrade/students-say-you-are-what-you-eatand-drink-and-wear/

Students Say: You are what you eat…and drink, and wear!

*** begin quote ***

When Lois Harr, CRS Fair Trade Ambassador from the Bronx, invited me to join her and Manhattan College student Sarah Cicuto in St. Louis at a conference with the theme, “Global Learning and Social Responsibility through a LaSallian Education,” I was all about the global social responsibility piece, but I had to do a little homework to learn who the “LaSallians” are. I quickly figured out these are the educators—both religious and lay–associated with the Brothers of the Christian Schools, an order founded by the “universal patron of educators,” French priest John Baptiste de La Salle. The warm welcome and the outstanding range of speakers I am experiencing here at their Huether Conference is educating me quickly on the power and reach of the LaSallian tradition. At our workshop, Lois and I discussed the faith-based roots of Fair Trade and how Fair Trade is a tool of economic justice. But Sarah was the star of the show, explaining how Manhattan College’s Just Peace group helps students live their values through eating chocolate and drinking coffee!

Sarah took the gathered group through the brief but impressive history of Just Peace on campus. In her role as Campus Minister, Lois had taken a group of student volunteers on a service trip to Ecuador where they were introduced to the need for Fair Trade. Soon after, some of the students decided to attend a United Students for Fair Trade (USFT) convergence in Boston in 2006 to learn how other students were bringing Fair Trade to campus. After seeking out examples from surrounding schools in their region, the students decided to take on a campus campaign. But first they organized themselves as an official student government organization, not only to spread news of their mission but also to get some of the budget allocated to student groups on campus. Pretty savvy kids.

The group started its campaign by encouraging students to fill out the comment cards in the dining halls asking for Fair Trade coffee, and then they set up a meeting with the Operations Manager for Sodexho to “demand” Fair Trade coffee. What they didn’t realize is that the manager, Dennis McCoskey, was quite willing to make the switch if the students wanted it. Sarah and her fellow group members were surprised that Sodexho was so willing to respond. Sarah says, “I learned that to make change sometimes you just have to ask the right people the right questions.”

{Extraneous Deleted}

*** end quote ***

[JR: Now, I'm not much on "Social Justice" (aka Socialism) or "Free or Fair Trade" (aka gooferment trade restrictions). But this sounds like something a little different. Consumers making choices. I can support that as long as there's no gooferment thumb in the equation.]

# # # # #

* Posted on: Sun, Nov 23 2008 6:37 PM

JBlogger: Gibbons, Patti (MC1986) thinks Churches should be open!

http://pattigibbons.com/?p=821

This is the wrong direction, people!

*** begin quote ***

With regard to my strong belief that Christians ought not expect the government to handle the mercy and justice aspects of the Church’s mission, I need to vent. I came across a news item today providing information that just astounds me in it’s abject stupidity.

*** end quote ***

Gibbons, Patti (MC1986)

[JR: Clearly, she doesn't understand that the gooferment's diktats preempt the free exercise of one's religion in the new United Socialist States of Amerika! None of that Church charity. That's the job of Nanny Gooferment. So what if a few bums freeze to death. It's the RULES that have to be followed. Shut up, comrade citizen!]

# # # # #

* Posted on: Mon, Nov 24 2008 3:11 AM

JOY: Katkocin, Matthew [MC????] engaged

http://www.newstimes.com/ci_11043723?source=most_emailed

Engaged: Crystal Russo, Matthew Katkocin

Newstimes

Updated: 11/21/2008 05:33:48 PM EST

John Russo of Myrtle Beach, S.C., and Ruth Cabral of Rose Lane, Danbury, announce the engagement of their daughter, Crystal Russo, to Matthew Katkocin, son of Mr. and Mrs. Dennis Katkocin of Sunswept Drive, New Fairfield.

The future bride graduated from Danbury High School and from Western Connecticut State University in Danbury with a bachelor’s degree in financial accounting.

She is an accountant for Equale & Cirone in Danbury.

The future bridegroom graduated from New Fairfield High School and from Manhattan College with a bachelor’s degree in civil engineering.

He is a project engineer for a company in New York City.

A March wedding is planned.

# - # - #

Katkocin, Matthew [MC????]

# # # # #

* Posted on: Mon, Nov 24 2008 3:26 AM

JHQ: Manhattan College To Honor John V. Magliano ’66, Chairman Of Syska Hennessy Group, Inc., At 2009 De La Salle Medal Dinner

News Release

November 21, 2008

Manhattan College To Honor John V. Magliano ’66, Chairman Of Syska Hennessy Group, Inc., At 2009 De La Salle Medal Dinner

De La Salle Medal Dinner is the College’s key annual fundraising event.

RIVERDALE, N.Y. – Manhattan College will present John Magliano ’66, chairman of Syska Hennesssy Group, Inc., with the De La Salle Medal at the College’s annual fundraising dinner on Wednesday, Jan. 21, 2009.

The ceremony will be held at The Waldorf=Astoria in New York City.

Magliano, a licensed professional engineer in 12 states, joined Syska Hennesssy Group, one of the country’s leading consulting, engineering, technology and construction firms, in 1970, after graduated from the College with a degree in electrical engineering and served a four-year tour of duty in the U.S. Air Force.

During his 38 years with the firm, he has served as principal-in-charge of many of its high-profile clients and projects, including Goldman Sachs, JPMorgan, New York-Presbyterian Hospital, the United Nations and the U.S. Department of Agriculture.

“I am both humbled and thankful at the thought of being the honoree at the Manhattan College De La Salle Dinner,” Magliano says. “Humbled because I was fortunate to be able to make good use of the gift of a superb education that the College gave me in the four years I spent there.”

A firm advocate of mentoring and team advancement, Magliano is one of the founding members of the ACE Mentor Program, a nonprofit group that provides mentoring for high school students in the fields of architecture, construction and engineering. He also established Syska’s unique Engineer in Training Program, an intensive program for new engineers just out of college, among other initiatives.

Richard Anderson, president of the New York Building Congress, Tom Farrell ’83, senior managing director of Tishman Speyer, and Richard Tomasetti ’63, founding principal of Thornton Tomasetti, Inc., will serve as dinner co-chairmen.

The De La Salle Medal Dinner is the College’s top fundraising event. Proceeds from the $750-per-plate fundraiser are applied to academic and cocurricular programs, scholarship assistance and library resources. The black-tie event begins with a cocktail reception at 6:30 p.m., followed by dinner and dancing at 7:30 p.m. For more information about the dinner, please call Susan Bronson, director of corporate and foundation relations, at (718) 862-7837 or e-mail susan.bronson@manhattan.edu.

The De La Salle Medal was established in 1951 in honor of John Baptist de La Salle, founder of the Institute of the Brothers of the Christian Schools and one of the world’s great educators. The Order founded Manhattan College in 1853. Since 1977, the De La Salle Medal has been conferred annually by the College’s board of trustees to honor executives who exemplify the principles of excellence and corporate leadership. Past recipients include New York Life Insurance Chief Executive Sy Sternberg, former Mayor of New York City Rudolph W. Giuliani ’65 and Con Edison Chairman Eugene R. McGrath ’63.

# # # # #

* Posted on: Mon, Nov 24 2008 12:27 PM

MFound: A pic of Cheerleaders and Dancers is on Flickr site

REPORTING LIVE FROM THE FLICKR NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

http://www.flickr.com/photos/kcjc/3049487243/in/pool-35575849@N00

Manhattan College Jasper Cheerleaders

# - # - #

http://www.flickr.com/photos/kcjc/3049469619/in/pool-35575849@N00

Manhattan College Jasper Dance Team

# - # - #

About kcjc009 / Kevin Coles

# # # # #

* Posted on: Mon, Nov 24 2008 4:37 PM

JEmail: Jack Raidy (MC1961) seeking John Fisher (MC1961)

From: Jack Raidy (MC1961)

Date: November 24, 2008 4:27:45 PM EST

To: Distribute_Jasper_Jottings-owner@yahoogroups.com

Subject: Re: [Distribute_Jasper_Jottings] JASPER JOTTINGS Week 47 - 2008 Nov 23

Hi.

I don’t know what the “protocol” is for posting this request, but…does anyone know the whereabouts of John Fisher (MC1961)? I was a classmate of his and would like to re-connect, if possible. The last contact was sometime in the 1970s, when he was living in Philadelphia, and had recently been divorced from his wife, the former Jeanne Blank. Can anyone help?

Thanks -

Jack Raidy, MC1961

[JR: I'll ask the readership to help.]

# # # # #

* Posted on: Mon, Nov 24 2008 5:29 PM

JFound: Ryan, Tom (MC1985) identified

Ryan, Tom (MC1985)

http://www.jasperjottings.com/2007/jasperjottings20070422.htm#_JFound1

http://www.linkedin.com/pub/4/52b/a09

[JR: I happened to spot a "loose end" in my never ending quest for 'hidden' Jaspers. So this puts a Class Year with an old story.]

# # # # #

* Posted on: Mon, Nov 24 2008 6:37 PM

JNews: Pfaff, Mark [MC????] promoted at New York Life Insurance Company

By reinkefj on MC????

http://www.marketwatch.com/news/story/New-York-Life-Taps-Chris/

story.aspx?guid={2B3DB908-9577-4901-A1C5-057BE9FA7EF9}

PRESS RELEASE

New York Life Taps Chris Blunt and Mark Pfaff to Run Key Operations

Company Combines Two Powerhouses: Life Insurance and Career Agency; Senior Vice President Mark Pfaff to Run New Entity

Last update: 3:58 p.m. EST Nov. 24, 2008

NEW YORK, Nov 24, 2008 (BUSINESS WIRE) — –Company Bolsters Retirement Business to Help Consumers Handle Retirement Challenge; Senior Vice President Chris Blunt to Run Retirement Income Security Operation Comprised of Annuities, Long Term Care Insurance and the Distribution of Mutual Funds

New York Life Insurance Company announced today that it will place its life insurance manufacturing and marketing operations under the direction of Senior Vice President Mark Pfaff, who has run the Agency Department since 2006. The move creates a powerful combination of the industry’s leading field force and one of its strongest life insurance franchises. Concurrent with that announcement, the company said it has bolstered its retirement business. Senior Vice President Chris Blunt will run a new organization, Retirement Income Security (RIS), dedicated to providing solutions to consumers in both the accumulation and income phases of retirement. RIS brings together for the first time under a single executive, New York Life’s income annuities, investment annuities, long-term care insurance, and the distribution of mutual funds.

Ted Mathas, New York Life’s president and chief executive officer, said, “With these organizational changes we are combining our number one product - life insurance - with our primary distribution system - career agents. I expect the combination to grow the company, which benefits our policyholders over the long term, and bring numerous consumer benefits in the form of better product development, better marketing, and in the end, a better-protected public.

“At the same time we recognize the enormous potential for New York Life to contribute to the retirement security of millions of people across the country. By focusing on our unique positions and capabilities in annuities, long term care insurance and mutual funds, we will grow more rapidly and provide better solutions to consumers seeking reliable sources of income in retirement. Mark Pfaff and Chris Blunt are veteran leaders and I have every confidence they will lead these businesses to substantially greater growth in the decade ahead.” Mr. Mathas noted that with these changes the four primary business operations of New York Life are:

– U.S. Life Insurance and Agency

– Retirement Income Security

– Investments, a wholly owned subsidiary with more than $235 billion in assets under management.

– International, a wholly owned subsidiary with insurance operations in eight markets in Asia and Latin America.

U.S. Life Insurance and Agency

The U.S. life insurance operations being consolidated under Mark Pfaff include the company’s individual, bank- and corporate-owned life insurance, as well as its Group Membership Association Division, the largest underwriter of professional association insurance programs in the United States, and life insurance sold through an exclusive, endorsed program with AARP. Consolidated revenue is expected to be more than $8 billion in 2008. Agency has more than 10,500 licensed agents in the United States.

Mr. Pfaff said, “Our mission for 163 years has been to bring the protection of life insurance to as many families as possible. The role of the agent in this process has never been more important, as studies have shown that Americans are significantly underinsured. Much of that phenomenon can be attributed to a lack of good advice. As one of America’s leading life insurance companies, we can have a positive impact in countering the nation’s underinsurance problem. We believe we have the best-trained, most professional career agents in the nation. This is also a time when more Americans are seeking advice about their family’s financial future. I know that combining our agency operations with the life insurance operations will lead to stronger growth of our company’s primary product line, greater benefits to the consumer, as well as more opportunities for those seeking careers in insurance and financial services.”

Mr. Pfaff noted that a recent public opinion survey by Greenwald & Associates, sponsored by New York Life, found that Americans have just half the life insurance they need to achieve their own self-described financial objectives.

{Extraneous Deleted}

Mr. Pfaff received a B.A. from Manhattan College and an A.A. degree from Westchester Community College. He joined New York Life in 1985.

About New York Life

New York Life Insurance Company, a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States and one of the largest life insurers in the world. New York Life has the highest possible financial strength ratings from all four of the major credit rating agencies. Headquartered in New York City, New York Life’s family of companies offers life insurance, retirement income, investments and long-term care insurance. New York Life Investment Management LLC provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds.

New York Life Insurance Company

William Werfelman, 212-576-5385

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Pfaff, Mark [MC????]

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* Posted on: Mon, Nov 24 2008 11:37 PM

JFound: Sposito, Peter J. [MC????] is a banker’s banker

Sposito, Peter J. [MC????]

Peter J. Sposito

http://www.spock.com/Peter-J.-Sposito-Ml4Km1Dh

Peter Sposito has over 35 years in banking with an emphasis on sales management and depository institution market development. He is recognized both regionally and nationally for his diverse expertise within the correspondent banking arena. He has had extensive interaction with the CEOs and CFOs of banks, thrifts and credit unions throughout the Northeast. bankersbanknortheast

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http://www.bankersbanknortheast.com/sposito.htm

Peter J. Sposito

President & CEO

Peter Sposito has over 35 years in banking with an emphasis on sales management and depository institution market development. He is recognized both regionally and nationally for his diverse expertise within the correspondent banking arena. He has had extensive interaction with the CEOs and CFOs of banks, thrifts and credit unions throughout the Northeast. Mr. Sposito has a strong working knowledge of the national payment system, lending, investments, operations, systems, and regulatory compliance and wholesale business development.

Mr. Sposito began his career with the Hartford National Bank shortly after completing the MBA program at the University of Connecticut. As manager of correspondent banking he directed the business activity for the Connecticut and national markets. After a merger with Shawmut Bank, he managed the Correspondent Banking Division for Shawmut Bank in Boston and in Hartford.

In 1994 Mr. Sposito recognized an opportunity to provide community banks with an array of correspondent services. Dramatic changes in the banking industry had negatively impacted traditional correspondent banking activity. His research led to the bankers’ bank concept whose sole purpose was to meet the financial, operational and business needs of community banks. After an extensive due diligence process, capital was raised and a charter was granted to the Bankers’ Bank Northeast on September 8, 1998. Mr. Sposito was elected President / CEO and Director of the new entity. He is Past Chairman of the Bankers’ Bank Council, a national association of CEOs of bankers’ banks. He serves on the Board of Directors of Connecticut Farmland Trust, an organization formed to protect Connecticut’s remaining farmland for agricultural use by current and future farmers. Mr. Sposito is also active with Americares Homefront at St. Dunstan’s Church in Glastonbury, CT.

Mr. Sposito graduated from Manhattan College with a Bachelor of Science in Business Administration, majoring in Accounting. He completed his graduate degree at the University of Connecticut where he received an MBA in Marketing. He lives in Glastonbury with his wife Susan.

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* Posted on: Tue, Nov 25 2008 6:37 AM

JObit: DeMicco, Bonnie M. [MC1984], husband of Emil {MC1979]

http://www.legacy.com/MCall/Obituaries.asp?

Page=LifeStory&PersonId=120628727

http://tinyurl.com/5pckef

Bonnie M. DeMicco

Bonnie M. DeMicco, 51, of Lower Macungie Township, passed away November 24, 2008. She was a mechanical engineering graduate of Manhattan College with an M.B.A. from Lehigh University and eventually became a manager at AT&T. Despite her professional success, she put her career on hold to devote more time to raising her two children. Bonnie continue to work as an adjunct professor and academic advisor at Moravian College and later as a tax preparer for H&R Block. In an effort to giver her son every possible advantage, she became heavily involved in the issues of special needs children. She was an active member of St. Thomas More Catholic Church, where she enjoyed singing in the choir.

Survivors: Husband, Emil; daughter, Amy; son, Michael; sisters, Susan MacDougall, Maureen MacDougall and Lynn Tobin; brothers, Brian and Craig MacDougall.

Services: Mass of Christian Burial, will be held at 10 a.m. Wednesday, November 26 in St. Thomas More Catholic Church, 1040 Flexer Ave., Allentown. Calling hours will be held today, November 25 from 7-9 p.m. and Wednesday from 9-10 a.m. in the church. Arrangements by J.S. Burkholder Funeral Home, Allentown. Contributions: In lieu of flowers, contributions may be made in her memory to A Special Needs Fund for Michael DeMicco, c/o St. Thomas More Catholic Church, 1040 Flexer Ave., Allentown, PA 18103.

Published in the Morning Call on 11/25/2008

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Dear John,

I believe that Bonnie is a member of the Class of 1984 and her Husband Emil, is a member of the Class of 1979.

May She Rest In Peace.

Mike

[JR: Thanks, Mike. Much appreciated. ]

Dear John,

I believe that her brother Brian W. MacDougall is a member of the Class of 1973.

Mike

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From: “Richard A. Lawrence” (MC1968)

Date: November 26, 2008 12:02:11 PM EST

To: “reinke, fjohn68″

Subject: Re: [ManhattanCollegeAlumni] Jasper Obit: DeMicco, Bonnie M. [MC????]

F. John,

1984 MBA according to the MC Alumni Directory

[JR: Thanks, RAL68. Much appreciated. ]

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DeMicco, Bonnie M. [MC1984]

Guestbook: http://tinyurl.com/5byco6

[JR: This especially saddens me. A young woman, a decade plus younger than me, with a special needs child. Makes me sad to report this.]

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* Posted on: Tue, Nov 25 2008 8:58 AM

* Updated: Thu, Nov 27 2008 11:36 AM

MNews: Manhattan College Christmas Lessons And Carols Singers Jazz Band

Jonathan Bernaber (MC2012) invited you to “A festival of Lessons and Carols” on Sunday, December 7 at 4:00pm.

n515066362_625.jpg

Event: A festival of Lessons and Carols

“Manhattan College Christmas Lessons And Carols Singers Jazz Band”

What: Concert

Host: Singers & Jazz Band

Start Time: Sunday, December 7 at 4:00pm

End Time: Sunday, December 7 at 5:15pm

Where: The Chapel of De La Salle

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* Posted on: Tue, Nov 25 2008 3:56 PM

QUADRANGLE: “Missing Professor Now Deceased”

http://www.mcquadrangle.org

Missing Professor Now Deceased

by Matthew Coyne in News

In what was originally suspected to be a missing persons case, Dr. Munther Nushiwat, an adjunct professor of Finance and Economics here at MC, has been identified as dead after he suffered a sudden and fatal heart attack. “As far as we can tell … he (Nushiwat) had a heart attack in the (Kingsbridge Avenue) library on Sunday the 26th of October,” said Dr.…

[JR: Interesting. Sad. Troubling.]

News

* Busy Person’s Retreat Enlightens MC Students

* Costello Lecture 2008 Echoes the Ideals of its Namesake

* Manhattan Magazine Sponsors Coffeehouses

* Missing Professor Now Deceased

* Music Men Frat Returns to MC

* New Study Abroad Trips Offered

* News Briefs

Op Ed

* Got Issues? No Problem!

* Is the Nation Ready for a Black President?

* Notes from the Editor

* P/C: Change? Yeah, Right

* P/C: Yes We Did

* Sports Briefs

* The 2008 Presidential Election

* The Majority Isn’t Always Right

* The Mystery and Magic of the Gypsy Cab

Features

* A Day in the Life of a Bridge Inspector

* Energy Sustainability Lecture at MC

* Falling Short

* Ryan’s Journey to the Olympics Benefits MC Track and Field

Arts & Entertainment

* Abba Fans Look Out, Mamma Mia Keeps on Dancing

* Bob That Head

* New NHL ‘09 Video Game

* Return of the Jedi

* What’s On Your iPod?

Sports

* Lady Jaspers Dive into Final Half of Season

* Tennis Courts to be Built on New Garage

* Women’s Basketball Program Willy Rely on Intensity and Youth

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* Posted on: Tue, Nov 25 2008 6:37 PM

JFound: Eskridge, Honora Nerz [MC????] at NCSU Libraries

http://blog-hendri.blogspot.com/2008/11/engineering-entrepreneurs-industry.html

Honora Nerz Eskridge

89_Honora_Nerz_Eskridge-Small.JPG

Honora Nerz Eskridge is currently the Head, Textiles Library and Engineering Services and the Interim Associate Head of Collection Management. She has been with the NCSU Libraries since 1998, following completion of her Master’s degree in Library and Information Science, which she received from The Catholic University of America in Washington, DC. She also holds a Bachelor of Engineering Degree in Mechanical Engineering from Manhattan College in New York, NY.

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Eskridge, Honora Nerz [MC????]

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* Posted on: Wed, Nov 26 2008 2:36 PM

JFound: Dupper, Thad [MC1979] P+CEO of Evolving Systems

[JR: Sometime between 10/2006 and now, Jasper Thad got kicked upstairs. Automated searching rarely works. Argh!]

Dupper, Thad [MC1979]

http://www.evolving.com/thad_dupper_m.html

Thad Dupper

President & Chief Executive Officer

Dupper, promoted to Chief Executive Officer in April 2007, joined Evolving Systems’ leadership team in 2004 to oversee sales, business development and marketing. Dupper has more than 23 years’ experience in the telecommunications technology industry and has a track record of delivering innovative solutions to leading telecommunications companies.

Dupper was Vice President of Sales and Marketing for Expand Beyond, a wireless software company. He was also Vice President, International Sales and Business Development of Terabeam, where he helped pioneer the use of free space optics with telecommunications carriers around the world. Dupper held positions as Senior Vice President of Dun & Bradstreet and Vice President of Teradata, where he oversaw data warehousing solutions for the communication industry. He holds a B.S. in Computer Information Systems from Manhattan College in New York.

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http://www.jasperjottings.com/2006/jasperjottings20061022.htm#_JNews5_1

JNews5

October 16, 2006

Evolving Systems, Inc.

9777 Mount Pyramid Ct. Suite 100

Englewood, CO 80112

UNITED STATES OF AMERICA

KEY EMPLOYEES:

{extraneous deleted}

Thad Dupper, Executive Vice President, Worldwide Sales and Marketing

BOARD: Senior Management

SINCE: 2004

BIOGRAPHY: Mr Dupper was Vice President of Sales and Marketing for Expand Beyond, a wireless software company. He was also Vice President, International Sales and Business Development of Terabeam, where he helped pioneer the use of free space optics with telecommunications carriers around the world. Dupper held positions as Senior Vice President of Dun & Bradstreet and Vice President of Teradata, where he oversaw data warehousing solutions for the communication industry. He holds a B.S. in Computer Information Systems from Manhattan College in New York.

{extraneous deleted}

LOAD-DATE: October 17, 2006

{MikeMcE reports: Dear John, I believe that Thad is a member of the Class of 1979. Mike (Thanks, Mike.) }

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* Posted on: Wed, Nov 26 2008 6:37 PM

JOY: Finch, Bernadette Kelly (MC1995) gives us something to be thankful for. Among other things.

REPORTING LIVE FROM THE FACEBOOK NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

http://www.facebook.com/profile.php?id=32104185#/profile.php?id=1014258209&ref=nf

baby.jpg

Finch, Bernadette Kelly (MC1995) shares photos of James from HOME! After a very rough start. Proof that prayers are answered. What happy story for Thanksgiving Day!

[JR: Yes, I am a sucker for happy endings. And, I am thankful to have something to post today! Hope this makes you smile as it did me.]

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* Posted on: Thu, Nov 27 2008 7:19 AM

MFound: Jack Taylor (19th century baseball player)

http://sqnet.org/27/jack-taylor-19th-century-baseball-player/

Jack Taylor (19th century baseball player)

Jack Taylor

Pitcher

Born: May 23, 1873(1873-05-23)

Sandy Hill, Maryland

Died: February 7, 1900 (aged 26)

Staten Island, New York

Batted: Right Threw: Right

MLB debut

September 16, 1891

for the New York Giants

Final game

September 12, 1899

for the Cincinnati Reds

Career statistics

Win-Loss record 120-117

Earned run average 4.23

Strikeouts 528

Teams

* New York Giants (1891)

* Philadelphia Phillies (1891-1897)

* St. Louis Browns (1898)

* Cincinnati Reds (1899)

Career highlights and awards

John Besson “Brewery Jack” Taylor (May 23, 1873 - Feb 7, 1900) was a baseball player in the National League from 1891 to 1899. He is often confused with John W. “Jack” Taylor, who also played in the NL during an overlapping period. His real name has also been erroneously published as John Budd Taylor in many sources, perhaps confused with the Minor League pitcher Jack “Bud” Taylor of similar period. John Besson Taylor was born in Sandy Hill, Maryland and moved to Staten Island, New York as a young child, where he played with would-become Major League contemporaries Jack Cronin, Jack Sharrott, George Sharrott, and Tuck Turner.

“Brewery Jack” was a right-handed pitcher with a career record and 120 wins and 117 losses. His nine-season career consisted of (in chronological order) one game for the 1891 New York Giants, six seasons with the Philadelphia Phillies, one with the St. Louis Browns, and a final one with the Cincinnati Reds. While an ace pitcher, Taylor was known for arguing with umpire calls and (as his nickname implies) for his propensity for drinking. Taylor was still considered active in the National League during planning for the 1900 season, but died of Bright’s disease in February of that year. He is buried nearby his mother at Fairview Cemetery in the Castleton Corners neighborhood of Staten Island, and was inducted into the Staten Island Sports Hall Of Fame in 2002.

See also

* List of Major League Baseball leaders in career wins

Related Discussions

* There is currently an open discussion as to whether or not Taylor was an alumnus of (or even a student in) Manhattan College; category status is pending the ability to cite a source on the matter.

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[JR: Never heard this one. You?]

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* Posted on: Thu, Nov 27 2008 5:03 PM

JFound: Romero, Dennis O. [MC????] in 2006 was … …

REPORTING LIVE FROM THE SPOCK NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

Romero, Dennis O. [MC????]

http://www.recoverymonth.gov/2006/press/dromero.aspx

Dennis O. Romero, M.A.

Acting Director, Center for Substance Abuse Prevention

*** begin quote ***

Mr. Dennis O. Romero is the Acting Director for the Center for Substance Abuse Prevention (CSAP), Substance Abuse and Mental Health Services Administration (SAMHSA), U.S. Department of Health and Human Service (DHHS). Mr. Romero’s role is to provide national leadership and direction in substance abuse prevention, setting the goals and objectives of the Center and participating in the formulation of strategies and guidelines needed to plan, implement and manage national programs and projects. He will also give national presence by representing CSAP to members of the White House Committees, the Office of National Drug Control Policy and the news media to ensure an understanding of CSAP programs, objectives, and priorities. As Chief Operating Officer, he is responsible for development of strategic program plans and management of CSAP’s internal operations. This includes management of CSAP’s $634 million annual budget, human resources, and program implementation and performance.

{Extraneous Deleted}

Mr. Romero received a Bachelor of Arts Degree in Philosophy and Psychology from Cathedral College and a Masters Degree in Counseling Psychology from Manhattan College. He received post-graduate training at the State University of New York (SUNY), Albany Campus.

*** end quote ***

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* Posted on: Thu, Nov 27 2008 6:37 PM

JObit: Coyne, Robert T (MC1970) reports the obit for Jackman, Frederick [MC1945]

REPORTING LIVE FROM THE FACEBOOKLINKED NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

Coyne, Robert T. (MC1970) reports the obit for Jackman, Frederick [MC1945]

http://www.licatholic.org/news/obits.htm

*** begin quote ***

Vol. 47 No. 36 November 26, 2008

Deacon Frederick Jackman

Smithtown — Deacon Frederick Jackman, who served at St. Patrick’s Church, Smithtown, died Nov. 15.

Deacon Jackman, 84, a member of the first ordination class of the Diocese of Rockville Centre, was ordained to the permanent diaconate June 9, 1979.

He graduated from Manhattan College in 1945 and subsequently taught world history at Regis High School, Manhattan (1945-1946) and history and English at Fordham Prep in the Bronx (1946-1947). From 1962 until his retirement, he worked for the Suffolk County Department of Social Services as a supervisor of case workers in the housing unit in Babylon Center. He was a certified social worker.

During his ministry at St. Patrick’s, Deacon Jackman served as a hospital chaplain. He assisted retired priests at the bi-monthly Mass at Holy Rood Cemetery in Westbury, and he performed burial services for the Diocese of Brooklyn, St. Vincent de Paul Society at St. Charles Cemetery, usually every third Friday. As sacristan at St. Patrick’s, he worked with members of the Rosary Altar Society to maintain all aspects of the sacristy.

The Mass of Transferral on Monday evening, Nov. 17 at St. Patrick’s was celebrated by Msgr. Ellsworth R. Walden, pastor; Deacon Vincent Abrahams was homilist. Msgr. Walden also celebrated the Mass of Christian Burial on Nov. 18. Deacon Jackman was interred at St. Patrick’s Cemetery here.

Deacon Jackman is survived by Mary Anne, his wife of 52 years; three children, Jeanmarie Romero, Michael, and Lisa Marie Asendorf; a sister, Delores Donato; and four grandchildren.

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Jackman, Frederick [MC1945]

Guestbook: None cited

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* Posted on: Thu, Nov 27 2008 8:39 PM

JEmail: Breen, Jerry (MC1971) shares Obama calligraphy portrait

From: Breen, Jerry (MC1971)

Date: November 27, 2008 3:38:09 AM EST

Subject: Obama calligraphy portrait

To one and all: My latest creation is a new addition to a series of unique calligraphy portraits that I’ve done over the years. My calligraphy portrait of President-elect Barack Obama “In His Own Words” is literally that - Obama’s own words, from his eloquent keynote address at the 2004 Democratic National Convention, rendered by hand in calligraphy, actually forms his portrait! An absolutely unique collectible work of art. Nobody

Just Chillin

Here in the kitchen and wondering if I belong. Jack and Kate are over like you’d expect. Stealing a little bit of shuteye on the sly I have to admit - but that ain’t so bad. Can’t help but wonder if everything will be the same next month . . . By the way check out this interesting mutual fund magazine analysis site.

Today

Here in my hotel at the conference. Me and the family having a most excellent time. Playing a couple of mind games that you’d never be able to figure out. Thinking there’s no way I’m going to get my whole todo list done by tomorrow. By the way check out this interesting mutual fund comparison site.

Nothing Much

Hanging out at the apartment today. Hanging out with the crew that we met at the club last week. Getting ready to go out later tonight . . . It’s going to be a good time. Thinking that life couldn’t really get any better . . . And not expecting it to. Seen this mutual fund company ratings info before?

Just a quick hello

Taking some time off work to be at home today. Me and the family having a most excellent time. Getting ready to go out later tonight . . . It’s going to be a good time. Thinking about those spiders up in the corner. How did they get there? And check this largest mutual fund companies stuff out.

Quick Update

Hanging out at the apartment today. Just me and the gang. Making the most of a few spare hours cause I know that won’t last long. Imagining myself and where I’ll be in 2 weeks - going to be awesome! Seen this mutual fund analysis research info before?

Just a quick hello

Taking some time off work to be at home today. Me and the family having a most excellent time. Having a good time and not worrying about much at all. Thinking there’s no way I’m going to get my whole todo list done by tomorrow. mutual fund investment ratings stuff - check it out.

Newspaper for Month of December/2008 Sarbazan Organization

 

Kindly check the below web link, and requesting compatriots to disseminate this paper, as well as, joining this United Front of Army and Iranian People to work toward liberation of Iran.

Ba doroud va sepas,

Az mobarezin va Iran Parastan Taghaza mishavad da pakhshe in ealamih ma ra yari dahand ta dast dar daste yek digar Iraneman ra azad sazim.

Taghaza mishavad be link zir morajeh farmaid:

Dasarts Final: Timbuktu report

Borut Šeparović

Macleans.ca - Feeling queasy on the oil

The oil market is only ever driven by fear

This summer, when global oil prices surged to an apocalyptic US$150 a barrel and filling up the gas tank began to feel like making a mortgage payment, radio call-in shows were in an uproar. My voice mail fielded almost-daily invitations to answer questions on “the oil crisis” for one station or another. That invariably meant coming ear-to-face with the public’s visceral fury. In three months, the oil price had shot up by 50 per cent and had more than doubled in less than a year. Anybody with a car and a furnace was ready to lash out—at “greedy speculators,” at Alberta, at billionaire oil barons, even at innocent journalists cheerfully answering their questions out of the goodness of their heart.

How, they asked, could prices change so fast? And why? Why!? Why dammit!!

Nerves aren’t nearly so raw now that extreme volatility is working in the opposite direction. Oil is now in sudden free fall, having dipped below US$50 a barrel last week for the first time in years. Crude has plunged by roughly two-thirds in four months, but the open-line shows are conspicuously quiet. The fact that oil went from US$85 to US$150 to US$50 in 12 months tells us something important, not only about the shape of the global economy, but also about the forces that dictate our oil and gas bills. But you won’t hear it discussed much on talk radio.

There is a fundamental misunderstanding about energy prices, which is exacerbated by analysts and executives who continually insist that prices are driven by supply and demand. This is misleading, and the constant repetition of this idea has produced in people a widespread distrust of the energy industry. These days, the price of oil is driven primarily by expectations of future supply and demand months and even years down the line. We have a pretty decent idea of what current supply and demand are, and how big global stockpiles are. But trying to estimate the future is little more than educated guesswork, subject to the naturally distorting effects of human emotion.

That guesswork is further complicated by the fact that global oil supply is routinely manipulated. The Organization of the Petroleum Exporting Countries (better known as OPEC, and dominated by our dear friends in Saudi Arabia and Iran) open and close the spigot arbitrarily, to maximize their own profits, often at the expense of market stability. OPEC members routinely lie to each other about how much oil they’re pumping on a monthly basis. It may be technically true that supply and demand drive the price—except that demand is estimated, and supply is manipulated. So is it any wonder that nobody has any firm idea of what a barrel really ought to cost at any given moment?

It’s often said that all markets are driven by the constant war between fear and greed, but the oil market is an exception. It is only ever driven by different forms of fear. Last summer, when oil hit US$150, the fear was of global shortages. With China and India expanding at a blistering pace, and much of the world supply buried beneath an ancient war zone, traders swapped stories of pipeline bombings and millions of Chinese urbanites preparing to buy their first car. Now, with oil at US$50, the overriding fear is of a sudden collapse in global trade. The question is no longer whether the world economy is growing too fast, but whether it will grow at all over the next couple of years. Pick your poison: the bulls are all about unstable supply; the bears are obsessed with anemic demand. Right now, the bears are on top, but that’ll change. It always does.

It’s enough to drive a poor commuter nuts, and sometimes it seems like it has. No other commodity is such a constant and looming presence in our lives, and so nothing else has the same power to get our blood boiling. The price for copper soared for more than a year (also driven by burgeoning demand in Asia) and has recently collapsed. But unless you’re a copper miner or happen to be replacing your plumbing, nobody much cares.

This is understandable, but not entirely rational. If we really sat back and thought about it, we’d be far more worried about the impact that falling energy prices have had on the Canadian stock market and the value of the loonie in recent months. Stocks are in the midst of a crash every bit as bad as the one in 1987, and far worse than in 2000. But where most crashes work like explosions, this one is unfolding more like an earthquake with multiple aftershocks, and the victims are piling up. If you’ve been diligently socking away money into mutual funds for the past few decades, chances are your losses are now well into six figures. By contrast, when gas jumps from 85 cents to $1.25 a litre, it costs an extra $20 to fill up a 50-litre tank. If you drive a lot, and fill up about twice a week, that surge adds about $2,000 to your annual gasoline bill—not chump change by any means, but miniscule compared to the impact of the recent market meltdown. A new survey from Desjardins Financial just revealed that almost half of Canadians over the age of 40 now expect they will have to delay their retirement plans by an average of almost six years due to the market turmoil. That kind of news produces weary resignation. Meanwhile, a 10-cent jump at the gas pump has people ready to man the barricades.

For the Record: November 25, 2008, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority, Islamic finance – its potential to bring new economic growth to Hong Kong, Statement to the Hong Kong Islamic Finance Forum, Hong Kong SAR

Release here.

Ladies and gentlemen,

I would like to thank the organisers for inviting me to speak at this forum, which is being held in Hong Kong for the first time.

In the past several months, we have witnessed the unfolding of a global financial crisis. The sub-prime problem in the US and the ensuing credit crunch in the industrialised economies have spread and brought about a weakening of confidence in the solvency of the financial system. Concerns about credit risk exposures among financial market participants mounted following the failure of Lehman Brothers. Interbank money markets in many economies came under extreme pressure or seized up entirely. Extraordinary and concerted efforts by governments and central banks to restore confidence, inject liquidity and recapitalise the banking system appear to have paid off to the extent of preventing the collapse of the banking and financial system although credit and money markets remain stressed. As the turmoil deepened, people have also focussed attention on the wider impact of the crisis on the real economy, leading to a grimmer outlook for global economic performance.

Against the backdrop of this global financial crisis, Islamic finance is inevitably affected and subject to challenging conditions reflected by a steep slowdown in activities such as sukuk issuance and declines in equity value managed by Islamic funds. New sukuk brought to the market in the first three quarters amounted to some US$13 billion, down 40% from the same period last year.[Footnote 1 - Source: Bloomberg.]

But the pullback in new sukuk issuance and the widening of sukuk yield spreads are generally in line with what has been happening in the conventional market. This broadly suggests that the global sukuk market slowdown has more to do with the general market conditions and a general reluctance to issue US dollar instruments. Observers say that while there are still those who wish to issue sukuk, investors would prefer to stay on the sidelines in the current volatile market environment. It is true that the industry is experiencing a temporary setback, but this also reflects how closely integrated Islamic finance is with the global financial system, which is not at all bad news for the industry because when global markets stabilise and take a turn for the better – as they must in the long run – Islamic finance will ride on that curve and excel.

While we are in the midst of a global financial turmoil and there are many challenges lying ahead of us, I’m delighted to find this impressive gathering of regulators, shariah scholars, business leaders and practitioners who commit themselves to the future development of the financial market. Your presence here is ample evidence that there remains plenty of opportunities even in circumstances like these and that a forward-looking view is more important than ever. Today, I’m particularly honoured to join you in the discussion of a topic that has been recognised as a source of sustainability and growth – Islamic finance. There are two main issues that I would like to talk about today.

First, despite the current financial turmoil, we continue to see the long term potential in Islamic finance. There are two good reasons for this. One is that the Islamic finance industry is in many ways fortunate to be at an early stage of development during this turmoil. Despite the effects of a temporary shortage of liquidity, which has been a worldwide phenomenon, the degree of damage has been far lower than that to the much wider network of international finance, primarily because of the more restricted spread of Islamic financial instruments across regions and the generally lower level of leverage allowed in Islamic financial transactions. Although Islamic finance has grown by leaps and bounds in recent years, assets held by Islamic financial institutions and insurance operators known as takaful providers are estimated to be US$1 trillion, accounting for only about 1% of the financial assets in the overall banking and insurance sectors.[Footnote 2 - 2 Sources: Islamic Financial Services Board; IFSL Research]

The industry’s remarkable annual growth rate of 15% to 20% has to be viewed in perspective: after all it began from a small base. This suggests that there is still ample room for growth on the supply side in the provision of Islamic financial products.

On the demand side, the potential of Islamic finance is often linked to the 1.4 billion-strong Muslim population worldwide, and some people appear to believe that this obviates the need for further development of Islamic finance. But population is not the only factor: economic development in Islamic regions also has to be taken into account. The IMF has estimated that there are some US$800 billion worth of investment projects under way or in the pipeline in countries of the Gulf Cooperation Council (GCC) over the next five years, with major projects in the oil and gas sectors, infrastructure and real estate. According to a UK research report, the annual investment rate in the range of US$200 billion to US$300 billion in the GCC is about half the annual rate of India and one-tenth that of China.[Footnote 3: 3 Source: Chatham House report on “The Gulf as a Global Financial Centre”]

As some of the deals may be of a scale that requires financial risks to be spread internationally, global banks are already geared up to tap this market through the formation of Islamic bank subsidiaries and Islamic banking windows. With the increased participation of global and regional players, project financing opportunities will increasingly attract interest from investors worldwide and that project finance will need to be delivered in forms that comply with the principles of Islamic finance. This in turn will fuel the demand for Islamic finance. There is clearly very significant long-term potential across most of the region.

The second issue is our continuous commitment to developing Islamic finance in Hong Kong. The Chief Executive of the Hong Kong Special Administrative Region acknowledged in his Policy Address in 2007 that Islamic finance offers huge potential for development. To further consolidate Hong Kong’s position as a global financial centre, Hong Kong should actively leverage on this new trend by developing an Islamic financial platform. Our priority is to push ahead with the development of an Islamic bond market. There should be no doubt about our determination to establish a platform for Islamic finance in Hong Kong.

In a recent speech, the Secretary for Financial Services and the Treasury also mentioned that having reviewed Hong Kong’s legal, taxation and regulatory regimes, there is no fundamental obstacle to accommodating a sukuk market in our existing system. Technical modifications to the taxation regime to provide a level playing field for Islamic finance transactions are being pursued as a priority.

With our commitment and status as an international financial centre, we believe that Hong Kong is well positioned to develop Islamic finance. We should play to our key strengths and capabilities and I would like to highlight two very important aspects on which Hong Kong intends to capitalise.

The first aspect relates to the core strengths of Hong Kong in providing a stable and free economy. Hong Kong has been ranked the freest economy in the world for 14 consecutive years by the Heritage Foundation. We have no foreign exchange controls and do not impose tax on offshore income, capital gains, dividends, estate or sales. There is free movement of capital, talent and goods. It is a combination of many factors including political stability, a strong legal and regulatory regime, and a pro-business market environment which makes Hong Kong a popular city for international business in Asia. Given these core values, there are no barriers to entry and no obstacles to mobility for financial and human capital from local and overseas financial institutions planning to engage in Islamic or conventional finance in Hong Kong.

The second aspect is the unique role Hong Kong plays in the economic development of China. In the past three decades when the Mainland was achieving economic liberalisation, Hong Kong has capitalised on its strong cultural and geographic links to become the gateway connecting the Mainland market to the world. Our close and increasing economic cooperation with the Mainland undoubtedly makes Hong Kong the natural choice for anyone wishing to tap into China’s high savings rate and huge growth potential.

Hong Kong is the premier capital formation centre for the Mainland and hence a global investment platform for enterprises from around the world wishing to gain exposure to China’s growth. This is demonstrated by the fact that we have the largest, deepest, and most open Chinese capital markets outside of the Mainland: half of our stock market capitalisation comprises Mainland related companies. At the end of August, our stock market was the sixth largest in the world and the second largest in Asia in terms of market capitalisation. It ranked first in the world in securitised derivatives turnover, and first in Asia for stock options turnover and exchange-traded funds turnover. It also ranked fifth in the world in total equity raised through IPOs.[Footnote 4 Source: World Federation of Exchanges]

In the other direction, many Mainland companies have set up regional headquarters or offices in Hong Kong as part of their strategies to step up their international presence. Continuously high growth in recent years has resulted in a vast accumulation of wealth on the Mainland and the authorities there are progressively liberalising the requirements for Mainland financial institutions to invest overseas. As a result, Hong Kong has benefited from the outward investment flows given our geographic, cultural and linguistic affinities with the Mainland and our ability to provide a broad access to numerous Asia-Pacific and global markets. The potential demand for wealth management thus presents capital-market intermediaries in Hong Kong with huge opportunities.

We are also the first jurisdiction outside of the Mainland with the ability to conduct renminbi banking business and deal in renminbi-denominated financial products. The establishment of a renminbi bond market in Hong Kong last year marked a key milestone in the development of renminbi business here. It has helped entrench Hong Kong as a testing ground and pilot market for China’s continuing financial reform and liberalisation.

There is clearly immense scope for us to leverage on our key strengths as a close business partner, a capital formation centre and a financial intermediary for the Mainland economy in the development of Islamic finance. There are opportunities for us to extend our reach to potential Islamic investors and financiers in the Middle East and Asia. The addition of Islamic finance as a new asset class in our financial system will add value to Hong Kong as a thriving financial centre and a leading financial services hub in Asia.

As a major financial centre, Hong Kong – with its flexible and innovative market participants and its responsive government – has always stood ready to adapt to and embrace new ideas. Even if the current financial environment appears unfavourable to the development of Islamic finance in the short term, this is, at worst, a temporary setback as future prospects remain promising. We at least do not intend to be put off by temporary difficulties from our goal of making Hong Kong an Islamic financial hub. Indeed we believe that this is a good time to do the groundwork of installing the necessary legal, taxation and market infrastructure.

To name just a few developments in the past 12 months: a new Dow Jones Islamic Market Index was launched to track China-related equities listed on the Hong Kong Stock Exchange; Islamic mutual funds were introduced by a local bank and an asset management company featuring China-related equity investments through the stock market platform in Hong Kong; and an exchangeable sukuk linked to the shares of a Mainland company listed in Hong Kong was issued in March, enabling investors to gain exposure to China’s growth story. The response so far has been highly encouraging: for example, the sukuk was 10 times oversubscribed.

Likewise, positive progress is achieved in the development of Islamic banking in Hong Kong. Following the first Islamic banking window introduced three months ago, I’m glad to witness yet another market player who is set to launch its Islamic banking window in Hong Kong at this auspicious occasion today. The increasing number of banks taking part in Islamic banking activities will add further momentum to the development of an Islamic capital market in Hong Kong by providing an important tool for funding and liquidity management.

The Hong Kong Monetary Authority will continue to give full support to the HKSAR government in its initiative to develop Islamic finance in Hong Kong by acting as a market enabler and infrastructure provider. The HKMA has taken important steps and devoted considerable resources to promote the industry in Hong Kong. We are now focusing our efforts on four major areas: first, building Hong Kong’s international profile and forging closer ties with market participants in the Middle East; secondly, promoting market infrastructure and establishing policies conducive to the development of Islamic finance; thirdly, promoting talent and knowledge of Islamic financial principles among market professionals in Hong Kong; and fourthly, encouraging the development and launch of Islamic finance products in Hong Kong.

Concluding remarks

Ladies and gentlemen, the potential for the growth of Islamic finance is clear. The foundations for its development here in Hong Kong have already been laid. It is essential for all of us to look beyond the current global financial turbulence and treat the development of Islamic finance as an investment in the future. With this in mind, I would like to encourage all of you, whether you are regulators, financial institutions or investors, to look critically at the opportunities that lie before us. Islamic finance is a new asset class that has the potential to bring new economic growth to Hong Kong and the region given our wealth of knowledge in financial intermediation, our experience, and our agility in adopting innovative products. So let us work together towards building a stronger and stronger link and increasing cooperation with other global players to identify and capitalise on new opportunities. Today’s holding of the Islamic Finance Forum in Hong Kong is a significant step on a journey that is just beginning. I look forward to travelling this road with all of you.

Thank you.

JASPER JOTTINGS Week 48 - 2008 Nov 30

JASPER JOTTINGS Week 48 - 2008 Nov 30

Jasper Jottings - The achievement journal of my fellow Jaspers, the alumni of the Manhattan College

http://www.jasperjottings.com/2008/jasperjottings2008WEEK48.html

INDEX

POSITRACTION: Overcoming a horendous accident

JEmail: Quinlan, Liam (MC1985) updates us on Kinnally, Rev. Robert M. [MC1982]

JEmail: Louis Menchise (MC1985) agrees with cards for vets in Wally World

JFound: Muller, Mark (MC????)

JNews: Desposito, Joseph (MC????) remembers “Get wrong answer, bridge fall down!”

JFound: Cicuto, Sarah (MC20??) uses consumer choice for good

JBlogger: Gibbons, Patti (MC1986) thinks Churches should be open!

JOY: Katkocin, Matthew [MC????] engaged

JHQ: Manhattan College To Honor John V. Magliano ’66, Chairman Of Syska Hennessy Group, Inc., At 2009 De La Salle Medal Dinner

MFound: A pic of Cheerleaders and Dancers is on Flickr site

JEmail: Jack Raidy (MC1961) seeking John Fisher (MC1961)

JFound: Ryan, Tom (MC1985) identified

JNews: Pfaff, Mark [MC????] promoted at New York Life Insurance Company

JFound: Sposito, Peter J. [MC????] is a banker’s banker

JObit: DeMicco, Bonnie M. [MC1984], husband of Emil [MC1979]

MNews: Manhattan College Christmas Lessons And Carols Singers Jazz Band

QUADRANGLE: “Missing Professor Now Deceased”

JFound: Eskridge, Honora Nerz [MC????] at NCSU Libraries

JFound: Dupper, Thad [MC1979] P+CEO of Evolving Systems

JOY: Finch, Bernadette Kelly (MC1995) gives us something to be thankful for. Among other things.

MFound: Jack Taylor (19th century baseball player)

JFound: Romero, Dennis O. [MC????] in 2006 was … …

JObit: Coyne, Robert T (MC1970) reports the obit for Jackman, Frederick [MC1945]

JEmail: Breen, Jerry (MC1971) shares Obama calligraphy portrait

JUpdate: Hughes, Gerry [MC1982] seeking Microsoft Business Intelligence position

JFound: Schermer, Dolores [MC????]

JNews: Kelly, Ray [MC1963] was going to run for NYC mayor?

JEmail: Dandola, John (MC1970) celebrates 60 with … …

Comment on MObit: Eugene J. O’Brien, Eugene J. [MCattendee] by Peg O’Brien

ENDNOTE: Lincoln wasn’t the worst President, but close!

# - # - #

POSITRACTION: Overcoming a horendous accident

http://www.nytimes.com/2008/11/03/nyregion/03long.html?ex=13

83454800&en=0c00edc864f96127&ei=5124&partner=fac

ebook&exprod=facebook

http://tinyurl.com/6jsfwv

After Serious Accident, His Time to Beat? 3 Years

Published: November 2, 2008

*** begin quote ***

On Sunday, Matthew Long, 42, finished the New York City Marathon in 7 hours, 21 minutes. He was well back in the pack of tens of thousands of entrants, yet his finish was, in its own way, a first.

*** end quote ***

What was that famous quote … … I learned it back at MC … … in Brother Barry Austin “measurements” class … … did we ever learn any “measuring”? … … it went something like “If you think you can or you can’t, you’re right!”

Here’s a little inspiration, when you think you “can’t”, maybe this might convince you’re wrong!

# # # # #

* Posted on: Sun, Nov 23 2008 12:37 PM

JEmail: Quinlan, Liam (MC1985) updates us on Kinnally, Rev. Robert M. [MC1982]

From: Quinlan, Liam (MC1985)

Date: November 23, 2008 9:56:30 AM EST

To: Distribute_Jasper_Jottings-owner@yahoogroups.com

Subject: JFound: Kinnally, Rev. Robert M. [MC????]

John–Fr. Kinnally is the class of 1982, English Major with a minor in French.

[JR: Thanks, Liam. Much appreciated.]

# # # # #

* Posted on: Sun, Nov 23 2008 3:32 PM

JEmail: Louis Menchise (MC1985) agrees with cards for vets in Wally World

From: Louis Menchise (MC1985)

Date: November 23, 2008 12:08:40 PM EST

To: Distribute_Jasper_Jottings-owner@yahoogroups.com

Subject: Re: [Distribute_Jasper_Jottings] JASPER JOTTINGS Week 47 - 2008 Nov 23

I “went through” Walter Reed twice in my life. First, for chemotherapy in 1994-5 and the second time in 2003 when my left inner ear was damaged by a virus in Iraq that required vestibular rehabilitation. In the six weeks I spent at Wally World (Walter Reed) in 2003, I saw three times more amputees than I had in my previous 38 years on Earth. So - especially in this Holiday season - I can tell you that a letter to a veteran at a military or VA hospital would do a world of good. Please thank all veterans. I had it relatively easy in 2003. I only served one year on active duty. WW II and Korean (The Forgotten War) servicemembers were gone for years. Vietnam veterans had no support from the people back home, much less well-wishing stickers/magnets on cars. In fact, upon their return from Hell, they were spit on and called baby-killers. So, when you see a veteran - any veteran - thank them.

Louis Menchise

‘87B

US Army 1994 -2004

[JR: As a USAF vet of the 70-73 era, I am probably overly sensitive to how the American People "mistreat" veterans. And, how we allow politicians to pander to the people on the dead and broken bodies of vets. (Calm down, or this will have to be an end note!) Sorry, but I agree with Robert Heinlein's proscription that only veterans should be allowed to vote. In "Starship Troopers" and his other writings, he makes the argument that: Only those have fought for their country and risk death should be allowed to vote. I still agree with that. With a very practical corollary, from "A Few Good Men", "... I suggest that you pick up a weapon and stand a post. Either way, I don't give a damn what you think you are entitled to." Only those called on to fight need to be consulted. Those, that won't fight, won't revolt anyway, so they shouldn't vote either. Old politicians send young men in harm's way and turn their backs when the "check comes due". The VA medical care system should be a crown jewel. And, it's not by a long shot!]

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* Posted on: Sun, Nov 23 2008 4:02 PM

JFound: Muller, Mark (MC????)

REPORTING LIVE FROM THE SPOCK NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

Muller, Mark (MC????)

http://www.iatp.org/iatp/experts.cfm

Director, Environment and Agriculture Program

Since starting at IATP in 1997, Muller has worked on a wide variety of issues, including agricultural diversification, nutrient management, agricultural transportation, regional food systems and renewable energy production. He has been involved in both regional project-based efforts and national policy development. He has had opinion pieces on agricultural policy appear in newspapers throughout the Midwest. Muller has a B.A. in physics from the State University of New York at Geneseo and a M.S. in environmental engineering from Manhattan College. Prior to joining IATP, Muller worked as an environmental engineer and high school science teacher.

# # # # #

* Posted on: Sun, Nov 23 2008 6:37 PM

JNews: Desposito, Joseph (MC????) remembers “Get wrong answer, bridge fall down!”

Desposito, Joseph (MC????)

http://electronicdesign.com/Article/ArticleID/17392/17392.html

Engineering Bridges Isn’t Just Civil Anymore

Joseph Desposito | ED Online ID #17392 | November 5, 2007

*** begin quote ***

During my days as an engineering student at Manhattan College, my calculus teacher used to say, “No partial credit! Get wrong answer, bridge fall down!” This was the first thing that flashed through my mind back in August when I heard about the I-35W bridge collapse in Minnesota. My very next thought was that an error in calculations couldn’t have been the cause of this disaster. So what was the cause?

The day after the collapse, Michael J. O’Rourke, a professor of civil and environmental engineering at Rensselaer Polytechnic Institute, said in a New York Times article that the bridge’s renovations likely caused the collapse, not general decrepitude. “It is more common for a bridge to have problems during renovations than before or after,” he said.

I travel over two bridges to get to my office in Paramus, New Jersey, from my home on Long Island: the Throgs Neck Bridge and the George Washington Bridge. A statement like this gives me pause, since these two bridges are under constant renovation. In fact, I often wonder how long it will take to remove the copious rust from the towers of the Throgs Neck.

*** end quote ***

[JR: Automated searching is uniquely frustrting. Here's a "recent" alert I received today. I guess it was a long way from hither to yon. And, I'll quibble with the quote. I received the admonition many times: "Ohhh, wrong sign, bridge fall down! Nooooooo partial credit." This from the guy who gave a final exam of one question. That was pressure! Argh. Still agravates me to THIS day.]

# - # - #

[JR: This Jasper has been doing a lot of that authoring stuff!]

http://electronicdesign.com/Authors/AuthorID/914/914.html

# # # # #

* Posted on: Sun, Nov 23 2008 6:37 PM

JFound: Cicuto, Sarah (MC20??) uses consumer choice for good

Cicuto, Sarah (MC20??)

http://fairtrade.crs-blog.org/fairtrade/students-say-you-are-what-you-eatand-drink-and-wear/

Students Say: You are what you eat…and drink, and wear!

*** begin quote ***

When Lois Harr, CRS Fair Trade Ambassador from the Bronx, invited me to join her and Manhattan College student Sarah Cicuto in St. Louis at a conference with the theme, “Global Learning and Social Responsibility through a LaSallian Education,” I was all about the global social responsibility piece, but I had to do a little homework to learn who the “LaSallians” are. I quickly figured out these are the educators—both religious and lay–associated with the Brothers of the Christian Schools, an order founded by the “universal patron of educators,” French priest John Baptiste de La Salle. The warm welcome and the outstanding range of speakers I am experiencing here at their Huether Conference is educating me quickly on the power and reach of the LaSallian tradition. At our workshop, Lois and I discussed the faith-based roots of Fair Trade and how Fair Trade is a tool of economic justice. But Sarah was the star of the show, explaining how Manhattan College’s Just Peace group helps students live their values through eating chocolate and drinking coffee!

Sarah took the gathered group through the brief but impressive history of Just Peace on campus. In her role as Campus Minister, Lois had taken a group of student volunteers on a service trip to Ecuador where they were introduced to the need for Fair Trade. Soon after, some of the students decided to attend a United Students for Fair Trade (USFT) convergence in Boston in 2006 to learn how other students were bringing Fair Trade to campus. After seeking out examples from surrounding schools in their region, the students decided to take on a campus campaign. But first they organized themselves as an official student government organization, not only to spread news of their mission but also to get some of the budget allocated to student groups on campus. Pretty savvy kids.

The group started its campaign by encouraging students to fill out the comment cards in the dining halls asking for Fair Trade coffee, and then they set up a meeting with the Operations Manager for Sodexho to “demand” Fair Trade coffee. What they didn’t realize is that the manager, Dennis McCoskey, was quite willing to make the switch if the students wanted it. Sarah and her fellow group members were surprised that Sodexho was so willing to respond. Sarah says, “I learned that to make change sometimes you just have to ask the right people the right questions.”

{Extraneous Deleted}

*** end quote ***

[JR: Now, I'm not much on "Social Justice" (aka Socialism) or "Free or Fair Trade" (aka gooferment trade restrictions). But this sounds like something a little different. Consumers making choices. I can support that as long as there's no gooferment thumb in the equation.]

# # # # #

* Posted on: Sun, Nov 23 2008 6:37 PM

JBlogger: Gibbons, Patti (MC1986) thinks Churches should be open!

http://pattigibbons.com/?p=821

This is the wrong direction, people!

*** begin quote ***

With regard to my strong belief that Christians ought not expect the government to handle the mercy and justice aspects of the Church’s mission, I need to vent. I came across a news item today providing information that just astounds me in it’s abject stupidity.

*** end quote ***

Gibbons, Patti (MC1986)

[JR: Clearly, she doesn't understand that the gooferment's diktats preempt the free exercise of one's religion in the new United Socialist States of Amerika! None of that Church charity. That's the job of Nanny Gooferment. So what if a few bums freeze to death. It's the RULES that have to be followed. Shut up, comrade citizen!]

# # # # #

* Posted on: Mon, Nov 24 2008 3:11 AM

JOY: Katkocin, Matthew [MC????] engaged

http://www.newstimes.com/ci_11043723?source=most_emailed

Engaged: Crystal Russo, Matthew Katkocin

Newstimes

Updated: 11/21/2008 05:33:48 PM EST

John Russo of Myrtle Beach, S.C., and Ruth Cabral of Rose Lane, Danbury, announce the engagement of their daughter, Crystal Russo, to Matthew Katkocin, son of Mr. and Mrs. Dennis Katkocin of Sunswept Drive, New Fairfield.

The future bride graduated from Danbury High School and from Western Connecticut State University in Danbury with a bachelor’s degree in financial accounting.

She is an accountant for Equale & Cirone in Danbury.

The future bridegroom graduated from New Fairfield High School and from Manhattan College with a bachelor’s degree in civil engineering.

He is a project engineer for a company in New York City.

A March wedding is planned.

# - # - #

Katkocin, Matthew [MC????]

# # # # #

* Posted on: Mon, Nov 24 2008 3:26 AM

JHQ: Manhattan College To Honor John V. Magliano ’66, Chairman Of Syska Hennessy Group, Inc., At 2009 De La Salle Medal Dinner

News Release

November 21, 2008

Manhattan College To Honor John V. Magliano ’66, Chairman Of Syska Hennessy Group, Inc., At 2009 De La Salle Medal Dinner

De La Salle Medal Dinner is the College’s key annual fundraising event.

RIVERDALE, N.Y. – Manhattan College will present John Magliano ’66, chairman of Syska Hennesssy Group, Inc., with the De La Salle Medal at the College’s annual fundraising dinner on Wednesday, Jan. 21, 2009.

The ceremony will be held at The Waldorf=Astoria in New York City.

Magliano, a licensed professional engineer in 12 states, joined Syska Hennesssy Group, one of the country’s leading consulting, engineering, technology and construction firms, in 1970, after graduated from the College with a degree in electrical engineering and served a four-year tour of duty in the U.S. Air Force.

During his 38 years with the firm, he has served as principal-in-charge of many of its high-profile clients and projects, including Goldman Sachs, JPMorgan, New York-Presbyterian Hospital, the United Nations and the U.S. Department of Agriculture.

“I am both humbled and thankful at the thought of being the honoree at the Manhattan College De La Salle Dinner,” Magliano says. “Humbled because I was fortunate to be able to make good use of the gift of a superb education that the College gave me in the four years I spent there.”

A firm advocate of mentoring and team advancement, Magliano is one of the founding members of the ACE Mentor Program, a nonprofit group that provides mentoring for high school students in the fields of architecture, construction and engineering. He also established Syska’s unique Engineer in Training Program, an intensive program for new engineers just out of college, among other initiatives.

Richard Anderson, president of the New York Building Congress, Tom Farrell ’83, senior managing director of Tishman Speyer, and Richard Tomasetti ’63, founding principal of Thornton Tomasetti, Inc., will serve as dinner co-chairmen.

The De La Salle Medal Dinner is the College’s top fundraising event. Proceeds from the $750-per-plate fundraiser are applied to academic and cocurricular programs, scholarship assistance and library resources. The black-tie event begins with a cocktail reception at 6:30 p.m., followed by dinner and dancing at 7:30 p.m. For more information about the dinner, please call Susan Bronson, director of corporate and foundation relations, at (718) 862-7837 or e-mail susan.bronson@manhattan.edu.

The De La Salle Medal was established in 1951 in honor of John Baptist de La Salle, founder of the Institute of the Brothers of the Christian Schools and one of the world’s great educators. The Order founded Manhattan College in 1853. Since 1977, the De La Salle Medal has been conferred annually by the College’s board of trustees to honor executives who exemplify the principles of excellence and corporate leadership. Past recipients include New York Life Insurance Chief Executive Sy Sternberg, former Mayor of New York City Rudolph W. Giuliani ’65 and Con Edison Chairman Eugene R. McGrath ’63.

# # # # #

* Posted on: Mon, Nov 24 2008 12:27 PM

MFound: A pic of Cheerleaders and Dancers is on Flickr site

REPORTING LIVE FROM THE FLICKR NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

http://www.flickr.com/photos/kcjc/3049487243/in/pool-35575849@N00

Manhattan College Jasper Cheerleaders

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http://www.flickr.com/photos/kcjc/3049469619/in/pool-35575849@N00

Manhattan College Jasper Dance Team

# - # - #

About kcjc009 / Kevin Coles

# # # # #

* Posted on: Mon, Nov 24 2008 4:37 PM

JEmail: Jack Raidy (MC1961) seeking John Fisher (MC1961)

From: Jack Raidy (MC1961)

Date: November 24, 2008 4:27:45 PM EST

To: Distribute_Jasper_Jottings-owner@yahoogroups.com

Subject: Re: [Distribute_Jasper_Jottings] JASPER JOTTINGS Week 47 - 2008 Nov 23

Hi.

I don’t know what the “protocol” is for posting this request, but…does anyone know the whereabouts of John Fisher (MC1961)? I was a classmate of his and would like to re-connect, if possible. The last contact was sometime in the 1970s, when he was living in Philadelphia, and had recently been divorced from his wife, the former Jeanne Blank. Can anyone help?

Thanks -

Jack Raidy, MC1961

[JR: I'll ask the readership to help.]

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* Posted on: Mon, Nov 24 2008 5:29 PM

JFound: Ryan, Tom (MC1985) identified

Ryan, Tom (MC1985)

http://www.jasperjottings.com/2007/jasperjottings20070422.htm#_JFound1

http://www.linkedin.com/pub/4/52b/a09

[JR: I happened to spot a "loose end" in my never ending quest for 'hidden' Jaspers. So this puts a Class Year with an old story.]

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* Posted on: Mon, Nov 24 2008 6:37 PM

JNews: Pfaff, Mark [MC????] promoted at New York Life Insurance Company

By reinkefj on MC????

http://www.marketwatch.com/news/story/New-York-Life-Taps-Chris/

story.aspx?guid={2B3DB908-9577-4901-A1C5-057BE9FA7EF9}

PRESS RELEASE

New York Life Taps Chris Blunt and Mark Pfaff to Run Key Operations

Company Combines Two Powerhouses: Life Insurance and Career Agency; Senior Vice President Mark Pfaff to Run New Entity

Last update: 3:58 p.m. EST Nov. 24, 2008

NEW YORK, Nov 24, 2008 (BUSINESS WIRE) — –Company Bolsters Retirement Business to Help Consumers Handle Retirement Challenge; Senior Vice President Chris Blunt to Run Retirement Income Security Operation Comprised of Annuities, Long Term Care Insurance and the Distribution of Mutual Funds

New York Life Insurance Company announced today that it will place its life insurance manufacturing and marketing operations under the direction of Senior Vice President Mark Pfaff, who has run the Agency Department since 2006. The move creates a powerful combination of the industry’s leading field force and one of its strongest life insurance franchises. Concurrent with that announcement, the company said it has bolstered its retirement business. Senior Vice President Chris Blunt will run a new organization, Retirement Income Security (RIS), dedicated to providing solutions to consumers in both the accumulation and income phases of retirement. RIS brings together for the first time under a single executive, New York Life’s income annuities, investment annuities, long-term care insurance, and the distribution of mutual funds.

Ted Mathas, New York Life’s president and chief executive officer, said, “With these organizational changes we are combining our number one product - life insurance - with our primary distribution system - career agents. I expect the combination to grow the company, which benefits our policyholders over the long term, and bring numerous consumer benefits in the form of better product development, better marketing, and in the end, a better-protected public.

“At the same time we recognize the enormous potential for New York Life to contribute to the retirement security of millions of people across the country. By focusing on our unique positions and capabilities in annuities, long term care insurance and mutual funds, we will grow more rapidly and provide better solutions to consumers seeking reliable sources of income in retirement. Mark Pfaff and Chris Blunt are veteran leaders and I have every confidence they will lead these businesses to substantially greater growth in the decade ahead.” Mr. Mathas noted that with these changes the four primary business operations of New York Life are:

– U.S. Life Insurance and Agency

– Retirement Income Security

– Investments, a wholly owned subsidiary with more than $235 billion in assets under management.

– International, a wholly owned subsidiary with insurance operations in eight markets in Asia and Latin America.

U.S. Life Insurance and Agency

The U.S. life insurance operations being consolidated under Mark Pfaff include the company’s individual, bank- and corporate-owned life insurance, as well as its Group Membership Association Division, the largest underwriter of professional association insurance programs in the United States, and life insurance sold through an exclusive, endorsed program with AARP. Consolidated revenue is expected to be more than $8 billion in 2008. Agency has more than 10,500 licensed agents in the United States.

Mr. Pfaff said, “Our mission for 163 years has been to bring the protection of life insurance to as many families as possible. The role of the agent in this process has never been more important, as studies have shown that Americans are significantly underinsured. Much of that phenomenon can be attributed to a lack of good advice. As one of America’s leading life insurance companies, we can have a positive impact in countering the nation’s underinsurance problem. We believe we have the best-trained, most professional career agents in the nation. This is also a time when more Americans are seeking advice about their family’s financial future. I know that combining our agency operations with the life insurance operations will lead to stronger growth of our company’s primary product line, greater benefits to the consumer, as well as more opportunities for those seeking careers in insurance and financial services.”

Mr. Pfaff noted that a recent public opinion survey by Greenwald & Associates, sponsored by New York Life, found that Americans have just half the life insurance they need to achieve their own self-described financial objectives.

{Extraneous Deleted}

Mr. Pfaff received a B.A. from Manhattan College and an A.A. degree from Westchester Community College. He joined New York Life in 1985.

About New York Life

New York Life Insurance Company, a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States and one of the largest life insurers in the world. New York Life has the highest possible financial strength ratings from all four of the major credit rating agencies. Headquartered in New York City, New York Life’s family of companies offers life insurance, retirement income, investments and long-term care insurance. New York Life Investment Management LLC provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds.

New York Life Insurance Company

William Werfelman, 212-576-5385

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Pfaff, Mark [MC????]

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* Posted on: Mon, Nov 24 2008 11:37 PM

JFound: Sposito, Peter J. [MC????] is a banker’s banker

Sposito, Peter J. [MC????]

Peter J. Sposito

http://www.spock.com/Peter-J.-Sposito-Ml4Km1Dh

Peter Sposito has over 35 years in banking with an emphasis on sales management and depository institution market development. He is recognized both regionally and nationally for his diverse expertise within the correspondent banking arena. He has had extensive interaction with the CEOs and CFOs of banks, thrifts and credit unions throughout the Northeast. bankersbanknortheast

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http://www.bankersbanknortheast.com/sposito.htm

Peter J. Sposito

President & CEO

Peter Sposito has over 35 years in banking with an emphasis on sales management and depository institution market development. He is recognized both regionally and nationally for his diverse expertise within the correspondent banking arena. He has had extensive interaction with the CEOs and CFOs of banks, thrifts and credit unions throughout the Northeast. Mr. Sposito has a strong working knowledge of the national payment system, lending, investments, operations, systems, and regulatory compliance and wholesale business development.

Mr. Sposito began his career with the Hartford National Bank shortly after completing the MBA program at the University of Connecticut. As manager of correspondent banking he directed the business activity for the Connecticut and national markets. After a merger with Shawmut Bank, he managed the Correspondent Banking Division for Shawmut Bank in Boston and in Hartford.

In 1994 Mr. Sposito recognized an opportunity to provide community banks with an array of correspondent services. Dramatic changes in the banking industry had negatively impacted traditional correspondent banking activity. His research led to the bankers’ bank concept whose sole purpose was to meet the financial, operational and business needs of community banks. After an extensive due diligence process, capital was raised and a charter was granted to the Bankers’ Bank Northeast on September 8, 1998. Mr. Sposito was elected President / CEO and Director of the new entity. He is Past Chairman of the Bankers’ Bank Council, a national association of CEOs of bankers’ banks. He serves on the Board of Directors of Connecticut Farmland Trust, an organization formed to protect Connecticut’s remaining farmland for agricultural use by current and future farmers. Mr. Sposito is also active with Americares Homefront at St. Dunstan’s Church in Glastonbury, CT.

Mr. Sposito graduated from Manhattan College with a Bachelor of Science in Business Administration, majoring in Accounting. He completed his graduate degree at the University of Connecticut where he received an MBA in Marketing. He lives in Glastonbury with his wife Susan.

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* Posted on: Tue, Nov 25 2008 6:37 AM

JObit: DeMicco, Bonnie M. [MC1984], husband of Emil {MC1979]

http://www.legacy.com/MCall/Obituaries.asp?

Page=LifeStory&PersonId=120628727

http://tinyurl.com/5pckef

Bonnie M. DeMicco

Bonnie M. DeMicco, 51, of Lower Macungie Township, passed away November 24, 2008. She was a mechanical engineering graduate of Manhattan College with an M.B.A. from Lehigh University and eventually became a manager at AT&T. Despite her professional success, she put her career on hold to devote more time to raising her two children. Bonnie continue to work as an adjunct professor and academic advisor at Moravian College and later as a tax preparer for H&R Block. In an effort to giver her son every possible advantage, she became heavily involved in the issues of special needs children. She was an active member of St. Thomas More Catholic Church, where she enjoyed singing in the choir.

Survivors: Husband, Emil; daughter, Amy; son, Michael; sisters, Susan MacDougall, Maureen MacDougall and Lynn Tobin; brothers, Brian and Craig MacDougall.

Services: Mass of Christian Burial, will be held at 10 a.m. Wednesday, November 26 in St. Thomas More Catholic Church, 1040 Flexer Ave., Allentown. Calling hours will be held today, November 25 from 7-9 p.m. and Wednesday from 9-10 a.m. in the church. Arrangements by J.S. Burkholder Funeral Home, Allentown. Contributions: In lieu of flowers, contributions may be made in her memory to A Special Needs Fund for Michael DeMicco, c/o St. Thomas More Catholic Church, 1040 Flexer Ave., Allentown, PA 18103.

Published in the Morning Call on 11/25/2008

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Dear John,

I believe that Bonnie is a member of the Class of 1984 and her Husband Emil, is a member of the Class of 1979.

May She Rest In Peace.

Mike

[JR: Thanks, Mike. Much appreciated. ]

Dear John,

I believe that her brother Brian W. MacDougall is a member of the Class of 1973.

Mike

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From: “Richard A. Lawrence” (MC1968)

Date: November 26, 2008 12:02:11 PM EST

To: “reinke, fjohn68″

Subject: Re: [ManhattanCollegeAlumni] Jasper Obit: DeMicco, Bonnie M. [MC????]

F. John,

1984 MBA according to the MC Alumni Directory

[JR: Thanks, RAL68. Much appreciated. ]

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DeMicco, Bonnie M. [MC1984]

Guestbook: http://tinyurl.com/5byco6

[JR: This especially saddens me. A young woman, a decade plus younger than me, with a special needs child. Makes me sad to report this.]

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* Posted on: Tue, Nov 25 2008 8:58 AM

* Updated: Thu, Nov 27 2008 11:36 AM

MNews: Manhattan College Christmas Lessons And Carols Singers Jazz Band

Jonathan Bernaber (MC2012) invited you to “A festival of Lessons and Carols” on Sunday, December 7 at 4:00pm.

n515066362_625.jpg

Event: A festival of Lessons and Carols

“Manhattan College Christmas Lessons And Carols Singers Jazz Band”

What: Concert

Host: Singers & Jazz Band

Start Time: Sunday, December 7 at 4:00pm

End Time: Sunday, December 7 at 5:15pm

Where: The Chapel of De La Salle

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* Posted on: Tue, Nov 25 2008 3:56 PM

QUADRANGLE: “Missing Professor Now Deceased”

http://www.mcquadrangle.org

Missing Professor Now Deceased

by Matthew Coyne in News

In what was originally suspected to be a missing persons case, Dr. Munther Nushiwat, an adjunct professor of Finance and Economics here at MC, has been identified as dead after he suffered a sudden and fatal heart attack. “As far as we can tell … he (Nushiwat) had a heart attack in the (Kingsbridge Avenue) library on Sunday the 26th of October,” said Dr.…

[JR: Interesting. Sad. Troubling.]

News

* Busy Person’s Retreat Enlightens MC Students

* Costello Lecture 2008 Echoes the Ideals of its Namesake

* Manhattan Magazine Sponsors Coffeehouses

* Missing Professor Now Deceased

* Music Men Frat Returns to MC

* New Study Abroad Trips Offered

* News Briefs

Op Ed

* Got Issues? No Problem!

* Is the Nation Ready for a Black President?

* Notes from the Editor

* P/C: Change? Yeah, Right

* P/C: Yes We Did

* Sports Briefs

* The 2008 Presidential Election

* The Majority Isn’t Always Right

* The Mystery and Magic of the Gypsy Cab

Features

* A Day in the Life of a Bridge Inspector

* Energy Sustainability Lecture at MC

* Falling Short

* Ryan’s Journey to the Olympics Benefits MC Track and Field

Arts & Entertainment

* Abba Fans Look Out, Mamma Mia Keeps on Dancing

* Bob That Head

* New NHL ‘09 Video Game

* Return of the Jedi

* What’s On Your iPod?

Sports

* Lady Jaspers Dive into Final Half of Season

* Tennis Courts to be Built on New Garage

* Women’s Basketball Program Willy Rely on Intensity and Youth

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* Posted on: Tue, Nov 25 2008 6:37 PM

JFound: Eskridge, Honora Nerz [MC????] at NCSU Libraries

http://blog-hendri.blogspot.com/2008/11/engineering-entrepreneurs-industry.html

Honora Nerz Eskridge

89_Honora_Nerz_Eskridge-Small.JPG

Honora Nerz Eskridge is currently the Head, Textiles Library and Engineering Services and the Interim Associate Head of Collection Management. She has been with the NCSU Libraries since 1998, following completion of her Master’s degree in Library and Information Science, which she received from The Catholic University of America in Washington, DC. She also holds a Bachelor of Engineering Degree in Mechanical Engineering from Manhattan College in New York, NY.

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Eskridge, Honora Nerz [MC????]

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* Posted on: Wed, Nov 26 2008 2:36 PM

JFound: Dupper, Thad [MC1979] P+CEO of Evolving Systems

[JR: Sometime between 10/2006 and now, Jasper Thad got kicked upstairs. Automated searching rarely works. Argh!]

Dupper, Thad [MC1979]

http://www.evolving.com/thad_dupper_m.html

Thad Dupper

President & Chief Executive Officer

Dupper, promoted to Chief Executive Officer in April 2007, joined Evolving Systems’ leadership team in 2004 to oversee sales, business development and marketing. Dupper has more than 23 years’ experience in the telecommunications technology industry and has a track record of delivering innovative solutions to leading telecommunications companies.

Dupper was Vice President of Sales and Marketing for Expand Beyond, a wireless software company. He was also Vice President, International Sales and Business Development of Terabeam, where he helped pioneer the use of free space optics with telecommunications carriers around the world. Dupper held positions as Senior Vice President of Dun & Bradstreet and Vice President of Teradata, where he oversaw data warehousing solutions for the communication industry. He holds a B.S. in Computer Information Systems from Manhattan College in New York.

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http://www.jasperjottings.com/2006/jasperjottings20061022.htm#_JNews5_1

JNews5

October 16, 2006

Evolving Systems, Inc.

9777 Mount Pyramid Ct. Suite 100

Englewood, CO 80112

UNITED STATES OF AMERICA

KEY EMPLOYEES:

{extraneous deleted}

Thad Dupper, Executive Vice President, Worldwide Sales and Marketing

BOARD: Senior Management

SINCE: 2004

BIOGRAPHY: Mr Dupper was Vice President of Sales and Marketing for Expand Beyond, a wireless software company. He was also Vice President, International Sales and Business Development of Terabeam, where he helped pioneer the use of free space optics with telecommunications carriers around the world. Dupper held positions as Senior Vice President of Dun & Bradstreet and Vice President of Teradata, where he oversaw data warehousing solutions for the communication industry. He holds a B.S. in Computer Information Systems from Manhattan College in New York.

{extraneous deleted}

LOAD-DATE: October 17, 2006

{MikeMcE reports: Dear John, I believe that Thad is a member of the Class of 1979. Mike (Thanks, Mike.) }

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* Posted on: Wed, Nov 26 2008 6:37 PM

JOY: Finch, Bernadette Kelly (MC1995) gives us something to be thankful for. Among other things.

REPORTING LIVE FROM THE FACEBOOK NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

http://www.facebook.com/profile.php?id=32104185#/profile.php?id=1014258209&ref=nf

baby.jpg

Finch, Bernadette Kelly (MC1995) shares photos of James from HOME! After a very rough start. Proof that prayers are answered. What happy story for Thanksgiving Day!

[JR: Yes, I am a sucker for happy endings. And, I am thankful to have something to post today! Hope this makes you smile as it did me.]

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* Posted on: Thu, Nov 27 2008 7:19 AM

MFound: Jack Taylor (19th century baseball player)

http://sqnet.org/27/jack-taylor-19th-century-baseball-player/

Jack Taylor (19th century baseball player)

Jack Taylor

Pitcher

Born: May 23, 1873(1873-05-23)

Sandy Hill, Maryland

Died: February 7, 1900 (aged 26)

Staten Island, New York

Batted: Right Threw: Right

MLB debut

September 16, 1891

for the New York Giants

Final game

September 12, 1899

for the Cincinnati Reds

Career statistics

Win-Loss record 120-117

Earned run average 4.23

Strikeouts 528

Teams

* New York Giants (1891)

* Philadelphia Phillies (1891-1897)

* St. Louis Browns (1898)

* Cincinnati Reds (1899)

Career highlights and awards

John Besson “Brewery Jack” Taylor (May 23, 1873 - Feb 7, 1900) was a baseball player in the National League from 1891 to 1899. He is often confused with John W. “Jack” Taylor, who also played in the NL during an overlapping period. His real name has also been erroneously published as John Budd Taylor in many sources, perhaps confused with the Minor League pitcher Jack “Bud” Taylor of similar period. John Besson Taylor was born in Sandy Hill, Maryland and moved to Staten Island, New York as a young child, where he played with would-become Major League contemporaries Jack Cronin, Jack Sharrott, George Sharrott, and Tuck Turner.

“Brewery Jack” was a right-handed pitcher with a career record and 120 wins and 117 losses. His nine-season career consisted of (in chronological order) one game for the 1891 New York Giants, six seasons with the Philadelphia Phillies, one with the St. Louis Browns, and a final one with the Cincinnati Reds. While an ace pitcher, Taylor was known for arguing with umpire calls and (as his nickname implies) for his propensity for drinking. Taylor was still considered active in the National League during planning for the 1900 season, but died of Bright’s disease in February of that year. He is buried nearby his mother at Fairview Cemetery in the Castleton Corners neighborhood of Staten Island, and was inducted into the Staten Island Sports Hall Of Fame in 2002.

See also

* List of Major League Baseball leaders in career wins

Related Discussions

* There is currently an open discussion as to whether or not Taylor was an alumnus of (or even a student in) Manhattan College; category status is pending the ability to cite a source on the matter.

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[JR: Never heard this one. You?]

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* Posted on: Thu, Nov 27 2008 5:03 PM

JFound: Romero, Dennis O. [MC????] in 2006 was … …

REPORTING LIVE FROM THE SPOCK NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

Romero, Dennis O. [MC????]

http://www.recoverymonth.gov/2006/press/dromero.aspx

Dennis O. Romero, M.A.

Acting Director, Center for Substance Abuse Prevention

*** begin quote ***

Mr. Dennis O. Romero is the Acting Director for the Center for Substance Abuse Prevention (CSAP), Substance Abuse and Mental Health Services Administration (SAMHSA), U.S. Department of Health and Human Service (DHHS). Mr. Romero’s role is to provide national leadership and direction in substance abuse prevention, setting the goals and objectives of the Center and participating in the formulation of strategies and guidelines needed to plan, implement and manage national programs and projects. He will also give national presence by representing CSAP to members of the White House Committees, the Office of National Drug Control Policy and the news media to ensure an understanding of CSAP programs, objectives, and priorities. As Chief Operating Officer, he is responsible for development of strategic program plans and management of CSAP’s internal operations. This includes management of CSAP’s $634 million annual budget, human resources, and program implementation and performance.

{Extraneous Deleted}

Mr. Romero received a Bachelor of Arts Degree in Philosophy and Psychology from Cathedral College and a Masters Degree in Counseling Psychology from Manhattan College. He received post-graduate training at the State University of New York (SUNY), Albany Campus.

*** end quote ***

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* Posted on: Thu, Nov 27 2008 6:37 PM

JObit: Coyne, Robert T (MC1970) reports the obit for Jackman, Frederick [MC1945]

REPORTING LIVE FROM THE FACEBOOKLINKED NEWS DESK

IN THE VIRTUAL JASPER JOTTINGS NEWSROOM …

Coyne, Robert T. (MC1970) reports the obit for Jackman, Frederick [MC1945]

http://www.licatholic.org/news/obits.htm

*** begin quote ***

Vol. 47 No. 36 November 26, 2008

Deacon Frederick Jackman

Smithtown — Deacon Frederick Jackman, who served at St. Patrick’s Church, Smithtown, died Nov. 15.

Deacon Jackman, 84, a member of the first ordination class of the Diocese of Rockville Centre, was ordained to the permanent diaconate June 9, 1979.

He graduated from Manhattan College in 1945 and subsequently taught world history at Regis High School, Manhattan (1945-1946) and history and English at Fordham Prep in the Bronx (1946-1947). From 1962 until his retirement, he worked for the Suffolk County Department of Social Services as a supervisor of case workers in the housing unit in Babylon Center. He was a certified social worker.

During his ministry at St. Patrick’s, Deacon Jackman served as a hospital chaplain. He assisted retired priests at the bi-monthly Mass at Holy Rood Cemetery in Westbury, and he performed burial services for the Diocese of Brooklyn, St. Vincent de Paul Society at St. Charles Cemetery, usually every third Friday. As sacristan at St. Patrick’s, he worked with members of the Rosary Altar Society to maintain all aspects of the sacristy.

The Mass of Transferral on Monday evening, Nov. 17 at St. Patrick’s was celebrated by Msgr. Ellsworth R. Walden, pastor; Deacon Vincent Abrahams was homilist. Msgr. Walden also celebrated the Mass of Christian Burial on Nov. 18. Deacon Jackman was interred at St. Patrick’s Cemetery here.

Deacon Jackman is survived by Mary Anne, his wife of 52 years; three children, Jeanmarie Romero, Michael, and Lisa Marie Asendorf; a sister, Delores Donato; and four grandchildren.

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Jackman, Frederick [MC1945]

Guestbook: None cited

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* Posted on: Thu, Nov 27 2008 8:39 PM

JEmail: Breen, Jerry (MC1971) shares Obama calligraphy portrait

From: Breen, Jerry (MC1971)

Date: November 27, 2008 3:38:09 AM EST

Subject: Obama calligraphy portrait

To one and all: My latest creation is a new addition to a series of unique calligraphy portraits that I’ve done over the years. My calligraphy portrait of President-elect Barack Obama “In His Own Words” is literally that - Obama’s own words, from his eloquent keynote address at the 2004 Democratic National Convention, rendered by hand in calligraphy, actually forms his portrait! An absolutely unique collectible work of art. Nobody

New books from Nbcindia IFCAI Press

S.No ISBN TITLE Buy From Nbcindia Series CE1 CE2 Rel_Dt Pages PB (US$) PB (Rs) HB (US$) HB (Rs) Snapshot

1 978-81-314-1561-0 Lean Transformation - Perspectives and Experiences www.nbcindia.com Jaya Krishna S 18-Oct-08 344 20 500 0 0 Today, ‘lean’ is an enterprise-wide concept although it has originated and evolved in the manufacturing plants and factory floors. It has become pervasive throughout the organization and an overriding principle that guides every activity in the organization. On the other hand, it has evolved as a vital tool to become competitive. Broad insights into success factors, nitty-gritty’s, prerequisites and capabilities for transforming an organization or function into lean can make the difference between lean winners and losers. Hence, organizations and their people need to know what it requires and how one should approach to successfully transform into lean. This book can act as a potential resource for those forward-looking firms and professionals in such critical situations.  This book, while introducing the concept of ‘lean transformation’, highlights the potential of transforming into ‘lean’ at large and offer guidance in transforming certain critical functions or organizations into ‘lean’. It is an attempt to address what, why, where and how of lean transformation to empower the concerned. It tries to enlighten the concerned with the lessons learnt from previous experiences of transforming into lean. Further, the lean transformation initiatives and/or experiences of some organizations (predominantly the manufacturing firms) are being included with an aim to offer practical insights to prospective readers.  The book is targeted at various interest groups, including practising professionals/executives in the areas of Business Process Reengineering (BPR), Total Quality Management (TQM), Lean Management, production and operations, which are the primary audience for this book. It can be of use for academicians and students of operations, and process management.  

2 978-81-314-1536-8 Ecosystem Management: Issues And Trends www.nbcindia.com Simantee Sen 18-Oct-08 252 17 425 0 0 Today, we are undergoing a fundamental shift in our attitude to natural resources and the environment from the focus on the production of commodities to the focus on the ecological conditions of the land. Scientists, land managers, and others are increasingly proposing the ecosystem management as the best way to manage our planet’s resources. It is a management philosophy that depends as much on understanding political and social factors as it does on understanding biological information. Further, ecosystem management calls for a shift in the way humans approach the natural world; it requires an explicit examination of the relationship between humans and nature, our patterns of politics, and methods of scientific inquiry.  Humanity has always depended on the services provided by the biosphere and its ecosystems. Further, the biosphere is itself the product of life on Earth. The composition of the atmosphere and soil, the cycling of elements through air and waterways, and many other ecological assets are all the results of living processes—and all are maintained and replenished by living ecosystems. The human species, while buffered against environmental immediacies by culture and technology, is ultimately fully dependent on the flow of ecosystem services.  Patterns of politics suggested by ecosystem management include public deliberation of values toward the environment, cooperative solutions, and dispersion of power and authority. These are all avenues to lessen social hierarchy and domination. The significance lies in the fact that ecosystem management maintains the flow and balance between environment, economic as well as social goods and services. Institutions as well as every global citizen must, therefore, cooperate towards this end.  

3 978-81-314-1548-1 Urban Water Supply and Sanitation: A Management Perspective www.nbcindia.com Mallikarjun Janardan Iyyer 18-Oct-08 244 16.5 425 0 0 Access to water is a human right as declared by UNESCO. Civilizations have developed at the proximity of rivers and other fresh water sources. Water is a basic human need and its availability has governed the survival of human existence and, therefore, the civilizations.  The provision of water supply and sanitation services in the urban areas continues to be one of the core functions of the urban local bodies. Rapid urbanization in the last few decades has brought the sector providing these services under stress.   Improved investment in water sector infrastructure, which is accorded high priority, needs to be supported by efficient management of the day-to-day operation and maintenance. This poses a major challenge with fresher elements contributing to its efficacy. Training personnel in water management and bringing about awareness of the scarcity of water to public attention are the need of the hour. The book has tried to bring to the fore some of the challenges in water management. It provides the reader with various perspectives on the issues posed by water management and discusses the best practices being evolved by the local governments in consultation with their country’s Governments to overcome them.  

4 978-81-314-1957-1 Medical Ethics: Issues and Implications www.nbcindia.com Ethics and Corporate Governance Asis Kumar Pain 18-Oct-08 232 16 400 0 0 “Medical ethics is a field of applied ethics that deals with the study of moral values and judgments in the area of healthcare and medicine. It encompasses its practical application in clinical settings apart from that in history, philosophy, theology and sociology. Looked at from a historical perspective, Western medical ethics can be traced from the Hippocratic Oath apart from early rabbinic and Christian teachings. During the Medieval and early modern period, the field was indebted to Islamic physicians such as Ishaq bin Ali Rahawi and al-Razi, Jewish thinkers, Roman Catholic scholastic thinkers such as Thomas Aquinas. 

During the 18th and 19th centuries, medical ethics emerged as a more self-conscious discourse, enriched with the writings of such authors as the British doctor Thomas Percival (1740-1804) of Manchester. Based on his thought, the American Medical Association instituted its first code of ethics in 1847. However, in the 1960s and 1970s, medical ethics went through a dramatic shift by confining itself into bioethics through appropriate development of liberal theory and procedural justice. Medical ethics tends to be understood narrowly as an applied professional ethics, whereas bioethics appears to have more expansive concerns, touching upon the philosophy of science and the critique of biotechnology. Still, the two fields often overlap and the distinction is more a matter of style than professional consensus. The aforesaid discussion sets the tone of the proposed book wherein the concept and development of medical ethics along with its implications are perused upon. Also, the practical aspects of medical ethics reflected in its practice in different countries of the world are taken a look.

5 978-81-314-1460-6 Economic Sovereignty and Global Capital Flows www.nbcindia.com Economy Fikret Causevic 17-Oct-08 276 18 450 20.5 525 This book Economic Sovereignty and Global Capital Flows has three parts. The first part treats financial liberalization, analysing its development, the opportunities and risks involved in financial globalization, fundamental problems within the international financial system, and the consequences of financial liberalization and globalization, drawing on standard studies in the field. The second part addresses the theoretical basis of contemporary monetary policy, how financial asset prices affect economic policy implementation, basic controversies regarding exchange rate policy, and the interdependence of exchange rate, monetary, and fiscal policy under conditions of free capital movement. The third part presents a review of the results of economic development in a sample of 122 countries, between 1980 and 2004.  The methodological basis for the analysis is a national Wealth Coefficient, which expresses the ratio of a country’s share in world GDP to its share in world population. As GDP growth does not necessarily have a sound economic basis, the data from the 20 countries with the highest rates of Wealth Coefficient growth was supplemented by data on GDP, foreign debt, foreign reserves, and import-export ratios to allow conclusions to be drawn regarding the sustainability of relative prosperity growth in high-growth economies. Finally, growth rate data was compared to the speed of financial liberalization and openness to international capital flows. Comparison of Wealth Coefficient growth rates with the dynamics and degree of financial liberalization allowed conclusions to be drawn regarding financial liberalization’s impact on economic policy’s real results.  

6 978-81-314-1550-4 Cisco s Growth and Business Strategy www.nbcindia.com Business Strategy Kalai Selvan N 17-Oct-08 252 17 425 0 0 Cisco system, Inc was founded by a small group of computer scientists from Stanford University in 1984. It has now become a multinational corporation and a leader in networking for the Internet employing 61,000 people all over the world, with an annual turnover of US$ 35 billion. In 2007, it ranked 74th in the Fortune 500 list of companies. With a unique networking system and solution, Cisco has created a big revolution in the Internet networking industry.  Its growth strategy has focused on three market segments such as, Core technologies based market like routing and switching; the Service provider based market segment; and Advanced Technology market segment.   Cisco’s product development has evolved based on customer needs and wants. It has successfully implemented their customer friendly strategies which have enabled it to become the market leader. Cisco Systems have used acquisition as a strategic business weapon. It has made more than126 acquisitions since 1993 to broaden its product offerings and secure talent pool in the extremely competitive networking industry. It has transformed its business through strong business strategy, focusing on the technology and dotcom boom in the last decade to become a market leader in the field of computer software, hardware, and networking and communication industry.   This book discusses how Cisco gained its competitiveness in the market place through its innovative business model, technology innovation, product innovation, and customer management.  

7 978-81-314-1565-8 Audit Committees - An Insight www.nbcindia.com General Books Padmavathi C Aparna Bellur 17-Oct-08 212 15.5 400 0 0 Audit Committees today face the onerous task of overseeing the dynamics, and metamorphosed corporate reporting process resulting in increased responsibilities and accountabilities. An Audit Committee is viewed as the cornerstone of the shareholder’s protection. This new facet can be attributed to changes in regulatory reforms, corporate governance environment, dynamic business environment and heightened expectations of market players. Its functions, role and responsibilities vary from company to company, even though, in essence, its objectives of overseeing the company’s processes related to risk and control environment, financial reporting and evaluation of internal controls and audit process remain same. This book, ‘Audit Committees – An Insight,’ is an effort to bring together Audit Committee practices and responsibilities, as also the worldwide practices in various sectors.     To be effective, Audit Committees must have the right structure and process in place. But in the absence of strong leadership and good group dynamics to promote a culture of challenge and engagement, they may not be able to fulfil their role effectively. Audit Committees, in general, are to meet the expectations of the committee members themselves, the board, the shareholders, the regulators and capital markets.  The maximization of their contribution to corporate governance and capital market calls for an efficient and appropriate design of Audit Committee practices. Independence is the cornerstone for effectiveness. The success of their functioning depends on the skills, knowledge and ability of their members, committee’s mission, which is tailor-made to company, and the tone set at the top. To be effective, Audit Committee members should be dynamic, proactive and should possess a wide range of knowledge, strong interpersonal skills, and willingness to take up challenges.  

8 978-81-314-1556-6 Management Control Systems in Competitive Environment www.nbcindia.com Satyanarayana Y 17-Oct-08 188 14.5 375 17 425 Having winning strategies is very important for a company. Executing these strategies is the key to business. Studies have shown that most companies fail more on account of their inability to implement strategies than, perhaps, their not being able to have the right strategies. Here comes the role of management control.  Under the management control system, managers play a key role in implementing the company’s strategies. In fact, they influence other members of the organisation/company in executing this task. Imperfect design or inadequate implementation can even result in failure to achieve the objectives of the organisation. This keeps the managers on tenterhooks. They should have a clear understanding of the management control system.  According to studies, though many organizations have been making efforts for improving their performance through conventional methods, like lower-cost, improved quality, etc., they have not identified any strategic processes. Many of them do not link their performance management systems to strategy. Current trend is that most innovative companies implement management control more effectively than their lesser innovative counterparts. This shows the need for management control and innovation.  This book makes a study of the issues pertaining to management control, which will be useful for both practicing managers and students of management.  

9 81-314-1287-8 Case Studies on Strategies for Foreign Markets - An Anthology www.nbcindia.com Business and Finance Specials Bharathi S.Gopal 17-Oct-08 360 0 0 50 1250 Companies that aim to extend their operations to other countries face unique challenges. Entering into a foreign country market requires a clear mindset as to what the company wants to achieve. This determines the mode of entry that the business wants to adopt. The mode of market entry chosen will also have implications in the marketing strategies that the company wants to implement in the foreign market. If the company intends to enter indirectly, like exporting, its control over marketing is limited. On the contrary, if a company wants to control marketing of its products or services, it needs to have a foresight of how the business will develop in the future.   Equally daunting is the task of developing a foreign market. It is important that companies understand the local business environment before formulating strategies for the foreign market. Companies that have shown greater commitment at the early stage of market entry, made long-term plans and focused on localizing their marketing programs have succeeded in foreign countries.   This book “Case Studies on Strategies for Foreign Markets – An Anthology” is a compilation of case studies that chronicle the strategies in foreign markets of various companies across industries. The book is divided into two sections. The first section comprises case studies that deal with strategies pertaining to entry or re-entry into foreign markets, while the second section consists of case studies on strategies to develop foreign markets.  

10 978-81-314-1491-0 India and Japan: Economic and Strategic Partnership www.nbcindia.com Economy Sukhvinder Kaur Multani 4-Oct-08 268 17 425 0 0 The Indo-Japanese relationship has witnessed a major transformation since the end of cold war. The bipolar system resulted in greater interdependence among nations. The concept of security became more comprehensive and included non-military elements. Above all, globalization created new opportunities and united the whole world by integrating and breaking barriers. All these transformed the Indo-Japanese relations which hitherto seemed stagnated. India’s economic liberalization also played its role by throwing new opportunities. Since liberalization, both the countries have reaffirmed to continue to promote commonalities and identify areas of convergence for mutual cooperation between them in a constructive manner. With common values and broad convergence of our interests, India-Japan partnership has the potential to create a ripple effect, leading to positive developments – not just for them but for Asia as a whole and, in turn, the world as well.  Of late, the Indo-Japanese relations have broadened and included security along with economic aspects. One important lesson that both the countries have learnt from their past experiences is that they should improve the quality of their relationship. In future, it would be interesting to see how the bilateral relationship between the two countries would have an impact on Asia.  Focusing on the Indo-Japanese relations, the book is designed in two sections. The first section delves into economic relations between India and Japan and focuses on Trade, business, investments, etc. The second section exclusively deals with the strategic aspect of their relationship.  

11 978-81-314-1506-1 Shareholder Value - Concepts and Cases www.nbcindia.com Finance Keerti Mallela 4-Oct-08 248 16.5 425 0 0 It is often said in the world of finance and management that the role of the CEO of an enterprise encompasses something more than just delivering profits. It stretches to the intention of creating and maximizing shareholder value. In this context, value-based management has come a long way in helping enterprises and managers create, measure and enhance shareholder value. It has prescribed many an antidote to overcome major hindrances in processes, operations and systems inside an organization and at the same time pay singular attention to processes that enhance shareholder value. Adhering to and establishing organizational goals by understanding the ultimate goals and objectives of the enterprise may come a long way, according to experts. This involves many inter-related and mutually dependent functions like managing risk, strategy initiation and development, earnings improvement and most importantly focusing and capitalizing on growth opportunities. Things that help goals fall in line with maximizing shareholder value may be some reference points like review of historical performance, comprehending competitors’ strategies, taking note of stock market expectations, due diligence towards ensuring that the current risk factors are all met with realistic and executable measures and preparing for future economic and value-based performance.   This book covers some very vital aspects of shareholder value creation at enterprises, what enterprises ought to do in order to create shareholder value and maximize it. Firms that have undertaken shareholder value creation and enhancement on a serious measure are illustrated in the form of cases.  

12 978-81-314-2073-7 Customer Service in Hotel Industry www.nbcindia.com Marketing Amitabha Ghose Ishita Mukherjee 4-Oct-08 200 15 375 0 0 The rapid pace of globalization has caused increasing consciousness among customers. Due to growing competition and improved job opportunities, especially in the private sector, coupled with improved buying power (which is a direct impact of regular employment generation), consumers have become more demanding. Therefore, to attract and retain customers, cost and quality control continues to be the keywords as hospitality remains primarily a service catering to the business as well as leisure customers. It is, therefore, vital to focus on the planning and delivery aspects related to effective customer service in the hotel industry.  Associations of hotel and restaurant owners have been established by those who create and enforce quality standards, and many of those associations are honored as corporations, that embody the philosophies of effective quality management. As per the principles of total quality management, accomplishment of service quality is a continuous process. It extends throughout every stage of the client’s lifecycle. This is applicable for all in business, and the delivery of service that meets or exceeds customers’ expectations becomes an increasingly significant differentiating factor in business development. Therefore, continuous efforts have to be made to reassess the gap between expectations and delivery of service. What constitutes service quality is a matter of concern as it is a relative concept, referring to the demand and expectation fulfilment of customers. Reduced price coupled with a tailor-made service is one strategy to attract and retain customers by service provider.  

13 978-81-314-1897-0 Addressing Health Issues: Financial Perspectives www.nbcindia.com General Azmal Hussain 4-Oct-08 216 15 375 0 0 “As applicable to any other development paradigm, finance often forms the lifeline of health intervention and therefore, merits prudent considerations. But, government commitment allegedly falls short in healthcare funding in resource poor countries for several reasons, the most conspicuous of them being modest tax revenues limiting spending on healthcare services. This leads to a gap between ideal and affordable investments. Another factor which often escapes the attention of the authorities concerned is the seemingly sub-standard quality of public services and the low motivation of public servants dealing with those services grossly undermining and compromising the value of public investments. The erstwhile evidences are suggestive of manifold issues hinging around the financial aspects of health interventions. This book provides a practical know-how of the issues and dimensions in healthcare financing through suitable examples.

 

Structured into two sections, this book covers the conceptual and generic aspects of healthcare financing, besides providing a close look at the issues and dimensions in healthcare financing through suitable country experiences. This book will be useful for development professionals, policy planners, grass-root level organizations including NGOs devoted to health issues (especially the implementing organizations), administrators and social activists.

14 978-81-314-2034-8 Case Studies on Retail Store Strategies: A Repertoire www.nbcindia.com Supply Chain Management Menaka Rao 4-Oct-08 376 0 0 50 1250 Unlike never before, companies have to constantly watch out to maintain that edge over competition, which sometimes is essentially a break or make situation that a company finds itself in. As Cases occupy a prominent place among pedagogical tools for teaching, this book with a repository of 19 case studies extends over 3 sections showcasing the technical segmentation and in-store strategies used by retailers to drive growth, increase profit margins, beat competition and grab market share. The cases chosen in this book serve as excellent vehicles to project an integrated view of retailers, to blend theory with practice, and sharpen the analytical skills of the readers. Compared to the large number and wide range of marketing topics covered in marketing books, this book focuses on the “Store Strategy” in retailing and in tune with the current needs of the industry. Rich in pedagogic content, the book navigates through case studies to provide a deep understanding of the retail industry and the challenges faced by retailers like 7-Eleven stores, Wal-Mart, Metro cash and carry, Starbucks, McDonald’s, Amazon, to name a few. The book helps in discussing retail strategy, customer centricity, in-store facelifts and makeovers, the shift to virtual shopping, the advantages of on-line shopping and the fortitude borne by companies during challenges. With real time people and happenings, each case study comes alive before the reader.  What, perhaps, is a significant take away from the book, apart from its intrinsic pedagogic objectives are the thoughts and opinions of great retailers like Sam Walton, founder of Wal-Mart, Bezos, founder of Amazon, Brad Anderson, CEO of Best Buy Inc., Kishore Biyani, the Indian retail pioneer and others.

15 978-81-314-1435-4 Case Studies on Business Ethics and CSR Initiatives www.nbcindia.com Case Study Collection Krishna Kumar Lekha Ravi 4-Oct-08 224 0 0 50 1250 Business Ethics relates to value-based and ethical business practices. Business ethics defines “how a company integrates core values - such as honesty, trust, respect, and fairness ¬- into its policies, practices, and decision making. Business ethics also involves a company’s compliance with legal standards and adherence to internal rules and regulations”. The last decade has  witnessed extensive awareness  among  companies  of their responsibilities toward the communities they impact on, which has evolved into the concept of CSR and allied notions such as  ‘corporate sustainability’.  Many companies have grown globally and are adopting ethical practices to preserve a sustainable business. If a company’s main purpose is to maximize the returns to its shareholders, is it unethical for a company to consider the interests and rights of anyone else? The book attempts to be an eye-opener to the business firms’ sensitivity to the society and environment. It analyses the issues faced in this dilemma of business vs. ethics.  This case book discusses opportunities and constraints in engaging the private sector in  demand-driven community development programs. The book aims to provide readers with a critical analysis of CSR to question the underlying assumption that companies, as currently constituted, can be part of a shift to a more sustainable and socially just society. The book hopes to provide a meaningful edge to the debate around CSR. As such, while it does not claim to have all the answers, it hopes to serve as an eye-opener to these issues.  

16 978-81-314-1449-1 Global Scenario on HIV and AIDS: Is there a way out? www.nbcindia.com General Naveen Kumar Agarwal Ramani V V 30-Sep-08 340 20 500 0 0 AIDS is the new epidemic of 80s, which destroyed many families and communities and posed a threat to the modern world. Most of the countries hit by this epidemic suffered from mortality search and drop in life expectancy. This epidemic is causing harm to the productive citizens that too between ages of 15 and 35. Kids are becoming orphans because of the untimely death of their parents and families are losing their talented young lot, who are the key earning members of the family. AIDS ranks fourth among the leading causes of death worldwide and first in sub-Saharan Africa.  The most affected countries are located in Eastern Europe, Central Asia, and Asia. The key challenges of the epidemic are how to control the epidemic, arrest the spread among infants and adults, provide low cost treatment facility, obtain support from the society for the infected and check impact on poor countries.  Collective effort should focus on the prevention of HIV and also provide access to Antiretroviral Treatment for the affected people. The civil society and the government together have to combat HIV and AIDS in developing and under developed countries. With this background, the book has been divided into two sections. Section-I consists of Global Perspectives of HIV and AIDS and Section-II covers Mitigation Strategies. The book attempts to give an overview of the status of HIV and AIDS in regions like Africa, Asia, America and Europe. Efforts have also been made to include the experiences from these regions to know how far they have been able to treat their HIV infected people and mitigate this chronic and intimidating syndrome.  

17 978-81-314-2065-2 Economic Downturns - Lessons from Country Experiences www.nbcindia.com Economy: World Jayshree Bose Keerti Mallela 30-Sep-08 244 16.5 425 0 0 An economy’s prosperity is generally measured by specific indicators like international prices, costs of external financing, capital flows and trade flows. Rise in interest rates, tightening monetary conditions, nevertheless, natural calamities and disasters like the 9/11 and the resultant global imbalances in recent times have led economists worldwide to think of an impending recession. The year 2006 saw the US stating a Current Account Deficit of more than US$800 billion and, on the other hand, the oil-exporting countries reaped surpluses. In 2008, the world at large is expected to watch out for continuing stock market falls, less of foreign direct investment in both developing and developed economies, oil price shocks, further fall in house prices and, therefore, gloomier credit markets. Erosion of investor confidence is on the way given the huge losses reported by Banks, given the shattering aftermath of the subprime crisis. It is widely opined that even if the Fed keeps cutting interest rates, these cuts may not really be able to offset the rate cuts in the previous recessions, since consumers and businesses may not be able to borrow enough to keep up their spending. A long-standing view point is that a flexible economy, with maximum competition as its driving force is the most sought after method to withstand recession. In that continuum, flexible market-driven economies have been cited to be more resilient towards recessions.  This book on Economic Downturns focuses more on some vital concepts of economic recessions, policy changes brought about by nations that ran into profound recessions and some country-experiences. In its various segments, it covers some important preventive measures prescribed by leading economists and experts.  

18 978-81-314-2014-0 Globalization: Latin American Experience www.nbcindia.com Globalization Asis Kumar Pain 30-Sep-08 236 16 400 0 0 After the “lost decade” of the 1980s, the 1990s were a distinct improvement for Latin America with the continent embracing the structural reform process. GDP growth rose as high as 4 percent in 1997 prior to the outbreak of the crisis in Asia and in the emerging markets. On a country basis, 17 countries were found to have raised their average annual growth rate in the 1990s (average per capita income in the region grew 1.5 percent per annum in the 1990s) compared to the 1980s. Besides, 24 countries showed a reduction in the volatility of their growth performance while 13 countries achieved both higher growth and greater stability of growth. Inflation was also brought down to single-digit-level after decades of double-digit inflation. These enhanced economic performance had its reflection in the various parameters of social progress. Between the period 1975 and 1997, the gap in the UNDP’s Human Development Index was reduced by more than 20 percent, reflecting a substantial improvement in social indicators. Despite these positive directions of economic development, the extent of poverty still affected 36 percent of Latin Americans. Income distribution across quintiles or deciles continued, thus presenting a discouraging picture.   The aforementioned portrayal brings up the Latin American development initiated with the globalization process. The present volume is a modest effort at capturing some essence of this process wherein the basic idea of the circumstances for embracing globalization and economic development ushered thereon, supplemented with individualistic experiences, are examined.  

19 81-314-1292-4 Case Studies on Business Ethics and Corporate Governance- Promoting Social Responsibility www.nbcindia.com Ethics and Corporate Governance Harish R 30-Sep-08 332 0 0 50 1250 There is a growing awareness and realization about the need for industry to be more ethical and responsible in its actions, whether towards its employees, suppliers or customers; or towards the environment and the society at large. Adhering to appropriate norms and regulations pertaining to corporate governance and maintaining financial and fiscal integrity are also gaining importance. Shareholder groups too have become more active and are raising their voices whenever they observe that companies may not have been adequately ethical and fair in their behavior and dealings. Several movements aimed at ethical and fairtrade practices have gained ground, and products with fairtrade and/or environment friendly/organic labels are beginning to command significant market demand and price premiums.  Given this background, Business Ethics and Corporate Governance have become important subjects of study in many business schools across the world. It is, therefore, felt that a book of cases pertaining to the concepts and issues typically dealt with in such a course would be of immense help to both faculty and students. This book attempts to fill this need by presenting a bouquet of cases on a cross-section of topics that may be covered in a course on Business Ethics and Corporate Governance. The cases are selected from different industries and geographic regions of the world, thereby adding to the diversity and richness of content.  

20 978-81-314-1459-0 The Icfai Handbook Of Behavioral Sciences www.nbcindia.com General Anamika Sharma 27-Sep-08 356 21 525 0 0 The Icfai Handbook of Behavioral Sciences is addressed to the undergraduate & postgraduate students of behavioral sciences and its allied disciplines. They include psychology, social psychology, psychobiology, social neuroscience, cognitive organization theory, consumer psychology, management science & operations research besides ethology, anthropology, organizational studies & psycho-economics, memetics, organizational behavior, social networks, and organizational ecology. Psychologists, behavioral scientists, management consultants, sociologists, anthropologists, OD consultants and the faculties in the concerned areas and general readers whose daily work demands some familiarity with terminology of Behavioral Sciences like history and meaning of Behavioral Sciences and its allied areas are expected to benefit by this handbook. The handbook also addresses terms from the conceptual level to the advanced level. It aims to provide a comprehensive companion to support other readings in a discipline, which employs remarkably similar terminology.  This handbook is an authentic, accessible and alphabetical reference resource for the main ideas and teaching connected to the basics of and advances in Behavioral Sciences. The book is designed to cover the salient facts and features of various terms of Behavioral Sciences and its allied areas. It also explores conceptual development in various sciences from professional perspective. Over 3000 entries define and explain clearly the salient facts within the context of Behavioral Sciences. It incorporates up-to-date information which is sure to appeal to active psychologists, behavioral scientists, management consultants, and the faculty and students of Behavioral Sciences.  

21 978-81-314-1527-6 Perspectives on Inclusive Growth in India www.nbcindia.com Economy: Issues in Economic De Dholakia J R 27-Sep-08 356 21 525 0 0 Inclusive growth is a major concern for human development in India with rising inequalities. Despite tremendous growth of economy, failure on distributive front has aggravated the progressive journey towards collective well-being. Inclusive growth has become the buzzword in policy-spheres with recent phenomenon of rapid growth with characteristic patterns of exclusion. The sectoral, social and spatial inequalities have raised questions about welfare approaches of Government planning, and emphasized the role of the private sector in addressing development issues in the country. Employment generation, social and developmental infrastructure, health-care and rural diversification are some of the major suggestions from experts. Due to faulty approaches and often politically motivated policies, growth has generated inequalities. It is imperative for the planners and policy-makers to make growth inclusive through adoption of pragmatic policies. The journey towards balancing the outcome of economic growth involves many challenges. The dominant challenges include the imperative of maintaining the acceleration of economic growth without compromising on human development and sustainability.  The book analyses various policy and programming issues about inclusive growth in India. With indepth overview of human development issues surfaced by various researches, the book outlines certain policy issues pertinent to inclusive growth. This book specifically looks at the issue in broader framework of sectoral, social and regional inequalities which form the macro framework for inclusive growth.  

22 978-81-314-1529-0 Addressing Health Issues: Role of Participatory Research and Action www.nbcindia.com General Azmal Hussain Nirbachita Karmakar 27-Sep-08 308 19 475 0 0 It is clear for all to see that in the attainment of sustainable growth and development, health plays a crucial role. The question of accessibility of the health benefits by the poor brings to the fore the role of participatory research and action. This book attempts to show how different participatory approaches are useful in improving mass health, and document practices in health intervention through participatory action and research. Approaches like Participatory Action Research (PAR), Community Participation (CP) and Community-Based Participatory Research (CBPR) are discussed in possible detail wherever deemed necessary.   CBPR is particularly viewed as consistent with the goals of “result-oriented philanthropy” of various national as well as international funding agencies who often become discouraged by the modest or even disappointing results of more traditional research and intervention efforts in many low income communities. Supporters of participatory approaches, however, face challenging issues in the areas of partnership capacity and readiness, time requirements, funding flexibility, evaluation and so on.   The book intends to identify strategies for addressing such issues through documentation of desirable practices justifying participation as an important tool for effectively addressing health issues. It is expected to be of use for development professionals, policy planners, public administrators, applied anthropologists, social work professionals and other social scientists.  

23 978-81-314-1542-9 Community Investing www.nbcindia.com Economy: World Swapna Gopalan 27-Sep-08 316 19 475 0 0 Community investing refers to financing that creates resources and opportunities for economically disadvantaged people and people under-served by traditional financial institutions. Capital generated through community investing initiatives enable local organizations to generate jobs, fund small businesses, create affordable housing and provide financial and other vital community services to financially disadvantaged people.  Community investments are known to make a greater impact in helping communities in need than charitable giving. It is perhaps for this reason that community investing has become an attractive investment option for wealthy individuals, interested in making a social impact, even earn monetary gains. Corporates have also found a good avenue in community investing to fulfil  their social missions.   Today, community investors are playing a crucial role in alleviating poverty in many countries like the US, the UK, South Africa and India. In fact, community investors have been at the forefront of rehabilitation efforts in the aftermath of the disastrous tsunami, hurricane Katrina and after the war in Afghanistan.  This book captures the recent developments in the area of community investing across the globe. It is divided into three sections: the first section titled “Introduction” introduces and explains the concept of ‘Community Investing’, the second section “Experiences” showcases a few country experiences and the third section “Corporate Community Investments” is devoted to studying the

Top Tax Saving Mutual Funds (ELSS) 2009

As it is investment season and people are desperate to save from that dreaded taxman and invest in instruments classified under Sec80c , here are my top 3 Tax Saving Mutual Funds.

Please do ur own research before u come to a decision and dont blame me if they dont perform according to ur expectations. Also note due to the market crash most mutual funds have lost money on investments made during last 2 yrs.* standard disclaimers apply.

Sundaram BNP Paribas Taxsaver

NAV 22.56  EXPENSE RATIO 2.24

Fund has a good performance record for the last 2 years and has come out as a leader in its class.

Magnum Taxgain

NAV 28.5 EXPENSE RATIO 2.5

One of the best Tax savings funds over the long term with a good pf and a consistant track record but a slightly higher expense ratio than the market.

Franklin India Taxshield

NAV 94.68  EXPENSE RATIO 2.24

Fund is slightly more risky and does not have a consistant performance but has performed better than its peers in the current downturn.

HDFC Taxsaver

NAV 90.95  EXPENSE RATIO 1.98

This is also a relatively good performer but has been hit by the current downturn

Fees Increase as Your Assets Decrease

An article in a local paper here in Atlanta, ‘Investors likely to face higher mutual fund fees” by Eileen Ambrose detailsJeff Tjornehoj, a senior research analyst at Lipper, Inc, estimates that the average equity mutual will increase its expense ratio by .10%.

These increases are because mutual funds have actually dollar cost many being fixed cost.  They then set fees according to their assets under management.  So as their total portfolio values drop due to their investing and investors it mass pull money out of these funds, the fees no longer are adequate.     

This is why we will see increases among to most damaged mutual funds.  International funds may be among the largest category to increase its fees.

More plain English from the SEC

The Securities and Exchanage Commission unanimously ruled that a “plain English” executive summary must be made available on the cover of a mutual fund prospectus.  Now I don’t mean to be a curmudgeon but really, shouldn’t this be the case with all such filings?  Isn’t “plain-English” what we Americans speak?

Okay, I’ll get on board and applaud them and encourage them not to stop here but to make sure ALL filings have an executive summary in “plain English.”

New release

Welcome Back from the Holidays

Computer Apps-First a couple of changes: Your final Alice project (game or movie) is due on December 12th. The date change is to enable us to fit a few more projects into the semester. After you finish this, refer to my previous post about completion of the 32 things assignment.

Personal Finance-Your terms test is tomorrow as promised. Here is a list of the last terms you should add to the previous data:

Tax bills for fund shareholders in the worst year for financial markets since the 1930s

Here is the first concrete example we’ve found of the losing proposition mentioned in several posts over the last three weeks. Many more are on the way.

Mutual fund shareholders who have lost up to 50% will face serious taxable events as a result of manager sell-offs to generate cash for redemptions. One statistic we’ll be looking for is the tax liability for investors in active vs. passive investment vehicles.

Fidelity, Franklin Stick Investors With Tax Bills as Funds Fall

Investors in the $4 billion Templeton Foreign Fund already have lost more than 50 percent of their money this year and now they’ll be forced to pay taxes on as much as $1 billion of gains from the sales of investments.

Shareholders of Templeton Foreign, run by Franklin Resources Inc. in San Mateo, California, have plenty of company. Franklin said 33 of its 106 stock and bond funds will have capital gains. Fidelity Investments, the world’s largest mutual- fund manager, expects 135 of its 212 funds to make the distributions, based on data as of Nov. 15.

Money managers have had to sell profitable holdings this year as customer redemptions increased, resulting in short- and long-term capital gains. The result means tax bills for investors in the worst year for financial markets since the 1930s.

For the record: Mutual fund industry light 2.5 trillion

Mutual funds had $9.5 trillion in assets as of Oct. 31, a full $2.5 trillion, or 21% less, than their year-to-date $12 trillion under management peak at the end of May, Lipper data shows. Since the beginning of the year, when mutual funds had $11.7 trillion under management, assets have fallen 19%.

Going back to Lipper’s archive of data dating to 1959, the biggest annual percentage drop in assets on record was in 1973, when they fell 20%, and 1974, when they dropped 21%.

Certainly, billions of dollars in redemptions have exacerbated the market’s steep declines; stock funds lost $86 billion in October. Even fixed-income funds lost $44.3 billion. To put the fixed-income mutual fund redemptions in perspective, the very worst monthly outflow prior to 2008 was in September 1992, when $37 billion left such funds, and May 2004, when $16.7 billion was lost.

Noting that the Dow Jones Industrial Average was on track to decline more than 9% in November, Lipper Senior Analyst Tom Roseen told The Wall Street Journal: “Funds are still going to have difficult periods to go through.”

What every middle class person should understand about their financial behavior!

About 10 years ago, I took a serious look at my financial life.  I had grown concerned that my net worth was not moving ahead at the velocity it needed to in order that my wife and I could have a comfortable retirement.  Frankly, we were doing the things that Wall Street and the Banks encouraged us to do.  We thought these were the prudent financial behaviors needed for success.  We were wrong as my research was going to point out. 

There are really three behaviors needed to have a successful financial life; spending control, wealth creation, and wealth preservation.  We had concentrated on spending control and what we thought was wealth creation, but was really wealth preservation.  In short, we were doing whatthe majority of the middle class tries to do.  We were concerned about the size of our mortgage, wanting to have it paid off as soon as possible, and invested in mutual funds inside a tax deferred wrapper (403B).  And we were good at saving over 15% of our income.  That is why I became agitated, we were doing exactly what we were supposed to be doing and our financial progress was not very convincing.

So I went on a fact finding mission, researching wealth creation and personal finance.  Well, what I found was eye opening.  I was not involved in any wealth creation strategies.  What we thought was a wealth creating strategy, mutual fund investing, was really a wealth preservation strategy.  We were failing to produce wealth because we were confused as to how wealth is really created.  We were taken in by the propaganda emerging from Wall Street.  I can not overstress how bad I felt, as one who had formal finance training, to learn that I was making this fundamental mistake.

Since then I have reversed course and concentrated on wealth creation first.  An amazing thing happened.  Our net worth started to accelerate upward.  And last year I decided to create a part of my business dedicated to teaching/helping people do the same thing with their financial lives that I am accomplishing with mine.  This blog is dedicated to offering folks free insight into my thinking on wealth creation and wealth building plans.  I hope the reader keeps in mind that what I am offering is my experience, my intellect, and my research into wealth.  Whether you ever formalize our relationship by joining with me at the Shafer Wealth Academy, or not, I hope my words are used as encouragement to creating a better, more fufilling life based on true wealth relationships! 

Now that Thanksgiving is behind us, we will be hit with a full out attack of the Christmas season.  I put my lights up on my house yesterday!  No matter what your religious preference is, I know this next month is a very stressful time.  It is, of course, made even more stressful by recessionary economic times.  Let us all remember that this is a time of joyful giving.  As a gift to my readers, if you send me a message with your e-mail address, I will send you a copy of “The Best of Uncommon Financial Wisdom,” an e-book created for my impending new web-site!  This e-book is a compilation of the best blog posts, as judged by my readers.  Perfect for those holiday resolutions!

Urgent Business Proposition!

Scam type: 419

Subject: Urgent Business Proposition!

From: fz@live.co.za

No more Great Britain: A blueprint for a federal UK

The trouble with the UK is ‘Great Britain’. The future of the UK, if it has one, will be settled by coming to a more stable, mature and equitable relationship between the different nations that currently make up that state. Great Britain, and its even more ill-defined cognate ‘Britain’, is the great interloper that stands in the way of those nations finding a new path of mutual autonomy and co-operation. Great Britain wants it all – and wants to be all; and while it’s still around, it will try to stop its ‘constituent nations’ from realising their aspirations to be themselves.

What is Great Britain, after all? You could call it the non-existent national core of the state, the United Kingdom; or the alter ego of England as the unacknowledged heart of the UK state. Although the ‘national’ UK politicians make great capital out of Great Britain or Britain as the personality of the state, does Great Britain actually exist in the present in any fundamental national, political or constitutional sense? Great Britain is indeed the ‘foundation’ of the UK state because that state’s parliament was constituted as the parliament of the Kingdom of Great Britain through the Acts of Union between England (including Wales) and Scotland in 1707. When Ireland (later reduced to Northern Ireland) was added 100 years later to form the United Kingdom of Great Britain and Ireland, this was essentially an extension of the jurisdiction of the Great Britain parliament and government to include Ireland. So the UK, on this basis, remained Great Britain at its core.

However, Great Britain itself was in reality the product of an extension of the writ of the English parliament and state to include Scotland – albeit that to ’sell’ the deal to the English and Scots alike, the new state had to be re-branded Great Britain rather than the Great(er) England that was implied. The English and Scots people have always been aware that this was the ‘real deal’: that real power and rule over Scotland was simply transferred to the English crown and sovereign parliament.

Before I set out my ideas here for a new federal constitutional settlement, it will be useful to discuss further some of the overlaps and distinctions between Britain and England, as I see them. That way, the differences between my proposed federal UK and Britain as we know it will be clearer. Readers who wish to skip this preamble could jump down to the heading ‘Blueprint for a new federal UK’ below.

The first thing I would want to lay out is the proposition that Great Britain / Britain is not a nation, let alone a ‘great nation’: England is the real nation at the heart of the UK state. I’m not trying to deny that the actual states of Great Britain and later the United Kingdom don’t have a ‘great’ history, defined as having made possibly the biggest contribution of any state towards shaping the modern world. What I’m trying to get at is the myth that Britain is a nation. Many people in all of the actual nations of the UK do feel that Britain is a nation, indeed ‘their’ nation in a sense that either sits alongside their feelings of being English, Scottish, Welsh or Northern Irish, or takes priority over those feelings. But the paradox is that, constitutionally, Great Britain does not exist. The state is the United Kingdom: it has been for over 200 years. And the United Kingdom definitely is not a nation: nobody says ‘I’m UK’ to describe their nationality, other than in the sense of their citizenship; they say ‘I’m British’. But (Great) Britain itself does not have any constitutional status as either a state (which is the UK) or a nation. When laws are enacted in the UK parliament, for instance, they are laws either for the whole of the UK or – more often – they are UK laws that have effect only in one or more ‘parts’ of the UK, but certainly not in ‘Great Britain’ as such. If some laws do apply to England, Wales and Scotland, they are described as applying to England and Wales, and to Scotland – as England and Wales, and Scotland respectively have two separate legal systems. Great Britain has no legal personality. There is no such thing as British law. Technically, there is no parliament or government for Great Britain, either. Indeed, the fact that the laws of the land are enacted for England and Wales, for Scotland and – where applicable – Northern Ireland itself implies that the ‘lands’ (nations) of those laws are indeed England, Wales, Scotland and (Northern) Ireland – not (Great) Britain.

So Great Britain / Britain is just a ‘nation name’ or ‘national persona’ for the UK, not a formal nation in its own right. If you wanted to finesse this argument further, you could say that the reason why ‘Britain’ rather than ‘Great Britain’ tends to be used nowadays to evoke a national identity for the non-nation state of the UK is that ‘Great Britain’ refers back to the historical nation – ‘kingdom’ – of Great Britain about which people are vaguely aware that it ended when Ireland came on board; and that it is not, consequently, inclusive of Northern Ireland. So ‘Britain’ is used precisely because it is not the formal name of a state or a nation that does or does not exist in the present. Indeed, one might say that the power of the name ‘Britain’ to evoke feelings and ideas of nationhood is in inverse proportion to the actual existence, past or present, of such a state or nation.

In fact, this power of the words ‘Britain’ and ‘British’ to arouse feelings of patriotism and nationhood – despite the non-existence of such a nation in legal or constitutional fact – is primarily a function of English national identity and pride: England being the real nation that has fantasied and mythologised itself as British. That is to say, the English, historically, have tended to merge their English national identity with the idea of (Great) Britain, to the extent that ‘England / English’ and ‘Britain / British’ became co-terminous and indistinguishable. This has never been true to the same extent in Scotland or Wales. Scottish and Welsh unionists are indeed proud to be British; but this ‘being British’ has not tended to override or replace their primary national identities. They are proud as Scottish or Welsh persons to be part of the great British project and its historical achievements: Britain being clearly demarcated as a state (’dominated’ by and synonymous with the English nation) to which the Scots and Welsh by and large have been content for their nations to adhere, albeit for pragmatic or ideological reasons as much as through any affection they might or might not have felt for their mutual neighbour.

By contrast, the feelings and pride felt by English people at being English and at being British have tended to be one and the same thing. They still are for many people, as present-day surveys of people living in England discover that virtually the same high percentage of respondents feel they are English (and proud of it) as feel British (and proud of it) – with the balance slowly tipping in favour of English being the primary identity. Indeed, this is so much the case that a stranger from Mars, or from another country (say, Scotland), might conclude that ‘British’ is merely another name for ‘English’. Indeed, this is the perception of many Scots, who are all too aware that when supposedly national (that is, UK-wide) media or English people in general talk about ‘Britain’ or ‘the country’, they are generally referring to England only; or else, they may be trying in their own minds to include Scotland and Wales (and possibly, Northern Ireland) but are in fact still dealing with English circumstances and situations, as the realities in Scotland and Wales are often quite different – increasingly so, after devolution.

This business of politicians and the media (and the marketing and branding of consumer products, and general parlance to some extent) saying ‘Britain’ or ‘the / this country’ when they’re actually referring to England is a real bugbear to those who have woken up to the post-devolution realities, which mean that the majority of what Westminster politicians do and talk about does in fact relate to England only, as their writ now stops there in so many vital areas of government. But in a way, this tendency is a continuation of the longstanding habit of English people to confuse England and Britain: to say ‘Britain’ when they’re really thinking of England, and to say ‘England’ even when talking about Scotland or Wales – demonstrating the extent to which the concepts of ‘England’ and ‘Britain’ were interchangeable in their minds.

The difference now, however – and it is fundamental – is that, whereas it’s politically correct (if factually incorrect) to say ‘Britain’ when talking about England, it’s definitely no longer politically correct to say ‘England’: not just where the whole of Britain is concerned but even when one is referring to exclusively English concerns and facts. I have frequently commented on this politically motivated linguistic suppression of ‘England’ – both in this blog and its sister blog Britology Watch. At the extreme, this almost pathological aversion to using the word ‘England’ when talking about England appears to express a wish, on the part of some within the political establishment, to abolish England altogether and replace it with some sort of regionally divided New Britain.

There is a curious paradox here, the form of which, in its simplicity, only became apparent to me a few days ago. You could express it as follows:

In other words, when England was Britain, it was OK to call it England; but now it’s England, you have to call it ‘Britain’.

How did this truly (and typically English) bonkers situation come about? The explanation is quite straightforward, really. The old ‘Britain’ (idea, not nation) was, as I’ve said, largely a projection and alternative name for England itself, and expressed England’s pride in having extended its dominion and influence first to the island of Britain and then across the world – historically, through the British Empire. Post-devolution Britain, by contrast, is a world where a separation has been made between both the identities and polities of England and Britain: in the national (that is, English) psyche as well as in national political institutions, England and Britain are no longer seen as indivisible. This separation between England and Britain in people’s minds has the potential to blow the whole UK state apart by virtue of a very simple logic: ‘if the English people start thinking of themselves as English and not British’, so the thinking goes, ‘then they’re going to want an English parliament, government and eventually even state’. The response on the part of the establishment, fighting for its survival, is classic denial – in the psychological sense: it seeks to deny that any split between the English and British identities has occurred, and to suppress people’s developing sense of a distinct Englishness by censoring ‘England’ (politically, linguistically, psychologically), and pretending that there is only Britain, and that England effectively does not exist.

The primary political manifestation of this is that the government and the mainstream parties, who feel they have most to lose from a disintegration of Britain into its constituent parts, carry on a pretence that there is absolutely no distinction between the areas of government that genuinely extend across the whole of the UK, and those that relate to England only (or, at a pinch, to England and Wales only). This thinking reflects, and is used to justify, the fact that, in the matters that do in reality relate to England only, England is – uniquely – governed in the way all the UK countries were governed before devolution: with the participation of elected representatives from all four national corners of the state.

Without rehearsing the arguments about the democratic deficit and lack of accountability on the part of their supposed representatives this creates for the people of England, another paradoxical aspect of this is that it means that England and the UK ironically continue to be indistinguishable and interchangeable – in fact, even more so (technically and constitutionally) than before devolution: England is the only part of the UK that continues to be the old unitary UK in all respects of national governance. And, of course, it’s because the establishment is desperate to hold on to the unitary UK, despite having broken it up by its own actions through devolution, that it has to deny any alternative existential status for England: as England, and not as the UK. But you could just as easily turn this completely on its head and say that if England is the UK, then you might as well just call the UK ‘England’. Then, whenever all those politicians and lazy journalists go on about ‘the country’ (meaning England but pretending they’re talking about the whole of the UK), instead of assuming they’re referring to the UK, we should assume that the default meaning of ‘the country’ is England. As this is the fact, in most cases, it shouldn’t offend our Scottish and Welsh friends if we start to call a spade a spade. However, if we develop this consciousness that ‘the country’ is England – not Britain – then the game truly is up for the unionist establishment.

If England really is to establish itself in its turn as a nation and polity separate from Britain and the UK, then we’re going to have to develop just such a consciousness of our distinct national identity (England as ‘the country’) along with a new political maturity, separate from Britain; rather in the way that a child needs to outgrow its parent’s expectations, beliefs and attitudes of an earlier generation in order to establish itself as an adult able to make its own way in the world of today. Now that England and Britain have started to separate out – psychologically and politically – the rational, mentally sane response has to be define a new English identity and future – including political future – not to try to deny that there is such a thing as England and Englishness out of a delusional retreat into a unitary Britain that no longer exists, other than in England itself. Psychologically speaking, that’s a pathological defence mechanism: avoiding the challenge and need for individuation, and retreating into one’s parent’s (Britain’s) certainties rather than exploring one’s own truth and possibilities, as a self-reliant England.

Taking these psychological metaphors a little bit further, if the reader will forgive me this self-indulgence (if not, read on to the next paragraph!), one could say that England – a nation whose people are characterised to some extent by dualistic psychological conflicts, such as that between aggression towards the stranger and an over-willingness to let the stranger feel at home here – ‘projectively’ identified with Britain as a persona enabling England to pursue world domination under the guise of a civilising, anglicising mission. This means that ‘Britain’ and the civilising project of the Empire provided a justifying ‘outlet’ for what might otherwise have been seen as totally unacceptable and destructive English aggression. Now that, even within the British ‘homeland’, the nations England once subdued are turning away from England-Britain, that projection of Englishness onto the world in the name of Britain has turned aggressively in on itself, ‘introjectively’: England’s aggression is now directed self-destructively against England itself, which is the last savage colony resisting the creation of a Britain made in the image of the global civilisation with which it identifies – the diametrical reverse of the previous project to fashion a world made in the image of England.

Put in more straightforward language, if you’ve followed the logic so far, the potential destruction of the nation of England in the name of a New Britain that takes England’s place is primarily being undertaken by English people: effectively, England turning against England because an England distinct from Britain risks destroying the ‘great Britain’ that has been England’s power, pride and joy. And power is what essentially it comes down to. We the English created Britain as an instrument for English power; and now, those who are the heirs of British power see a separate England as a mortal rival and as something that could undermine their whole power base – forgetting all the while that England is their power base: Britain’s foundation and its very raison d’être. If England is the foundation, then you could say that ‘Britain’ is the superstructure of the building – all show, display of pomp and circumstance, glamour and sophistication; while Scotland and Wales represent the supporting walls. Just as the foundation is necessary to hold up the walls and prevent the building from collapsing, so Scotland and Wales would not be joined into Britain were they not rooted in and conjoined with England, which provides the whole basis for Britain and the ground on which it stands. But as Scotland and Wales loosen their ties with England, the superstructure that is Britain – sitting astride the whole edifice – thinks it is sufficient in itself to hold it all together: its values, its high-minded ideals and its top-down instruments of power enough to shore up its collapsing internal walls. In reality, however, it’s the grit, the determination, the solidity and commitment of the English that has held the building together up till now, for better or for worse. Undermine and strip that away, and the whole building cannot stand.

Which is to say that the legitimacy of power comes from the people, not from the apparatus of state: from the English people who previously invested the British state with their self-sacrificing loyalty, commitment and support; and not from that state that now seeks to deny that very Englishness that is its living core and soul. Britain is about power: it was the vehicle of English global power, and dominion over its Empire and over its island neighbours; and now it’s a system of power that sees itself as ruling the tumultuous waves and surfing the changing tides of global markets (we English were ever a merchant, seafaring nation, after all) with little if any concept of the nation – England – which the activity of government and the economy is intended to serve, build and defend. In fact, the more that memory of Britain’s original, founding nation – England – can be erased, the more we can fashion ourselves (and retain that projected image of ourselves) as a global power.

Poor England; deluded Britain – the monster we created (and which we in part are) that is now devouring its own true greatness, which is not in domination but in itself. We have to become a new creation, as it were: a new England that sets aside the will to dominate and Britain’s delusions of grandeur. England not Britain; but united, if still possible, with our neighbours in a different sort of union: a union of equals – not a Britain that is merely a name for an aggressive England it could not avow, and which now it aggressively disavows in turn. We have to do away with Britain to become truly a united kingdom and not all in our different ways vassals of an overweening state that would remake us in its image rather than let us make it in ours.

New England, new United Kingdom: not a United Kingdom of Great Britain and Northern Ireland, but a United Kingdom of England, Scotland, Wales and Northern Ireland (and Cornwall, perhaps). Why bother with the UK at all, albeit a re-cast one, some might ask? Why not just discard this remnant of empire and domination, and let each nation chart out its own course across the choppy seas of the present? I, for one, would be far from unhappy to see an independent nation state of England. But perhaps before we throw the baby of our Union out to sea with the bath water of lost illusions, there could still be something worth salvaging from the past in a new union for the future. The greatness of Britain, as I’ve attempted to evoke, was not Great Britain, but the greatness of its people: yes, the English but also of course the Scots, Welsh and Irish with which we have – still – so many things in common; more that ‘unites’ us than divides us, in fact. Our island home; our historic civilisations; our mingled blood lines and family ties; our Christian and liberal heritage; our English language; and, yes, our British history.

It’s worth a punt trying to keep all this together in some form; that much I would concede to the unionists. But if this is to work, it has to be a togetherness that allows us to express our own identities, plot our own destinies and govern our own lives: as separate and not subordinate nations, working together in a common structure for mutual advantage and enrichment.

It’s worth a punt; so here’s mine:

This solution would prevent the national parliaments from competing with the federal, UK parliament, as they would be integrated into a single system. However, this would not involve a subordination of the national parliaments to the UK parliament. It would be redistribution, not devolution, of power: power in the areas assigned to the national parliaments would be permanently transferred to them, not handed over to them ‘on licence’, as under devolution. When I say permanently, this is because there would be a written constitution setting out the specific roles and responsibilities of the national and UK parliaments, as well as the many other details concerning the composition of and relationships between the executives, parliaments and judiciaries in each nation.

One important, founding element of this constitution should be that it would declare that sovereignty resides with the people of each UK nation; and that it is therefore each nation’s intrinsic right to determine the form of government it desires: enshrining the freedom to secede from the UK at any time should there be a clear popular mandate to do so, as manifested in a referendum. This latter principle redresses the imbalance that prevails at present, whereby many of the UK’s leading politicians, including Gordon Brown, are on record as having accepted the above principles of popular sovereignty and national self-determination for Scotland while denying the same rights to England, which remains subject to the sovereignty of the UK parliament. This imbalance has made a major contribution towards the present asymmetric, multi-track, creeping devolution process. It has involved the setting up of a national Scottish parliament with quite extensive powers to pass primary legislation, and which is a clear rival to the UK parliament and focus for aspirations for an independent Scotland. At the same time, a much less powerful and more dependent body has been established for Wales; while England, of course, has been denied any form of national self-government.

Clearly, this is one of the most contentious proposals, as it could be seen by many in Scotland, Wales and Northern Ireland as a means for England to ensure that it is able to fund a higher per-capita level of public expenditure because it can raise higher per-capita tax revenues. On the other hand, a certain redressing of the imbalance that is currently tilted in favour of the devolved nations via the Barnett Formula is definitely needed. I believe that an integrated national and federal parliament could provide the most effective mechanism for regulating these competing claims on the wealth of our respective nations. On the one hand, it would create a means for the needs and rights of England to be defended, which does not exist in the present. But, on the other hand, so long as the nations were still bound together in a common state, with a common economic policy, the idea that a certain proportion of our collective wealth should be redistributed to where it was genuinely most needed could be safeguarded. And that also means directing more resources to the under-funded ‘regions’ of England, particularly in the North and South-West.

One objection that is often made to the idea of a federal UK parliament is that England would be too dominant. Yet, in the same breath almost, defenders of the present asymmetric system say that England’s needs are adequately represented by the UK parliament, as English MPs make up around 85% of the House of Commons; so England is, supposedly, dominant there. I’ve discussed the specious nature of this argument elsewhere. But the whole point of this present proposal, in fact, is to move away from a situation in which either England can dominate the other nations of the UK (which was more the case pre-devolution than post, as discussed above), or in which the central UK government can subordinate any of the nations; which is the case now with the UK government regulating English affairs in the interests of the UK and of its own political survival, rather than seeking the good of England itself.

The above objection to federal government, under my model, could in any case apply only to those areas of policy that remained the responsibility of the federal government; most of the aspects of government, in pretty fundamental areas (e.g. planning, health, education, etc.) would be completely transferred to the national governments, free from any interference from the UK state or from any of the other national governments. In addition, I would propose a system for the decision-making processes of the federal parliament that ensured that fundamental objections to federal policies on the part of any of the nations could not be overridden; and indeed, the way the new parliament worked would be designed to prevent such policies forming the basis of parliamentary bills in the first place.

For a start, it could be a principle enshrined in the constitution that any UK government should contain MPs from each of the UK nations. If it were a government for the nations, it should be a government of the nations. This should not be too complicated a principle to enact, as the new national and federal parliaments would be elected by a proportional system, meaning that coalition government would be required probably in each of the nations as well as in the federal parliament. My idea is that UK bills would be subject to separate scrutiny by each of the national parliaments; rather like a combination of the scrutiny bills presently receive at their second reading together with the principle of referring legislation to a second chamber of parliament: currently, the House of Lords. At this stage, amendments could be suggested, which could be debated and voted on by the full parliament. If the bill in its final form still encountered the objection of the majority of MPs from any country, a final attempt could be made to find common ground, so the bill could be passed with the unanimity of all the nations. If this were still not possible, and the bill enjoyed substantive majority support (e.g. 55% or more of the MPs in each of the other nations), then it could be passed. However, if this substantive cross-nation support did not exist, it would fail.

Such a mechanism would prevent any one nation, e.g. England, from being dominant. The only circumstance in which a bill could be passed against the will of the elected representatives of any country would be if it enjoyed strong support in each of the other countries, and then only if this support added up to the backing of the majority of UK MPs as a whole. For certain critical issues, such as the use of UK troops in war or the ratification of international treaties, majority support from all countries would be required. If bills were consistently driven through without the support of the MPs from any one country (e.g. Scotland), this would engender resentment and would create greater demands for full independence on the part of that nation. Therefore, the system would contain its own natural checks and balances: push things too far, and the nations might seek total separation; but refuse to co-operate at all, and no business would get done – and again, the system would implode and there would be no alternative other than independence for all four (or five) countries.

In addition, it would be virtually impossible for bills to be passed without enjoying at least strong support from English MPs. At the very least, you’d need the MPs from all three (or four) other UK countries to be strongly in favour of a bill plus a large minority of English MPs for it to go through without the full majority support of English MPs. This is simply because of the arithmetic: the English MPs would continue to far outnumber the combined total of Scottish, Welsh and Northern Irish (and Cornish) MPs. It would in theory be possible for such a bill to be passed, though; which is right and proper given that those bills would relate to the whole of the UK and should ultimately be decided on by a majority of UK MPs. However, this would not at all be equivalent to the present situation, where bills that relate to England only can be, and have been, passed through the support of non-English MPs whose constituents are not affected by them. England-only bills, under my system, would be decided on by English MPs only.

There would, however, be the possibility of the UK federal parliament providing some sort of second house-type revising scrutiny of bills from the national parliaments. This would not mean that it would have the power to permanently amend or override provisions in national-parliamentary bills. But this scrutiny would provide an opportunity for policy development in each of the nations to be compared and co-ordinated with that in the other nations, providing opportunities to learn from each other’s experiences and capitalise on best practice; as well as to elaborate the most economically efficient way to deliver the best results, because the more the nations co-operated and worked on combining resources where it was opportune to do so, the more cost-effective could be the delivery.

This aspect of co-ordinated policy development and implementation in devolved areas of government has been profoundly and damagingly lacking under the present devolution settlement. This is not to say that, in my system, there would be, for instance, a single strategy on education or transport across the UK, which the individual nations would have to comply with. But it would be useful and beneficial to the nations themselves to try to agree on a common overall UK strategy and vision for national-level policy areas, so that the measures adopted in each country were tailored to the needs of the whole of the UK as well as to those of each nation; and so that policies in each country could support and complement each other rather than competing against each other, which could be detrimental to the social cohesion and economic competitiveness of the UK as a whole. This is really one of the main arguments in favour of keeping any overall UK state and government structure: that it helps to realise the potential for each country to prosper to a greater extent by working together than by pulling apart. But, for this to work, there has to be a balance between central direction and national autonomy.

Under the present settlement, what we have is either one or the other: the UK state calling all the shots in some areas (including over all policy affecting England), with the devolved nations doing entirely their own thing in their own areas of responsibility. This has meant, among other things, that there has been little or no development of social policy for England as England because the UK government has no mandate as an English government, and does not want to be a government for England, even in areas where effectively that is all it is. So the government has washed its hands of England and has sought to let ‘the market’ determine what is best for England in health, education and planning. This abnegation and delegation of its responsibilities to the market reflects the fact that the government at least has some sort of mandate for England on economic affairs, together with the fact that it has been wedded to the ideology of the free market. Meanwhile, English people understandably feel resentment when they see the Scottish and Welsh governments pursuing the kind of social policies they would like to see implemented in England, based on true democratic mandates received from the people of Scotland and Wales themselves, and on resources made available to them thanks to cost savings and wealth generated (at least before the whole thing imploded in the credit crunch) by the English market model.

The level of co-operation and compromise required under my system to get bills through the UK parliament could well appear elusive, given the adversarial and confrontational politics we are used to. However, as there would be coalition government at both national and federal levels, a willingness to make deals, and forge cross-party and cross-country alliances would just have to become part of the day-to-day fabric of our political life. This has already worked to a considerable degree in the Scottish Parliament and Welsh Assembly. And, in any case, while this could be difficult to get used to, it’s the right thing to do, because it ensures that decisions that are made enjoy the majority support of the people’s elected representatives and that that majority accurately reflects the way the people actually voted. The first-past-the-post (FPTP) system used to choose the present House of Commons is enormously distorting of the popular vote, allowing huge majorities for either Labour or the Conservatives on a minority of votes cast while preventing smaller parties from making the impact that their true level of support deserves.

This raises the question of what system of proportional representation (PR) should be used for the new integrated national and federal parliamentary system I am proposing. I favour multi-member Single Transferrable Vote (STV), which is widely thought to be the best system for achieving the goals both of proportional representation at national level while preserving the link between MPs and their constituencies. This electoral system would also provide a very effective means to counter one of the main objections that could be raised to my proposals: that the fact that you were effectively holding two elections in one (national and federal) would distort the result, causing voters’ choices at national level to be overly influenced by UK-wide issues. If the electoral system used were multi-member STV, however, there would be absolutely no reason why voters could not pick candidates on the basis of parties’ national programmes as well as their UK manifestos, because there would be, say, four or five MPs per seat. So you could express your preferences for the best party(-ies) and candidate(s) for the national and UK parliaments in the ranking you gave to the various candidates you decided to vote for (STV relying on ranking candidates from number one down to the last candidate on the ballot paper, if you so wish).

In any case, the parties already present effectively dual-mandate manifestos at general elections, albeit disingenuous ones: in Scotland, the parties try to make political capital from referring to what they have achieved or stood up for at Holyrood – which has nothing to do with Westminster elections; and in England, they set out effectively England-only policies in all of the devolved areas of government while misleadingly creating the impression that those policies apply UK-wide. Under my system, there would be no getting away with attempting to make electoral gain from misrepresenting what was really on offer for voters in this way: the parties in each country would have to set out the parts of their agenda that were UK-wide and those that were nation-specific; and, as I’ve said, the voters could effectively vote for two or more parties (or two or more candidates from a single party) based on their national and / or federal policies and credentials. It is possible that, under certain circumstances, voters’ choices would be influenced by UK-wide concerns more than by national ones, such as in the present economic crisis, where Scottish people might be more inclined to vote Labour rather than the SNP. But then, it is equally the case that voters are influenced in this way even in the presently separate Holyrood and Westminster elections; and it can also work the other way round: a combined national and federal election under multi-member STV would almost certainly produce much more representation for the SNP in the UK parliament than under the present system.

Another objection that could be raised to my proposals is that the national parliaments elected in this way would not be genuine, autonomous national parliaments but would be subordinate and beholden to the UK parliament and party apparatuses. This risk is one of the main reasons why it would be important to protect the national parliaments’ autonomy through a written constitution. Certain types of attempted interference in, or centralised direction of, national policy and parliamentary tactics by the UK government could become an offence against the constitution. And, as I’ve said, the national parliaments would have real and permanent powers: greater and better protected autonomy than at present. In addition, the use of multi-member STV would mean that different coalition groupings would be required in the national parliaments from those in the federal parliament: if there were a Tory / Lib Dem coalition at UK level, there might be an SNP / Green Party coalition in Scotland (the Greens winning more MPs because of the fairer voting system) and a Labour / Plaid or Labour / Lib Dem coalition in Wales. Therefore, it would be impossible for the governing coalition of the UK parliament to dictate the shape of the governing coalitions in the national parliaments and impose central control over them.

Another advantage of this integrated system is that it would avoid creating an unnecessary and expensive extra tier of government, with a whole new set of MPs, and a whole new English parliament that would be almost as big as the present UK parliament on its own. In fact, we’d get a reduction in duplication, as there would no longer be both MSPs and MPs for Scotland, and AMs and MPs for Wales. There is a valid question, however, about whether the relatively small number of Scottish and Welsh MPs would be sufficient to fulfil all of the functions of a national parliament in those countries. In elections in Scotland and Wales, it might be necessary to elect, say, five candidates per multi-member constituency compared with four per seat in England. Only four elected candidates would then serve as UK MPs; and the additional candidate would be elected to the national parliament only. Voters could opt to indicate whether they wanted the candidates they were choosing to go to the national or federal parliament. The national-only MP would be the successful candidate with the largest number of ticks in the ‘national’ check box. An incentive for candidates to put themselves forward as national-only MPs would be that they would be more likely to be preferred for ministerial positions, as they’d be exclusively devoted to the national parliament. This would also provide a boost to their salaries, which, as MPs for the national parliaments only, would be lower than that of dual-purpose MPs. (Let’s not pretend that’s not an issue!)

What of the questions of nationality and statehood? Well, as I set out in the first half of this post, the new federal state would no longer be Britain or Great Britain in any shape or form: having ‘Great Britain’ in its full name, as it does now; referred to in official statements as ‘Britain’, as it is now, even though a state or nation of Britain does not exist; or ‘Britain’ in the more profound sense as the national persona of the state that was previously the vehicle of English power and is now a means above all to suppress the aspirations to self-government of the English nation. So it would, as stated above, be ‘the United Kingdom of England, Scotland, Wales and Northern Ireland’ (and potentially with Cornwall listed as the fifth nation of the federal kingdom). Formally, the adjectival form of the state’s name would be ‘UK’ not ‘British’, as in ‘the UK government’ or ‘UK citizens’. Doubtless, many people would continue, at least for a time, to use the word ‘British’ informally in this sense, particularly as the geographical extent of the state would remain largely that of Britain, with the addition of Northern Ireland. But the point is that there would be a move away from the tendency to imagine or create a ‘British nation’ superseding and suppressing the primary nationalities of England, Scotland, Wales, Northern Ireland and Cornwall. So in England, to describe their nationality, people would be encouraged to think of and refer to themselves as English in the first instance – unless, of course, they are genuinely something else such as Scottish or from a different state altogether. If people wish to continue to think of themselves as British first and foremost, they would be fully entitled to do so. But the way the language of official statements and the media would change to reflect the altered political realities (i.e. thriving English-national government and civic institutions) would mean that ‘British’ would increasingly be limited to meaning either ‘UK’ in the informal sense (i.e. the UK state rather than a nation) or the merely geographical meaning. People might find that they were asked to clarify ‘you mean English’, or that they were assumed to mean English based on things such as they way they spoke.

So we’d be English nationals but UK citizens. Of course, all of the above paragraph is predicated on the assumptions that the UK remained a kingdom (i.e. a monarchy), and that present-day constituent parts of the UK such as Scotland and Northern Ireland chose to sign up to and stay within such a new federal state. But, based on the principles outlined above, it would be entirely a matter for the people of the UK as a whole – who would be sovereign – to decide whether they wanted a monarch or an elected president as head of state. And, similarly, it would be up to the people of each UK nation to decide whether to remain part of the new state. At least, putting the present creeping and asymmetri

Dow Plunges 680 Points as Recession Is Declared

 New York Times: December 1, 2008

Recession is officially here: December 2, 2008

Dow Plunges 680 Points as Recession Is Declared

MICHAEL M. GRYNBAUM | nytimes.com | December 1, 2008

The evidence of a recession has been widespread for months: slower production, stagnant wages and hundreds of thousands of lost jobs.

But the nonpartisan National Bureau of Economic Research, charged with making the call for the history books, waited until now to make it official — and the announcement came on a day when the American stock market fell nearly 9 percent in a single session.

The sharp declines on Wall Street — the Dow Jones industrial average dropped 679.95 points or 7.7 percent — appeared more about profit-taking than the economy. Investors have long assumed that the country was in recession, and analysts said that after last week’s gains, including the biggest five-day rally in decades, a sell-off was to be expected.

Still, Monday’s losses were striking, and they reminded investors that nothing can be predicted in today’s environment. The major indexes fell by hundreds of points from the start, led by huge declines in shares of financial firms. Citigroup, Merrill Lynch and Morgan Stanley shares all dropped nearly 20 percent. Most other major Wall Street banks were also in double-digit percentage declines.

“Financials led the rally on the way up, and they’re leading on the way down,” said Anthony Conroy, head equity trader at BNY ConvergEx Group.

The broader Standard & Poor’s 500-stock index was down 8.9 percent, and the Nasdaq fell 8.95 percent.

The S.&P. and the Dow are back to their levels of last Monday, erasing nearly four days of gains.

Crude oil futures for January delivery settled Monday at $49.34 barrel, down $5.09. in New York trading.

Some hedge fund and mutual fund managers, anticipating big redemption requests from clients, may have seen last week’s rally as a good point to unload assets at a decent price. Other investors may have been spooked by a spate of poor economic news, including the worst reading on the health of the manufacturing industry since 1982.

Investors may also be playing defense ahead of Friday’s report on the job market, one of the most important indicators of the health of the economy. Analysts expect that employers shed more than 300,000 jobs in November, underscoring the problems facing American workers and businesses.

It is also somewhat remarkable that on one of the worst days in the history of the stock market, there was no panic to be seen on Wall Street. In six and a half hours, the S.&P. declined more than 8 percent — the type of collapse that historically has taken years to occur. But in the new Wall Street, the reaction was quiet.

“Investors have slowly become accustomed to it, after seeing it day after day for month after month,” said Todd Salamone, an analyst at Schaeffer’s Investment Research. “A year ago, an 8 percent move would have raised a lot more eyebrows than it does today.”

The difference, of course, is that the country entered a recession exactly one year ago, at least according to the Business Cycle Dating Committee, which is made up of seven prominent economists, most from the academic sector. The group made their official announcement on Monday that the economy entered a recession in December 2007.

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators,” the members said in a statement. “A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”

The committee noted that the contraction in the labor market began in the first month of 2008 and said that the declines in most major indicators, like personal income, manufacturing activity, retail sales, and industrial production, “met the standard for a recession.”

“Many of these indicators, including monthly data on the largest component of G.D.P., consumption, have declined sharply in recent months,” they wrote.

This is the first official recession since 2001, when the economy suffered after the bursting of the technology bubble. The period of expansion lasted 73 months, from November 2001 to December 2007.

The manufacturing industry suffered its worst month since 1982, according to a closely watched index published by the private Institution for Supply Management. The index fell to 36.2 in November from 38.9 in October, on a scale where readings below 50 indicate contraction.

That was the worst monthly reading since 1982, and a sign that the worldwide credit crisis was taking a serious toll on American businesses. New orders fell sharply, although export orders held steady from October.

“However you look at the numbers, the message is the same: manufacturing is in free fall, with output collapsing,” Ian Shepherdson of High Frequency Economics wrote in a note to clients. “We see no prospect for near-term improvement.”

A separate report from the Commerce Department showed that spending on construction projects fell 1.2 percent in October, after staying unchanged in September. Private construction dropped 2 percent with a sharp drop in the residential sector, offering few signs of relief from the housing slump.

The declines on Wall Street came after stocks in Europe and most of Asia moved lower, as investors refocused attention on a gloomy economic outlook.

Benchmark indexes in Paris and Frankfurt were down more than 4 percent, and London’s FTSE-100 dipped 3.6 percent. The declines were minor compared with the 13 percent increase that European stocks enjoyed last week.

“We’re giving back some of the appreciation in equities that we gained in the last few weeks,” said Robert Talbut, a fund manager at Royal London Asset Management.

“I think in terms of valuations there are some good deals starting to appear,” Mr. Talbut said. “But valuations are never enough in themselves.”

Any serious market recovery would require a determined response from global governments, he said, but investors have lots of questions about how the policy measures that have already been announced will work.

Investors were also troubled by mounting evidence that consumer spending in the United States would fall sharply this holiday shopping season, choking off one of the prime fuels of American economic growth. Retailers received more business than expected over the Thanksgiving shopping weekend, but the steep discounts they used to lure customers could undermine profits.

Black Friday sales were 3 percent higher than the year before, according to ShopperTrak, which tracks the industry.

Asian stocks ended mostly lower. The Tokyo benchmark Nikkei 225 stock average fell 1.4 percent, while the S.& P./ASX 200 in Sydney fell 1.6 percent.

The Kospi index in Seoul declined 1.6 percent. But the Hang Seng index in Hong Kong rose 1.6 percent, and the Shanghai Stock Exchange composite index rose 1.3 percent.

The yield on the two-year Treasury note, which moves in the opposite direction of the price, fell to a record just below 0.95 percent, while the yield on the 10-year note fell to 2.86 percent, the lowest on record.

David Jolly contributed reporting.

December 2008 Newsletter

Hi all-

Here is a post concerning tax tips for the end of the year.  It is a good idea to evaluate what has happened during the current year to see if there might be some advantage to repositioning some assets.  In years like this one, some of your assets held in mutual funds may see some significant capital gains due to moves made early in the year–moves designed to avoid excesive losses due to market fluctuation, economic changes, etc.  It may seem weird, but even though your account values have declined, you may still be on the hook for short and long term capital gains due to these moves.   Read on and shoot me any questions.  Cheers!

The first step in your year-end investment planning process should be a review of your overall portfolio. That review can tell you whether you need to rebalance. If one type of investment has done well–for example, large-cap stocks–it might now represent a greater percentage of your portfolio than you originally intended. To rebalance, you would sell some of that asset class and use that money to buy other types of investments to bring your overall allocation back to an appropriate balance. Your overall review should also help you decide whether that rebalancing should be done before or after December 31 for tax reasons.

Also, make sure your asset allocation is still appropriate for your time horizon and goals. You might consider being a bit more aggressive if you’re not meeting your financial targets, or more conservative if you’re getting closer to retirement. If you want greater diversification, you might consider adding an asset class that tends to react to market conditions differently than your existing investments do. Or you might look into an investment that you have avoided in the past because of its high valuation if it’s now selling at a more attractive price. Diversification and asset allocation don’t guarantee a profit or insure against a possible loss, of course, but they’re worth reviewing at least once a year.

Your holding period can also affect the treatment of qualified stock dividends, which are taxed at the more favorable long-term capital gains rates if you have held the stock at least 61 days. (Those days must occur within the 121-day period that starts 60 days before the stock’s ex-dividend date; preferred stock must be held for 91 days within a 181-day window.) The lower rate also depends on when and whether your shares were hedged or optioned during those 61 days. Check with your tax professional to make sure you don’t inadvertently incur unnecessary taxes by selling or buying at the wrong time.

If you have realized capital gains from selling securities at a profit (congratulations!) and you have no tax losses carried forward from previous years, you can sell losing positions to avoid being taxed on some or all of those gains. Any losses over and above the amount of your gains can be used to offset up to $3,000 of ordinary income ($1,500 for a married person filing separately) or carried forward to reduce your taxes in future years. Selling losing positions for the tax benefit they will provide next April is a common financial practice known as “harvesting your losses.”

If you’re selling to harvest losses in a stock or mutual fund and intend to repurchase the same security, make sure you wait at least 31 days before buying it again. Otherwise, the trade is considered a “wash sale,” and the tax loss will be disallowed. The wash sale rule also applies if you buy an option on the stock, sell it short, or buy it through your spouse within 30 days before or after the sale.

If you have unrealized losses that you want to capture but still believe in a specific investment, there are a couple of strategies you might think about. If you want to sell but don’t want to be out of the market for even a short period, you could sell your position at a loss, then buy a similar exchange-traded fund (ETF) that invests in the same asset class or industry. Or you could double your holdings, then sell your original shares at a loss after 31 days. You’d end up with the same position, but would have captured the tax loss.

If you’re buying a mutual fund in a taxable account, find out when it will distribute any dividends or capital gains. Consider delaying your purchase until after that date, which often is near year-end. If you buy just before the distribution, you’ll owe taxes this year on that money, even if your own shares haven’t appreciated. And if you plan to sell a fund anyway, you may minimize taxes by selling before the distribution date.

If you own a stock, fund, or ETF and decide to unload some shares, you may be able to maximize your tax advantage. For a mutual fund, the most common way to calculate cost basis is to use the average cost per share. However, you can also request that specific shares be sold–for example, those bought at a certain price. Which shares you choose depends on whether you want to book capital losses to offset gains, or keep gains to a minimum to reduce the tax bite. (This only applies to shares held in a taxable account.) Be aware that you must use the same method when you sell the rest of those shares.

 

 

INVESTMENT AND ITS DILEMMA

I think the culprits should be caught and prosecuted in our court of law. The due process of our legal system must take its own course. No mercy should be accorded to them especially who had committed these offences several times. They operated under different names and the schemes were created under various labels. Swiss Cash or Hibah Scheme are few examples which being part of the long lists. Although, the Government Agencies are trying very hard to educate the public and many laws were enacted specifically to curb these illegal activities but the problems are still rampant.

On the other hand, it does not mean when invest in a legal operation which adhere with the laws such as Unit Trusts, Bonds, Money Market, Index Markets, Comodities, Forex Market and even Fixed Deposits, our money are safe. Even your money in the savings or current accounts is not safe anymore. This is what Americans are facing now, even if their money protected by the Insurance Companies but bear in mind, it is not for the entire amount. I was once told, that even our own Bank Negara has lost millions of taxpayers money due to the false prediction by its top officers in Currency Market but of course nobody can take action against the Government. Subsequently that same officer has been promoted and now he is advising the Prime Minister on how to manage the economy. Sometimes, even the culprit can be rewarded, but of course I cannot corroborate this statement.

It might be true but in other words, when you invest either in legal or illegal means, your money is not guaranteed to be there tomorrow. Nonetheless, your agents or financial planner will try to paint different picture such as “the financial market is down or the stock shares are generally cheap, so it’s good time to buy or if you invest more, they will apply dollar cost averaging” and other excuses they might apply without saying or stating that they have advised wrongly or the Fund Managers are not performing. Perhaps, they will blame the economics scenarios because it is now moving towards recession and as a result their Mutual Fund are badly affected. These are the sort of advice that you would get after they already charged you the administrative charges while they laugh all the way to the Banks. So, for those who do not understand the economy in its totality and its so called cycles, will take their agents’ words at their face values. These are the same peoples who do not even understand the actual meaning of some economic jargons. What a pity!! and I am not trying to belittle these peoples who are active in this industry. The words fluctuation, volatility, bearish become handy to them nowadays.

NEW Pulicly Owned Hedge Fund Advice $90/mo

Answering Readers

For a long time the oil companies, insurance companies, and pharmaceutical companies have gouged the public. Will there ever be changes that will benefit the good of the public instead of these companies?

Also, I read somewhere that there will be fewer doctors. The reason is due to problems dealing with the insurance companies.

Hi Dera,

This is a great question, one we’d all be interested in knowing.  So lets look at a couple different charts for the US, and see what will be going on in the world of doctors and health care as time progresses.

Let me explain the 8th house thing spilling into the 9th (8=cults, 9=foreigners), that would be the Pilgrims, the Quakers, the Shakers and all the small radical religious groups that “came over,” (actually many were kicked out of England because of their beliefs) during that time. It was these people who founded this nation, and that energy which is all very 8th house is the bedrock of our nation, sort of like our subconscious.

However, just because we declared our Independence we still were not truly legal until the US Constitution started, and was signed. Often the later is used as the true north of the US because it is comprable to a marriage date as opposed to when you first started dating. It’s the completion of what was started on July 4, 1776. That being said, the first date with your spouse is also very important because it sets the tone of a relationship.

Our Declaration, definitely set the tone for our nation, which is why we are a haven for radical religious (cult-like or lets come on out and just say it cults). 

Truly the only difference between a cult and an organized religion like Catholicism, Islam, Buddhism, Hinduism or Judaism is the length of time and amount of people that identify themselves as part of that religion, so I don’t mean to demean the word “cult,” all religions start out as cults. Judaism, Buddhism, Christianity, Islam, the Mormons started out this way, the Shakers, the Quakers, Scientology is now becoming more acceptable and less seen as a cult. Basically, once a religion goes from a small group to an institution it looses its cult status.

But, anyway, I digress. I want to also say that I just looked at all 3 charts and compared them to 9/11 and found the most accurate by far to be the US Constitution signing chart. Someone had posted much earlier (sometime in September or October) that the US Declaration chart had been used by Liz Greene and somehow she had found a way to make it dovetail with the 9/11 attacks. I would very much doubt this to be true, and this reader was probably confused. Liz Greene more than likely used the Constitution Signing chart because if you look at it in terms of transits, it should have been a very good period with Jupiter returning and hitting this charts stellium in Cancer. And transiting Pluto is not making any close opposing aspects. Perhaps she used a solar arc chart or a progressed chart based on it but it couldn’t have been that actual chart with the transits.

Anyway in the US Constitution Chart, transiting Pluto had just gone over the US Cons. Sign. chart’s Moon and squared Mercury ruler of the 8th house, both death aspects and transiting Neptune was in the 12th house of loss making an applying a conjunction to the ascendant, again major loss. The 12th and 8th house are both death houses, and both Neptune and Pluto are key to major loss, transformation, literal and figurative death.  

So lets focus on the US Constitution Chart as it seems most accurate in terms of transits. 

1st your question of health-care:

In the spring of 2009 we’ll see the first in a series of bills aimed at health-care reform as transiting Uranus in Pisces goes through the first house and opposes the US cons. sign. chart’s Sun. The way we see this issue has been changing over the past seven or so years, our minds began changing then when Uranus opposed Mercury in the 7th. And then as bankruptcy laws changed and increases in health-care costs went up, Uranus opposed Venus in the 7th, again highlighting the financial need for laws to change how we deal with our health-care system, pointing out the lack of human kindness in it. And finally when it hits the Sun in spring of 09, the vitality of this issue, the soul of the problem will be tackled in a bill. This aspect will go back and forth for a while so it will be the first in a series of several major changes to the system we now have in place.

It probably won’t be until May of 2010 until these changes are really put into action. This will be when transiting Uranus in Pisces will be trining the US cons. sign’s Uranus in the 6th house of health and the health-care system. This overhaul will be immediate, and a bit of a shock to the system, but will be a great improvement especially for women and children, and those who don’t have steady employment, but work more piece meal.

In terms of the Pharmaceutical company’s getting there’s — it’s coming. In February of 2012 when Neptune (ruler of their industry) enters Pisces they will start to see their days ripping off Americans coming to an end. This same thing can be said of the oil companies who are also ruled by Neptune. Companies who lower their prices and make sacrifices will stay in business, and do very well. Volume will be the key to this business and be very profitable from that angle. Those that want to continue making 150,000,000% profit off each pill will go under. The oil industry will have to basically do what its doing now, keep cheap in order to survive. Even then as Neptune goes into Pisces alternative types of fuel will become the mainstay, most likely hydrogen based, either water itself or hydrogen engines this will happen in 2012.

Of course all of these changes won’t happen overnight, little by little we’ll see things headed down this path, and this trend will continue until about 2025. So hopefully by the end of it we will be a completely green world. Let’s cross our fingers that is one potential outcome.

My guess is that at that time (2025 when Uranus enters Aries) the pharmaceutical industry will have a revolution of a different sort, and will be more nano-technology driven, with tiny micro surgical techniques in the form of pills that will release tiny robots that will cut out ulcers or cancers or whatever, very early on, staving off the need for more traditional medicine in a lot of cases.

Hi Denise, I have a question in relation to the property market in Australia. Will property crash in Australia? Will it drop more than 30%?

Thanking you in advance.

Hi Truthseeker,

Real Estate will crash or bottom out in 2011, truly bottom out. Meaning the value of houses will go under. I’m not familiar enough with the real estate market down there but if you feel that the houses are really over valued, this will be when they are not just “corrected” but when they are actually worth less then what logic dictates that they should be. People will not want to buy real estate during this period. They will be afraid of it. This is when you should buy real estate. You can make a fortune at that time until about 2013. Then you still can make money but not as much. It will hit a peak again starting around 2018 and really 2019, 2020, people will be going crazy again like they just did for it. so there you go. Hope that helps.

Any thoughts on the two unresolved Senate races in Minnesota and Georgia? I think you predicted the Senate would get close to 60 seats a few weeks back. I wonder what the cards say closer to the evantual realities. Thanks!

Hi Northernlights,

I still have the feeling that the Dems are just barely going to crack that 60 margin. I lost track of where it was now. It’s hard to believe its still going on! And no one really cares! That’s the amazing thing, it shows how good things are on the political front at least.

Hi Sally Ann,

The tarot says: Yes.

It seems there has been some lying going on. Some illusion, delusion, some mismanagement and whoever was in charge has just sort of walked away from the problem leaving the company and investors in the lurch, while taking what they could from the situation. Not good. Hope this turns out to be a false read on the situation, here. But that’s what the cards are saying. Sometimes though the cards aren’t very good with timing. Astrology is much better for that.

I want to clarify a basic note here. I wish I could have seen the little bump up last week in the stock market, but as I said before there is too much novelty here to read the market for these. There is too much irrational, emotional stuff clouding the zeitgeist of the market. It’s almost as if everyone is on amphetamines, stuffed into a theater in the dark, and someone shouts “Fire!” There’s a stampede before anyone bothers to look around, and see if there actually is one or if its just a nut yelling it.

And on the other end of that, are the financial “experts” who are kissing the “ouchy’s” of investors and lulling them back into the market with false expectations that everything is OK when it’s not which is why we saw this crazy drop when the news came out that we are in a recession. Duh. Really? It’s ridiculous. And I’m sure in another month it will be news that we’re in a Depression that will cause the market to plummet. But look around, it doesn’t take a genius to figure this out.

The arguement against why this isn’t a Depression is a very flimsy one right now. It is simply that unemployment isn’t high enough. But back when George W. took office his administration changed the laws so that as soon as your 6 months of unemployment ran out you were taken out of the unemployment statistics. So how many people have been unemployed for years? We don’t know. They aren’t being counted. This is a hidden problem, another shadow that we’ll see come out when Pluto pops over the ascendant of the Dow.

Here’s the other thing, in the Decleration chart Pluto is about to shred it. I’m glad it’s not our real chart, (and if it is well, we’ll know it for sure soon) but rather our more unconscious one, or we’d be in even bigger trouble then we already are. But it’s still posed to do some major damage to our US Cons. Sign chart this will happen a little later though in March of 2009, and will again most likely hit speculators and the stock market.

Ironically, this Monday Pluto hit 0 degrees again as it had the last time we had the major drop in November, and that is directly on the US Const. Sign charts south node in the 5th — meaning, what we have reaped in the market we are going to be sowing, and it’s going to be powerful, and painful. I think the Dow’s big Pluto over the ascendant happening at the end of December into January will be more about the horrible corruption, lies and sociopathic behavior of CEOs that will come out making investors think twice about trusting their money to these people, many of whom are really criminals in business suits. This is the shore I think the Tsunami is headed in terms of the Dow.

OK, More questions tomorrow. These will be covered over the next couple of days:

Be well. Best wishes to all. Pray for our planet and each other. We need it now!

Hi Denise,

Thanks.

Dear Denise,

Thank you for your analysis and insights. In these troubled times on a lot of fronts ( financial, physical and even spiritual ) you provide clarity and hope.

I have two questions.

To readers of this blog, please do google “urban survival” and make some basic preparations.

Peace

 

Hi : Very interesting

On the prediction that India will hit Pak sites, I wonder whether this could happen thru US, becos it seems more likely that Obama will use his power to persuade Pak to let US take on the training camps etc in Pak. Don’t see India doing this unless we continue to get hit like 26/11. May be you could run a chart for US vis-a-vis Pak and see how it looks…

 

I woke up with the feeling that the credit crisis wasnt the cause of the market crash at the end of Dec/ Jan

Any thoughts on the two unresolved Senate races in Minnesota and Georgia? I think you predicted the Senate would get close to 60 seats a few weeks back. I wonder what the cards say closer to the evantual realities. Thanks!

 

Another question. Some of Obama’s supporters are up in arms about the people he is choosing to work in his Administration. They feel that they have been betrayed. Will the Disgruntled Dems. get over it in time or will they hold a grudge for the next 4 years?

 

 

 

 

Will Arnold Schwartzenegger be joining Obama’s cabniet? I thought when Obama said a top Republican would be on his cabniet, it would be Arnie. Now he’s picked Gates to stay on as Sec. of Defense. Since some very conservative Christians are in top level positions in the military, this seems to be a wise move aimed at keeping them calm. What’s up for the Governator after his term runs out?

Thanks in advance!

PS

I sure hope he will be. After four years of having to look at Bush and Cheney, this lady would appreciate someone up there easier on the eyes. LOL

 

Efficient Market School of Economics

To simplify this groups argument a little, we can say that efficient market theorist  believe markets are efficient and in constant equilibrium, therefore priced correctly and future movements are always random.  Since information is readily available to everyone there is no advantage had by anyone, therefore no way of “beating” the market.  For this reason they insist that investing in index mutual funds is the way to maximize returns by minimizing risk.

Interestingly, Warren Buffett pointed out, “observing correctly that the market was frequently efficient, they [the efficient marketers] went on the conclude incorrectly that it was always efficient.”  And George Soros commented that he had found the workings of the efficient market theorist, with their complex equations, to be more like the medieval scholastics calculating the number of angels able to stand on the head of a pin than like those of the eighteenth-century rationalists.

Why post on this?  Well, the efficient marketers have a hard time explaining asset bubbles and extreme bear markets like we are in now.  If all the information is out there to correctly price an asset, then why do people buy expensive assets one year and then sell them another when they are cheap?  And they have a hard time explaining people like Warren Buffett and George Soros who have made billions by beating the market, something that the efficient marketers insist is impossible in the long run.  Also the 1980s designers of derivatives were efficient marketers and designed a trading strategy called portfolio insurance that was suppose to be a fail-safe investment strategy that brought on the 1987 crash in the stock market.  And of course the failed derivatives of mortgage backed securities were designed by these same folks and we are now living through the nightmare of that failure.

Now, we are starting to see the crack in their indexed funds recomendation.  So if you are still on the indexed mutual funds route, you might want to consider the history associated with their main proponents or more truthfully the failures associated with index mutual fund proponents!  Beware of the leaders you are following!

Just food for thought! 

The Financial Crisis, From A-Z

Assalamualaikum. Just to share with all an article that I’ve read a month ago. packed with facts..

The Financial Crisis, From A-Z

Tunku Varadarajan,

Is Adam Smith under the TARP?

The editors at Forbes.com–not, on the whole, a pedantic bunch–made a decision a little while back to swap the phrase “Wall Street Crisis” for another, spookier one: “Global Financial Crisis.” While this taxonomical adjustment is important–reflecting, as it does, the borderless nature of the financial contagion–the underlying cast of causes and characters remains unchanged. Here, I offer an alphabetic sampling, by no means exhaustive. Apologies to anyone who feels unfairly left out.

A is for America, the big swinging Richard whose dysfunction started it all. Think also of accountability (lack of); AIG(which has cost the U.S. $140 billion, and counting–who knew insurance could be so exciting!); assets (what assets?), and Adam Smith, who’s slapping us about the face–with his invisible hand.

B boasts Ben Bernanke, known, lovingly, as “Helicopter Ben,” who’s clearly no Greenspan, um … Volcker, um … Morgan. And isn’t it swell that he’s an expert on the Great Depression and its causes? Bear Sterns was the big, fat canary in the coal-mine, whose death-trill was the first note of a symphony known as the bailout. B is also for balance sheet and belt-tightening.

C is for Credit Default Swaps, defined for me by a Wall Street watcher as: Risk whatever you want, and we insure it; risk too much, taxpayers insure it. And there are those CDOs (pronounced “seedy owes”) that were all the rage at Citigroup, one of many tarnished poster children of capitalism, a philosophy that’s taken a hefty write-down. (Congress certainly doesn’t believe in it.) And then there’s Christopher Cox, whose finger was never going to be big enough for the dike, poor bloke.

E is for excess (of, for example, executive pay and easy money).

F has a rich hand: Fannie & Freddie (that avuncular couple down the street with their children’s bodies in the basement), and Fuld (Richard, Last of the Lehmans). Let’s not forget flippers, the Fed, and frozen credit; or FDR and fear: The only thing we have to fear is fear itself … Yikes, isn’t that exactly what’s happening? (F is also for Fair Value Accounting, a genie that all the banks once clamored for, but now wish they could stuff back in the bottle.)

G is for Greenspan, godfather of this crisis, whose legacy sleeps with the fishes; and Goldman Sachs, coming to an ATM near you. G is also for greed, simple and unadorned.

H is for home equity, a quaint notion from the 1990s (cf. housing bubble), and haircut (a cold-blooded euphemism for household calamity). H is also for hearings (expect a lot of those).

I is for Iceland, on which Britain exacted its revenge, some 1,300 years after the Viking raids; and inflation, the next crisis … or will that be deflation? Of course, there’s your IRA … but let’s change the subject. I is also for innovation, the life-blood of the American economic miracle. Will it survive the coming age of regulatory overreach?

J is for Jamie Dimon, jolly good fellow, whose JP Morgan held back–and missed the mess.

K is for Kashkari (Neel), the bald young hero brought in by Paulson to fish us out of the deep end; oh … and it’s also for Keynes (John Maynard), who is enjoying a comeback to match anything that the Rolling Stones could ever pull off. (Watch, as Washington’s fever swamps are drained of neo-cons and then restocked with neo-Keynsians.)

L is for leverage (a means of maximizing your losses), liar loans, Lehman (pronounced “lemon”)–and the losses/liabilities that unite them all. L is also for liquidity puts (don’t ask me what that means, Robert Rubin didn’t know, either); and layoffs.

M is for where it all started: the mortgage (which, aptly, means death-pledge). Like the dog, it comes in a variety of breeds, “sub-prime” being a cross between a pit bull and a chihuahua. And let’s not forget marking-to-market, a hyper-purist tool that contributed to the downward spiral; moral hazard (moral what?); Main Street (the rest of us dopes); and, my favorite, macroprudence (a sadly neglected word–and concept, come to that).

N is the no-short rule. Why didn’t someone tell the SEC there’s no shortcut?

O is for Obama, the most important political outcome of the Global Financial Crisis. The question is, will Obamanomics only make things worse?

P is for Paulson: Is he Moses, or Don Quixote? At least he isn’t John Snow. And for that small mercy we give thanks.

Q is for quants, who forgot that, every so often, past performance is no indicator of anything at all.

R is for Roubini (Nouriel), the professor at NYU’s Stern Business School and Forbes.com columnist, who foresaw it all. Not for nothing is he known as Doctor Doom. In person, he’s a rather cheerful chap. And why shouldn’t he be? There’s no tonic more invigorating than one’s being right.

S is for securitization, the process by which one passes off cat food as caviar. This is how mortgage debt was repackaged and sold. Be suspicious–very suspicious–of that stuff on the plate before you.

T is for TARP, which is what all of Wall Street is hiding under. This writer finds the acronym (for Troubled Assets Relief Program) reassuring: it’s proof that someone in Treasury has a sense of fun, even when dealing with toxic securities.

U is for unemployment. And also for underwater (almost every hedge fund, mutual fund and 401(k)).

V is for a new vocabulary, which we’ve had to acquire in a blazing hurry, to fathom our way through this failure. Try these for size: CRA, Alt-A, ABCP, SPV. And that’s just the ones in English. (What’s Icelandic for CDO?)

W is for Wall Street, which will never be the same again–until the next boom, when idiocy will once more stake its claim to excess.

X is for xenophobia. Let’s blame the Chinese … Wait, can we really do that?

Y is for yelling “fire!” in a crowded theater, what Jim Cramer was accused of doing when he went on NBC’s Today Show and told people to pull their money from the stock market. (His response: There is a fire!)

Z is for ZWD, the symbol for the Zimbabwe dollar. If you thought the greenback had problems … try getting a mortgage in Harare.

p/s-

Tunku Varadarajan, a professor at the Stern Business School at NYU and research fellow at Stanford’s Hoover Institution, is Opinions editor at Forbes.com, where he writes a weekly column. (For this week’s column he’d like to offer a grateful tip of the hat to the following: Sudhakar Balachandran, Dan Bigman, Jerry Bowyer, Reuven Brenner, Philip Delves Broughton, Thomas Cooley, Charles Dubow, Andy Kessler, Annabel Levy, David Levy, Paul Maidment, Partha Mohanram, Thomas Peacock, Roy Smith, Marti Subrahmanyam, Hugh H. Shull Jr., Hugh H. Shull III and Vijay Vaitheeswaran.)

Simple solution to data privacy, GLBA to Red Flags

 

 

Moments of Fame

id="blog_description">Simple Living = Frugality = Peace of Mind: Personal Finance and Stress Control

At Living Almost Large, the 154th Festival of Frugality has gone live. Funny’s post on whether (or not) to plunge into the Black Friday frenzy appears among a number of observations on frantic holiday sales: Silicon Valley Blogger thinks they’re not worth the hassle and risk; Summer at Wired for Noise subscribes to the Buy Nothing Day approach; at Greener Pastures Lisa Spinelli offers ten sane and fresh attitudes toward Christmas; and Ask Mr. Credit Card has a system, which he calls “Extreme Christmas Shopping.” On other fronts, Green Panda continues the project to rise to Ramit’s Save $1,000 in 30 days challenge. Student Scrooge has kicked off an entertaining new feature, “Frugal Court,” with the Netflix case. And here’s an interesting report at the Happy Rock, whose proprietor switched to cash for all spending and is comparing the results with her prior credit-card expenses.

12/2/08

 

 

Whatever happened to NBFCs

NBFCs are an integral part of economy that provides easier access to credit and hence help in attaining aggressive growth. But that also makes them vulnerable as any slowdown in the economy hits them hard first. Let us try to analyse the business sense of these NBFCs and arrive at the scenario of Indian NBFCs.

In this post, I have tried to make an analysis of Indian NBFCs yesterday, today and tomorrow.

NBFC - a brief introduction

NBFC stands for Non Banking Financial Company. These are money lending institutions that are much more agile than traditional banks. They are agile in the sense that the credit line extended is much deeper and aggressive than normal banks. Other advantages of NBFCs are that they are extremely quick at processing and accomodate riskier profiles in their portfolio. And since they take more risks, they get their cushion in the form of higher interest rates. Yes, they charge higher interest rates than what normally banks charge. This also has to be viewed in the context that the acquisition cost of funds for NBFCs come at a higher cost than banks, the details of which we will explore further below.

Lending and Credit

Before delving deep into the subject of NBFCs, it is important to understand how credit extension and growth of a country are interlinked. Most of the business operations are financed by lending institutions. Banks form a major chunk of providing funds to these companies. This is evident from the fact that more than 50% of credit portfolio of State Bank of India is through corporate lending. These funds are required to meet varied requirements like day-to-day operations, capital expansion, business consolidation, etc. For most of the small and medium sized businesses, access to aggressive credit from banks is unthinkable. These businesses usually turn to such non-banking finance companies for gaining access to credit. More credits to businesses means more growth when things go fine. Thus along with growth numbers of these companies, the GDP index also climbs up. But if the going gets tough, then defaults go on the rise. This is when the risks taken by these NBFCs start showing its naked face. As the defaults rise, to stay on the NBFCs naturally would tighten the valves and rework their risk model to flush out riskier profiles. Access to credits become tougher and businesses shutdown leading to job cuts. Hence the production comes down and consequently the GDP numbers take a hit. It is not as straight-forward as explained here but I have tried to provide a simple explanation of what happens in large scale.

List of popular NBFCs in India

NBFCs Yesterday

For the past five years, the indian economy was promising on all aspects and with money from foreign investors pouring in, large pool of investments were created through mutual funds. These mutual funds have been the primary source of funds for NBFCs. As there was excessive inflow of money, borrowing from mutual funds was cheaper then. A bunch of above mentioned NBFCs mushroomed during this period to ride on such a promising opportunity. With indian banks remaining as conservative as ever (partly due to government regulations), and natural greed of mutual funds, NBFCs were nothing less than celebrating. Many other small NBFCs have also been started within a short span of five years. An Increasing number of microfinance institutions (MFIs) were also seeking non-banking finance company (NBFC) status from RBI to get wide access to funding, including bank finance. As the weather was fine and the government was poised to attain aggressive GDP growth, nothing could have stopped these NBFCs from posting tremendous growth. NBFCs have been accounting for as much as 30% of the retail lending sector where the only other aggressive lender among banks is ICICI Bank. Well, the world was about to receive one of the greatest shocks of this century that would threaten the world economy to bring it to a grinding halt.

NBFCs today

As of the time I am writing this article, most of the NBFCs that have mushroomed during the last five years have either shutdown their shops or have stopped providing credit for the time being. Yes, they have come to a stand-still. Why did this happen all of a sudden? The reason is very simple. All these NBFCs have been relying on Mutual Funds to provide them with access to capital. But as the global economy was facing turmoil, mutual funds were profusely bleeding under redemption pressure. With capital drying up and banks refusing to lend any money at all to these institutions, NBFCs could no longer stay afloat. Atleast, these institutions no longer provide any unsecured loans like personal loans and they dont have the money to provide home loans.

NBFCs tomorrow

In the long term, as said by CRISIL, these institutions would have to change their business model with strong focus on product innovation and a move towards the originate-and-sell model.

Other interesting articles that covers the state of affairs of NBFCs in India

Mega Corruption - The Case Against James Ibori

Given the current controversy surrounding former EFCC boss Nuhu Ribadu, I thought it worthwhile to dig into the archives and let readers review this article published a year ago by Tell Magazine on former Delta State Governor James Ibori who was accused of scandalous corruption, and was being prosecuted by Ribadu until Ribadu’s removal from the EFCC stopped Ibori’s prosecution. Today, Ibori is a free man, his prosecution has stalled and he is still enjoying his illegally gotten wealth and access to Nigeria’s political elite. This is the story of how Ibori stole from the Nigerian people.

Investment Proposition

Sir,

I write to solicit your assistance in a project of mutual benefit and regret any inconvenience contacting you this way with my proposal. I am Donald Nelson, former head of Accounts Department at a diamond mining company in Sierra Leone.

I am in urgent need of a foreign associate to work with to facilitate the transfer of money which I intend to invest into profitable areas of business in your country. The funds currently secured with a security company is legitimate money rightfully belonging to me and earned from private diamond business deals during my time as a top official at the diamond mining company. Due to political problems and unfavourable economic environment in Africa, it is not quite safe investing ones financial future in this part of the world. I am currently living in Banjul capital city of The Gambia and in collaboration with some top officials of Bank of Gambia have concluded arrangements for confidential transfer of the money.

Please consider this proposal seriously and handle with utmost confidentiality the information I have provided you with here. If you are in a position to assist, then get back to me immediately, so I can give you more details.

Thank you in anticipation.

Donald Nelson.

————=_491FDE80.006BD470–

Scam of the day

Christopher Cox

For go to the Committee on Oversight and Government Reform’s home page, please Click here

For Download this Testimony from the Committe’s home page, please Click here

No depth in the Indian ETF markets

I have been reading a lot of global writers & commentators over the last 1 year. A common theme among investors/traders is to play the ETF market in the US. Exchange traded funds (ETF) are akin to open ended mutual funds - the similarities end there.

An ETF has a particular strategy, for ex. an INDEX ETF would replicate the Index. ETFs allow an investor to diversify, capitalize on arbitrage opportunities - without increasing the transaction costs. ETFs are traded on exchanges and as with any other stock, you can have long, short positions on them.

I had already invested in GOLDSHARE which is essentially a gold ETF, run by UTI. On a quick check, it seems  we don’t really have ETF’s beyond the simple Index ETF s (Nifty, Jr Nifty & Bank) options available.

It would have been good to have sector ETFs.  People would have made a killing shorting a real-estate ETF. And in such volatile markets, if one is not an active trader an ultra short (levered ETF) would have given us an option of playing the volatility without taking the risk of naked positions.

So, many more investment opportunities would have been possible.

Fidelity couldn

Years ago, at a speech at Harvard, the famous, or infamous, George Soros said that the trouble with mutual funds is that they are rewarded by the amount of money they collect, not the amount of money they earn. Seeing the remark as an astute summary of a range of flaws and weaknesses of funds and the industry that provided them, I used Soros” remark as an epithet for my book, The Trouble with Mutual Funds.

Today, we see the degree to which the mutual fund industry has been reduced to an asset gathering machine. By marketing CDs, Fidelity promotes the idea of bailing out of the market right now. Of course, this notion contradicts the advice that level-headed advisers and public figures have been giving to individual investors in this time of crisis, (see anything said or written by J. Bogle or W. Buffet in the last six months).

Imagine the investor who has just been convinced that he can’t win by bailing out now — that, in spite of the awful news and ugly data spitting out of the market meltdown, running won’t help, but only hurt, since you will miss the big days of the market’s recovery. Then he comes across Fidelity’s marketing campaign for CDs.

Confusing? You bet.

Fidelity is going where the money is. Period. If that means fanning the flames of panic, causing confusion and mistrust, and leading more investors to follow their emotions rather than reason, tough.

Fidelity Promoting FDIC-Insured CD

With the markets siphoning value from mutual funds and investors running for cover to the tune of billions of dollars in redemptions a month, Fidelity Investments is trying to hold onto customers’ assets by promoting FDIC-insured certificates of deposit.

Fidelity is promoting the CDs through mailers to existing clients and in no-nonsense advertisements.

Certainly, Fidelity is being impacted by the downturn, having announced it is laying off a total of 3,000 people, or 7% of its workforce, by the end of the first quarter of 2009. Thus, it makes sense that Fidelity is trying to hold onto assets, even in lower-paying CDs.

“As you might expect, in this volatile market, our customers have expressed interest in conservative, fixed-income investments,” Fidelity spokeswoman Jennifer Engle told the Boston Herald. Fidelity is letting its customers know that, like banks, CDs are available at select mutual fund companies, including Fidelity.

Thanks Jennifer. Thanks Fidelity. It’s good to know that America can count on you in turbulent times.

InterBeing, Buddhism and Business

Last night I read a fascinating article in What is Enlightenment? Magazine (www.wie.org) by Howard Bloom subtitled “Descartes’ Delusion”.  The delusion was that René Descartes settled himself into a house in Amsterdam, back in 1636, and decided he’d sit there, more or less by himself, until he penetrated the bedrock of reality, ie “What is that I can know for sure?”.  And he came up with the famous statement “I think, therefore I am”.  Bloom deftly critiques Descartes’ methodology - and makes the statement that Descartes could only think because he inherited a body, a mind, a language, and an entire social environment from millions of years of evolution.  Like Descartes, each of us is in fact a multitude.

Descartes has had such an impact on our culture that today we tend to think it “common sense” that each of us is an island - or at least we behave that way.  One of my teachers, Julio Olalla, was fond of pointing out that we tend to think of ourselves and our problems as our own isolated psychological case, when in fact we are playing out cultural scripts that date back centuries.  These scripts are passed on through family stories, cultural messages, official history, and the very words we use to describe our world.

Our culture has achieved incredible material success/excess because of our ability to view ourselves as separate - as if, like Archimedes, all we need is a place to stand and a lever big enough, and we can move the earth.  The only problem is, we are standing on the earth.  There’s nowhere else to stand, space fantasies notwithstanding. Despite our limited success at conquering nature, we are in danger of overbreeding, starving and poisoning ourselves with our own toxins.

Eastern philosophies, particularly buddhism, offer a radically different worldview, based on mutual causality. Western philosophy has generally focused on linear causality until very recently.  A causes B, which causes C.  Which is exactly why so many of our great inventions have brought about unintended consequences. Pharmaceuticals have conquered many diseases, which is a good thing, but are now polluting our water, subjecting fish, and ourselves, to unmetabolized birth control pills, anti-depressants, etc.  Only recently, with the development of Systems Theory, have we begun to see how phenomena emerge, sometimes unexpectedly and chaotically, from a variety of causes.

In a chaotic, interconnected world, we see that we cannot control everything, but instead influence a complex chain of events through intentions and small actions - even if we are not sure which ones matter.  This is why random acts of kindness are a good thing!  Thich Nhat Hanh, the Vietnamese buddhist monk and peace activist, has coined the term “InterBeing” to describe this mutual connectedness.  Rather than believe our own story about how things happen to us, he suggests we continually ask why things occur the way they do.  And, when we keep asking that question, we ultimately see there is no one to blame, including ourselves.

The way of leading business that I see emerging among “natural” entrepreneurs draws from this well.  Any complex product arises from a number of ingredients, that come from different places.  Each has an impact on the local economy that produces it, the local ecology, the health and well being of the people who live and work there.  Likewise for the way it’s manufactured, packaged, used and ultimately disposed of.

Today on my BlogTalkRadio Show, I interviewed Joshua Onysko, the founder of Pangea Organics. Pangea is the fastest growing organic skin care line in the world.  Josh has built Pangea from the ground up to be a business that acknowledges the connectedness of all players in the manufacture and use of the product.  Josh has even thought deeply about packaging.  Since cardboard packaging consumes millions of trees a year, Pangea’s products are packaged in downcycled paper fiber which is impregnated with seeds.  Plant your holiday gift pack wrapper and a Colorado Blue Spruce tree will grow.

Josh is using profits from Pangea to fund micro-financing efforts that go back to the people - mostly women - who grow the crops that supply Pangea with ingredients.  This creates stable livelihood for the growers, and a steady supply of quality product for Pangea.

The market for organic personal care products is growing at 22% per year. Why does this matter? Our skin is our largest organ, and absorbs 87% of what we put on it.  Cold processed organic soaps maintain the liveliness and efficacy of the ingredients so they can be available to the skin.

Josh pointed out that we are led to believe that healthy products are a luxury. In many cases, because of their effectiveness, organic products are actually cheaper per use, and infinitely better for long term health. Is a “cheap” bar of soap actually cheaper, when we consider the real cost of petroleum by-products, wasteful packaging, and unknown efffects of chemical ingredients?

All of this may sound like fringe thinking, but Josh summed it up when he said “the Fringe predicts the Future”. Business people and economists are beginning to see how many costs we have traditionally “externalized” - but on a small, crowded planet, all those “externalized” costs, like the pharmaceuticals in the water supply, ultimately find us.

Political parties unite against Mukhriz

Source : The Nut Graph

KUALA LUMPUR, 2 Dec 2008: Umno Youth chief aspirant Datuk Mukhriz Mahathir continues to draw flak for suggesting that vernacular schools are the cause of racial polarisation.

Two members of parliament (MP), Charles Santiago of Klang and Nurul Izzah Anwar of Lembah Pantai, both said Mukhriz was clearly trying to win favour for his bid in the March Umno elections.

“MCA Youth will never agree to Mukhriz’s statement that our polarised society is due to the existence of different types of education in the country. Language alone cannot be deemed as a main factor for national unity.

“Naitonal unity should also entail mutual understanding, sincerity and respect among all the races,” Wee, who is also the Deputy Education Minister, said in a statement today.

He noted that not only Chinese, but pupils of other races also attended Chinese primary schools.

He also disagreed with Mukhriz’s proposal yesterday to convert vernacular schools into a single system, noting that other countries were promoting an inclusive society by granting equal rights to citizens from minority groups to maintain their own vernacular education.

“Any suggestion of racial assimilation is obsolete and will be forsaken by the people,” Wee said.

MCA president Datuk Ong Tee Keat in his blog yesterday said the Jerlun MP was using racial polemics because he was contesting in the Umno elections in March.

Kedah Gerakan Youth has also described the proposal to abolish vernacular schools as unconstitutional, and has instead called for the government to allow mother-tongue language classes in national schools.

DAP’s Santiago said Mukhriz showed “a total lack of sensitivity to the non-Malays in Malaysia.”

“It’s nonsensical. Vernacular schools do not prevent racial unity in the country. In fact, it is race-based policies in civil service employment, awarding of contracts and discrimination against minority communities and marginalisation of the poor that hampers national unity,” Santiago said in a statement.

Noting that there were some 50,000 Malay students currently enrolled in vernacular schools, Santiago said Mukhriz’s statement was aimed at securing support in his bid for the Umno Youth top post.

“Mukhriz should be deeply ashamed for politicising mother-tongue education to further his career in ruling Umno. He must immediately retract his statement and instead encourage the government to provide the necessary funds to vernacular schools to upgrade its existing infrastructure and build new facilities.”

Parti Keadilan Rakyat (PKR)’s Nurul Izzah also joined in the fray by accusing Mukhriz of fanning the flames of racial prejudice.

“He is suggesting that these schools be closed down as a reaction to the comments of other Barisan Nasional leaders on ‘ketuanan Melayu’,” she said.

PKR believed in strengthening the national school system while preserving the vernacular schools’ tradition to promote different cultures and the right for pupils to learn their mother tongue.

“Mukhriz’s proposal to have a single education system is clearly meant to promote himself as a Malay hero for his party elections in March. If he really was a Malay hero, he should oppose the teaching of science and mathematics in English which has caused the performance of rural and poor Malays to decline,” Nurul Izzah said, reiterating her party’s stand against the programme implemented by Mukhriz’ father, then prime minister Tun Dr Mahathir Mohamed.

She said that Mukhriz as an youth leader, was no open minded in his views but was instead following older politicians who used racial polemics.

The End

When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of ­borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’”

And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

More generally, the subprime market tapped a tranche of the American public that did not typically have anything to do with Wall Street. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population. Eisman knew some of these people. One day, his housekeeper, a South American woman, told him that she was planning to buy a townhouse in Queens. “The price was absurd, and they were giving her a low-down-payment option-ARM,” says Eisman, who talked her into taking out a conventional fixed-rate mortgage. Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’ ” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.”

n retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?

The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

A full nine months earlier, Daniel and ­Moses had flown to Orlando for an industry conference. It had a grand title—the American Securitization Forum—but it was essentially a trade show for the ­subprime-mortgage business: the people who originated subprime mortgages, the Wall Street firms that packaged and sold subprime mortgages, the fund managers who invested in nothing but subprime-mortgage-backed bonds, the agencies that rated subprime-­mortgage bonds, the lawyers who did whatever the lawyers did. Daniel and Moses thought they were paying a courtesy call on a cottage industry, but the cottage had become a castle. “There were like 6,000 people there,” Daniel says. “There were so many people being fed by this industry. The entire fixed-income department of each brokerage firm is built on this. Everyone there was the long side of the trade. The wrong side of the trade. And then there was us. That’s when the picture really started to become clearer, and we started to get more cynical, if that was possible. We went back home and said to Steve, ‘You gotta see this.’ ”

Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged.

Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

A probability, said the C.E.O., and he continued his speech.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

This was what they had been waiting for: total collapse. “The investment-banking industry is fucked,” Eisman had told me a few weeks earlier. “These guys are only beginning to understand how fucked they are. It’s like being a Scholastic, prior to Newton. Newton comes along, and one morning you wake up: ‘Holy shit, I’m wrong!’ ” Now Lehman Brothers had vanished, Merrill had surrendered, and Goldman Sachs and Morgan Stanley were just a week away from ceasing to be investment banks. The investment banks were not just fucked; they were extinct.

Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.” Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to fucking deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

Truth to tell, there wasn’t a whole lot of hand-wringing inside FrontPoint either. The only one among them who wrestled a bit with his conscience was Daniel. “Vinny, being from Queens, needs to see the dark side of everything,” Eisman says. To which Daniel replies, “The way we thought about it was, ‘By shorting this market we’re creating the liquidity to keep the market going.’ ”

“It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”

There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

I smiled back, though it wasn’t quite a smile.

“Your fucking book destroyed my career, and it made yours,” he said.

I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

It was now all someone else’s fault.

He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

“That’s nauseating,” he said.

Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

Drogas

”Sandeep Isaac Abraham, is that you? What’s up nig-nog? Come on up here.” comes a dazed cry from upstairs. It’s Antoine, of course.

”Nothin’ much, just doing my fucking UC application. It’s like due in two days and I haven’t slept in 36 hours…you know, usual shit. But hey, this is why God created Aderol, right?”

His tolerance for the stuff is way too high; three pills now only keeps him wired for six hours. What once was salvation for narcoleptics and kids with ADHD is now the trendy drug of choice for overworked college kids inconvenienced by sleep. Adult side effects include stomachaches, dry mouth, dehydration, loss of appetite, inability to fall asleep, weight loss, extreme irritability, extreme mood swings, severe headaches, and mental depression. Then again, this is Antoine were talking about.

Antoine, had he a choice, would not live on Linden Lane. After all, he grew up in a $2 million mansion in a gated community and went to the 43rd best public high school in the nation. His first car was an old Jaguar. He dressed in Armani and Express when he was twelve years old. But nothing’s ever as it seems. His parents divorced when he was twelve in a mess of legal documents, custody hearings, and alimony settlements. He drowned in depression and sold himself to apathy, adorning himself in black clothes and a constant grimace. When he was fourteen, his depression made them ship him off to Casa by the Sea (not a pseudonym), supposedly a youth rehab facility in Ensenada, Mexico run by “fucking Mormons.”

And fucking Mormons they were. Antoine once told me a story about a girl who came there after being raped and molested by her father. Kids there are given tags based on the “offences” that got them there. Her tag was “Daddy’s Little Slut.” To “cure” her, the administrator in charge of her was instructed to keep asking her about her father and when that didn’t work, to wave his penis in front of her. That was Casa by the Sea –shut down a year later by the Mexican government after abuse and neglect were suspected. A coke bottle shank and mass amounts of classic literature were what kept Antoine sane and safe in those years. He writes in one of his application essays: “I’m better now. When I’m manic and angry, I work harder. When I’m depressed, I read Camus.”

WESTERN UNION MONEY TRANSFER in the amount of $850,000.00 USD

Send Money Worldwide

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Scam of the day

Answering Readers

Hi Denise,

Thanks.

Hi Jean,

Here are the charts of both funds analysis to follow:

It looks like MEURX will really be hit hard when transiting Pluto through the 5th (house of speculation) makes an exact opposition to its Mercury in Cancer in the 11th (house of hopes and dreams). Also Mercury rules the second house of work and everyday sort of money flow, as well as ruling 2 planet, Venus=money(in this case) and Mars how the fund is perceived. They are both wedged in the 10th which is also another important earth/money house. I would move my money into a different fund if I were you before late January. Specifically right around inauguration. So move it before then.

MDISX will fair better until about the 20th of January 2010 when transiting Pluto will be at 4 Cap making an exact square to the funds moon which has involvement in the 5th house of speculation but mostly rules the 6th house. So I’d guess there will be some bizarre fluctuations in the value of the fund during this time, sort of irrational in nature. But it will settle down and it won’t see major changes until Jan. 2010 when perhaps new laws will take place forcing (more then likely many areas of the market) to adjust. It will be more in its business practices and ideology. So I’d say this fund looks healthier for the time being.

Hope that helped.

Next from Ylem:

Okay, this scared the crap out of me:

http://www.cnn.com/2008/US/12/02/terror.report/index.html

Do you have anything to say on the likelihood of a bioterror attack in the next 10 years (or much sooner) that will wipe out millions of people?

I’m freaked!

just to add to my post: The fear of a bioterror attack is in some ways paralyzing, as it makes working towards anything feel pointless - what’s the use if our world will be in ruins in less than five years? Give us some hope, please!

Hi Ylem,

I read the article you sent a link to. It is really, really, really scary. 

I have been thinking about this a lot lately, especially with what happened in Mumbai. And especially when looking at the charts of India and Pakistan, and seeing the upcoming transits over the next few years, and the direction the planets are headed.

I got scared when I realized that we weren’t that far off from Uranus hitting Aries. That revelation felt very bad. 

Uranus smacks Aries in March of 2011. My read on this is: sudden and explosive violence. Especially, as it will near a square to Pluto. These two warring planets will clash (square each other exactly) in August of 2012. We had better get our act together rounding up terrorists and spreading good will and compassion. I hate to say what this could bring. I will do more analysis on it over time. I don’t want to jump to conclusions right now. We have time to turn this potentially deadly aspect into something more innocuous, but it will be a hard ship to turn around. I’m not going to lie about that.

Good news though, we do have free will and we have the power to choose love and compassion, kindness and fairness over whatever crazy bee drove into those terrorists’ types heads. Sometimes I feel there is an almost sick sexual fetishism of murder really driving these people, more than any pretended belief they have in God. Because I’ll say one thing no one who is spiritual believes in killing anyone for any reason. And any religion or branch of a religion that preaches this is not a religion, its a political power machine using naive people to brainwash through fear so they can do the dirty work of those leaders who manipulate them and blindly seek power.

OK, enough of my going on about that. It makes me so angry. I wish there was a way to round up all the terrorists and make them sit around a campfire and listen to Kumbayah for a year, do some knitting, talk about their feelings, go through some therapy and deprogram them from their crazy- maker leaders. Most of these people are young men who have no way to feel important, and aren’t allowed to express their sensuality or sexuality except through this horrible violence. It’s a terribly sick combination. A stew of rotten meat, and I’m afraid we’ve all been guilty of not addressing it. I think the whole, “Well, it’s a cultural thing,” thing is part of the problem. Not that we should take control of their lives. I do think these groups pray on very impoverished, angry, probably abused souls who haven’t seen any other option in life. We owe it to all of our brothers and sisters to at least show them that there are other ways of seeing, believing, feeling, and help them live in dignity, not just ignore them, relegating them to deserts of the world to starve in, while we live it up. It’s no wonder they hate us. We are so decadent compared to them.

I really hope instead of bombing Pakistan and Afghanistan and Iraq and trying to control the Muslim world militarily, we try to lift them up and befriend them. That’s the only way we are going to make this world work.

Blah, blah, blah…

OK, power speech: this is why it is crucial for everyone to live up to their highest potential and do whatever little thing you can to change the hearts and minds of those around you for the better.  

If you imagine we are all drops of water in this sea of humanity, (check out the book, “The Messages in Water,” if you get a chance) and by being more loving and kind we actually effect the whole sea. We don’t have to become President or be a famous movie star or whatever, just being loving changes the world for the better.

Anyway, it’s 4 AM now I’m going to answer the next bunch of questions tomorrow.

Best wishes to all.

Denise

Sorry everyone down there! I’ll get to you soon!

Dear Denise,

Thank you for your analysis and insights. In these troubled times on a lot of fronts ( financial, physical and even spiritual ) you provide clarity and hope.

I have two questions.

To readers of this blog, please do google “urban survival” and make some basic preparations.

Peace

 

Hi : Very interesting

On the prediction that India will hit Pak sites, I wonder whether this could happen thru US, becos it seems more likely that Obama will use his power to persuade Pak to let US take on the training camps etc in Pak. Don’t see India doing this unless we continue to get hit like 26/11. May be you could run a chart for US vis-a-vis Pak and see how it looks…

 

I woke up with the feeling that the credit crisis wasnt the cause of the market crash at the end of Dec/ Jan

Any thoughts on the two unresolved Senate races in Minnesota and Georgia? I think you predicted the Senate would get close to 60 seats a few weeks back. I wonder what the cards say closer to the evantual realities. Thanks!

Another question. Some of Obama’s supporters are up in arms about the people he is choosing to work in his Administration. They feel that they have been betrayed. Will the Disgruntled Dems. get over it in time or will they hold a grudge for the next 4 years?

 

 

 

 

Will Arnold Schwartzenegger be joining Obama’s cabniet? I thought when Obama said a top Republican would be on his cabniet, it would be Arnie. Now he’s picked Gates to stay on as Sec. of Defense. Since some very conservative Christians are in top level positions in the military, this seems to be a wise move aimed at keeping them calm. What’s up for the Governator after his term runs out?

Thanks in advance!

PS

I sure hope he will be. After four years of having to look at Bush and Cheney, this lady would appreciate someone up there easier on the eyes. LOL

The Moviegoer and me

Most of you understand that much of my life view was forged by devouring “The Fountainhead” and “Atlas Shrugged” - both by Ayn Rand.

But, only a few of you know the profound impact Walker Percy’s The Moviegoer” has had on me.

Walker Percy was forty-six years old when his first published novel, “The Moviegoer”, was awarded the National Book Award in 1962. It was, in some sense, the public beginning of the second half of Percy’s life. 

Percy himself wrote in 1972: 

“Life is much stranger than art-and often more geometrical. My life breaks exactly in half: 1st half growing up Southern and medical; 2nd half imposing art on 1st half.” 

But what, exactly, did Percy mean when he said this? In some sense, “The Moviegoer” is the beginning of an answer.

Percy was born in 1915 and lived his early life in Birmingham, Alabama. His grandfather committed suicide when Walker was an infant, and his father, too, committed suicide in 1929. Following his father’s suicide, his mother moved Walker and his two brothers to Mississippi. Percy’s family was one of the oldest families in the South, and he and his brothers soon found a father figure in the form of his cousin, William Alexander Percy - known affectionately as Uncle Will. Three years after his father’s suicide, Percy’s life was again marked by tragedy when his mother’s car went off a bridge, killing her and leaving Walker and his brothers in the charge of his Uncle Will.

Cork:  So, obviously, as self-absorbed and ego-centric as I am, I understand Walker.

Percy went to medical school at Columbia University, where he contracted tuberculosis during his internship. In and out of sanitariums for several years, he finally returned to the South in his early 30s, getting married in 1946 and settling in the New Orleans area, where he lived the remainder of his life. It was at this time that Percy received an inheritance from his Uncle Will that allowed him to devote himself completely to his long-standing interest in literature and philosophy.

More Cork:  So, this is where I really feel Walker Percy.

I (further) relate the biographical details because, as you read “The Moviegoer”, it seems (not surprisingly) heavily marked by Percy’s life experience, the author’s biography being one point of reference for the novel.

Even more Cork:  I am therefore I Blog.

“The Moviegoer” is a peculiarly American and belated expression of the existential novel that had been so brilliantly articulated in France by Albert Camus. Like “The Stranger”, Percy’s novel focuses on meaning.  In this case, the obsession of Binx Bolling, the novel’s narrator, on what he calls the “search”. /1

As Bolling says at one point: 

“The search is what anyone would undertake if he were not sunk in the everydayness of his own life.” 

And exactly what does this mean? 

“To become aware of the possibility of the search is to be onto something. Not to be onto something is to be in despair.”

This is certainly an enigmatic definition. But, one which makes the reader who spends time with “The Moviegoer”, who reads the book carefully and reflectively, to think more deeply about his or her own life.

“The Moviegoer” is not a novel dominated by plot. 

At a superficial level, the novel relates, in a wry and matter-of-fact way, a few days in the seemingly unremarkable life of Bolling, a New Orleans stockbroker whose main activities are going to the movies and carrying on with each of his successive secretaries. 

Muses Bolling:

“Once I thought of going into law or medicine or even pure science. I even dreamed of doing something great. But there is much to be said for giving up such grand ambitions and living the most ordinary life imaginable, a life without the old longings; selling stocks and bonds and mutual funds; quitting work at five o’clock like everyone else; having a girl and perhaps one day settling down and raising a flock of Marcias and Sandras and Lindas of my own.”

What “The Moviegoer” suggests is resonant of Thoreau’s contention that most men lead lives of quiet desperation. 

But it is a desperation that arises not from the ordinariness of everyday lives, but, rather, from the failure to transform that ordinariness through contemplation and self-reflection, through an appreciation for the mundane. 

Thus, in the book’s epigraph, Percy actually quotes Kierkegaard

“The specific character of despair is precisely this: it is unaware of being despair.” 

That rascal!

As Percy has suggested in another of his books, “Lost in the Cosmos” (a work of non-fiction subtitled “The Last Self-Help Book”), we inhabit a society of alienated and despairing “non-suicides” who Percy wanted to transform, through his writing, into “ex-suicides”. 

In Binx Bolling’s words: 

“For some time now the impression has been growing upon me that everyone is dead. It happens when I speak to people. In the middle of the sentence it will come over me: yes, beyond a doubt this is death . . . At times it seems that the conversation is spoken by automatons who have no choice in what they say.”

So, in summary, “The Moviegoer” is a thoughtful and a thought-provoking book that should be read and then re-read, slowly and carefully, for every paragraph is laden with insight into the character of its narrator, the character of its author and, ultimately, the character of ourselves.

Read what I tell you to, or don’t speak to me.

Today I shall be listening to “Bullet and a Target” by Citizen Cope.

Peace be to my Brothers and Sisters.

Brian Patrick Cork

__________________________

1/  We can see parallels to Ayn Rand’s Rourke (“The Fountainhead”) and Gault (“Atlas Shrugged”).

Who killed the Indian University?

I was discussing with a friend of mine the other day about the impact of the IIT system on tertiary education in India. My contention was that the IIT system has caused the death of universities in India. He, ofcourse hotly contested the point. According to him, the IITs were a great idea at the time of independence, and have contributed immensely to the growth and development of the country. So I thought a little more about it, and the result of that thinking is the post below.

Now lets see if the Indian Institutes of Technology/Management/Information Technology/Fashion Technology/Drama/Design/what-have-you are really needed in this country and whether they have done more harm than good, as I think they have. It all started with the Indian Institutes of Technology. A result of a young socialist India’s admiration of the Soviet model of education. In fact, the first IIT was established at Kharagpur with help from the Government of the erstwhile Soviet Union in 1951. Other IITs followed, Mumbai in 1958, Kanpur and Chennai in 1961, and Delhi in 1963. Currently there are 13 Indian Institutes of Technology in various states in the country all covered under the Institutes of Technology Act of 1961 that declare these Institutions as Institutes of National Importance. The stated need for setting up the IIT system was to produce the scientists and engineers that a newly independent India needed for its development. It seems interesting that the decision makers deemed it necessary to create Institutes of National Importance like the IITs to impart education that could easily have been imparted simply by upgrading the existing universities to the status of Institutions of National Importance. The psychology behind the building of big Institutions with lofty ideals and huge amounts of public money as symbols of national pride is a distinguishing feature of socialist societies. Take the example of Mao Tse Tung’s destruction of the city of Beijing to build huge factories inside the city - his personal idea of, and a tribute to a worker’s paradise. In our case, we destroyed the University system by our own idea of socialized education. To really understand the basic evil of the Soviet system of higher education we have to realize that their society was based on collective ownership. The State owned everything, including your life. You individual growth and development as a person was essentially anti-state. An individual was simply a cog in the State machinery, everyone had his place in the society. You were not supposed to “think” as an individual, you were supposed to “do”. This led to their creation of highly specialized schools and universities dedicated to narrow disciplines — Institute of Mathematics, Institute of Genetics, Institute of Physical Research, the Medical Academies, and the list goes on and on. A highly centralized government controlled system put in place with the sole purpose of creating higly efficient workers for the country. This practice, of course created technically competent people, who were experts in their field of work — the Russian mathematicians and physicists for example, but did that system work? Were these people anything more than well programmed robots who were not good at anything but what they were trained for? I would be interested to know the real statistics. But their immediate success in the Soviet society was visible to everyone. They had great scientists, excellent engineers, efficient workers, but no philosophers, no independent artists, or film makers, or writers. But the quality of their engineers was probably what impressed Jawaharlal Nehru the most. He, after all had the responsibility of bringing India up to speed on development and infrastructure post independence. So the idea of setting up a series of engineering schools must have sounded good to him, and he went ahead and built the first series of IITs - Kharagpur, Bombay, Delhi, Kanpur and Madras. There is no doubt that at the time of Independence there was an urgent need for skilled technical manpower in order for India to build itself, and there was a very real need for the Government to focus on technical education. There is also no doubt about the fact that, given the stringent selection criteria, the IITs got the best students in the country who after graduation went on to lead successful professional lives. Given the socialist bent of mind, our leaders, possibly forgetting the original thoughts that went into the setting up of IITs started establishing other specialized Institutes and the Indian Institutes of Management, National Institute of Design, National Institute of Fashion Technology followed over the years. In parallel, the University system of this country went from bad to worse. Bad management, lack of funds, archaic rules, politics, all contributed to the rot. This asymmetry also led to an asymmetric perception of college education among the media and the public in general. In a country and at a time when good jobs were few, not getting into an IIT meant you were a failure even before you started.

From the Universities’ standpoint, the problems were compounded by the fact that in addition to the policy of establishing specialized undergraduate schools the Government also set up specialized research Institutes directly under the control of funding agencies. So we had the Council for Scientific and Industrial Research, The Department of Atomic Energy, The Department of Biotechnology, The Department of Science and Technology, all funding agencies under various ministries running a bunch of their own Institutes specializing in narrow research domains. One would agree that there are research problems that need coordinated effort of many people, and substantial financial inputs. Setting up small Institutes dedicated to specific questions of importance is in itself not a bad idea. So where is the problem? The problem lies in the fact that these institutes are not connected to universities. They are far better funded than university departments, and thus have excellent research facilities, but the scientists who work there are not required to teach. Most of them being situated away from universities, their scientists and students have limited interaction with people from other disciplines. There is little exchange of ideas and views in the free flowing manner that is at the heart of innovative research. The result? Our entire scientific establishment is engaged in a “me too” research program where the really radical and original ideas come from the west and we simply fill in the gaps. The lack of innovation in science is evident in the example of the use of Zebrafish as a genetic model system for biological research. Zebrafish, a native of the Ganges needed George Streisinger of the University of Oregon to be studied in detail and be used as a genetic model. Our experience with research on medicinal plants is another example. In the humanities, we need a William Dalrymple to teach us about the history of the Deccan, or Delhi. There are many economic and social factors involved this sad sate of affairs, but one of the most prominent of these factors is the utter lack of a vibrant univerisity system fostering unfettered interaction and exchange of ideas among people of widely disparate interests and expertise. All this affects another important part of the higher education system of the country - Graduate School. We are creating more PhDs than any other country in the world with the possible exception of China, but are our PhDs really worth the title of “Doctor of Philosophy”? I am not sure. Are our research institutes producing loads of doctorates who are nothing but highly trained technicians or are we producing leaders and thinkers who can cross boundaries of discipline and think creatively? I think our policy makers need to ask this question to themselves.

So what is the result of this long policy of specialization and fragmentation? Our leaders would have us believe that our country is progressing and India is shining because we have a huge pool of English speaking individuals who can program a computer and run a PCR reaction. What they will not admit even to themselves is that all this lopsided development comes at a price. In mundane terms, this preference for quantity over quality has led to a huge workforce trained in a specific skill set and completely dependent on a certain set of industries in order to remain employed. In a deeper sense, this has led to the slow, but definite dilution of the cultural and intellectual vibrancy of the country. We seem to be well on the path to becoming a country of unthinking automatons who do as they are told, trapped in our own little intellectual boxes. We seem to have forgotten our own historical contribution to higher education by way of inventing the model of multidisciplinary university system with Taxila. The path of higher education chosen at the infancy of the Indian republic has without doubt helped India reach a position of strength in the world. But everything has to evolve, what may have been relevant earlier may loose its relevance with time as society advances. For the country to really move forward, there is a need to rethink and reform the higher education system. We need to bring the University back! Unfortunately the government seems to think otherwise. They have gone ahead and established a bunch of more IITs taking the total to 13 (and 6 more planned). And as if that was not enough, they have started a chain of Indian Institutes of Science Education and Research! It seems we did not have enough university departments good enough to teach basic sciences to undergraduates. As I have mentioned earlier, specialized institutes, a misplaced and misguided priority in the first place, has now largely lost relevance in today’s society where people with new and “unconventional” combination of skill sets are often the drivers of progress. This country needs well rounded individuals who, while being trained in a particular discipline, are at the same time aware of their society and open to exchange of ideas.

In my “ideal” education and research policy, I would first increase funding to Universities and at the same time bring about changes in their academic and administrative structure. Over time, the universities will be run by academics who are also proven administrators. I would expect these institutions to be run in a democratic fashion with no interference from outside. Ultimately, funding to universities will be based on their performance. The Indian Institutes of technology will  be upgraded to the level of central universities and be treated as such. National laboratories and Institutes will be attached to universities with scientists having the option to teach if they so wish. I would ofcourse encourage researchers to teach undergraduates, which would mean that the academic staff of the universities will be of two kinds — research scientists, who choose not to teach in the class room but take graduate students for research work, and faculty, who choose to teach along with doing their research. The latter will ofcourse be more difficult but I would wish to make it more rewarding too. I would encourage private sector participation in higher education and research with tax benefits to corporates and private individuals who choose to support academic research in purely non-applied fields like history, philosophy, art or the basic sciences. Setting up of private universities will be encouraged subject to their satisfying stringent criteria (I will talk about higher education as an industry sector in a later post) to ensure quality. The idea is to turn universities into centers of knowledge rather than just degree granting bodies, places where knowledge is not only disseminated, but also generated, where students and teachers alike benefit from their mutual interactions without boundaries or restrictions. Universities in my “ideal” society will be as sensitive to social change as they will be drivers of that change.

It is high time the policy makers stopped and did a serious analysis of the higher education and research system in this country. The whole system needs to be reformed if we want to graduate (no pun intended) from being a “developing country” to being a “developed country” in the real sense of the term.

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Profit selling wipes off initial gains; Sensex down 106pts - Times of India


Anti-government protesters have begun leaving Bangkok’s main airports after an eight-day siege that paralysed government and stymied tourism.They packed up bedding and began leaving the international and domestic airports as cleaners moved in.The People’s Alliance for Democracy called off the protests and after a court banned Prime Minister Somchai Wongsawat from politics.The protests have left thousands of tourists stranded in Thailand.The country has lost millions of dollars in revenue.

Who cares?
By Paula DearBBC NewsUnemployment is back. The economic downturn means the issue has again climbed to the surface of the political and news agenda. But for millions of people it never went away.Has British society been ignoring the real plight of the jobless in recent timesOur series on joblessness will explore the lives of Britain’s non-workers. How did they get there, how do they feel and how do they get by"The unemployed are portrayed as social outcasts who don’t share the moral and ethical values of the rest of us"Dr David Fryer, Stirling UniversityThose losing their jobs now are joining millions who have already been out of work long term, who want to work but for many reasons are not searching, or who have been lurching between insecure jobs and joblessness for years.The number of unemployed now stands at 1.8m, but thatheadline figure tells only part of the story. On top of the unemployed, a further 8m people of working age in the UK are not working and are categorised as “economically inactive”.Of that number some 2.2m - nearly all women - are looking after home and family, 2m are students and a further 2m are long-term sick.Nearly 40,000 people are listed as “discouraged workers” and some 760,000 people are categorised simply as “other” in figures that chart the reasons for people’s economic inactivity.Of the 8m inactive people, more than 2m say they want to work, but are not currently able to or have given up seeking a job. Meanwhile, the number of job vacancies in the UK has dropped below 600,000.BRITAIN’S JOBLESSOur series asks, who are Britain’s joblessInterviews with five people who are out of work will be published on the BBC News website in December and January. Read the first, ‘No-one works in our house’, hereWeek beginning 15 December - ask a government minister your questions about unemploymentQ&A: Who are the joblessKey statisticsThere is concern among some experts that ignoring the core issues and pressurising jobless people- for example with welfare reforms - will not only be a waste of time given the number of jobs available, but could further damage the mental wellbeing of individuals already demoralised.”If you have four million or so people chasing a few hundred thousand jobs, it goes without saying that putting pressure on the unemployed to look harder is not going to work,” says psychologist Dr David Fryer, of Stirling University.In the past few years it has been harder to get funding for research on unemployment, giving the impression people felt the problem had gone away, adds Dr Fryer.And what media coverage there has been often portrays the jobless as being to blame for their problems, even to be envied in the way we might envy the “idle rich”, he adds.”In general the media has not done unemployment a service. The unemployed are portrayed as social outcasts who don’t share the moral and ethical values of the rest of us.”‘In denial’Some people commit benefit fraud - with at least 2.6bn lost to fraud and errors last year - and tales of cheating lap dancers and fighting-fit football referees claiming sickness benefits make for popular copy.But, says New Policy Institute (NPI) Director Peter Kenway, if we start by believing that the vast majority are telling the truth when they say they want to work, then we have a big problem on our hands.An upcoming annual NPI report for the Joseph Rowntree Foundation concludes that the progress regarding most of those wanting, but lacking, work - which was seen in the first half of New Labour’s rule - flattened out in 2004. In the case of young adults unemployment went up, he says.Dr Kenway added that he believed the UK was heading into a recession after a period of several years in which the labour market had at best been steady, rather than strong.”The political class is still in complete denial that this unemployment issue is coming back with a vengeance."Employers will pick the freshest flowers and the others will get more and more wilted"Prof Alan Manning, LSESend us your comments”And you cannot say the whole responsibility for this lies with the would-be workers.”There’s a strange flaw in government reasoning that if you somehow got all these people out and plonked them onto the labour market, the jobs would just appear.” Until the credit crunch bit there was less attention on the long-term unemployed because numbers had genuinely fallen, says Professor Alan Manning, of the London School of Economics (LSE).”But if you are one of those people that remains long-term unemployed that’s not much comfort.”Like the rising tide lifting all boats, “the view was that the way to help those people was by having the labour market generally doing well”, he says.He predicts that with rising unemployment, sympathy levels will also rise, as more people have direct or indirect experience of joblessness.More sympathy but not more opportunities, he says, because the situation for the long-term unemployed is likely to worsen as more qualified recently redundant people flood the market.”The analogy of the flower shop rings true - employers will pick the freshest flowers and the others will get more and more wilted.”AnxietyLast week’s pre-Budget report put much emphasis on addressing the plight of the newly unemployed, but ministers do acknowledge the ongoing “scar” of long-term unemployment.Work and Pensions Secretary James Purnell told MPs last week the government would “do everything we can to bring those who have been out of a job for some time back closer to the world of work”.And welfare reforms have been brought in, with more on the table, which the government says will tackle some of the more entrenched areas of joblessness.The problem, some argue, is that leaders are ignoring the reality of life for the unemployed, and the societal ills that lie behind joblessness and deprivation.Last year the government ploughed millions into paying for more psychologists to treat people for depression and anxiety, in an attempt to get more people back to work."Working with an individual means they then compete more effectively against another unemployed person - it can never do anything other than reorder the queue"Dr David FryerResearch over decades has consistently shown that joblessness leads to mental ill health.For people like Drs Fryer and Kenway, putting the emphasis on treating individuals for their “deficiency” in finding work, is damaging.Dr Fryer is part of the Community Psychology movement, currently small in the UK, but a bigger force in other parts of the world - both rich and poor.He and fellow campaigners believe social change, not treatment for individuals, is the only way to deal with the distress caused by material inequality, poverty and joblessness. All the psychologists in the world could never “treat it better” unless the root problems were solved, they say.”Working with an individual person just means they then compete more effectively against another unemployed person. But it can never do anything other than reorder the queue,” adds Dr Fryer.”Society has become more individualist. And clinical treatment is individualist, which fits conveniently with this idea that all ills are related to the individual.”He likens treating someone depressed because they are unemployed to giving therapy to a woman who is beaten at home then returns each night to an unaltered situation.”All you are doing,” says Dr Fryer, “is making them think differently about being punched.This article is from the BBC News website. © British Broadcasting Corporation

England stars ready to shun tour
At least five England players are not prepared to return to India following the Mumbai terror attacks, according to former Test fast bowler Dominic Cork.The players are waiting for a security report before deciding whether to return to India for the Test series.But Cork told BBC Radio 5 Live: “I know of at least five or six players who are going to turn their backs on England.”Those I’ve spoken to are traumatised. What they saw on television was 10 times worse than what was shown here.”


MUMBAI: In a volatile trade session, the benchmark Sensex pared the early gains and slipped into the negative zone with a fall of over 106 points at 1100 hrs on profit selling by speculators at improved levels. The Bombay Stock Exchange barometer

Mutual funds may now have to list close-ended schemes - Economic Times
MUMBAI: Capital market regulator Securities and Exchange Board of India (Sebi) is set to revise its rules to make it mandatory for mutual funds to list close-ended schemes both equity and debt on stock exchanges. The proposed changes are

Crompton Greaves surges 4.79% at BSE - MyIris
Shares of Crompton Greaves are trading at Rs 113.80, up Rs 5.2, or 4.79% at the Bombay Stock Exchange (BSE) on Wednesday at 12:17 p.m. The scrip has touched an intra-day high of Rs 115.00 and low of Rs 109.10. The total volume of shares traded at the


US Currency Auction,Online Auction site - Coin,Currency,Bullion,Exonumia,Paper Money Auctions. Free listings! Buy or sell your Coins,Paper Money,Bullion & Exonumia at our on line

Currencies - Currency Converter & Latest Rates at CNNMoney.com
View exchange rates for top currencies and convert currencies from over 18 countries 7:22am: After slow trading on Thanksgiving, the dollar also slips against the euro and

End of post. . . . . . . . . . . . . . . .

Apartment-al meetings - Part 1

Ting tong….

“Excuse me Mr Ramaswamy. We have come here to tell you that we urgently need to have a residents meeting.” complained a harried Saroja and other ladies in a similar state.

This was the third time that my bell was ringing for the same purpose, after I became the secretary of Kumbha Residency, a middle class apartment straight out of ‘Wagle ki duniya’. I moved in there about 5 years ago. And moved out about 2 years back. But memories of that dismal building are plastered like concrete on my brain.

Kumbha was a grand residential apartment filled up mostly by middle class brahmin folks. It boasted of grand amenities like an overtank, a sump, 2 coconut trees and a special ’sand pit’ for kids to play. All in the middle of peaceful Banashankari 2nd Stage. It consisted of 11 flats, both single and double bedroom options, distributed over 3 levels with no liftman. Why? No lift. The highlight was undoubtedly the parking lot, that could ideally hold about 1/3rd of the vehicles in the apartment, but still had a big heart to accommodate all of them. All of this Kumbha was safe guarded by the perseverant watchman named ‘Bahadur III’ (The third watchman in the first year of my stay, who’s name was Bahadur, twice again. The first one ran away. The second one ran away. The third Bahadur didn’t get a chance to meet the first two.)

‘Secretary’

This grand title was bestowed on me when nobody volunteered to take up this post. So my name was picked out in a draw of lots. And I was crowned ’secretary’ for the following six months.

I took my mandatory oath,

1. I promise to provide phenyl, broom and other cleaning products on a monthly basis to the watchman. And keep a tab of it.

2. I will ensure that the common electricity and water bills are paid on time. If I fail, I will bear the cost of any fine that is incurred due to my negligence.

3. I will arrange for acrobats on a timely basis to pluck coconut from the coconut trees.

4. I will ration out the plucked coconuts to all the residents, ensuring that everyone gets an equal share. In case any coconut turns out to be spoilt after breaking, I will replace it with one from my own collection.

5. I will hunt for plumbers, electricians, gardeners and other difficult to find people, whenever need arises.

6. I will monitor the watchman to remove dog poo from the ’sand pit’ every week.

7. I will beg and plead for monthly maintenance from all residents.

8. I will maintain a strict record in a fat ledger of all the accounts, down to the last penny. I will submit the ledger to anyone who feels like scrutinizing it, at any time in the night.

9. I will arrange meetings and also campaign them among the residents.

10. I will distribute ‘minutes of the meeting’ to all residents after the meetings are over. And that too in a typed form. (Apparently, the previous person who held the post had a bad handwriting, so this amendment was made.)

Needless to say, any other emergencies like the watchman running away, leakage in drainpipes etc., is the secretary’s headache.

So giving into the pressure, I dutifully went and pasted a ‘notice’ on the notice board inviting audiences for the evening entertainment program - ‘The Residents Meeting’.

I was also forced at yell-point to invent a list of ‘reasons to meet’ and make it compelling for the usual bunkers to attend.

The venue was my flat. It was agreed upon in the previous meeting to sacrifice a sum of Rs. 300 from the apartment fund towards ‘refreshments’ for these meetings. A glass of Fanta, potato chips and a sweet of the host’s choice was the agreed menu.

I left office early, to reach home on time, and host the entertainment programme with the approved ‘list of refreshments’.

Protocol demanded that the watchman be sent with a repeat invitation, and request the anxious guests to grace the occasion with their presence.

Usually these meetings were dominated by women folk, as the men knew little about domestic matters, and secondly, it made better sense to make the loudest respondents represent their household.

In about half an hour the guests trooped in, wearing clothes that were specially reserved to be inaugurated on this day. It was the usual turnout. By now, the bunkers had learnt to wear blinkers to any notice. Extra chairs were brought in by the watchman from the neighbouring flats and the guests seated themselves with a determined look on their faces to make the evening, a promising one. Their respective children were granted liberty to use any other room as play area for the stipulated time.

After initial discussions on each others’ sarees, which tailor in the locality stitches good ’saree falls/ zig-zag’ on time, and who possessed how many blouse pieces, the first decision was taken.

A mutual date was agreed upon where they could meet up and barter their ‘unused blouse pieces’.

Then, refreshments were served.

After a few crunches, comments were passed on the quality of the chips. An impromptu survey was done on the neighbouring ‘chips shops’. They were compared on various parameters like freshness, taste, price and service. Branded chips like Lays were also considered, but lost out on the fear of exceeding the ‘painfully-arrived-at-budget’. And the second verdict was passed.

The winning ‘chips shop’ was declared as the default chips provider for all future meetings.

The sweet had mixed reactions. Someone suggested her Uncle’s sweet shop, that he had recently opened on Avenue Road. She also volunteered to exercise her influence and get us a special discount. It was decided that further action would be taken only after the volunteer first served a free sample of Her Uncle’s flagship sweet.

“Not bad, three concrete decisions even before the meeting started” I thought to myself.

……to be contd.

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Flattening The American Internet

NOTE:  I originally published this article in 2007

Accessing information and interactive resources available around the globe via the Internet is a pretty simple task. In a carefree Internet world, the dynamics of connecting to resources are transparent, and we expect resources we want to access are available through our local Internet service provider. Technical details of connecting to Internet resources are an abstract concept for most, and whatever mechanics happen behind the scenes are not relevant to our everyday use of the network.

Because the Internet is made up of a complex matrix of physical, business and international relationships, how these systems interact and collaborate is actually very important to the end user, as well as to those providing Internet services and content. Of the greatest concern impacting online resources from eBay to the Bank of America is the potential financial pressure brought on by the largest Tier 1 networks. As the only networks in the world having global Internet visibility, these few companies, including AT&T, Sprint, Verizon, Level 3, and Cable and Wireless, facilitate access to the global Internet - a function which people and companies worldwide depend on to ensure small networks and content providers are available through their local service providers.

The Tier 1 world was born at the demise of NSFNet (National Science Foundation Network). In the early days of Internet development, the NSF supported development of a large publicaly funded academic and research network throughout the United States, and connecting many foreign academic networks to the US as a hub through the International Connections Manager (ICM Network). As commercial Internet development grew in the early 1990s, the NSF realized it was time to back away from publicaly funding the “Internet” and grant contracts to large US carriers to take over responsibility for the former US Domestic backbone and ICM portions of the NSFNet.

Small Internet exchange points (IXPs) were also funded, allowing the large networks taking over NSFNet assets, as well as their own commercial Internets to connect and share Internet traffic. Those network access points (NAPs) were also contracted to the large US carriers, who managed policies for US and International network exchange. The large US carriers ultimately had control of the networks, and were the original Tier 1 Internet providers.

Roadblocks in the Internet Community

Debates around net neutrality highlight some underlying issues. The goal of net neutrality is to preserve the open and interconnected nature of the public Internet. But whether the largest networks use their control to hinder growth and innovation within the Internet-connect business community or impede free access to Internet-connected content sources, they have the power and control which could present challenges to an open Internet environment.

A Tier 1 network, for example, has the power to charge a major content delivery network (CDN) a premium to access its network. This is because the CDN may deliver a very large amount of content traffic into a network, and the Tier 1 network believes they should receive additional compensation to fund additional capacity needed to support content distribution. This premium may be more money than the CDN is willing or able to pay. In turn, if the CDN doesn’t comply, the Tier 1 can ultimately refuse the CDN access to its network and cut its consumers access to the CDN’s content. This applies whether consumers access the Tier 1 directly or if the Tier 1 is the middle-network between consumers and their Tier 2 or 3 networks.

A voice over Internet Protocol Company underscores another potential conflict of interest. Let’s say you’re a consumer of a Tier 1 network that’s also a telephone company and you want to use a VoIP company, such as Vonage. But the Tier 1 doesn’t want the VoIP company to compete with its network and would rather that you use its own telephone product, so the Tier 1 may prevent you from using your VoIP company. In other words, a Tier 1, in developing its own commercial VoIP product, can prevent non-owned VoIP traffic from passing through its network.

While Tier 1 networks hold value for much of the Internet world, they also impose many political and financial barriers on smaller networks, content delivery networks, emerging VoIP companies, online gaming businesses, B2B and online commerce, and entertainment web sites. It is evident that Internet Service Providers (ISPs), CDNs, VoIPs, and many others need an alternative method of communicating with each other - one providing tools to redesign how relationships and interconnections bond the US Internet content and access communities.

Breaking Down Barriers

One objective in building efficiency and the performance needed to deliver content resources to end users is to flatten existing Internet architecture. Whenever possible, you eliminate the Tier 1 Internet networks from participating in the delivery of content resources to end users.

How do we accomplish this task? One option is through development and use of commercial Internet Exchange Points (IXPs), a location where many Internet-enabled networks and content resources meet to interconnect with each other as peers.

According to Wikipedia, an IXP is a physical infrastructure that allows different Internet Service Providers to exchange Internet traffic between their networks (autonomous systems) by means of mutual peering agreements, which allows traffic to be exchanged without cost. An IXP is essentially a physical switch in a carrier hotel or data center with the capacity to connect thousands of networks together, whether content providers or network providers.

Today at the Any2 Exchange, an IXP built within One Wilshire, on a single switch 125 different networks interconnect and are freely able to pass traffic amongst each other without having to go to a Tier 1 for routing. Members pay a small annual fee to the Any2 Exchange for the one-time connection and then benefit from the “peering” relationships among members of the Internet exchange.

Akamai, for example, a large content distribution network company that delivers streaming media and movies on demand, can connect to American Internet Services, a Tier 3 ISP in San Diego, Calif., through a local or regional Internet exchange point such as the Any2 Exchange, the Palo Alto Internet Exchange (PAIX), or other large exchange points operated by data centers and carrier hotels.

When an American Internet Services user wants to watch a movie that’s available on Akamai’s content delivery network, the data is passed directly from Akamai to American Internet Services - and subsequently to the end user - without transiting any other network. Not only has the goal of being less reliant on a Tier 1 been achieved, but the performance is superior because there are no “hops” between the CSP and ISP. Anytime you’re able to cut out the transit network, you increase the end user experience. Plus, it’s more economical, as in moist cases the CDN and ISP have no financial settlement for data exchanged.

The European IXP model, which is more mature and robust than the US model, highlights the important function of IXPs and how an exchange point alone can help influence the net neutrality debate. In Europe, Internet service providers and content delivery networks look to the IXP as their first connection point and if the IXP doesn’t have what they’re looking for, only then will they go to a Tier 1 or large Tier 2. Americans on the other hand, partially due to geographic size

Overall European IXP traffic grew at a rate of 11.05%, compared to America’s rate of 7.44%, according to the European Internet Exchange Association in August 2007. This can be attributed in part to greater member density in Europe - the London Internet Exchange/LINX has more than 275 members - where the larger the addressable community, the larger the traffic exchanged and the more the members want to get involved. After all, network effect (exponential growth of a community) and the “Law of Plentitude” (the idea that once an addressable or social community reaches participation by 15% or greater of a total community, it becomes a risk to not participate in the emerging community) motivate European companies to use IXPs. Additionally, Europeans generally have lower entry costs for participation, giving companies every reason why to participate in the IXP-enabled peering community. If one were to buy access to 275 networks through a Tier 1, the cost would be astronomical, but through a single connection to LINX, one can access 275 networks for a nominal fee. This is why European companies rely on IXPs 60% of the time, and only look to Tier 1 or 2 networks 40% of the time.

In contrast, American ISPs normally look to larger wholesale and Internet transit providers first and then consider reducing their operational expenses via an IXP as a second priority. American ISPs companies use IXPs at a more meager 15% rate, looking to larger wholesale and transit Tier 1 or Tier 2 networks 85% of the time. Still, recent American IXP traffic growth does exceed other regions, such as Japan (+5.85% in August) and the rest of Asia (+4.3% in August), which we believe is a result of increased price pressure on the American IXP industry. Newer IXPs, such as the Any2 Exchange, have lowered entry costs significantly, forcing others to follow suit and encouraging more networks to participate. As the cost of entry to IXPs continues to fall, participation in IXPs will become more common and attractive to all access and CDN networks.

What can we learn from the European model? Participation in an IXP can increase performance, lower operational costs and expenses, as well as bring an additional layer of redundancy and disaster recovery capacity to even the smallest networks. But most important, companies’ independence from Tier 1s through the collective bargaining of the exchange points puts them in a stronger position to deal with large networks than our position allows for in the US, where the vast majority of people have their primary Internet connections through a large Tier 2 or Tier 1 network provider.

Adding to the Cause

Today’s content-rich Internet is just a prelude to the future content, media, applications and services soon to be developed and deployed. It’s no wonder that in large IXPs, such as the Amsterdam Internet Exchange (AMS-IX), there are already several content delivery networks using bundled 10Gbps ports, clearly showing end users’ insatiable demand for high bandwidth applications and services. High Definition Internet TV (IPTV), massive online interactive gaming, video on demand (VOD), and feature-rich communications (video conferencing) are just a few examples of Internet-enabled applications contributing to the heightened demand.

For American ISPs that pay anywhere from $20-to-$40/Mbps when connecting to Tier 1 and Tier 2 networks, the cost of delivering applications and services to end users who require much larger network and bandwidth resources is one of the obstacles that needs to be overcome. But without broad participation in IXPs, access networks have a difficult future, as do content providers who will find that the cost of delivery to end users becomes much more expensive if Tier 1 and Tier 2 networks increase the cost of delivering both wholesale and end user Internet traffic.

What Can the American Internet-Connected Community Do?

Whether through price increases or monopolistic practices, the largest networks are currently writing the rules for a global Internet product. They are gradually merging and acquiring competition, reinforcing their influence in wholesale and transit network share and presence. Opportunities for network peering decrease with each merger.

Carrier hotels and large data centers in the US can support positive change in the Internet peering community by creating or supporting open and low cost Internet Exchange points promoting network peering and content delivery to all networks.

Reducing barriers to entry and the cost of wholesale or transit networks will allow Internet network and content companies to focus on delivering network access and services, with the ultimate winner being end users who will enjoy a lower cost, higher performance Internet experience.

The Common Sense Declaration: How to Fix Health Care

I am on a reading frenzy, and finally got to the October 17, 2008 issue of Medical Economics.  There was an excellent article by Elizabeth A. Pector, MD, on fixing health care.  I will highlight some key points, but encourage all of you to see the entire article (pages 29-33.)  (www.memag.com)

“Establish equal rights for doctors.”  Dr. Pector advocates appropriate reimbursement, taming the paper tiger, and reigning in “etitlementiasisis” by patients.  Bravo!

“Improve access to doctors.”  She again targets physician reimbursement, but my only question is “how”?  Increasing physician reimbursement will be a tough sell in today’s economic times.  Sadly, I don’t see a way off the office visit treadmill that is the bane of primary care existence.

“Stop the blame game.”  Our society has turned into expert finger pointers.  Bad things just happen.  People die.  Sometimes, physicians make mistakes.  We need to have mutual respect between patients and physicians, rather than mutual antagonism.  And hey, tort reform wouldn’t be so bad either!

“Establish workable technology standards.”  Amen.  “We need to establish workable standards for PHR and EHR systems, including mutually compatible communications platforms.  Also, cash strapped doctors need help to fund changes…”  Technology is here to stay, but we need a coherent direction for all of health care, such that physicians and patients can access records through out the spectrum of medical institutions (clinics, offices, hospitals, nursing homes, etc.) 

“Stop punishing doctors and hospitals.”  See my previous rant on the medicare never ever no pay list.  The no pay list will continue to grow as Medicare pokes its fingers into patient management.  The no pay rules range from common sense to absurd, but there seems to be no one reigning in the free wheeling CMS.

“Take responsibility.”  Americans need to pony up and take responsibility for their choices, rather than shifting the responsibility elsewhere.  This will take giant social change, from throwing out the television and X-box to eating meals that don’t come in a “super size.”  Are we up for the challenge?

I think Dr. Pector is my twin sister of a different mother! Keep fighting the good fight, Dr. Pector!

Making The Best of a Bad Year- Consider Taking Tax Lossess

With New Year’s Day less than a month away, it’s time to consider converting investment lemons into lemonade.

For most investors, this has been an abysmal year. But if you’re stuck with hefty losses, here’s a way to help soften the blow: Take a fresh look at what’s left of your wounded portfolio, dump losers you were thinking of ditching anyway and use your losses to cut your taxes for this year.

Tax professionals refer to this as “tax-loss harvesting.” While it may not make you feel much better about those ill-starred investments, it certainly can help fatten your wallet at tax time next year — and possibly in future years, too. “It’s a great year to tax-loss-harvest,” says Lawrence Glazer, managing partner of Mayflower Advisors, an investment advisory firm based in Boston.

The basic tax rules are fairly simple. But in your haste to save taxes, try to avoid wrong turns. For example, steer clear of a painful pothole known as the wash-sale rule, says Bob D. Scharin, a senior tax analyst at the tax and accounting business of Thomson Reuters in New York.

Here is a summary of the basic rules of the road, a few twists and turns to watch out for, and advice from investment and tax professionals.

THE BASICS: Although losing money is painful, you can use capital losses to soak up an unlimited amount of capital gains. If your capital losses are bigger than your gains or you don’t have any gains at all, you typically can deduct as much as $3,000 of net losses from wages and other income. The limit is $1,500 if you’re married and filing separately from your spouse, says Mr. Scharin.

Additional net losses get carried over onto your federal returns in future years, which can mean tax savings for years to come. However, capital-loss carryovers survive only as long as you do. You can’t leave them in your will for your heirs.

Naturally, paper losses don’t count. To be able to use your capital losses for tax purposes, you have to actually sell the investments.

These rules aren’t limited to stocks. They also apply to bonds and other securities.

During this year’s presidential campaign, Sen. John McCain proposed increasing the $3,000-a-year limit to $15,000 a year. President-elect Barack Obama hasn’t said whether he favors this idea.

IT’S A WASH: A “wash sale” typically happens when someone sells a stock or some other security at a loss and then buys the same stock, or something “substantially identical,” within 30 days of the sale. That means 30 days before or after the sale — not just 30 days after. Break this rule, and you aren’t allowed to deduct your loss. Instead, you add the disallowed loss to the cost of the new stock; that becomes your basis in that stock.

Thus, if you sell a security at a loss and want to be able to deduct that loss, don’t buy the same security, or something “substantially identical,” within the banned period. What does “substantially identical” mean? It can be a gray area, says Gregory Rosica, tax partner at Ernst & Young LLP in Tampa, Fla. The IRS says it depends on the facts and circumstances of your particular case, and the issue can get surprisingly tricky.

The safest bet: Wait until after the banned period to purchase the security — or buy something completely different. For more details, see IRS Publication 550, or check with a trusted tax expert.

The IRS has finally answered a separate question that lawyers and accountants had debated for years: Could an investor dodge the wash-sale rule by selling a stock at a loss in a taxable account and then buying it back a few minutes later for an IRA or some other tax-advantaged account? The IRS said no: That would violate the wash-sale rule.

TAX RATES: Under current law, the top rate on long-term capital gains on stocks, bonds and other securities is 15%. “Long term” means something you’ve owned for more than a year. If you sell an investment you’ve owned for a year or less, that’s a short-term gain, and it’s usually subject to tax at ordinary income rates. There’s also a capital-gains rate of zero — yes, zero — for people in the lowest brackets, but it’s complicated. To see if you qualify, consider buying inexpensive tax-preparation software programs, such as Intuit Inc.’s TurboTax. For more details, see IRS Publications 550 and 564, available on the IRS Web site (irs.gov).

During the presidential campaign, Sen. Obama called for raising the top long-term capital-gains rate on stocks and other securities to 20% — but only for households making more than $250,000, or individuals making more than $200,000. He also indicated he might delay the idea of raising taxes next year if the economy is weak.

If you sell art, jewelry or other collectibles for a profit, the top long-term capital-gains rate is 28%.

TAX TRAP: With stock prices down sharply, many investors may be looking for opportunities to jump back into the market and scoop up bargains. But if you’re thinking of buying stock mutual funds this month for a regular taxable account, do some homework first. Otherwise, you could get hit with a large tax bill that could easily have been avoided.

This is the time of year when mutual funds typically make their required capital-gains distributions. Those payouts are taxable — unless you’re investing for a tax-advantaged account such as an IRA. Thus, before investing in a fund, be sure to contact the fund and ask whether it’s planning a distribution, how much and when it will be paid, says Mr. Glazer of Mayflower Advisors. If getting a large distribution would have a significant impact on your taxes, consider deferring your investment in that fund until shortly after the date to qualify for the payout — or pick another fund, Mr. Glazer says. Otherwise, you’ll essentially be getting back part of your own investment and owing taxes on it, which would be “adding insult to injury,” he says.

It may seem this couldn’t possibly be an issue this year since most funds have lost money. Logical — but wrong. Not every fund is going to have a distribution, but many will this year despite the decline of your investment, Mr. Glazer says.

STRATEGIES: Don’t ever sell a stock solely for tax reasons. But if you’re considering selling something for solid investment reasons, be sure you at least consider the tax consequences.

Many investors who have ordinary income and who also are stuck with investments that are underwater routinely try to arrange their affairs so that they take full advantage of the net capital-loss rules. That typically means taking enough losses during the year so that they wind up with at least $3,000 in net realized capital losses, which can be used to offset ordinary income. This can be especially helpful for upper-income investors since ordinary income-tax rates range as high as 35%.

Considering giving away stock to charity? If so, don’t donate stocks that are selling for less than you paid for them. Instead, sell the losers so that you can claim a loss that can help you cut your taxes. Then, if you wish, donate the proceeds to charity. If you want to donate stock, donate shares that have gone up significantly in value and that you’ve owned for more than a year.

When making your decisions, take a look at all your investments, not just your deeply depressed stocks. For example, a friend is thinking of selling the New York City apartment that he and his wife have lived in as their primary residence for many years. They expect to make a profit well in excess of $500,000.

Under current law, joint filers who sell their primary residence typically can exclude a gain of as much as $500,000 if they’ve owned it — and lived there — for at least two of the five years prior to the sale. (For most singles, the limit is $250,000.) Gains of more than that are subject to capital-gains taxes.

So how could this New York couple avoid those taxes? They could sell their apartment and also get rid of stocks or other securities at a loss to reduce or even eliminate the excess gains on the apartment sale.

—Mr. Herman is a Wall Street Journal staff reporter in New York.

NOTE FROM EDITOR:  If you’re worried about selling to take advantage of tax loss harvesting because you would potentially lose exposure to the stock market (and therefore miss any potential rebound), consider reinvesting the sale proceeds in a tax efficient ETF until you can reinvest in the stock you sold (31 days).

SEC Approves New Credit-Rating Rules

The Securities and Exchange Commission took aim at the big credit rating firms Wednesday, passing new rules designed to prevent conflicts of interest and increase transparency in the $5 billion a year industry.

The three largest ratings firms — Standard & Poor’s, Moody’s Investors Service and Fitch Ratings — have been widely criticized for their role in the global financial crisis brought on by the collapse of the subprime mortgage market.

Critics claim the rating firms gave their highest ratings to securities laced with risky mortgage backed assets in order to curry favor — and profits — from the firms buying and selling the securities.

The new rules specifically forbid the firms from advising banks on how to package securities in order to secure high ratings.

Thousands of securities initially given AAA ratings were later downgraded as the financial crisis washed across Wall Street, forcing nearly every large bank to write down billions of dollars in losses.

SEC commissioners voted unanimously at a public meeting to adopt the new rules.

SEC Chairman Christopher Cox called adoption of the new rules “a significant and substantive action.”

The industry had regulated itself for nearly a century, but that ended in 2007 as it became clear that many mortgage-backed securities given AAA ratings were likely to collapse in value.

The agencies have long been as almost de facto regulators, issuing ratings on the creditworthiness of public companies and securities. Investors depend on the ratings to purchase the safest possible securities.

Their grades can be key factors in determining a company’s ability to raise or borrow money, and at what cost which securities will be purchased by banks, mutual funds, state pension funds or local governments.

Among the other new rules is one that will require the rating firms to disclose how much verification they performed on the quality of the securities they review.

SEC Approves New Credit-Rating Rules By FBN,  http://www.foxbusiness.com/story/markets/industries/finance/sec-approves-new-credit-rating-rules/

Jeff Luers interviews prisoner Grant Barnes

Jeffrey Free Luers interviews Grant Barnes:

JL: You are currently serving a long prison sentence for arsons claimed on behalf of the Earth Liberation Front. What compelled you to take such actions?

GB: I had been aware of the ELF for some time, and as I became more aware of the severity of the most likely consequences of climate change I decided it was time for me to do my part and take responsibility. I think that property destruction is a useful component in a united front of tactics toward first, earth liberation, and ultimately towards the cultivation of a biocentric culture. It raises the economic and psychological costs of earth destruction, and when there is media coverage, as there usually is, it shows people on all sides of the struggle that the destroyers are vulnerable. I believe that property destruction is one of the things that the other species of the planet would do in their defense against extinction if they had the knowledge and ability to do so. Those who destroy the property of uncaring, irresponsible people act on behalf of these other species, which are our cousins.

JL: How did you first get into activism?

GB I helped with an info-shop in Denver (now closed) and Food Not Bombs, and I worked for the Rape Assistance and Awareness Program.

JL: You are serving your sentence in maximum security. What has that been like?

GB: One challenge has been racism. Im white, and most of the people I talk to are not, and this has led to some confrontations with racists. My friends back me up though, so when problems arrive we respond and that keeps me safe enough. They deserve the better part of the credit for that.

Otherwise, the hardest thing is the isolation; Im a social person and community is very important to me, so everyday it takes a conscious effort to adapt to spending most of my time alone (most of the time Im not allowed to leave the cell). However, I stay productive by studying for my degree and working out, and Ive made strong progress in both areas. I occasionally have the opportunity to return correspondence and that is one of my favorite things to do.

JL: When you first decided to get involved in eco-defense did you think you would end up in prison? If so, how did you prepare yourself for that possibility?

GB: I knew I could go down and I strove not to. At various times in my life I had read prison memoirs like Soul On Ice by Black Panther Eldridge Cleaver and Soledad Brother by George Jackson, and some more recent accounts of prison life, including a web file entitled How To Survive In Prison. It contains some good information, for instance on the importance of respect, but I think I would have picked up on that sort of thing whether or not I had read anything on it. Probably the best way somebody could prepare would be to stay in good physical shape.

JL: How has your support been? How can people get involved?

GB: The Lucy Parsons Project sent two books last year, which are outstanding to have as good reading material is hard to get here. Earth First! Journal kindly gave me a free prisoner subscription, and I also got an issue apiece from Green Anarchy and Bite Back, all of which I considered notable on the outside and appreciate having in here. I am especially thankful that Earth First! Journal and Green Anarchy have listed my address. Ive got several letters and postcards wishing me well, and recently Ive begun corresponding with several people. It would be outstanding to hear from others.

The best thing people can do is send information on intentional communities, mutual aid networks, and similar formations I might contribute to when I am released. One of the most frustrating things about being inside is having few outlets to give to others, but I want to lay a solid foundation for such community that I can build on when my time here is done. Creating community takes a great deal of work, and I know its necessary to spend time to understand, among other things, a potential members level of commitment and the extent of the common ground shared with existing members. I want to start that dialogue, because the kind of life I want to live on the outside is one spent as much as possible in spaces of liberation from patriarchy, exploitation, anthropocentrism, racism, and all other symptoms of the present alienating civilization. To that end I am most interested in more primitive groups.

Also, I find that in general pictures are more natural expressions than words, and it means a lot to me to see photos along with peoples writings. Regardless, it is always special to receive a letter or postcard from anyone who feels concern for the earth and joy for life.

JL: Are you working on projects while locked up?

GB: Im finishing my degree in cultural anthropology; I was a student when I was arrested. Reading about a range of cultures has been provocative. It has shown me to some extent how much is being lost with the extinction of so many sustainable, primitive ways of life–knowledge we need now more than ever. I also keep up with reports on climate change, and I am reading some books I had not made time for on the outside, like Derrick Jensens Endgame.

JL: And now heres your chance for a shameless wish list. Would you like people to send any specific books or books on particular subjects? Are there any canteen items, like a radio or anything else, we can help you buy to make your time easier?

GB: I dont listen to the radio or watch TV, or buy snacks, and money is qualitatively less valuable to me than heartfelt correspondence, but I would certainly appreciate funds for mailing supplies, and for beans and oats, as the vegan food here is very limited. One luxury I do love is music and receiving some of that would be a treat.

One of the subjects I most want to better understand is the difference between primitive and complex cultures. I would be very grateful for any well-researched reading material at the undergrad level on this topic. Much of what is listed in Green Anarchy is of interest, for instance.

Grant Barnes is serving a 12 year prison sentence for the arson of SUVs. From his prison cell he watches the birds that have made their nest within the razor wire. A reflection of what is happening to our world. Write to: Grant Barnes, #137563, San Carlos Correctional Facility, PO Box 3, Pueblo, CO 81002. Visit his new website at http://grantbarnes.wordpress.com.

—————————-

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Scam of the day

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IDEA #5: The Common Sense Guide

As much as life is about chasing dreams, make sure you live each day to the fullest.   Laugh.  Smile.  Share.  Engage with people.  We are all in a rat race, some with a lot less pressure, some with everything at stake everyday.   How we handle ourselves, is how we define our character.   Some us will have relentless schedules.   Others will have huge debts.  Some will enjoy nature and others will be trapped behind the desk.   Find your happiness.   Find your medium.   Enjoy the moments. 

Simple Socialism

Johnny and I were standing outside the tennis courts in Forsythe Park watching some of the regulars try to revive their backhands and discussing Obama’s win. I asked him if he was excited.

“Why? Because a black man is president?”

“Um, yeah.” Duh.

He shook his head. “Just because I’m black don’t mean I’m impressed.” Then he leaned in as if he was fearful of being overheard even though there was no one around except the players who had enough on their hands discovering top spin. “I’m a socialist,” he said in a near-whisper. “You know what that is?”

We’d been talking politics all summer but he’d never said the word before. “I’ve heard of it,” I said non-commitally. “What is it?”

“It means taking care of people. Socialism is people first.”

[T]he definition above is the commonly accepted depiction of Communism, while the commonly accepted definition of socialism has come to resemble what you call “European Democratic Socialism”. Might there be some good reason to accept these definitions rather than go back to Square One?

I was thinking of Johnny when I wrote that.

Political or economic movements/philosophies/policies should ultimately have as their goal the welfare of the people - all the people, not just a select few. Socialism has always seemed to me the best way to achieve that. Her definition is neatly put and couldn’t be clearer.

Socialism, as I envision it, is an economic system under which all natural resources, as well as all means of producing goods and commodities (above the scale of individual artisanship), and of organizing the delivery of services, would be owned and managed by a democratically-run government for the benefit of the society as a whole. The government, in turn, would take full responsibility for meeting everyone’s fundamental needs – food, clothing, shelter, health care, education, transportation, a healthy ecosystem, access to cultural and recreational resources – at the highest level possible.Rational planning, not competition for profit, would drive the allocation of resources, with the goal of meeting the needs of society as a whole. Maximum use of technology – intelligently designed and environmentally sustainable – would ensure that human drudgery could be continually reduced over time. Advances in productivity would be used to reduce the length of the work week and raise the standard of living for everyone, not to enrich a small elite.

That definition certainly encompasses what both Johnny and I have in mind.

But the problem with socialism for those of us who have looked at it has never really been in defining it. Its greatest flaw is its reliance on decision-making by citizens, most of whom, at least in America, seem notoriously disinterested in making any decisions at all, while the rest want to make as few as they can get away with. Socialism demands heavy participation by the majority of a nation’s citizens. But even that isn’t enough. They need to be knowledgable, educated (not necessarily the same thing), have a fund of common sense, and a solid connection to their communities.

***

In a society in which people are absolutely assured that their fundamental needs, and those of their family, friends, coworkers, and neighbors will be met without question, this insecurity, and the greed it produces, will fade away, and people will no longer feel the need to amass as much money and as many possessions as possible in order to bolster their sense of self-worth and provide for an uncertain future. When workplaces and other social institutions are administered with the goal of meeting human needs through cooperation and teamwork, people will no longer feel the need to compete with one another in destructive ways. Instead, people will derive satisfaction and pleasure primarily from contributing to their society through creative and fulfilling work.

Maybe, but while behaviour is malleable and depends on circumstances, just as she says, the circumstances in the US preclude a preponderance of the population acquiring the skills needed even to envision a socialist democracy, much less bring one about or participate in its maintenance. For that reason I, many years ago and with great reluctance, reached the conclusion that for the foreseeable future, the best we could hope for in America is what Organian calls “European Democratic Socialism” and describes, accurately I’m afraid, as little more than “a kinder, gentler capitalism”.

Given the alternative as we have experienced it for 30 years and especially for the last 8 as capitalism ran amok, I’d take it. Gladly.

Still, there is no inherent reason, not behaviour or our so-called “innate nature”, why a socialist society would not work. Indeed, many have and for very long periods of time. Most were brought down by outside forces far stronger than they could defend against and armed with weapons they didn’t expect and knew nothing about. But for as long as they lasted they were stable, hospitable, and peaceful. From the outside, in the case of those that were studied, they even appeared to be happy, a condition that could, of course, not be allowed to continue since it was a “threat”, to our self-image if nothing more.

Organian seems to be aiming at clearing the ground for an eventual discussion around realistically creating a socialist democracy in America, a discussion which the Bush Era makes almost inevitable and maybe even important. I’d urge you to read what she’s written and join in. If there’s any way it can be done, it might be our only way out of repeating Bush every century or so and we owe it to our grandkids to do everything we can think of to make sure that doesn’t happen.

Personally, I don’t think it can be done. There are too many shitheads and greedos who define America as a country where you have the right to make as much $$$ as you can get your grubby fingers on. They’re loud, they’re bullies, and they’ll threaten to kill you if you disagree with them. Still, I’m willing to listen.

macroéconomie_04/12/2008

Source : NEP (New Economics Papers) | RePEc

game-theory_04/12/2008

Source : NEP (New Economics Papers) | RePEc

What is a Short Sale? Considering a Short Sale on Your Orlando Home?

The Man Who Beats the S

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Visit By UK Twinning Group To Tang Ting Village

British representatives of a unique twinning scheme are due to meet with their Nepalese counterparts shortly, in what will be an exciting and enlightening experience for all concerned.

The idea for the twinning came to fruition when former Gurkha Captain, Gaubahadur Gurung approached his District Councillor, Tina Knight. He asked for her help in setting up some form of charity, to help support and aid his home village.

It was Councillor Knight’s radical idea to ‘twin’ the Nepalese and English villages, as she felt that the twinning would have many benefits, including improving community links between the English villages, Carver Barracks and the Nepalese community in the UK, as well as raising money for Tang Ting. Out of this new relationship the Tang Ting Twinning Association was born, which over its short life has raised many lakh rupees to support Tang Ting.

The twinning was celebrated in style in May 2007 at Carver Barracks, with the acting Nepalese Ambassador in attendance, the Gurkha band playing, school children singing and dancing and many local dignitaries in attendance, culminating in the signing of a Charter which joins these different communities in friendship, and which pledges to support the Nepalese people.

In England the charters were signed, but the ceremonies were not fully completed as spaces were reserved for signatures from the Tang Ting elders. Now, more than a year later, these spaces are about to be filled, as the committee members from the TTTA, together with members of the British Nepalese community, are making their way to Tang Ting to complete the ceremonies, formally open the Day Care centre and find out more about the village, its life and its needs.

The Tang Ting Twinning Association aims to promote friendship and co-operation between the communities of Debden, Debden Green and Wimbish in the UK, and of Tang Ting in Nepal, to the benefit of all of our citizens.

• The Tang Ting Twinning Association aims to encourage mutual understanding of life within the communities, in relation to cultural, economic, educational and social affairs, via communication between our communities, particularly through our children, but also through other sections of society.

Rip Van Winkle fills and files

Honest to goodness, if Rip Van Winkle didn’t wake up and file the Amended Answer for defendant Forensic Analysis and Engineering, it’s difficult to account for many of 67 defenses (yes, 67!).

New to the case or not, any Statue of Limitations that might apply would not consider the date an attorney makes an appearance; but, that’s only date that might, just might, be beyond some limit.

Like many of the defenses, the fifth had no supporting citation.  In those defenses with a citation, the reference was broad with no information on how it might apply.  For example:

A particularly bewildering defense are the many related to punitive damages beginning with defense thirteen and continuing through defense twenty-six save the one exception, defense twenty-five.

What makes the twelve punitive damage defenses so bewildering is that no punitive damages are sought.

WHEREFORE, Relators demand judgment against the Defendants jointly and severally in the amount of three times the overcharges submitted for payment to the United States Government, for a civil penalty against the Defendants each jointly and severally in an amount between Five Thousand, Five Hundred Dollars ($5,500.00) and Eleven Thousand Dollars ($11,000.00) for each violation of 31 U.S.C. § 3729, etseq., for the maximum amount allowed to the Qui Tam Plaintiff under 31 U.S.C. § 3730(d) of the False Claims Act or any other applicable provision of law, including any alternate remedy provisions, for its court costs and reasonable attorneys fees at prevailing rates, for expenses, and for such other and further relief as this Court deems meet, just and proper.

The False Claims Act establishes the penalty at three times the amount of each infraction.  Consequently, the qui tam claim filed by the Rigsby sisters simply requests a judgment consistent with the law and not requesting punitive damages -  which brings up the law established by the Act and another of the defenses.

WHEREFORE, Relators demand judgment against the Defendants jointly and severally for a fair and reasonable amount to be determined by a jury, for its court costs and reasonable attorneys fees at prevailing rates, for expenses, and for such other and further relief as this Court deems meet, just and proper.

Having filled the sink with 67 defenses, the brief the brief turns on the water and attempts to float 44 answers. en moves to answers. Two are particularly noteworthy:

3. It is admitted that FAEC conducted some limited business in this district immediately after Hurricane Katrina. Subject to the other defenses pled herein, FAEC admits only that it is properly before the court and that venue is proper in this district. Otherwise, paragraph 7 of the Complaint is denied.

However, the contact page on the Forensic website lists an office in Ocean Springs, Mississippi - and surely it takes more than “some limited business in this district” to maintain an office.

5. In response to paragraph 17, it is admitted that FAEC is in business to provide engineering services to its clients, which sometimes include insurance companies.

The insurance companies listed on the client page of the Forensic website represent 57% of the company’s total clients listed and include:

Allstate Insurance, Amica Mutual Insurance, Bituminous Insurance,Cigna Property & Casualty,CNA Insurance, Erie Insurance, Farmer’s Insurance,Fireman’s Fund Companies (Atlanta), GEICO, Golden Eagle Insurance (Los Angeles),Home Insurance (Jacksonville), Kemper Insurance, Liberty Mutual Insurance, Lloyds of London, Nationwide Insurance, North Carolina Farm Bureau,North Carolina Grange Mutual Insurance Company, Penn National Insurance, Phillips Petroleum, Reliance Insurance Group, Safeco Insurance, Selective Insurance, St. Paul Fire & Marine Insurance, State Farm Insurance,Texas Workers’ Compensation Fund, TIG Insurance (Honolulu), and USAA Property & Casualty Insurance

One can’t help but wonder how Judge Senter will drain the sink; but, when it comes to the Rigsby qui tam claim, the unexpected is always expected.

Year End Portfolio Reallocation

Managed Futures involve risk and are not suitable for all investors. Past performance is not indicative of future results.

AIG Offers First Takaful Homeowners Insurance Product for U.S.

by AIG Commercial Insurance

Risk Specialists Companies, Inc. (RSC), a subsidiary of AIG Commercial Insurance, is introducing what it says is a first in the U.S.: a homeowners insurance product that is compliant with key Islamic finance tenets and based on the concept of mutual insurance.

The Takaful Homeowners Policy is underwritten through RSC member company A.I. Risk Specialists Insurance, Inc., in conjunction with Lexington Insurance Co. and in association with AIG Takaful Enaya. Headquartered in Bahrain, AIG Takaful Enaya was established in 2006 to provide Takaful products, including accident and health, auto, energy, property and casualty products.

The Takaful home policy is the first installment in Lexington Takaful Solutions, a series of Shari’ah-compliant (Takaful) product offerings in the U.S.

According to Ernst & Young’s 2008 World Takaful Report, Takaful was estimated to be a $5.7 billion market globally with over 130 providers in 2006. The Takaful market is estimated to be in excess of $10 billion by 2010.

Takaful is similar to mutual insurance and cooperative risk sharing but there are key differences including a clear segregation of funds owned by participants and those owned by the insurance operations entity. Investments of funds are also restricted to avoid companies involved in entertainment, alcohol, pork and other elements prohibited by Islamic law.

Muslim countries only account for 5 percent of the global insurance market although they represent 25 percent of the world’s population, according to AIG, which launched its Takaful operation in October 2006.

The Takaful Homeowners Policy builds on LexElite, the homeowners policy from Lexington that is sold throughout the U.S. The Takaful Homeowners Policy is available in all 50 states.

According to Jim Crain, associate vice president and personal lines underwriting director for Risk Specialists, the coverage, terms, commissions and sales proceduers are the same for this new products as they are for LexElite.

“The introduction of Takaful products in the U.S. represents an important and emerging growth opportunity for AIG Commercial Insurance. We are pleased to offer socially responsible solutions to this segment of the domestic market,” said Matthew F. Power, president, Risk Specialists Companies, Inc.

AIG Takaful Enaya is licensed by the Central Bank of Bahrain and its Shari’ah Supervisory Board is composed of Shari’ah scholars Sheikh Nizam Yaquby, Dr. Mohammed Ali Elgari and Dr. Muhammad Imran Usmani.

Risk Specialists Companies, Inc. is a U.S. surplus lines broker providing access to specialty casualty, property and personal lines insurance from Lexington and other AIG companies.

Don

Since our October market update in which I stated that this is the worst financial crisis I have seen in my thirty years as a wealth manager, both consumers and investors are more scared and have retreated even further. The big three U.S. auto companies are in trouble and the markets have made lower lows. Until we see a solid bottom, caution is warranted.

I have recommended our 401K investors to be in fixed income or cash until the dust settles. With the markets trying to find a bottom and the possibility of much lower lows, we sold most of our mutual funds (representing about 10% of our portfolios) in last week’s rally. I have been very disappointed with their ability to protect their investors on the downside. By selling we can lock in capital losses to combat potential tax increases with the Obama administration. What is working well for us is our intraday trading and protecting our portfolios with ultra short Proshares positions.  We are very active in protecting our investor’s principal, as I feel it is better to be safe than sorry. The economy is not going to turn up for a while and we are going to hear negative news from different sectors that are adversely affected by the recession. However, I am anticipating that the markets will present great opportunities going into in the second quarter of 2009.

In other news, a new year is approaching and with this new year comes a new President and administration, and more importantly, new tax policies.  While President-elect Obama has not been specific with details or commitments, the hints he has dropped indicate that the tax increases he campaigned with will most likely be postponed until after 2009.

Even with this uncertainty, it is prudent to take action now and help shape your income tax liability for 2008.  Here are some traditional tax strategies to consider:

These are only a few but enough to start us thinking about tax savings.  For more detailed information on 2008 strategies and tax law changes, check out the “Year-End Tax Planning for Individuals” article, which is located in the news and resources section of the Tellone Financial Services website.  For questions more specific in nature, don’t hesitate to call.

Jeffrey Free Luers interviews Grant Barnes

Infoshop News

JL: You are currently serving a long prison sentence for arsons claimed on behalf of the Earth Liberation Front. What compelled you to take such actions?

GB: I had been aware of the ELF for some time, and as I became more aware of the severity of the most likely consequences of climate change I decided it was time for me to do my part and take responsibility. I think that property destruction is a useful component in a united front of tactics toward first, earth liberation, and ultimately towards the cultivation of a biocentric culture. It raises the economic and psychological costs of earth destruction, and when there is media coverage, as there usually is, it hows people on all sides of the struggle that the destroyers are vulnerable. I believe that property destruction is one of the things that the other species of the planet would do in their defense against extinction if they had the knowledge and ability to do so. Those who destroy the property of uncaring, irresponsible people act on behalf of these other species, which are our cousins.

JL: How did you first get into activism?

JL: You are serving your sentence in maximum security. What has that been like?

JL: How has your support been? How can people get involved?

JL: Are you working on projects while locked up?

Leadership In The Making

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Incredible Article (Some people predicted and even bet on the mortgage meltdown) a must read

When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of ­borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

Harboring suspicions about ­people’s morals and telling investors that companies don’t deserve their capital wasn’t, in the 1990s or at any other time, the fast track to success on Wall Street. Eisman quit Oppenheimer in 2001 to work as an analyst at a hedge fund, but what he really wanted to do was run money. FrontPoint Partners, another hedge fund, hired him in 2004 to invest in financial stocks. Eisman’s brief was to evaluate Wall Street banks, homebuilders, mortgage originators, and any company (General Electric or General Motors, for instance) with a big financial-services division—anyone who touched American finance. An insurance company backed him with $50 million, a paltry sum. “Basically, we tried to raise money and didn’t really do it,” Eisman says.

Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.”

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?

The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged.

Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.” Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to fucking deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

“It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”

About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.

There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.

Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.

When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.

We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

I smiled back, though it wasn’t quite a smile.

“Your fucking book destroyed my career, and it made yours,” he said.

I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

It was now all someone else’s fault.

He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

“That’s nauseating,” he said.

Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

Incredible Article (Some people predicted and even bet on the mortgage meltdown) a must read

When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of ­borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

Harboring suspicions about ­people’s morals and telling investors that companies don’t deserve their capital wasn’t, in the 1990s or at any other time, the fast track to success on Wall Street. Eisman quit Oppenheimer in 2001 to work as an analyst at a hedge fund, but what he really wanted to do was run money. FrontPoint Partners, another hedge fund, hired him in 2004 to invest in financial stocks. Eisman’s brief was to evaluate Wall Street banks, homebuilders, mortgage originators, and any company (General Electric or General Motors, for instance) with a big financial-services division—anyone who touched American finance. An insurance company backed him with $50 million, a paltry sum. “Basically, we tried to raise money and didn’t really do it,” Eisman says.

Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.”

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?

The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged.

Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.” Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to fucking deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

“It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”

About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.

There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.

Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.

When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.

We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

I smiled back, though it wasn’t quite a smile.

“Your fucking book destroyed my career, and it made yours,” he said.

I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

It was now all someone else’s fault.

He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

“That’s nauseating,” he said.

Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

Incredible Article (Some people predicted and even bet on the mortgage meltdown) a must read

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

 

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.”

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

 

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.

There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.

Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.

When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.

We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

I smiled back, though it wasn’t quite a smile.

“Your fucking book destroyed my career, and it made yours,” he said.

I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

It was now all someone else’s fault.

He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

“That’s nauseating,” he said.

Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

Incredible Article (Some people predicted and even bet on the mortgage meltdown) a must readbet on the mortgage meltdown) a must read

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

 

 

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

 

 

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.

Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.

When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.

We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

I smiled back, though it wasn’t quite a smile.

“Your fucking book destroyed my career, and it made yours,” he said.

I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

It was now all someone else’s fault.

He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

“That’s nauseating,” he said.

Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

 

Incredible Article (Some people predicted and even bet on the mortgage meltdown) a must read

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

 

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.”

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

 

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.

There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.

Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.

When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.

We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

I smiled back, though it wasn’t quite a smile.

“Your fucking book destroyed my career, and it made yours,” he said.

I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

It was now all someone else’s fault.

He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

“That’s nauseating,” he said.

Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

Incredible Article (Some people predicted and even bet on the mortgage meltdown) a must read

When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

From that moment, Whitney became E.F. Hutton: When she spoke, people listened. Her message was clear. If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of ­borrowed money, and imagine what they’d fetch in a fire sale. The vast assemblages of highly paid people inside the firms were essentially worth nothing. For better than a year now, Whitney has responded to the claims by bankers and brokers that they had put their problems behind them with this write-down or that capital raise with a claim of her own: You’re wrong. You’re still not facing up to how badly you have mismanaged your business.

Rivals accused Whitney of being overrated; bloggers accused her of being lucky. What she was, mainly, was right. But it’s true that she was, in part, guessing. There was no way she could have known what was going to happen to these Wall Street firms. The C.E.O.’s themselves didn’t know.

Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

At some point, I could no longer contain myself: I called Whitney. This was back in March, when Wall Street’s fate still hung in the balance. I thought, If she’s right, then this really could be the end of Wall Street as we’ve known it. I was curious to see if she made sense but also to know where this young woman who was crashing the stock market with her every utterance had come from.

It turned out that she made a great deal of sense and that she’d arrived on Wall Street in 1993, from the Brown University history department. “I got to New York, and I didn’t even know research existed,” she says. She’d wound up at Oppenheimer and had the most incredible piece of luck: to be trained by a man who helped her establish not merely a career but a worldview. His name, she says, was Steve Eisman.

Eisman had moved on, but they kept in touch. “After I made the Citi call,” she says, “one of the best things that happened was when Steve called and told me how proud he was of me.”

Having never heard of Eisman, I didn’t think anything of this. But a few months later, I called Whitney again and asked her, as I was asking others, whom she knew who had anticipated the cataclysm and set themselves up to make a fortune from it. There’s a long list of people who now say they saw it coming all along but a far shorter one of people who actually did. Of those, even fewer had the nerve to bet on their vision. It’s not easy to stand apart from mass hysteria—to believe that most of what’s in the financial news is wrong or distorted, to believe that most important financial people are either lying or deluded—without actually being insane. A handful of people had been inside the black box, understood how it worked, and bet on it blowing up. Whitney rattled off a list with a half-dozen names on it. At the top was Steve Eisman.

Steve Eisman entered finance about the time I exited it. He’d grown up in New York City and gone to a Jewish day school, the University of Pennsylvania, and Harvard Law School. In 1991, he was a 30-year-old corporate lawyer. “I hated it,” he says. “I hated being a lawyer. My parents worked as brokers at Oppenheimer. They managed to finagle me a job. It’s not pretty, but that’s what happened.”

He was hired as a junior equity analyst, a helpmate who didn’t actually offer his opinions. That changed in December 1991, less than a year into his new job, when a subprime mortgage lender called Ames Financial went public and no one at Oppenheimer particularly cared to express an opinion about it. One of Oppenheimer’s investment bankers stomped around the research department looking for anyone who knew anything about the mortgage business. Recalls Eisman: “I’m a junior analyst and just trying to figure out which end is up, but I told him that as a lawyer I’d worked on a deal for the Money Store.” He was promptly appointed the lead analyst for Ames Financial. “What I didn’t tell him was that my job had been to proofread the ­documents and that I hadn’t understood a word of the fucking things.”

Ames Financial belonged to a category of firms known as nonbank financial institutions. The category didn’t include J.P. Morgan, but it did encompass many little-known companies that one way or another were involved in the early-1990s boom in subprime mortgage lending—the lower class of American finance.

The second company for which Eisman was given sole responsibility was Lomas Financial, which had just emerged from bankruptcy. “I put a sell rating on the thing because it was a piece of shit,” Eisman says. “I didn’t know that you weren’t supposed to put a sell rating on companies. I thought there were three boxes—buy, hold, sell—and you could pick the one you thought you should.” He was pressured generally to be a bit more upbeat, but upbeat wasn’t Steve Eisman’s style. Upbeat and Eisman didn’t occupy the same planet. A hedge fund manager who counts Eisman as a friend set out to explain him to me but quit a minute into it. After describing how Eisman exposed various important people as either liars or idiots, the hedge fund manager started to laugh. “He’s sort of a prick in a way, but he’s smart and honest and fearless.”

Harboring suspicions about ­people’s morals and telling investors that companies don’t deserve their capital wasn’t, in the 1990s or at any other time, the fast track to success on Wall Street. Eisman quit Oppenheimer in 2001 to work as an analyst at a hedge fund, but what he really wanted to do was run money. FrontPoint Partners, another hedge fund, hired him in 2004 to invest in financial stocks. Eisman’s brief was to evaluate Wall Street banks, homebuilders, mortgage originators, and any company (General Electric or General Motors, for instance) with a big financial-services division—anyone who touched American finance. An insurance company backed him with $50 million, a paltry sum. “Basically, we tried to raise money and didn’t really do it,” Eisman says.

Instead of money, he attracted people whose worldviews were as shaded as his own—Vincent Daniel, for instance, who became a partner and an analyst in charge of the mortgage sector. Now 36, Daniel grew up a lower-middle-class kid in Queens. One of his first jobs, as a junior accountant at Arthur Andersen, was to audit Salomon Brothers’ books. “It was shocking,” he says. “No one could explain to me what they were doing.” He left accounting in the middle of the internet boom to become a research analyst, looking at companies that made subprime loans. “I was the only guy I knew covering companies that were all going to go bust,” he says. “I saw how the sausage was made in the economy, and it was really freaky.”

Danny Moses, who became Eisman’s head trader, was another who shared his perspective. Raised in Georgia, Moses, the son of a finance professor, was a bit less fatalistic than Daniel or Eisman, but he nevertheless shared a general sense that bad things can and do happen. When a Wall Street firm helped him get into a trade that seemed perfect in every way, he said to the salesman, “I appreciate this, but I just want to know one thing: How are you going to screw me?”

Heh heh heh, c’mon. We’d never do that, the trader started to say, but Moses was politely insistent: We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to screw me. And the salesman explained how he was going to screw him. And Moses did the trade.

Both Daniel and Moses enjoyed, immensely, working with Steve Eisman. He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.

And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

In retrospect, pretty much all of the riskiest subprime-backed bonds were worth betting against; they would all one day be worth zero. But at the time Eisman began to do it, in the fall of 2006, that wasn’t clear. He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made: Which poor Americans were likely to jump which way with their finances? How much did home prices need to fall for these loans to blow up? (It turned out they didn’t have to fall; they merely needed to stay flat.) The default rate in Georgia was five times higher than that in Florida even though the two states had the same unemployment rate. Why? Indiana had a 25 percent default rate; California’s was only 5 percent. Why?

The funny thing, looking back on it, is how long it took for even someone who predicted the disaster to grasp its root causes. They were learning about this on the fly, shorting the bonds and then trying to figure out what they had done. Eisman knew subprime lenders could be scumbags. What he underestimated was the total unabashed complicity of the upper class of American capitalism. For instance, he knew that the big Wall Street investment banks took huge piles of loans that in and of themselves might be rated BBB, threw them into a trust, carved the trust into tranches, and wound up with 60 percent of the new total being rated AAA.

But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

As an investor, Eisman was allowed on the quarterly conference calls held by Moody’s but not allowed to ask questions. The people at Moody’s were polite about their brush-off, however. The C.E.O. even invited Eisman and his team to his office for a visit in June 2007. By then, Eisman was so certain that the world had been turned upside down that he just assumed this guy must know it too. “But we’re sitting there,” Daniel recalls, “and he says to us, like he actually means it, ‘I truly believe that our rating will prove accurate.’ And Steve shoots up in his chair and asks, ‘What did you just say?’ as if the guy had just uttered the most preposterous statement in the history of finance. He repeated it. And Eisman just laughed at him.”

Eisman, Daniel, and Moses then flew out to Las Vegas for an even bigger subprime conference. By now, Eisman knew everything he needed to know about the quality of the loans being made. He still didn’t fully understand how the apparatus worked, but he knew that Wall Street had built a doomsday machine. He was at once opportunistic and outraged.

Their first stop was a speech given by the C.E.O. of Option One, the mortgage originator owned by H&R Block. When the guy got to the part of his speech about Option One’s subprime-loan portfolio, he claimed to be expecting a modest default rate of 5 percent. Eisman raised his hand. Moses and Daniel sank into their chairs. “It wasn’t a Q&A,” says Moses. “The guy was giving a speech. He sees Steve’s hand and says, ‘Yes?’”

“Would you say that 5 percent is a probability or a possibility?” Eisman asked.

“Yes?” the C.E.O. said, obviously irritated. “Is that another question?”

“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.

Eisman’s willingness to be abrasive in order to get to the heart of the matter was obvious to all; what was harder to see was his credulity: He actually wanted to believe in the system. As quick as he was to cry bullshit when he saw it, he was still shocked by bad behavior. That night in Vegas, he was seated at dinner beside a really nice guy who invested in mortgage C.D.O.’s—collateralized debt obligations. By then, Eisman thought he knew what he needed to know about C.D.O.’s. He didn’t, it turned out.

Later, when I sit down with Eisman, the very first thing he wants to explain is the importance of the mezzanine C.D.O. What you notice first about Eisman is his lips. He holds them pursed, waiting to speak. The second thing you notice is his short, light hair, cropped in a manner that suggests he cut it himself while thinking about something else. “You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

His dinner companion in Las Vegas ran a fund of about $15 billion and managed C.D.O.’s backed by the BBB tranche of a mortgage bond, or as Eisman puts it, “the equivalent of three levels of dog shit lower than the original bonds.”

FrontPoint had spent a lot of time digging around in the dog shit and knew that the default rates were already sufficient to wipe out this guy’s entire portfolio. “God, you must be having a hard time,” Eisman told his dinner companion.

“No,” the guy said, “I’ve sold everything out.”

After taking a fee, he passed them on to other investors. His job was to be the C.D.O. “expert,” but he actually didn’t spend any time at all thinking about what was in the C.D.O.’s. “He managed the C.D.O.’s,” says Eisman, “but managed what? I was just appalled. People would pay up to have someone manage their C.D.O.’s—as if this moron was helping you. I thought, You prick, you don’t give a fuck about the investors in this thing.”

That’s when Eisman finally got it. Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

This particular dinner was hosted by Deutsche Bank, whose head trader, Greg Lippman, was the fellow who had introduced Eisman to the subprime bond market. Eisman went and found Lippman, pointed back to his own dinner companion, and said, “I want to short him.” Lippman thought he was joking; he wasn’t. “Greg, I want to short his paper,” Eisman repeated. “Sight unseen.”

Eisman started out running a $60 million equity fund but was now short around $600 million of various ­subprime-related securities. In the spring of 2007, the market strengthened. But, says Eisman, “credit quality always gets better in March and April. And the reason it always gets better in March and April is that people get their tax refunds. You would think people in the securitization world would know this. We just thought that was moronic.”

He was already short the stocks of mortgage originators and the homebuilders. Now he took short positions in the rating agencies—“they were making 10 times more rating C.D.O.’s than they were rating G.M. bonds, and it was all going to end”—and, finally, the biggest Wall Street firms because of their exposure to C.D.O.’s. He wasn’t allowed to short Morgan Stanley because it owned a stake in his fund. But he shorted UBS, Lehman Brothers, and a few others. Not long after that, FrontPoint had a visit from Sanford C. Bernstein’s Brad Hintz, a prominent analyst who covered Wall Street firms. Hintz wanted to know what Eisman was up to. “We just shorted Merrill Lynch,” Eisman told him.

“Why?” asked Hintz.

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.” When it came time to bankrupt Orange County with bad advice, Merrill was there. When the internet went bust, Merrill was there. Way back in the 1980s, when the first bond trader was let off his leash and lost hundreds of millions of dollars, Merrill was there to take the hit. That was Eisman’s logic—the logic of Wall Street’s pecking order. Goldman Sachs was the big kid who ran the games in this neighborhood. Merrill Lynch was the little fat kid assigned the least pleasant roles, just happy to be a part of things. The game, as Eisman saw it, was Crack the Whip. He assumed Merrill Lynch had taken its assigned place at the end of the chain.

The models don’t have any idea of what this world has become…. For the first time in their lives, people in the asset-backed-securitization world are actually having to think.” He explained that the rating agencies were morally bankrupt and living in fear of becoming actually bankrupt. “The rating agencies are scared to death,” he said. “They’re scared to death about doing nothing because they’ll look like fools if they do nothing.”

On September 18, 2008, Danny Moses came to work as usual at 6:30 a.m. Earlier that week, Lehman Brothers had filed for bankruptcy. The day before, the Dow had fallen 449 points to its lowest level in four years. Overnight, European governments announced a ban on short-selling, but that served as faint warning for what happened next.

At the market opening in the U.S., everything—every financial asset—went into free fall. “All hell was breaking loose in a way I had never seen in my career,” Moses says. FrontPoint was net short the market, so this total collapse should have given Moses pleasure. He might have been forgiven if he stood up and cheered. After all, he’d been betting for two years that this sort of thing could happen, and now it was, more dramatically than he had ever imagined. Instead, he felt this terrifying shudder run through him. He had maybe 100 trades on, and he worked hard to keep a handle on them all. “I spent my morning trying to control all this energy and all this information,” he says, “and I lost control. I looked at the screens. I was staring into the abyss. The end. I felt this shooting pain in my head. I don’t get headaches. At first, I thought I was having an aneurysm.”

Moses stood up, wobbled, then turned to Daniel and said, “I gotta leave. Get out of here. Now.” Daniel thought about calling an ambulance but instead took Moses out for a walk.

Outside it was gorgeous, the blue sky reaching down through the tall buildings and warming the soul. Eisman was at a Goldman Sachs conference for hedge fund managers, raising capital. Moses and Daniel got him on the phone, and he left the conference and met them on the steps of St. Patrick’s Cathedral. “We just sat there,” Moses says. “Watching the people pass.”

Not so for hedge fund managers who had seen it coming. “As we sat there, we were weirdly calm,” Moses says. “We felt insulated from the whole market reality. It was an out-of-body experience. We just sat and watched the people pass and talked about what might happen next. How many of these people were going to lose their jobs. Who was going to rent these buildings after all the Wall Street firms collapsed.” Eisman was appalled. “Look,” he said. “I’m short. I don’t want the country to go into a depression. I just want it to fucking deleverage.” He had tried a thousand times in a thousand ways to explain how screwed up the business was, and no one wanted to hear it. “That Wall Street has gone down because of this is justice,” he says. “They fucked people. They built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience.”

“It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”

About the time they were sitting on the steps of the midtown cathedral, I sat in a booth in a restaurant on the East Side, waiting for John Gutfreund to arrive for lunch, and wondered, among other things, why any restaurant would seat side by side two men without the slightest interest in touching each other.

There was an umbilical cord running from the belly of the exploded beast back to the financial 1980s. A friend of mine created the first mortgage derivative in 1986, a year after we left the Salomon Brothers trading program. (“The problem isn’t the tools,” he likes to say. “It’s who is using the tools. Derivatives are like guns.”)

When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.

The changes were camouflage. They helped distract outsiders from the truly profane event: the growing misalignment of interests between the people who trafficked in financial risk and the wider culture.

I’d not seen Gutfreund since I quit Wall Street. I’d met him, nervously, a couple of times on the trading floor. A few months before I left, my bosses asked me to explain to Gutfreund what at the time seemed like exotic trades in derivatives I’d done with a European hedge fund. I tried. He claimed not to be smart enough to understand any of it, and I assumed that was how a Wall Street C.E.O. showed he was the boss, by rising above the details. There was no reason for him to remember any of these encounters, and he didn’t: When my book came out and became a public-relations nuisance to him, he told reporters we’d never met.

Over the years, I’d heard bits and pieces about Gutfreund. I knew that after he’d been forced to resign from Salomon Brothers he’d fallen on harder times. I heard later that a few years ago he’d sat on a panel about Wall Street at Columbia Business School. When his turn came to speak, he advised students to find something more meaningful to do with their lives. As he began to describe his career, he broke down and wept.

When I emailed him to invite him to lunch, he could not have been more polite or more gracious. That attitude persisted as he was escorted to the table, made chitchat with the owner, and ordered his food. He’d lost a half-step and was more deliberate in his movements, but otherwise he was completely recognizable. The same veneer of denatured courtliness masked the same animal need to see the world as it was, rather than as it should be.

We spent 20 minutes or so determining that our presence at the same lunch table was not going to cause the earth to explode. We discovered we had a mutual acquaintance in New Orleans. We agreed that the Wall Street C.E.O. had no real ability to keep track of the frantic innovation occurring inside his firm. (“I didn’t understand all the product lines, and they don’t either,” he said.) We agreed, further, that the chief of the Wall Street investment bank had little control over his subordinates. (“They’re buttering you up and then doing whatever the fuck they want to do.”) He thought the cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed.

But I didn’t argue with him. For just as you revert to being about nine years old when you visit your parents, you revert to total subordination when you are in the presence of your former C.E.O. John Gutfreund was still the King of Wall Street, and I was still a geek. He spoke in declarative statements; I spoke in questions.

But as he spoke, my eyes kept drifting to his hands. His alarmingly thick and meaty hands. They weren’t the hands of a soft Wall Street banker but of a boxer. I looked up. The boxer was smiling—though it was less a smile than a placeholder expression. And he was saying, very deliberately, “Your…fucking…book.”

I smiled back, though it wasn’t quite a smile.

“Your fucking book destroyed my career, and it made yours,” he said.

I didn’t think of it that way and said so, sort of.

“Why did you ask me to lunch?” he asked, though pleasantly. He was genuinely curious.

You can’t really tell someone that you asked him to lunch to let him know that you don’t think of him as evil. Nor can you tell him that you asked him to lunch because you thought that you could trace the biggest financial crisis in the history of the world back to a decision he had made. John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation. He ignored the outrage of Salomon’s retired partners. (“I was disgusted by his materialism,” William Salomon, the son of the firm’s founder, who had made Gutfreund C.E.O. only after he’d promised never to sell the firm, had told me.) He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders. (A share of Salomon Brothers purchased when I arrived on the trading floor, in 1986, at a then market price of $42, would be worth 2.26 shares of Citigroup today—market value: $27.) But it made fantastic sense for the investment bankers.

From that moment, though, the Wall Street firm became a black box. The shareholders who financed the risks had no real understanding of what the risk takers were doing, and as the risk-taking grew ever more complex, their understanding diminished. The moment Salomon Brothers demonstrated the potential gains to be had by the investment bank as public corporation, the psychological foundations of Wall Street shifted from trust to blind faith.

No investment bank owned by its employees would have levered itself 35 to 1 or bought and held $50 billion in mezzanine C.D.O.’s. I doubt any partnership would have sought to game the rating agencies or leap into bed with loan sharks or even allow mezzanine C.D.O.’s to be sold to its customers. The hoped-for short-term gain would not have justified the long-term hit.

No partnership, for that matter, would have hired me or anyone remotely like me. Was there ever any correlation between the ability to get in and out of Princeton and a talent for taking financial risk?

Now I asked Gutfreund about his biggest decision. “Yes,” he said. “They—the heads of the other Wall Street firms—all said what an awful thing it was to go public and how could you do such a thing. But when the temptation arose, they all gave in to it.” He agreed that the main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. “When things go wrong, it’s their problem,” he said—and obviously not theirs alone. When a Wall Street investment bank screwed up badly enough, its risks became the problem of the U.S. government. “It’s laissez-faire until you get in deep shit,” he said, with a half chuckle. He was out of the game.

It was now all someone else’s fault.

He watched me curiously as I scribbled down his words. “What’s this for?” he asked.

I told him I thought it might be worth revisiting the world I’d described in Liar’s Poker, now that it was finally dying. Maybe bring out a 20th-anniversary edition.

“That’s nauseating,” he said.

Hard as it was for him to enjoy my company, it was harder for me not to enjoy his. He was still tough, as straight and blunt as a butcher. He’d helped create a monster, but he still had in him a lot of the old Wall Street, where people said things like “A man’s word is his bond.” On that Wall Street, people didn’t walk out of their firms and cause trouble for their former bosses by writing books about them. “No,” he said, “I think we can agree about this: Your fucking book destroyed my career, and it made yours.” With that, the former king of a former Wall Street lifted the plate that held his appetizer and asked sweetly, “Would you like a deviled egg?”

Until that moment, I hadn’t paid much attention to what he’d been eating. Now I saw he’d ordered the best thing in the house, this gorgeous frothy confection of an earlier age. Who ever dreamed up the deviled egg? Who knew that a simple egg could be made so complicated and yet so appealing? I reached over and took one. Something for nothing. It never loses its charm.

For retiree, 71, paper route cash a

As investments lose thousands, income is a `godsend’

Leon Berezowski takes a careful step onto the driveway. Patches of ice cover the black asphalt leading to the porch of the house – making even the short trek from sidewalk to mailbox a treacherous one.

“Look at this,” he says, shaking his head. He points a gloved finger at the walkway in front of a small bungalow in his central Etobicoke neighbourhood. “It’s like an ice rink.” He’s wearing his “sturdy boots” but for a moment he hesitates. At 71, he’s not one to take risks. But at 71, he knows he can’t avoid them either.

The retired pressman signed up a year ago to deliver the community paper twice a week to 55 houses on his street. His wife, Marie, said it would be a good way to keep active and meet the neighbours. The money he made – around $100 a month – was a bonus.

Six months later, the world has changed. Changes he reads about in the paper: failing businesses, struggling banks and bankrupt industries; changes that resonate in the financial statements he receives each month; changes he never saw coming.

“For a while, my stocks were doing really well,” says Berezowski. In 2006, his financial adviser put his life savings, more than $100,000, into a diversified mix of mutual funds, bonds and stocks.

“But in the last four months, it has been going down,” he says. Since September, he has lost thousands of dollars.

At a time when many seniors expected financial freedom, the economic crisis is forcing a growing number to face the harrowing reality that their nest eggs will run out before they do. As the stock market has plunged, so has confidence among older workers that they will be able to retire as comfortably as planned, or worse, be able to retire at all. A sizeable number of almost-retirees in Canada – around 30 per cent – plan to keep working past 65.

Some, like Berezowski, have turned to part-time employment, working at coffee shops or in retail. But many are holding tight, keeping their money where it is and hoping to survive the downturn.

“Everyone keeps saying it will recover. But will it go back up again?” he asks. “If it’s going to be in 25 years, I am not going to be here. So you just have to hope that things turn around sooner.”

THE NEIGHBOURS come out to talk with the grey-haired paper boy as he pulls his shopping buggy of Etobicoke Guardians behind him.

“I bowl with the guy who lives here,” says Berezowski. “We always joke around. He’ll say, `Where’s my paper?’ I’ll say, ‘You don’t get one today.’ ”

On Fridays, the paper is twice as big, filled more with flyers and coupons than with community news. It takes Berezowski twice as long to complete the route. While he makes the first round of deliveries, Marie collates the flyers and papers, staining her fingers with ink from the colourful holiday ads. “It takes both of us to get the job done,” she says. “The work never ends.”

She’s not complaining. She has come to depend on the route – maybe more than he does.

“This has been a godsend,” says Marie. “You just feel a little better because we aren’t taking the money out of our savings, because we need that. Every year, all the bills go up, not just by cents, they go up by dollars.”

The money helps cover their hobbies – golfing and bowling for him, dance lessons for her. The income supplements Berezowski’s old-age pension and mandatory withdrawals from his Registered Retirement Income Fund. After 27 years as a pressman, printing flyers, posters and advertisements, Berezowski didn’t get a company pension.

“When he left, that was him leaving with not a cent,” says Marie. “No package, no safety net. We invested in RRSPs, but with everything being invested in mutual funds, it’s kind of rocky at the moment.

“It’s kind of scary, because this is all we have.”

THE BEREZOWSKIS moved into the neighbourhood 40 years ago, when the bungalows were new and now-busy Martin Grove Rd. was a dirt road.

They paid off the house years ago, when their two children – now adults – were kids. Berezowski often thought of following his brothers out of the city into a bigger, more expensive home. But he stayed put, enjoying being a 15-minute drive from work.

He built the basement with his own hands, learning as he went along. Framed photographs and certificates in his study tell the story of his “good life” – the certificate for 25 years of service at printing company Welch and Quest Ltd. hangs on one wall. The retirement gift – a framed photo of a hole at an unnamed golf course – hangs on another.

Berezowski started golfing a decade ago.

“I enjoy it. It keeps me healthy,” he says. Now that he is a senior, it is more affordable, too. At the city-run Humber Valley Golf Course where he often plays, seniors pay $27 on weekdays.

But golf is rarely just about golf. “If you don’t do much and just sit around, you keep worrying about it (the economy). If you keep your mind busy with different things, you just don’t,” he says.

Marie also keeps herself preoccupied. Four days a week she takes dance lessons at the York West Senior Citizens Centre in North York – tap, line and “Riverdance-like” clogging.

“I wasn’t allowed to dance (as a child) because I was brought up strict Baptist,” she says. When she turned 50, a friend invited her to line dance. “From there I kept moving.” It costs about $150 a season, and the price will rise in January. “Everything adds up, you know. You start to feel every dollar.”

She can’t remember the last time the economy hit this close to home. Even through recessions of the ’70s and ’90s, Berezowski kept his job, earned overtime and had enough for a little vacation now and then. Marie worked part-time, at Canadian Tire. There was never a need to go full-time.

“Other times of recession didn’t really bother us. I never really gave it much thought before. Maybe (it does now) because we’re at that age where we can’t recoup as quickly.”

AT THE YORK West Senior Citizens Centre, women saunter in during the morning. They have no need to rush.

Prime attractions are the dance classes, bridge and euchre, and the Friendship Group, members of which sit around two tables. It used to be one large circle, but conversations couldn’t carry as far. A year ago, there were 10 regulars; now there are more than 22. Their conversations are dynamic, touching upon novels, family and sex. These days, talk naturally shifts to the economy.

“It’s impossible to ignore it,” says Rolande MacKinnon, 79, the most financially savvy of the group. She leaves twice during the morning to call her financial adviser. She is hoping to get the best interest rate for her GICs. “When I heard the slowdown was global, that’s when I started to worry.

“You hope you will be able to look after yourself in your old age. This is what we saved for.”

Others are more concerned about their children and grandchildren.

“One of my sons, who works in computers, was just told that he may be laid off before Christmas because times are slow in his sector,” said Pam Lee, 82, who has four children.

Lee was a teenager in London during World War II. She saw her home destroyed by bombs. She remembers leaving family and possessions behind, sleeping in bomb shelters and rationing food.

“We got one egg a month,” says Lee, a distant look in her eyes. “The biggest decision would be how to prepare it: boiled, scrambled or poached. I always chose scrambled, since it went the furthest.”

She was 17 when the war ended, and was put to work as a typist. “We didn’t choose our jobs, the government told us what they wanted us to do.” Resilience helped them move on.

“We were a generation that learned to live with very little,” says Lee. “And learned to do with what we have.”

After coming to Toronto, Lee raised two young children, remarried and saved enough working as a legal assistant to be financially secure. She knows she is fortunate for what she has. But she can’t forget what she has lost.

“Life is very lonely as a senior. I was married to my second husband for 42 years. When he died, it was like losing a part of my body.”

Everyone in the room feels her pain. They are all here for the same reason. They joined the group to be saved from their own sadness. They are here because they are widows.

The group formed 11 years ago for a University of Toronto study on how bereavement groups help widows cope with grief. After the study, the women continued to meet.

“This group is the best thing that has happened to me,” says MacKinnon, an original member. “You never get over losing your husband. You can adjust to anything, even losing some money. You never get over losing your husband.”

MARIE BEREZOWSKI’S friends turn to her to talk about their losses. “It seems like everyone has a story, the older you get,” says Marie. Her friends, family and the “girls” she dances with. Like the friend who grieves over her husband’s death five years ago from cancer. “She still gets angry. When we’re driving sometimes, she’ll hit the steering wheel and say, `Why’d you have to leave me?’”

“It makes me realize I have so much to be thankful for,” says Marie. “I have health, and I have a good marriage.” One that has lasted 46 years – and counting. They met in church. Marie sat in an uncomfortable pew, while Leon was on stage as a member of the Berezowski brothers trumpet quartet.

“I got the right person. It makes a huge difference to your life, to your health, to your mindset.” Leon smiles in agreement.

They aren’t ones to dwell on the future or the past. There are bills to pay, lessons to take and holes to play. Living in the present suits them fine.

Winning Ideas in Hard Times

By Geralyn Cruz, 23

The Christmas season is almost upon us and everything seems to be costing a lot more than beforeand I am not even talking yet about the effects of the global financial crisis on our own island of calm.

A few weeks back I spoke with a friend, a mutual funds analyst who was trying to sell me her companys products. She mentioned that this is the shopping season for such kinds of investments. And for the first time, I agreed with someone who was selling me something. Yes, definitely, I told her.

I understand why the wealthy would panic after what happened to Lehman Brothers and Merrill Lynch. These are institutions where other institutions put their money. It would have a domino effect when one tile collapses, and the effect would be faster if the financial turbulence is stronger.

International and local stock markets are doing very badly, they say. We all see that. However, what we fail to see is the investment opportunity this opens up for us. I, for example, would risk a part of my savings to buy stocks and other forms of investments while the world is being battered by the economic crisis. The market is holding spending, and this is causing stock prices to drop. While the action I am planning to take seems to be irrational, no one can really tell what is going to happen next. I am risking the money that I have for additional earnings. If I lose, I lose. It is a gamble: gain some, learn some.

This time is also a good time to start a new business. If I were richer, I would put up a pawnshop. It is one of the few businesses that flourish when everyone becomes poorer every day. When people cannot afford to buy something, they will pawn whatever they have: jewelry, bicycles, laptops and even their mobile phones.

The cell-phone loading business is another inviting option since most of us would skip a meal just to buy enough load to send a message to mom, whether she is here or abroad, that reads Mom, please send us more money.

The money we have today will change its value tomorrow. Its value will either increase or decrease, but most probably it will be the latter. Although I see banks as a safe place to keep ones money, I am not recommending that you place your money in a savings account if you can afford to buy treasury bills and bonds. These are higher-yielding investments compared to a savings account where you would not even notice any increase in your deposit after a year. The good thing about these securities is that they are always prioritized and you always get paid first.

People who know me often wonder why I daydream so much. I tell them, I am making money.

Simple daydreaming may provide me with the bounty I wish for myself. I try to think of unusual ideas that might hit the market big-time. I can register these ideas so that my intellectual property rights are protected. In fact, I have a small notebook beside my bed where I write my winning ideas. Who knows, one of these ideas may yet make me a millionaire.

They say art is also a good form of investment. Since I am still on my way to earning my first million, I try to make my own art out of paper clips. I form different figures when I am nervous. I tell my sister that if I keep them in a box, a hundred years from now, my grandchildren will be able to sell them as works of art. But if you are richer than I am and you can afford the more expensive forms of art, invest in them. The older they get, the higher their value rises.

Back in college, our finance instructor asked, What would you do if you do not have enough money? My quick answer was, Sell my things.

I cannot recall now what the best answer was, but I apply my answer whenever the situation calls for it. Buy and sellthat is what I do. Sometimes, it is receive and sell.

This Christmas Season will probably be a receive-and-sell time for me. Not all the gifts I will receive will end up in my room; some will be listed on auction sites. What may be useless for me might be of great worth to another person.

So let us not blame other institutions for our own poverty and lack of cash. That is pass. It has been tried and tested that institutions can only do so much. If we cannot rely on our basic salary or allowance, we have to make good use of what we have.

I say that we should learn to take risks, because it is only when we take risks that we learn the tricks. We are forced to learn because we are afraid of losing all the money we have invested and letting all our efforts go to waste. We learn because sometimes things fail and we do not want that to happen again. Remember the first rule of investment or even gambling: the higher the risks the higher the returns.

From the simplest to the most complicated, there are numerous ways to add to our savings. We should be enterprising and creative during these times and try to see the potential of everything. Let us not spend the whole day sulking and thinking about the crisis that is happening around us.

Geralyn L. Cruz, 23, works for a petroleum company in Ortigas Center.

Breaking up with Zuma

On December 1st, I began a brief relationship with one Mr Zuma Pule from Johannesburg, South Africa. Mr Pule wrote to inform me of a financial opportunity he was inviting me to partake in. The following is the correspondences between the two of us over the last few days:

***********************

FROM:ZUMA PULE

APPEAL FOR ASSISSTANCE

I know that this message will come to you as a surprise since we don’t know each other before, but for purpose of introduction, I am ZUMA PULE the Bank Manager of AMALGAMATED BANK OF SOUTH AFRICA (ABSA).

First and foremost, I apologize using this medium to reach you for a transaction / business of this magnitude, but this is due to Confidentiality and prompt access reposed on this medium. Be informed that a member of the South Africa Export Promotion Council (SEPC) who was at the Government delegation to your country during a trade exhibition gave your enviable credentials / particulars to me. I plea to seek a confidential co-operation with you in the execution of the deal described hereunder for the benefit of all parties and hope you will keep it as a top secret because of the nature of this transaction.

There is an account opened in this bank in 1990 and since 1998 nobody has operated on this account again. After going through some old files in the records, I discovered that if I do not remit this money out urgently it would be forfeited for nothing. The owner of this account is MR. SAMUEL CARTER , a foreigner, and a miner at Kruger gold co., a geologist by profession and he died since 1998.

I need truthful person in this business because I don’t want to make mistake I need your strong assurance and trust. With my position now in the office I can transfer this money to any foreigner’s reliable account, which you can provide with assurance that this money will be intact pending my physical arrival in your country for sharing. I will destroy all documents of transaction immediately we receive this money leaving no trace to any place.

You can also come to discuss with me face to face after which I will make this remittance in your presence and two of us will fly to your country at least two days ahead of The money going into the account. I will apply for annual leave to get visa immediately I hear from you that you are ready to act and receive this fund in your account.

I look forward to your earliest reply

***********************

Zuma,

Thank you for contacting me. I am interested in this opportunity, and do have an American Bank account to deposit the funds into.

I would like to negotiate the percentages though, as I will be incurring much of the risk. How does 55% for me, and 45% for you seem?

Please let me know as soon as possible, time is running out.

Thank you.

***********************

Dear Craig Hennecke ,

Thank you so much for your mail and your interest to help transfer this fund to your account in your country.

Please i can not speak Chinese but i hope this would not be a problem to this transaction.

Now listing to me very well, we need to be very fast in this transfer of the fund because the bank auditors mighty be comeing in any time from today, therefore do what ever that it takes to be here this week so that i take you to the bank to open a non-resident dollar account in your name where the fund will be deposited first before finally transfer to your nominated local in your country and finally to sign the release order of the fund and other legal transfer documents which will be changed into your name as the beneficiary of the fund.

Please this needs to be done immediately, so try all you can to buy your air ticket and send to me your flight scheldue so that i will make a hotel reservations for you where you will stay just for onlt 2/3 days for the fund to be transferred into your nominated account, and with your flight scheldue i will know the date of your arrival so that i will come to pick you up from OR TAMBO INTERNATIONAL AIRPORT JOHANNESBURG.

To prove to you that what you are comeing for is legal and genuie i attached a copy of my international passport, a copy of our late customer Mr. Samuel Carter death certificate and his account balance in the bank as at today.

Remember that Mr. Samuel Carter is the late owner of the fund we want to transfer to your account in your country for our investments since there no body to come for it.

all the legal transfer documents will be issued to you on your arrival and immediately the fund is transferred to your account i will go with you for withdrwal and sharing.

Please we need also a copy of your international passport or ID, your fax/house and company address so that we can use them to change all the legal transfer documents into your name before your arrival here.

Thanks,

ZUMA

NB: Please we need to move this fund out into your nominated account immediately to avoid delay, therefore i urge you to make fast to be here if possible this week.

To the percentage you should know that i am not the only one involved in the transaction therefore with my own power as the manager and as theperson in four front of the transaction i would sugest you take 40% while i and others take the rest and you should also understand that we map out 5% of the total amount for our expenses.

I need to hear from you as soon as possible.

Thank.

***********************

Zuma,

I speak English, not Chinese, so this won’t be a problem.

I’m trying to find the best airfare deal right now to fly directly into JOHANNESBURG. Additionally, my doctor is out of town right now, and he supplies me with the medication which helps during these long flights to Africa.

Enclosed in a picture of my accountant, who will work on my side to clear the funds in my bank account.

Thanks

***********************

Dear Craig Hennecke,

You are free to fly down immediately since we have agreed to give you the 55%.

When you are ready send me your flight scheldue so that i make your hotel reservations and pick you from the airport.

Thanks,

zuma

***********************

Zuma -

This is excellent news! Thank you for alerting me of such great conclusions.

Thanks

***********************

Dear Craig Hennecke,

What type of joke are you trying to crack with me instead of telling me something important in the matter at hand.

Please tell me something.

thanks,

Zuma

***********************

Zuma -

Please keep me informed.

***********************

Dear Craig Hennecke

PLease we would like your own lawyer to prepare the agreement and send to us for signing while you send us a copy of your international passport, you home/company full address, your private phone/fax numbers so that we start chaneing the legal transfer documents in your name before your arrival.

Remember that a nonresident dollar account must be opened and upgrade in your name here in South Africa where the total fund will be deposited first before onward transfer to your nominated local account in USA.

This transfer of the fund to your account will only take 2/3 days, so you have to stay with us for those days and after that i have to go with you for the withdrwal and shareing.

Thanks,

Zuma

***********************

Zuma -

I need to have these details cleared before I finalize my traveling arrangements.

***********************

Zuma -

I have not heard from you lately and many of my questions remain unanswered.

Please let me know either way. Thanks

***********************

Dear Craig Hennecke,

Thank for your mail.

Just like you have said if you have bought your airticket, then i need to have your full flight scheldue so that i will make a hotel reservation for you, but most importantly you have to send a copy of your international passport, your full home address and your phone numbers for our easy cumunications.

Your coming on the 11th is not a problem but we must have all the requested itrems from you before any other thing.

Thanks,

Zuma

***********************

Zuma,

Thank you

***********************

Dear Craig Hennecke,

You can still see that you are joking, how dear you sent me a cover of your passport, no phone number as i requested.

Please send a real passport amnd your phone number or you forget about the transaction because i am not a fool as you may think.

Thanks,

ZUMA.

***********************

Zuma,

Do you have a phazar machine? This would be the best way to send the passport information without the security troubles which emails invite.

***********************

Dear Craig Hennecke,

You do not have to worry yourself much about the answers to your questions, i will do that immediately i receive the copy of your international passport and your telephone number because i would like to talk to you.

You can fax through this number 0027-866178662.

Thanks,

Zuma

***********************

Zuma -

I will use my airline ticket to meet them instead, as they have informed me of the local great eating places nearby the airport as well.

As a businessman, I’m sure you understand this decision.

Best of luck.

Central Banking: December 4, 2008 José de Gregorio: Governor of the Central Bank of Chile, Remarks the meeting Pensando Chile 2009. Propuestas y Desafíos en Tiempos de Crisis, organised by Pontificia Universidad Católica de Chile, El Mercurio newspaper and Banco Santander, Santiago, 3 November 2008

Release here.

The current world financial crisis has prompted significant debate around the proper management of monetary policy and its role in preventing financial crises, particularly when they grow to the size of the one we are now seeing in developed economies.

These are the issues I would like to address today, in the context of this seminar “Thinking Chile 2009, Proposals and Challenges in Critical Times,” to which I have been invited, and which makes us look into the future, beyond the juncture that has taken up the better part of our energies for the past several weeks.

I would like to make a special reference to the role that central banks play in both price and financial stability. It is interesting to note that financial stability has been overlooked for so long, or has been the secondary goal of central banks. Some people even thought that the only objective of central banks was price stability. However, at their origin, these institutions were created precisely to deal with the financial instability caused by frequent bank runs in the late 19th and early 20th century. Furthermore, the concern for price stability was even institutionalized later on around the world, with the inflation-targeting regime being the latest stage of its development.

It is important to review jointly the issues of price stability and financial stability, because here the well-known Tinbergen principle is clearly present. This principle indicates that, to achieve a certain number of objectives, at least an equal number of instruments are needed. We often have used this argument when asked to achieve inflationary, output and exchange rate objectives with only one instrument, that is, the interest rate.

Price stability: inflation targets

The regime adopted in Chile and in a number of other countries with low and stable inflation to pursue the price stability objective, is that of flexible inflation targeting. It consists of setting a quantitative inflation goal to anchor expectations, which in our case is 3% with a tolerance margin of plus/minus one percentage point, to be met most of the time.[Footnote 1 - 1 There is wide empirical debate on the effects of inflation targeting regimes on the volatility of inflation and output. Gonçalves and Salles (2008) show that output volatility and inflation volatility are actually reduced in inflation targeting emerging economies.]

To operationalize this objective – because the Central Bank controls inflation imperfectly and with lags and its purpose is not to cause output to deviate significantly to achieve its target – inflation deviations are corrected over a two-year horizon. In other words, the monetary policy is conducted in such a way as to have forecast annual inflation two years ahead stand at around 3%.

The instrument of monetary policy is the interest rate. It could be some monetary aggregate, but virtually everywhere central banks will rather use the interest rate for well-known reasons that are beyond the scope of this meeting.[Footnote 2 - 2 See, for example, De Gregorio (2003).]

What is inconsistent is to use both variables as monetary policy instruments, which certainly complicates the interpretation of the two-pillar strategy of the European Central Bank. Simply put, setting a monetary aggregate and the interest rate at the same time is tantamount to setting the price and the amount to be consumed for gasoline. Supply and demand constraints imply that you can peg either one, but not both. However, as I will discuss below, in practice the rationale for considering monetary aggregates is a little different.

What variables should a central bank consider when setting the interest rate? In the regime I just described, the answer to this question is pretty simple: anything affecting inflation over a two-year horizon. Variables such as inflation expectations, wages, output, the exchange rate, commodity prices, and so on, have important effects on inflationary forecasts and must be taken into account when deciding the future path of monetary policy.

There are other variables that have caught particular attention and I would like to take a brief look at them. These are the prices of assets (e.g., stocks, housing), the exchange rate and monetary aggregates.

Two questions arise with regard to asset prices. One is, should they influence monetary policy decisions? And the other is, what must be done when those prices contain speculative bubbles? I will address this second question in the next section. But it must be noted that we must avoid the confusion between inflation and financial stability.

Concern about asset price bubbles and distortions is at the core of financial stability analysis, but its impact on inflation is different. If stock or housing prices affect future inflation, they should be taken into account in monetary policy decisions. And this actually occurs via the effect of these prices on aggregate demand, output and, in the end, inflation. Hence, the monetary policy seems to have a stabilizing effect by leaning against the wind.

This should not be mistaken for setting goals for asset prices. In fact, the empirical evidence, particularly on stock prices, suggests that once the effects of asset prices have been internalized in inflation forecasts, they should have no further effects on the monetary policy reaction function, let alone be a monetary policy objective.[Footnote 3 - 3 This means that they should not be an argument in the Taylor rule. See, for example, Bernanke and Gertler (2001). In any case, they note that this prescription does not remove the possibility of short-term reactions to preserve financial stability.]

Something similar occurs with the effect of a house price boom. Where special care must be taken is in the relationship between a real-estate boom and financial crises, which makes it particularly important to monitor property prices and the expansion of mortgage credit, as I will review in a moment.[Footnote 4 - 4 In an interesting exercise, Taylor (2008) argues that monetary policy during 2003-2006 was more expansionary than what a Taylor rule would have suggested, and that if it had been more in line with it, the real-estate boom would have been milder.]

Implications on the exchange rate in the inflation-targeting context are similar to those just discussed for asset prices, since monetary policy should have a stabilizing effect. If the exchange rate appreciates persistently, this should reduce inflationary pressures and thus

blow some steam off the monetary policy, thereby tending to depreciate the exchange rate. This is precisely what the Board of the Central Bank of Chile decided to do in the face of the severe appreciation early this year, by holding the interest rate constant, while in the most likely scenario, had the appreciation not occurred, rates would have increased.

There is abundant evidence that pass-through from the exchange rate to inflation is fairly small. Monetary regimes pegging the exchange rate were based on the notion that exchange rate fluctuations were transmitted to inflation on a one-to-one basis. This was the logic, for example, of pegging the exchange rate in Chile in 1979. However, the empirical evidence shows a relatively low pass-through, particularly under floating regimes where the persistence of exchange rate movements is low. Still, despite the low pass-through, the inflationary effects of very acute depreciations such as those recently experienced by most emerging economies, would not be negligible. The final impact of the exchange rate depreciation on inflation will also depend on the behavior of international prices, which have been losing strength in the face of low growth prospects around the world.

With respect to monetary aggregates, some efforts have been made to bring them back to monetary policy, but as I said before, not with the intention of setting money targets, but rather because they are useful indicators of future inflationary pressures.

It is worth noting that the transmission mechanisms under study do not stem from the traditional recommendation of Friedman (1959) in his famous A Program for Monetary Stability, where the focus is on money demand stability and the role of money as a price anchor, and whose analytical base is the quantitative theory of money. Actually, recent works that assign a role to money, and to credit in general, do so because it can reveal future inflationary pressures or because it can contribute to achieve increased stability (Christiano et al., 2007; Goodfriend and McCallum, 2007; Kilponen and Leitemo, 2008).

Nonetheless, the empirical evidence on the ability of money to provide information to forecast inflation is not so favorable to monetary aggregates.[Footnote 5 - 5 For details on the European case, see Berger and Stavrev (2008). In Chile, there is no evidence, either, indicating that monetary aggregates improve inflation forecasts. For discussions on money and monetary policy, see papers in Cuadernos de Economía’s December 2003 issue (De Gregorio, 2003; García and Valdés, 2003; Vergara, 2003).]

It is more promising to conceive monetary and credit aggregates as indicators of potential distortions in financial markets, an issue I will discuss in the next section.

In this review of inflation targeting regimes it is worth to bear in mind that they are subjected to stress when inflation is of external origin and corresponds to a cost (or supply) shock. A cost shock that increases inflation may require a restrictive monetary policy in order to prevent relative price increases from snowballing into an inflationary spiral. In any case, and to avoid costly repercussions in terms of output losses, a horizon is established to correct deviations, which permits relative price changes to occur without requiring sharp monetary policy adjustments.

This is what has been happening in Chile since the prices of foods and fuels began soaring in an unprecedented way in early 2007. Constraining the monetary policy in the presence of a commodity price hike has its costs, but as we have stated a number of times, failing to tackle the inflationary problem opportunely leads to much higher output costs in the future, because inflation becomes much more entrenched.

On the contrary, when facing demand shocks the inflation targeting regimes are particularly useful, and that is the scenario we are seeing today. To rein in inflation, it is necessary to slow down growth via a more contractionary monetary policy. However, if output slowdown is caused by forces outside the monetary policy, the policy rate dosage should be small compared with that where the external scenario does not contribute to the deceleration, meaning that monetary policy conduct is countercyclical, reducing inflation and containing the demand slowdown.

Financial stability

Although more often than not, central banks have an explicit financial stability objective, for many years, and within a context of strong GDP growth and sound balance sheets of banks and firms, this was a second-class issue. Now things have changed dramatically. As of last year, financial stability became the protagonist in monetary policy management in developed countries.[Footnote 6 -The Fed does not have an explicit financial stability objective, although its role in this matter is widely known. See, for example, Plosser (2007).]

At the industrialized countries, particularly the United States, the potential distortions in financial markets were swept under the carpet. Furthermore, concern about the existence of an asset price bubble was nobody’s priority. An asset price bubble means that the price may be driven by variables other than its fundamentals. For example, stocks may be overpriced in comparison with the companies’ future stream of profits, or homes may be appraised at more than the living services they can provide. In other words, prices may be pushed up artificially, and the problem is that when the bubble bursts, it splatters across the financial markets and the overall economy.

Regarding how can monetary policy deal with the bubbles, as with the downfall of technological company stocks early this decade, the best strategy during the Greenspan era was believed to be “do nothing and clean up the mess when the bubble bursts” (Blinder and Reis, 2005). Laissez-faire is based on the idea that bubbles are hard to identify and also difficult to affect through monetary policy. Cleaning up afterwards consisted in providing liquidity, which normally was accompanied by aggressive interest rate cuts.

A major criticism to this strategy was that it favored bubbles, because financial markets internalized the final rescue. In fact, this strategy is known as the Greenspan put, in reference to interest rate reductions in the aftermaths of severe financial turmoil, such as the stock exchange downfall of 1987, the collapse of LTCM in 1998, or the technological stocks in the early 2000s.[Footnote 7 - 7 The idea is that investors could sell their shares at a given minimum price in the future, which is equivalent to a put option.]

In fact, from the standpoint of liquidity provision and potential downward pressures on inflation, a reduction in interest rates is generally recommended. The problem is that this response provides an incentive to adopting more risk-prone behavior, since investors perceive that they will have the put option available later. Therefore, it is advisable to not only provide the liquidity, but also carefully monitor the market’s operation to prevent overexposure to these risks in the future.

Indeed it can be argued that bubbles are difficult to identify. For example, Gürkaynak (2005) finds that, for every work identifying a bubble, there is another one finding the opposite. At the same time, it is not so clear how much of a given bubble can be affected by raising the interest rate and the necessary magnitude of the adjustment in order to make any difference, because, by definition, a bubble is determined by “non-fundamental” price movements. Thus, although after seeing the critical situation that developed financial markets have been enduring, a more proactive monetary policy strategy might have been advisable, but it is hard to believe that such a strategy could have averted this crisis by itself.

Actually, the overall purpose of financial stability is the proper functioning of markets and to avoid having to arrive at these degrees of turbulence and dislocation. From the macroeconomic standpoint, risks must be overseen and signaled, because the primary

Monetary aggregates in general, but especially the wider money aggregates as well as credit aggregates may signal unsustainable tendencies. As a matter of fact, whenever accelerated growth in credit and money aggregates occurs simultaneously with soaring asset prices and loose lending standards, increased inflation becomes very likely over the three years that follow (Roffia and Zaghini, 2007).[Footnote 8 - These authors find that only half of the accelerated expansions of broad monetary aggregates result in higher inflation, but the probability increases when this coincides with an asset price boom.]

In this context, one can argue that an increase in lending with inflation prospects can be fought with a tightening of monetary policy. However, if the boom was triggered by lack of regulation or supervision, monetary policy tightening by itself could probably be ineffective – or even counterproductive – if the financial system is weakened because of excessive risk taking.

Thus, financial regulation plays a major role in granting financial integrity. At the beginning, regulation focused on the strength of individual institutions. However, the tensions we are seeing now exemplify, once again, how individual fragility may quickly evolve into systemic problems. The interrelationships among financial institutions and the proper operation of the markets where liquidity is traded are essential ingredients of a market economy, but these characteristics are also the channels of financial contagion, as recently seen. So it is crucial to have a systemic vision, not only from the perspective of how the different institutions relate to each other, but also how the different types of financial and operating risks are intertwined, creating potential vulnerabilities.

The Financial Stability Reports that many central banks put together periodically – including us – seek to evaluate the resiliency of the system as a whole to large disruptions, by carrying out stress tests. It is necessary to continue strengthening the robustness of these methods to evaluate situations of extreme tension. Starting tomorrow, the Central Bank of Chile will hold its Annual Conference, and this version will feature frontier work in this area.

From the regulatory standpoint, supervision must consider the macroeconomic impact of financial activity. In the months to come, we will have to analyze also the potential procyclicality of the Basel II capital requirements, as well as the modeling and quantification of liquidity risk. A regulatory framework will be necessary to ensure the building of sufficient reserves in the boom phase of the cycle in order for the financial system to be well capitalized when the bust phase comes.[Footnote 9 - For an interesting discussion in the context of the present crisis, see Borio (2008).]

One of the most recurring sources of financial stress in the past few years in emerging economies are periods of euphoria or pessimism, which trigger movements in their exchange rates beyond what their fundamentals would justify. For example, when economic expectations are good, foreign exchange appreciations can arise with symptoms of bubbles in favor of all the domestic assets.

As I discussed before, a first line of defense for specific asset prices, stocks or housing is to raise the interest rate. However, in the area of exchange rates this may trigger more pressures to appreciate and exacerbate financial imbalances. A floating exchange rate regime is the most adequate to prevent exchange rate policy from inducing currency speculation. The fiscal policy can also contribute to reduce foreign exchange pressures. However, these measures may not be enough, and thus in some exceptional periods, and with the purpose of preserving financial stability, an intervention in the foreign exchange market is warranted.[Footnote 10 - In De Gregorio (2001), I discuss these points in connection with the first intervention period of 2001, and in De Gregorio (2006) I do so in the context of inflation targets and financial stability.]

In Chile, since the floating exchange rate regime was adopted, this has occurred on three occasions, all deemed exceptional. To avoid conflicting goals, consistency between the intervention and the direction of the monetary policy is important, and to that end a first requisite is that the intervention does not have a specific point or range objective for the exchange rate.

Finally, the current international financial crisis underscores the importance of having an adequate framework for international reserves management, as a key tool to cushion the impact of international liquidity shocks on the economy. The accumulation of reserves in Chile that begun in April this year was decided precisely to strengthen the liquidity position before the eventuality of a worsening of world financial conditions, which is what actually occurred in September.

Final remarks on the current juncture

The excesses of the US banking system could not have happened in Chile. Hence, the real-estate bubble driven by fast and unhealthy credit expansion would hardly have formed in our country.

In the first place, mortgage loans in Chile are different from those in the United States. There, these loans are issued “without recourse”, which allows the bank only to repossess the mortgaged property, but not other goods belonging to the debtor to recover the loan, as is the case in Chile.

Secondly, in Chile banks cannot hold substantial off-balance-sheet positions, because the General Banking Act expressly indicates what kind of firms the banks may establish, such as mutual fund administrators or securitizing firms. These firms, that the law terms affiliates, must have a single line of business and are banned from investing in other companies. In addition, banks must submit their consolidated financial statements on a monthly basis.

Moreover, banks may not take positions in credit derivatives, and face other restrictions regarding the operation of derivative instruments. In particular, to operate with interest rate or foreign exchange rate options, banks must undergo a thorough test by the SBIF, while holding uncovered positions in the balance sheet are costly in terms of capital requirements.

But not only regulators and policy-makers learned the lessons from our financial crisis. Enterprises did too. Thus we haven’t seen the massive currency speculations where so many firms in the emerging world were involved through the use of exotic derivatives that were not only complex but also very difficult to price.

In the present juncture we still face a severe inflationary challenge. In our last Monetary Policy Report we stated that, in our baseline scenario, we needed to grow somewhat less than our potential to contain the inflationary pressures and ensure inflation convergence to its target rate of 3% annually over a two-year horizon.

We also thought that the world economy would not help to reduce inflation. Today the scene has changed and we are carefully reviewing its inflationary implications. To begin with, the international scenario may trigger a reduction in demand that could help contain inflation. This certainly has implications on the monetary policy trajectory, consistent with the inflation target. Secondly, commodity prices are in a tailspin, particularly in the case of oil. However, these events have not fully passed through to our economy, because our currency has depreciated substantially. Overall, more evidence is needed with respect to the persistence of the recent events in the world to calibrate the monetary impulse.

The Central Bank of Chile has paid close attention to external developments and has been ready to provide any liquidity required for the proper operation of the financial markets, as it has been doing since the end of September and will continue to do for as long as it deems necessary.

I am convinced that we will weather this international financial crisis successfully. We have built a macroeconomic policy scheme with sufficient degrees of flexibility and a strong commitment to stability that, under the current circumstances have the challenge of attenuating the adverse world economic scenario and ensure stability.

Our monetary policy is oriented at controlling inflation. The exchange rate floats to absorb international shocks without causing major disruptions in domestic activity. The fiscal policy is based on a rule that implies saving transitory incomes and today enjoys the benefits of prudence. Fiscal savings, combined with the Central Bank’s international liquidity position, provide a reserve of resources that permits us to accommodate external financing shocks even worse than those we are seeing now. Our financial system has been prudent and has the necessary levels of capitalization to play its credit intermediating role properly. Prudence, both of the private sector and of the macroeconomic policies, can now yield their fruits in the worst financial episode the world has had to suffer in many decades.

Thank you.

References

Berger, H. and E. Stavrev (2008). “The Information Content of Money in Forecasting Euro Area Inflation”. IMF Working Paper WP/08/166.

Bernanke, B. and M. Gertler (2001). “Should Central Banks Respond to Movements in Asset Prices?” The American Economic Review, Papers and Proceedings of the Hundred Thirteenth Annual Meeting of the American Economic Association, 91(2): 253-257.

Blinder, A. and R. Reis (2005). “Understanding the Greenspan Standard.” In The Greenspan Era: Lessons for the Future, Proceedings of the Jackson Hole Symposium 2005, Federal Reserve Bank of Kansas City, pp. 11-96.

Borio, C. (2008). “The Financial Turmoil of 2007-?”: A Preliminary Assessment and Some Policy Considerations.” BIS Working Paper No. 251.

Christiano, L., R. Motto, and M. Rostagno (2007). “Two Reasons Why Money and Credit May Be Useful in Monetary Policy”. NBER Working Paper No. 13502.

De Gregorio, J. (2001). “La Política Cambiaria.” Economic Policy Paper No. 2, Central Bank of Chile.

_______. (2003). “Mucho Dinero y Poca Inflación: Chile y la Evidencia Internacional”. Cuadernos de Economía 40(121): 716-724.

_______. (2006). “Esquema de Metas de Inflación en Economías Emergentes”. Economic Policy Paper N° 18, Central Bank of Chile.

Friedman, M. (1959). A Program for Monetary Stability, Fordham University Press.

García, P. and R. Valdés (2003). “Dinero y Conducción de la Política Monetaria con Metas de Inflación.” Cuadernos de Economía 40(121): 698-706.

Gonçalves, C. and J. Salles (2008). “Inflation Targeting in Emerging Economies: What Do the Data Say?” Journal of Development Economics 85(1-2): 312–318.

Goodfriend, M. and B. McCallum (2007). “Banking and Interest Rate in Monetary Policy Analysis: A Quantitative Exploration”. Journal of Monetary Economics, 54(5): 1480-1507.

Gürkaynak, R. (2005). “Econometric Tests of Asset Price Bubbles: Taking Stock”. Federal Reserve Board, Finance and Economics Discussion Series 2005-04.

Kilponen, J. and K. Leitemo (2008). “Model Uncertainty and Delegation: A Case for Friedman’s “k”-percent Money Growth Rule”. Journal of Money, Credit and Banking 40(2-3): 547-556.

Plosser, C. (2007). “Two Pillars of Central Banking: Monetary Policy in Financial Stability.” Opening Remarks at the PACB Convention, Federal Reserve Bank of Philadelphia.

Roffia, B. and A. Zaghini (2007). “Excess Money Growth and Inflation Dynamics”. ECB Working Paper No. 749.

Taylor, J. (2008). “Housing and Monetary Policy”. In Housing, Housing Finance and Monetary Policy, Proceedings of the Jackson Hole Symposium 2007, Federal Reserve Bank of Kansas City.

Vergara, R. (2003). “El Dinero Como Indicador de Política Monetaria en Chile”. Cuadernos de Economía 40(121): 707-715.

New iShares ETFs

The following is an article featured on Indexuniverse.com recent ally as part of my column, Efficient Investor.

Only 2 iShares Pay Capital Gains in 2008

Barclays Global Investors (BGI) just announced that out of its iShares family of 178 ETFs, only two are paying out capital gains this year.

The iShares Cohen & Steers Realty Majors Index (ICF) expects to pay out long-term capital gains in the range of 35 cents to 45 cents per share. That’s 0.74% to 0.94% of the net asset value. There are no short-term capital gains.

The iShares Lehman Short Treasury Bond ETF (SHV) will pay out a short-term capital gain of 0.74 cents per shares. This is payable on Friday, Dec. 5.

The New School Bachelor

For over 25 years, the National Council for Research on Women has helped shape the future for women and girls. The Council is a network of 120 member research and policy centers and more than 2,000 top-level researchers. We provide the information and research needed to foster more equitable futures for women and girls. The key to the Council’s past and future success is highly-focused, accessible, timely research. Through Research-Action groups organized around urgent issue areas, rapid-response communications campaigns, and a website that features the research, expertise, and information produced by our network, the Council delivers the facts, promotes informed activism, and ensures positive change.

The National Council for Research on Women’s Intern Program exposes interns to the inner workings of a nonprofit while providing valuable job training, mentoring, and networking opportunities. The program introduces interns to the daily and long-term issues nonprofits currently face. At the same time, interns are immersed in a wide range of women’s issues and are introduced to an extensive feminist network of researchers, advocates, and activists, broadening an education that many of them begin in Women’s Studies courses in college.

Interns learn and assist with various Council projects and activities involving the Council’s Member Centers that will expand their awareness of jobs available within the feminist community and encourage their return to the Council or its Member Centers as future employees. In addition, interns have opportunities to forge connections with other interns and staff at NYC-Area Member Centers, thus initiating a professional network that will continue to serve them long after the internship ends.

During the Fall and Spring semesters, interns work a minimum of 10-15 hours per week. During the summer, a more full-time commitment is desired. When appropriate, the Council will assist interns in arranging for academic or work-study credit. A daily stipend of $10 (for food and travel) is available.

Each applicant will be evaluated on the basis of her/his resume, a writing sample, recommendations, and an interview. The ideal applicant will have a demonstrated commitment to women’s issues, strong writing and communication skills, and computer and general office proficiency. For more information, contact:

Internship Department: Research and Programs:

The National Council for Research on Women is a working alliance of 120 US based women’s research and policy centers. Its constituencies include educators, advocates, policymakers, and practitioners concerned with issues of diversity and gender equity. Through the Council’s role as an officially recognized non-governmental organization of the United Nations, and its programs for international scholars and activists, it is linked with over 250 women’s centers world-wide.

Council programs and publications move research off the shelves and into action reaching a broad audience of highly focused, economically diverse, and politically active women and girls. The Council connects researchers, activists and policymakers and has brought new and diverse voices to the public debate for over 25 years, providing accurate information and improving the lives of women and girls around the world. Bringing issues concerning women and girls to the forefront, the Council helps set the agenda for global debate.

Working under the direct supervision of the Director of Research and Programs, the Research Intern would support the research and policy programs at the National Council for Research on Women. S/he would help manage correspondence to member centers and other constituencies; contribute to the development of policy briefs and position papers; conduct relevant research on topics of interest to the Council; and help grow our Research Action Groups. Additionally, s/he will keep abreast of relevant issues and coordinate the collection and filing of news articles, reports and other materials.

The ideal candidate will be motivated, hardworking, self-directed and committed to social justice, equality, and women’s issues. Strong written and verbal communications are a must for this position. Interest or experience in public policy, intersectionality (race, class, gender, sexuality, ethnicity), or Council priority areas is desirable, but not required.

The intern’s responsibilities include (but are not limited to):

The intern’s responsibilities include (but are not limited to):

Find out more by visiting the organization’s website: http://www.ncrw.org/

c spot

The C Channel network has also recently introduced The C Directories, 5 user-friendly directories of websites, blogs, online retailers and other sites categorized under thousands of differenet subjects. Only a month old, it attracts new registrations every day of eBusinesses eager to become part of The C Channel Network. For example, in the Travel category, you can find Travel Street, a comprehensive guide to travel in Asia, Worlwide Holiday Homes with over 1,000 holiday homes in 51 countries including Spain, USA, Australia and Malaysia, plus Villa Tuscane and Tuscany Villas, the best place for holiday rentals in Tuscany.

In our Shopping Directory, we feature the likes of Teen Plus Size Clothing and Plus Size Lingerie. And if you’re getting married soon, you might like to check out http://engagementrings.ws. Plus, for the best deals the Directory of Wholesalers will tell you where to look.

In the Entertainment category, you can find a great site about Mahjong, for music-lovers there’s Hip Hop 100 and New York nightlife, keeps you up-to-date on the local party scene. You’ll also find a site about Indie rock musician Danielle Evin, and Rakeback for poker lovers. But there’s even links to Famous quotations and the Silly stuff blog. And game buffs can check out the Games Directory.

In the Health & Beauty category, we feature a myriad of sites with all sorts of information, like Cocovida Coconut Oil and Wellness News and Unique Asthma treatment secrets. In our Sports section, you’ll find the best source of information about all major sports in Sports Facts. Golfers will delight over at Secret Golf training System, and motorsports fans should visit Modded Mustangs and the German im-auto.de.

In the Real Estate Category, Construction World and the Real Estate Search by City Resource Directory are 2 of the best sources for home-searchers. And if you are a new home-buyer, check out our Finance category to find the best sources to help you with your money-matters, like TSP Talk, Ledger Services, Stocks and Mutual Funds or ChexSystems & Bad Credit Solutions.

In our Tools for Webmasters Directory, we feature some of the best multimedia directories for your audio, video and photo editing work, including Multimedia downloads, Audio & Video editing, converter and burning software, Audio & Video Software tools, the powerful and user-friendly MP3 Ripper, the best tool to Burn DVD Movies, Photo Editor, Digital Video Editor, Music Software, and two of the handiest directories for Multimedia and Graphics.

We also provide links to some of the best SEO sites online such as SEO and Internet Marketing, The Webmaster SEO Blog and SEO Ireland. Plus, there’s links to some of the best tools for webmasters, like Cheap domain register, Cheap domain hosting, and Webhost advisor. Learn where to find Niche articles, keep track of your backlinks with Link Checker, and Buy text links. We also feature other directories like the Alive Web Directory, Free Web Index and Submit Dot Com. Plus there’s other great links like Paid Survey online, which claims to tell you how you can make some extra cash.

There’s plenty to see, so pay us a visit.

the c spot

The C Channel network has also recently introduced The C Directories, 5 user-friendly directories of websites, blogs, online retailers and other sites categorized under thousands of differenet subjects. Only a month old, it attracts new registrations every day of eBusinesses eager to become part of The C Channel Network. For example, in the Travel category, you can find Travel Street, a comprehensive guide to travel in Asia, Worlwide Holiday Homes with over 1,000 holiday homes in 51 countries including Spain, USA, Australia and Malaysia, plus Villa Tuscane and Tuscany Villas, the best place for holiday rentals in Tuscany.

In our Shopping Directory, we feature the likes of Teen Plus Size Clothing and Plus Size Lingerie. And if you’re getting married soon, you might like to check out http://engagementrings.ws. Plus, for the best deals the Directory of Wholesalers will tell you where to look.

In the Entertainment category, you can find a great site about Mahjong, for music-lovers there’s Hip Hop 100 and New York nightlife, keeps you up-to-date on the local party scene. You’ll also find a site about Indie rock musician Danielle Evin, and Rakeback for poker lovers. But there’s even links to Famous quotations and the Silly stuff blog. And game buffs can check out the Games Directory.

In the Health & Beauty category, we feature a myriad of sites with all sorts of information, like Cocovida Coconut Oil and Wellness News and Unique Asthma treatment secrets. In our Sports section, you’ll find the best source of information about all major sports in Sports Facts. Golfers will delight over at Secret Golf training System, and motorsports fans should visit Modded Mustangs and the German im-auto.de.

In the Real Estate Category, Construction World and the Real Estate Search by City Resource Directory are 2 of the best sources for home-searchers. And if you are a new home-buyer, check out our Finance category to find the best sources to help you with your money-matters, like TSP Talk, Ledger Services, Stocks and Mutual Funds or ChexSystems & Bad Credit Solutions.

In our Tools for Webmasters Directory, we feature some of the best multimedia directories for your audio, video and photo editing work, including Multimedia downloads, Audio & Video editing, converter and burning software, Audio & Video Software tools, the powerful and user-friendly MP3 Ripper, the best tool to Burn DVD Movies, Photo Editor, Digital Video Editor, Music Software, and two of the handiest directories for Multimedia and Graphics.

We also provide links to some of the best SEO sites online such as SEO and Internet Marketing, The Webmaster SEO Blog and SEO Ireland. Plus, there’s links to some of the best tools for webmasters, like Cheap domain register, Cheap domain hosting, and Webhost advisor. Learn where to find Niche articles, keep track of your backlinks with Link Checker, and Buy text links. We also feature other directories like the Alive Web Directory, Free Web Index and Submit Dot Com. Plus there’s other great links like Paid Survey online, which claims to tell you how you can make some extra cash.

There’s plenty to see, so pay us a visit.

CAN I ENTRUST YOU

Dear Sir/ Madam,

————=_4921B94E.B36C485E–

Scam of the day

REIT

REIT stands  for real estate investment trust. REIT concept is similar to mutual funds, except it pools the investors money to invest in real estate.Or in other words, Invest in REIT is almost as same as owning a property then rent it out and the rental income will the main source of income.

REITs depends on the property market. If the property market is HOT, and rentals shoot up, the prices of REIT would reflect that. If property is in excess and rental comes down, so will your REIT prices. Appreciation in property is only paper gain until the REIT sells the property. Until it does so, it will not be reflected as profits and will not be distributed to investors of REIT. As REIT distributes 90% of its profits back to investors as dividends after management fees.

And profits meaning their rents collected, not property prices. So if a REIT reports that their property holdings has rise 50% in value, it will not benefit you until they sell that property and realised their 50% gain. As long as they hold on to that property and collect rent from it, the 50% in value means nothing to you in dividends.

But noted that any retail unitholders are subject to withholding tax of 15% (20% for foreigner) for dividends received from the trust. Hence let’s say the rate is 7.7%, the net yield will be 7.7% x 0.85 = 6.55%. And the properties will be revalued once every 3 years.

The market price movement for all is simply due to the liquidity issue. Price can jump up and down very drastically due to not many buyer and sellers around.

Some terms frequently used are :

DPU = distribution per unit

The cool thing about snowflakes

Before Nick & I became committed to being debt free in 3 years, we stuck to a budget really well.  We didn’t spend more than we took in and even had a small savings account, in addition to having money to put into house projects, etc.  What I am really loving about gathering snowflakes every week is that in the past if we’d have $5 or even $50 unspent we would end up using that money on something we didn’t need or even realize we were spending extra money on.  This may have been an extra meal or two out,  a coffee, a small purchase at Walmart.  Now that we are *looking* for this extra money every week, we find it and pay it to debt before we can lose it.  We’re averaging just over $150/month that way.  Can you find $150/month in your budget that you can do something impactful with that would have otherwise slipped away from you?  If you don’t have debt to pay off, sock that money into a mutual fund and see where it takes you.

U.S. TAXPAYER ALERT

Please read the following article and you will know why you should be alarmed over what AIG is doing and them take action and sign the petition and phone call the numbers that will be listed.

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2228 COHA Report, The Colombia FTA: A Less Attractive Face for Trade?

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The North American Free Trade Agreement (NAFTA), which came into being in December 1994, has been one of the more important free trade agreements of its time. The NAFTA pact was signed by Canada, Mexico, and the United States in hopes of strengthening the prevailing commercial climate and promoting trade among the three member countries. NAFTA has been the model for other trade agreements, including the pending Colombian Free Trade Agreement. Both NAFTA and the Colombian FTA have been controversial in terms of market access, creation of jobs as well as the labor and environmental regulations applicable to them.

Free trade apologists argue that the Colombian FTA will produce more jobs and boost a sluggish global economy through the creation of enhanced market competition, leading to innovation and improved products. Members of various sectors that have been crushed and displaced might beg to differ, and claim that in Mexico, while free trade arguably has revamped the manufacturing sector, it has caused the agricultural industry to progressively wilt. While Congress debates whether to pass or to continue blocking the Colombian FTA, a growing number of FTA critics cites the overall negative effects that NAFTA has had on Mexico, claiming that Colombia will be comparably harmed by the ratification of the FTA.

Certainly, the economic relationship between the United States and Mexico has ostensibly strengthened since 1994 with the advent of NAFTA. The two countries have collaborated in forming development links such as the Security and Prosperity Partnership of North America (SPP), whereby they advance their joint security and prosperity through a common security strategy and the enforcement of economic growth and competitiveness goals.

NAFTA also has proven to be controversial in many of its economic and social ramifications. Its drafters assumed that the governments involved in formulating and implementing the agreement would behave rationally, markets would respond prudently, and that the agreement would pave the way for Mexico’s entrance into the developed world. Critics of NAFTA claim that the real impact of the agreement has been to destroy the social fabric of existing workers’ rights and the democratic accountability of government authorities, and argue that NAFTA has principally benefited large corporate interests at the expense of small and subsidized farmers. At the end of the NAFTA drafting process, many of its critics speculated that inequality within particular economic sectors in member countries would rise. What was not foreseeable was that the economic gap would steadily increase between Mexico and its northern partners. Additionally, the expropriation of foreign direct investments in Mexico, the imbalance of imports compared to exports, poorly enforced environmental regulations, growing unemployment rates in both the United States and Mexico, negative effects on immigration, and the loss of a competitive edge in Mexico’s agricultural sector, were all unanticipated consequences when NAFTA was being put together.

Both Mexico and Colombia have a particularly close relationship with the United States. Mexico shares a 2,000 mile border with its North American neighbor, as well as extensive interconnections through the Gulf of Mexico. Additionally, Mexico has achieved a priority trade status as the world’s second largest consumer of American imports. As one of the United States’ closest allies in Latin America, the U.S. has assisted Colombia through Plan Colombia, a more than $6 billion counter-narcotics and security operation aimed at eradicating coca crops and shutting down trafficking networks, as well as promoting efforts to dismantle leftist guerrillas operating in that country, the Revolutionary Armed Forces of Colombia (FARC). Colombia, although much smaller than Mexico, is an essential market for exports of U.S. goods, as it imports $6.7 billion in U.S. goods and services annually. Mexico and Colombia not only depend on material assistance from the United States, but are also two of the last countries in the region which have remained relatively close allies to the U.S.

The most revealing flaws in the two agreements underscore the vagueness and inadequacy of the pacts regarding their abilities to provide proper enforcement and administration. Distressing to those who oppose the Colombian FTA are the acute parallels between the Colombian FTA and NAFTA, and how little Washington and Bogotá took NAFTA’s increasingly apparent problems into account when drafting and negotiating the later agreement. NAFTA’s concepts of minimal trade barriers and tariffs might seem uniquely attractive to countries that wish to sign future trade agreements. However, opponents of the Colombian model cannot help but question what improvements can be made in order to save the country from the same fate affecting Mexico.

Laura Carlsen, a highly regarded researcher for America’s Policy, stated in her article, which related Mexico’s lessons to Asia: “the government conceded considerable ground to obtain the access that they claimed would serve to reorient the Mexican economy which was outwardly based on its absolute and comparative advantages.” Washington has maintained the upper hand in choosing the exact nature of the access it will provide to its trading partners, while requiring total liberalization for the products it hopes to export. At the same time, the U.S. demands protection in the form of quotas and non-tariff barriers for its own products. This built-in U.S. advantage has forced Mexico to lose its competitive edge, which will cause it to continuously suffer at Washington’s hand, as countries such as China offer cheaper labor and transportation costs.

Although trade is supposed to move workers from low-productivity, low-wage import-competing industries into high-production export jobs with better wages, NAFTA led to job losses in all fifty U.S. states. Jeff Faux, a journalist for the Economic Policy Institute, exclaims in his important piece, Revisiting NAFTA that, “growing trade deficits with Mexico and Canada have pushed more than 1 million workers out of higher-wage jobs into lower-wage positions in non-trade related industries. Thus, the displacement of 1 million jobs from traded to non-traded goods’ industries reduced wage payments to U.S workers by $7.6 billion in 2004 alone.” An increase in the impact of the trade deficit on wages affects workers exposed to foreign competition, limits manufacturing sector jobs, and adds to a surplus in supply of service sector workers, resulting in wage depression.

Market access provisions may not have an entirely negative effect on the trade relationship between the U.S. and Colombia. However, when these provisions are combined with new rules on investment, procurement, and services, U.S. investment may begin to shift overseas, in turn hurting American workers. NAFTA’s inherent flaws in market access regulations have been incorporated in the Colombian Free Trade Agreement. Colombia’s fate could parallel that of Mexico, mostly due to the similarity of the new market access regulations, an increased radicalism regarding tariff barriers, and duty-free implementation practices that will most likely increase Colombia’s prospects for economic impairment.

NAFTA’s market regulations were drafted to open Mexican markets to Canada and U.S. exports, gradually constraining the robustness of protectionism in each others’ foreign markets. Opening markets moderately was to be a positive initiative when the trade pact was originally drafted. What was not considered at the time was the relatively small size of the Mexican economy and the difficulties that would result in attempting to impact the economies of its northern neighbors. Before the implementation of NAFTA, between 1991 and 1993, the Mexican unemployment rates slightly rose from 2.6 percent to 3.1 percent.

Import increases have had a substantial effect on the United States, particularly regarding the job market. Agricultural exports to Mexico have increased by 195.3 percent, far surpassing general export growth. Shortly before NAFTA in 1993, Mexico only purchased 8 percent of U.S. agricultural exports, a rate which grew in 2005 to over 15 percent. With the explosion of exports from the United States to its southern neighbor, Mexico’s competitive capacity in the agricultural sector alarmingly has weakened.

A representative from the Michigan Farm Bureau remarked that “an advantage for Michigan agriculture is that most of the imports we have seen from Mexico do not compete with Michigan products, they tend to be seasonal vegetables, which don’t really compete in the Michigan market in our window of production.” Alarmingly, thirty percent of Mexico’s farm jobs have disappeared since the trade pact went into effect, which has translated into 2.8 million farmers being pushed out of their fields by foreign competition. Mexico’s relatively feeble agricultural trade performance, when it comes to the United States, is partly a result of U.S. agricultural subsidies. The U.S. government subsidizes its farmers to the tune of $24 billion a year. Additionally, Washington has authorized an eighty percent increase in subsidies over the next ten years as a result of the 2002 Farm Bill. Such developments make it possible for American farmers to produce and sell below the price of production; therefore, it is out of the question for Mexico and Colombia to equably compete with the U.S. on a level playing field.

Just as Mexico’s agricultural sector has been hard hit, Colombia’s agricultural production vis-à-vis the U.S. also will likely be at a disadvantage. Along with the problem posed by agricultural subsidies, Colombia’s corn and bean crops will suffer greatly. Under the pending U.S.-Colombia Free Trade Agreement, the U.S. will export two million tons of yellow corn to Colombia, jeopardizing the jobs of 300,000 farm workers in the Colombian domestic corn industry. The bean market in Putumayo, Colombia is considered to be one of the largest in the country, with 2,200 acres of beans being planted for internal consumption. Under the agreement, it is estimated that 15,000 tons of beans will enter Colombia duty free, in turn destroying the local bean market. The American Farm Bureau Federation predicts that this arrangement could potentially provide $910 million in gains annually for American agriculture. It remains unclear whether Colombia will experience gains, or whether its fate will emulate Mexico’s appalling agricultural record.

Santa, Bring Me a Job for Christmas

The New York Times reported today that “533,000 non-farm jobs were eliminated in November, the most in one month since the mid-1970s, and figures for the prior two months were revised upward by 199,000.” I had one of the non-farm jobs eliminated last month, and my husband’s non-farm job was eliminated in September. We’re both unemployed.

CNN is reporting that 1.9 million Americans lost their jobs this year. I turned off the television, as I watched the DOW dropping from the news.

Having talked with my financial advisor this week, I knew that the unemployment stats would be grim today. Luckily he and I worked out a plan to get us through the next few months. But I need my mutual fund investments (both 401K and regular) to rebound.

I was given health insurance by my former employer until June 30, 2009, which is a big help. My husband has been without health insurance since September. We’re playing Russian roulette that he stays well until he can get a job, although we will probably purchase a temporary policy for him against anything catastrophic. He has just left the house for his third interview in two weeks. I hope he gets employed.

My husband is getting his unemployment checks now. I was approved for unemployment benefits, but when I’ve applied online, I was told that my request was not timely. The state of Tennessee has eliminated its unemployment office, where live people answer questions, since I was last laid off ten years ago. Everything has to be done online or by phone. Since I have had no luck qualifying online, I called the telephone number repeatedly only to receive a busy signal. I have gotten through a couple of times, but I am told that my request is not timely. There is no live person anywhere who can help me.

We watched Dave Ramsey’s show last night. I was struck by his comment on small businesses. He said that if a small business with 100 employees lays ten people off, that’s significant. It’s 10% of the workforce at the business, but the business owner can’t go to Washington and demand a bailout. I worked for a small business with twenty employees, and three were laid off. That’s a 15% reduction. And, no, the owner won’t be going to Washington and asking for a bailout.

I have worked for 35 years in the publishing industry, either catalogs or magazines. I was laid off the first time in 1997, when the retailer, where I had worked for 19 years, decided to eliminate its in-house catalog production staff. Fortunately, I found a job within a few months for a magazine publisher in Nashville. After a year there, the magazine was not making money due to poor ad sales and was closed down. Everyone lost their jobs, including the editors who had relocated from New York City. I had lost two jobs in less than 15 months.

Again, I rebounded in a couple of months by finding employment with a small publishing firm. After layoffs at two corporations, I had been advised to try a small business. I welcomed the change. I worked there for almost ten years, survived a staff reduction in 2001, survived in 2002 when the owner’s partners left to form their own business, but succumbed this year when a major client cut back its business.

Do I stay in publishing? Since my layoff last month, two other publishers in Nashville have reduced their staffs. Others may have also reduced payroll, but escaped being reported in the local media. While I’m looking for a new position in publishing (or contract or freelance work), I’m expanding my knowledge of social media.

I have two blogs and shortly before my layoff, nowpublic.com approached me about reporting on recycling for their environment section because of the success of my blog about litter. I am now recycling myself, along with almost 2 million other Americans.

SEC APPROVES NEW CREDIT-RATING RULES

The Securities and Exchange Commission took aim at the big credit rating firms Wednesday, passing new rules designed to prevent conflicts of interest and increase transparency in the $5 billion a year industry.

The three largest ratings firms — Standard & Poor’s, Moody’s Investors Service and Fitch Ratings — have been widely criticized for their role in the global financial crisis brought on by the collapse of the subprime mortgage market.

Critics claim the rating firms gave their highest ratings to securities laced with risky mortgage backed assets in order to curry favor — and profits — from the firms buying and selling the securities.

The new rules specifically forbid the firms from advising banks on how to package securities in order to secure high ratings.

Thousands of securities initially given AAA ratings were later downgraded as the financial crisis washed across Wall Street, forcing nearly every large bank to write down billions of dollars in losses.

SEC commissioners voted unanimously at a public meeting to adopt the new rules.

SEC Chairman Christopher Cox called adoption of the new rules “a significant and substantive action.”

The industry had regulated itself for nearly a century, but that ended in 2007 as it became clear that many mortgage-backed securities given AAA ratings were likely to collapse in value.

The agencies have long been as almost de facto regulators, issuing ratings on the creditworthiness of public companies and securities. Investors depend on the ratings to purchase the safest possible securities.

Their grades can be key factors in determining a company’s ability to raise or borrow money, and at what cost which securities will be purchased by banks, mutual funds, state pension funds or local governments.

Among the other new rules is one that will require the rating firms to disclose how much verification they performed on the quality of the securities they review.

SEC Approves New Credit-Rating Rules By FBN,  http://www.foxbusiness.com/story/markets/industries/finance/sec-approves-new-credit-rating-rules/

Real Estate

The Active U.S. Real Estate Fund (symbol PSR) invests in real estate investment trusts, aka REITs. The fund’s managed by a team of 13 investment pros experienced in managing real estate securities.

Unlike actively managed mutual fund. The real estate ETFs must disclose their portfolios at the end of each trading day. Since most ETFs track indexes, changes to the portfolio are rare and their performance predictably moves in line with the underlying benchmark.

Some industry watchers say that disclosing trades on a daily basis takes away the advantage of an active manager (mutual fund managers are only required to disclose their holdings quarterly.

The Unholy Alliance? Colety, Cavallo and Zherka

Westchester GOP  Chairman Doug Colety is taking alot of heat from fellow Republicans for his recent attendance at a fundraising event for Tony Castro. Castro, a Democrat, has run for Westchester district attorney on two occassions, and is said to be considering a third run for DA. Its easy to see why republicans would be a bit peeved that their leader and chairman, Colety, was seen and photographed at a fundraiser for a prominent Democrat — Castro.

Colety was caught recently on the pages of the Westchester Guardian at the fundraiser with Westchester Independence Party Chairman Dr. Giulio Cavallo and Castro. We spoke to Colety, who told us, ”I was invited to an event by Dr. Giulio Cavallo to honor Tony Castro, who as far as I know, has not announced that he is running for anything.”

“The Republican Party does have candidates (plural) interested in running for DA. All of who will be interviewed by the Excecutive Committee and nominated at the convention by the rank and file. I will not be selecting the candidates alone, and there is a process that we will be going through next year. My attendance at the event in no way should indicate that I’m supporting any candidate.”

When we followed up with Colety and asked if Castro could be the Republican candidate for DA next year, he called it “total nonsense. My feeling about Tony Castro’s bid to run, if he decides to run in a Democratic primary, is that I believe he is best served running without the Republican endorsement. Strategically, in a Democratic primary, a Democrat cannot win with the Republican line.”

But Colety added this caveat to his friend Cavallo, saying, “If the Independence Party asks us to interview a candidate who they are supporting, we will consider doing so. My friendship with Dr. Cavallo will benefit Republican candidates throughout the county.”

There is no disputing that Colety and Cavallo share a strong political alliance that has turned into a friendship over the years, and if Doc Cavallo asked Colety to come to this event, he would do so. It is also true that the two political parties that Cavallo and Colety preside over  need to work together in order for Republicans to have any chance of remaining a viable party here in Westchester. This is another reason for Colety to appear at this event for Cavallo.

But that’s where the rationale for Colety attending this event ends. Here’s the other side of the argument aganst Colety attending. First, this was not an event for Cavallo, or his Independence Party. It was for a Democratic candidate for district attorney very likely to be running again, and possibly running against the Republican party’s candidate for DA, in 2009.  If Cavallo asked Colety to attend a Hillary or Obama event, would he do it?

Second, as Colety stated above, there are more than one Republican candidates interested in running for DA next year. Dan Schor is the one GOP DA candidate already actively campaigning and raising money, and yes, some of the rumblings we heard about Colety attending the Castro event came from Schor supporters (but we got calls and e-mails from Republicans from Yonkers, Harrison and Rye complaining about the photo in the Guardian).

Third, the growing relationship between Colety, Cavallo and Westchester Guardian Publisher Sam Zherka deserve mention, and attention from the powers that be. Cavallo and Zherka have become friends over the past year after a group led by Zherka attempted to overthrow Cavallo from power as Westchester Independence Party chairman. Since then, the two have formed a mutual opppostion to current District Attorney Janet DiFiore.

When Cavallo brings his good friend Doug Colety into the mix with Zherka and co., you have a very powerful and dangerous political alliance. In theory, a political candidate, who has the blessing of Sam Zherka, could easily have two political party lines to run on here in Westchester: the Republican and Independence lines.

This is what got Republicans and others in Westchester so upset about the photo in the Guardian; most thought this meant that Castro was going to attempt to get the Republican line. While Colety disputed those rumors in his quotes to us, he may have simply backed off the idea because of all the intense opposition to it.

One thing is clear: that photo, assumed to be taken by Guardian Editor-in-Chief Richard Blassberg, did not have the intended outcome. It exposed Colety, Cavallo and Zherka and put them all on the hot seat.  It also didn’t  help Blassberg’s eternal candidate for DA, Castro. Or is this what Dick wanted to do all along — expose this unholy alliance to the public? But how can you justify that to your boss, or does Sam even understand this?  

Let’s also realize that DA DiFiore is now a Democrat, so if Castro wants to challenge DiFiore again in 2009, he must do so in a Democratic primary.

More analysis on this upcoming race , and the unoly alliance,  in our next post.

Long-term care insurance

id="blog_description">Simple Living = Frugality = Peace of Mind: Personal Finance and Stress Control

Is there any question about why some old folks ship out on luxury liners in their sunset years?

Medicaid will cover nursing home care, but only after you have utterly pauperized yourself. You must be left penniless, meaning you have had to sell your home, your car, and expend all other assets on medical and nursing home bills. In Arizona, if you’ve made the mistake of gifting your children, as is allowed under federal law, with a few thousand inheritance-tax-free bucks over the two years prior to your falling ill, you can be disqualified from this state’s equivalent of Medicaid on the theory that you must have been trying to cheat the system.

So as you can see, if you’re “lucky” enough to make it to advanced old age, you’d better have long-term care insurance. Fourteen percent of people over 71 suffer from dementia, and that doesn’t count strokes, broken hips, chronic heart failure, Parkinson’s disease, or any of the multitude of other causes that put the elderly out of commission.

In general, you should plan to buy long-term care insurance in your early fifties. Obviously, if you purchase a policy when you’re too young, you’ll pay premiums over a long period when your chance of needing the coverage is almost nil. If you wait until you’re too old, you may be disqualified from buying a policy or pay an exorbitant premium. 

You need to investigate any insurance company carefully before buying a long-term policy from it. Be sure it is financially sound and highly rated by Moody’s and A.M. Best. In addition, it’s important to fully understand what you’re buying. Most states have an agency on aging or an insurance commission. These agencies can provide you with information on what to look for and what to avoid in long-term care coverage. AARP also offers a  lot of valuable information, but you should be aware that this organization is in the business of selling long-term care insurance. 

Munis dying

Back on July 16 we warned “ Muni Securities are blowing up. Not safe.”

Today the news has hit the press:

As of Dec. 4, there were 12 muni funds down more than 30% this year — nine from OppenheimerFunds, two from Eaton Vance Corp. and one from Nuveen Investments.

“These are really extreme numbers,” said Lawrence Jones, senior mutual fund analyst at investment researcher Morningstar Inc. “It’s safe to say that muni funds have never seen losses like this.”

Thanks Lawrence. Back in July of course munis were seen as a safe bet by everyone and only cranks were suggesting that cities and states weren’t a good place to put your money.

Despite his fund’s losses, Fielding is bullish about the muni market in the years ahead.

Islamic Banking and the concept of economic development: The Nigerian perspective

id="blog-title">Islamic Banking & Finance Network

id="tagline">This blog explores the concept of Islamic Finance around the globe.

Come September

Arundhati Roy visits Albuquerque. The world as she sees it. A great speech.

My talk today is called “Come September.”

Writers imagine that they cull stories from the world. I’m beginning to believe that vanity makes them think so. That it’s actually the other way around. Stories cull writers from the world. Stories reveal themselves to us. The public narrative, the private narrative - they colonize us. They commission us. They insist on being told. Fiction and nonfiction are only different techniques of story telling. For reasons that I don’t fully understand, fiction dances out of me, and nonfiction is wrenched out by the aching, broken world I wake up to every morning.

The theme of much of what I write, fiction as well as nonfiction, is the relationship between power and powerlessness and the endless, circular conflict they’re engaged in. John Berger, that most wonderful writer, once wrote: “Never again will a single story be told as though it’s the only one.” There can never be a single story. There are only ways of seeing. So when I tell a story, I tell it not as an ideologue who wants to pit one absolutist ideology against another, but as a story-teller who wants to share her way of seeing. Though it might appear otherwise, my writing is not really about nations and histories; it’s about power. About the paranoia and ruthlessness of power. About the physics of power. I believe that the accumulation of vast unfettered power by a State or a country, a corporation or an institution - or even an individual, a spouse, a friend, a sibling -regardless of ideology, results in excesses such as the ones I will recount here.

Living as I do, as millions of us do, in the shadow of the nuclear holocaust that the governments of India and Pakistan keep promising their brain-washed citizenry, and in the global neighborhood of the War Against Terror (what President Bush rather biblically calls “The Task That Never Ends”), I find myself thinking a great deal about the relationship between Citizens and the State.

In India, those of us who have expressed views on Nuclear Bombs, Big Dams, Corporate Globalization and the rising threat of communal Hindu fascism - views that are at variance with the Indian government’s - are branded ‘anti- national.’ While this accusation doesn’t fill me with indignation, it’s not an accurate description of what I do or how I think. Because an ‘anti-national’ is a person who is against his or her own nation and, by inference, is pro some other one. But it isn’t necessary to be ‘anti-national’ to be deeply suspicious of all nationalism, to be anti-nationalism. Nationalism of one kind or another was the cause of most of the genocide of the twentieth century. Flags are bits of colored cloth that governments use first to shrink-wrap people’s brains and then as ceremonial shrouds to bury the dead. [Applause] When independent- thinking people (and here I do not include the corporate media) begin to rally under flags, when writers, painters, musicians, film makers suspend their judgment and blindly yoke their art to the service of the “Nation,” it’s time for all of us to sit up and worry. In India we saw it happen soon after the Nuclear tests in 1998 and during the Cargill War against Pakistan in 1999. In the U.S. we saw it during the Gulf War and we see it now during the “War Against Terror.” That blizzard of Made-in-China American flags. [Laughter]

Recently, those who have criticized the actions of the U.S. government (myself included) have been called “anti-American.” Anti-Americanismis in the process of being consecrated into an ideology.

The term “anti-American” is usually used by the American establishment to discredit and, not falsely - but shall we say inaccurately - define its critics. Once someone is branded anti-American, the chances are that he or she will be judged before they are heard, and the argument will be lost in the welter of bruised national pride.

But what does the term “anti-American” mean? Does it mean you are anti-jazz? Or that you’re opposed to freedom of speech? That you don’t delight in Toni Morrison or John Updike? That you have a quarrel with giant sequoias? Does it mean that you don’t admire the hundreds of thousands of American citizens who marched against nuclear weapons, or the thousands of war resisters who forced their government to withdraw from Vietnam? Does it mean that you hate all Americans?

This sly conflation of America’s culture, music, literature, the breathtaking physical beauty of the land, the ordinary pleasures of ordinary people with criticism of the U.S. government’s foreign policy (about which, thanks to America’s “free press”, sadly most Americans know very little) is a deliberate and extremely effective strategy. It’s like a retreating army taking cover in a heavily populated city, hoping that the prospect of hitting civilian targets will deter enemy fire.

But there are many Americans who would be mortified to be associated with their government’s policies. The most scholarly, scathing, incisive, hilarious critiques of the hypocrisy and the contradictions in U.S. government policy come from American citizens. When the rest of the world wants to know what the U.S. government is up to, we turn to Noam Chomsky, Edward Said, Howard Zinn, Ed Herman, Amy Goodman, Michael Albert, Chalmers Johnson, William Blum and Anthony Amove to tell us what’s really going on. [Applause]

Similarly, in India, not hundreds, but millions of us would be ashamed and offended if we were in any way implicated with the present Indian government’s fascist policies which, apart from the perpetration of State terrorism in the valley of Kashmir (in the name of fighting terrorism), have also turned a blind eye to the recent state-supervised progrom against Muslims in Gujarat. It would be absurd to think that those who criticize the Indian government are “anti-Indian” - although the government itself never hesitates to take that line. It is dangerous to cede to the Indian government or the American government or anyone for that matter, the right to define what “India” or “America” are or ought to be.

To call someone “anti-American”, indeed to be anti-American, (or for that matter, anti-Indian or anti-Timbuktuan) is not just racist, it’s a failure of the imagination. An inability to see the world in terms other than those the establishment has set out for you. If you’re not a Bushie you’re a Taliban. If you don’t love us, you hate us. If you’re not Good, you’re Evil. If you’re not with us, you’re with the terrorists.

Last year, like many others, I too made the mistake of scoffing at this post- September 11th rhetoric, dismissing it as foolish and arrogant. But I’ve realized it’s not foolish at all. It’s actually a canny recruitment drive for a misconceived, dangerous war. Everyday I’m taken aback at how many people believe that opposing the war in Afghanistan amounts to supporting terrorism, of voting for the Taliban. Now that the initial aim of the war - capturing Osama bin Laden (dead or alive) - seems to have run into bad weather, the goalposts have been moved. It’s being made out that the whole point of the war was to topple the Taliban regime and liberate Afghan women from their burqas, we are being asked to believe that the U.S. marines are actually on a feminist mission [laughter, applause]. (If so, will their next stop be America’s military ally Saudi Arabia?) [Laughter] Think of it this way: in India there are some pretty reprehensible social practices against “untouchables”, against Christians and Muslims, against women. Pakistan and Bangladesh have even worse ways of dealing with minority communities and women. Should they be bombed? Should Delhi, Islamabad and Dhaka be destroyed? Is it possible to bomb bigotry out of India? Can we bomb our way to a feminist paradise? [Laughter] Is that how women won the vote in the U.S? Or how slavery was abolished? Can we win redress for the genocide of the millions of Native Americans upon whose corpses the United States was founded by bombing Santa Fe? [Applause]

None of us need anniversaries to remind us of what we cannot forget. So it’s no more than co-incidence that I happen to be here, on American soil, in September - this month of dreadful anniversaries. Uppermost on everybody’s mind of course, particularly here in America, is the horror of what has come to be known as 9/11. Nearly three thousand civilians lost their lives in that lethal terrorist strike. The grief is still deep. The rage still sharp. The tears have not dried. And a strange, deadly war is raging around the world. Yet, each person who has lost a loved one surely knows secretly, deeply, that no war, no act of revenge, no daisy-cutters dropped on someone else’s loved ones or someone else’s children, will blunt the edges of their pain or bring their own loved ones back. War cannot avenge those who have died. War is only a brutal desecration of their memory.

To fuel yet another war - this time against Iraq - by cynically manipulating people’s grief, by packaging it for TV specials sponsored by corporations selling detergent and running shoes, is to cheapen and devalue grief, to drain it of meaning. What we are seeing now is a vulgar display of the business of grief, the commerce of grief, the pillaging of even the most private human feelings for political purpose. It is a terrible, violent thing for a State to do to its people. [Applause]

It’s not a clever-enough subject to speak of from a public platform, but what I would really love to talk to you about is Loss. Loss and losing. Grief, failure, brokenness, numbness, uncertainty, fear, the death of feeling, the death of dreaming. The absolute relentless, endless, habitual, unfairness of the world. What does loss mean to individuals? What does it mean to whole cultures, whole people who have learned to live with it as a constant companion?

Since it is September 11th we’re talking about, perhaps it’s in the fitness of things that we remember what that date means, not only to those who lost their loved ones in America last year, but to those in other parts of the world to whom that date has long held significance. This historical dredging is not offered as an accusation or a provocation. But just to share the grief of history. To thin the mists a little. To say to the citizens of America, in the gentlest, most human way: “Welcome to the World.” [Applause]

Twenty-nine years ago, in Chile, on the 11th of September 1973, General Pinochet overthrew the democratically elected government of Salvador Allende in a CIA-backed coup. “Chile should not be allowed to go Marxist just because its people are irresponsible,” said Henry Kissinger, Nobel Peace Laureate, then the U.S. Secretary of State.

After the coup President Allende was found dead inside the presidential palace. Whether he was killed or whether he killed himself, we’ll never know. In the regime of terror that ensured, thousands of people were killed. Many more simply “disappeared”. Firing squads conducted public executions. Concentration camps and torture chambers were opened across the country. The dead were buried in mine shafts and unmarked graves. For seventeen years the people of Chile lived in dread of the midnight knock, of routine “disappearances”, of sudden arrest and torture. Chileans tell the story of how the musician Victor Jara had his hands cut off in front of a crowd in the Santiago stadium. Before they shot him, Pinochet’s soldiers threw his guitar at him and mockingly asked him to play.

In 1999, following the arrest of General Pinochet in Britain, thousands of secret documents were declassified by the U.S. government. They contain unequivocal evidence of the CIA’s involvement in the coup as well as the fact that the U.S. government had detailed information about the situation in Chile during General Pinochet’s reign. Yet, Kissinger assured the general of his support: “In the United States as you know, we are sympathetic to what you’re trying to do,” he said. “We wish your government well.”

Those of us who have only ever known life in a democracy, however flawed, would find it hard to imagine what living in a dictatorship and enduring the absolute loss of freedom means. It isn’t just those who Pinochet murdered, but the lives he stole from the living that must be accounted for too.

Sadly, Chile was not the only country in South America to be singled out for the U.S. government’s attentions. Guatemala, Costa Rica, Ecuador, Brazil, Peru, the Dominican Republic, Bolivia, Nicaragua, Honduras, Panama, El Salvador, Peru, Mexico and Colombia - they’ve all been the playground for covert - and overt - operations by the CIA. Hundreds of thousands of Latin Americans have been killed, tortured or have simply disappeared under the despotic regimes that were propped up in their countries. If this were not humiliation enough, the people of South America have had to bear the cross of being branded as people who are incapable of democracy - as if coups and massacres are somehow encrypted in their genes.

This list does not, of course, include countries in Africa or Asia that suffered U.S. military interventions - Vietnam, Korea, Indonesia, Laos, and Cambodia. For how many Septembers for decades together have millions of Asian people been bombed, and burned, and slaughtered? How many Septembers have gone by since August 1945, when hundreds of thousands of ordinary Japanese people were obliterated by the nuclear strikes in Hiroshima and Nagasaki? For how many Septembers have the thousands who had the misfortune of surviving those strikes endured that living hell that was visited on them, their unborn children, their children’s children, on the earth, the sky, the water, the wind, and all the creatures that swim and walk and crawl and fly? Not far from here, in Albuquerque, is the National Atomic Museum where Fat Man and Little Boy (the affectionate nicknames for the bombs that were dropped on Hiroshima and Nagasaki) were available as souvenir earrings. Funky young people wore them. A massacre dangling in each ear. But I’m straying from my theme. It’s September that we’re talking about, not August.

September 11th has a tragic resonance in the Middle East, too. On the 11th of September 1922, ignoring Arab outrage, the British government proclaimed a mandate in Palestine, a follow-up to the 1917 Balfour Declaration which imperial Britain issued, with its army massed outside the gates of Gaza. The Balfour Declaration promised European Zionists a national home for Jewish people. (At the time, the Empire on which the Sun Never Set was free to snatch and bequeath national homes like a school bully distributes marbles.)

How carelessly imperial power vivisected ancient civilizations. Palestine and Kashmir are imperial Britain’s festering, blood-drenched gifts to the modern world. Both are fault lines in the raging international conflicts of today.

In 1937, Winston Churchill said of the Palestinians, I quote, “I do not agree that the dog in a manger has the final right to the manger even though he may have lain there for a very long time. I do not admit that right. I do not admit for instance, that a great wrong has been done to the Red Indians of America or the black people of Australia. I do not admit that a wrong has been done to these people by the fact that a stronger race, a higher-grade race, a more worldly wise race to put it that way, has come in and taken their place.” That set the trend for the Israeli State’s attitude towards the Palestinians. In 1969, Israeli Prime Minister Golda Meir said, “Palestinians do not exist.” Her successor, Prime Minister Levi Eschol said, “What are Palestinians? When I came here (to Palestine), there were 250,000 non-Jews, mainly Arabs and Bedouins. It was a desert, more than underdeveloped. Nothing.” Prime Minister Menachem Begin called Palestinians “two-legged beasts.” Prime Minister Yitzhak Shamir called them “grasshoppers” who could be crushed. This is the language of Heads of State, not the words of ordinary people.

In 1947, the U.N. formally partitioned Palestine and allotted 55 per cent of Palestine’s land to the Zionists. Within a year, they had captured 76 per cent. On the 14th of May 1948 the State of Israel was declared. Minutes after the declaration, the United States recognized Israel. The West Bank was annexed by Jordan. The Gaza strip came under Egyptian military control, and formally Palestine ceased to exist except in the minds and hearts of the hundreds of thousands of Palestinian people who became refugees. In 1967, Israel occupied the West Bank and the Gaza strip.

Over the decades there have been uprisings, wars, intifadas. Tens of thousands have lost their lives. Accords and treaties have been signed. Cease-fires declared and violated. But the bloodshed doesn’t end. Palestine still remains illegally occupied. Its people live in inhuman conditions, in virtual Bantustans, where they are subjected to collective punishments, twenty-four hour curfews, where they are humiliated and brutalized on a daily basis. They never know when their homes will be demolished, when their children will be shot, when their precious trees will be cut, when their roads will be closed, when they will be allowed to walk down to the market to buy food and medicine. And when they will not. They live with no semblance of dignity. With not much hope in sight. They have no control over their lands, their security, their movement, their communication, their water supply. So when accords are signed, and words like “autonomy” and even “statehood” bandied about, it’s always worth asking: What sort of autonomy? What sort of State? What sort of rights will its citizens have?

Young Palestinians who cannot control their anger turn themselves into human bombs and haunt Israel’s streets and public places, blowing themselves up, killing ordinary people, injecting terror into daily life, and eventually hardening both societies’ suspicion and mutual hatred of each other. Each bombing invites merciless reprisal and even more hardship on Palestinian people. But then suicide bombing is an act of individual despair, not a revolutionary tactic. Although Palestinian attacks strike terror into Israeli citizens, they provide the perfect cover for the Israeli government’s daily incursions into Palestinian territory, the perfect excuse for old-fashioned, nineteenth-century colonialism, dressed up as a new fashioned, twenty-first century “war”.

Israel’s staunchest political and military ally is and always has been the U.S. The U.S. government has blocked, along with Israel, almost every U.N. resolution that sought a peaceful, equitable solution to the conflict. It has supported almost every war that Israel has fought. When Israel attacks Palestine, it is American missiles that smash through Palestinian homes. And every year Israel receives several billion dollars from the United States - taxpayers money.

What lessons should we draw from this tragic conflict? Is it really impossible for Jewish people who suffered so cruelly themselves - more cruelly perhaps than any other people in history - to understand the vulnerability and the yearning of those whom they have displaced? Does extreme suffering always kindle cruelty? What hope does this leave the human race with? What will happen to the Palestinian people in the event of a victory? When a nation without a state eventually proclaims a state, what kind of state will it be? What horrors will be perpetrated under its flag? Is it a separate state that we should be fighting for or, the rights to a life of liberty and dignity for everyone regardless of their ethnicity or religion?

Palestine was once a secular bulwark in the Middle East. But now the weak, undemocratic, by all accounts corrupt but avowedly nonsectarian P.L.O., is losing ground to Hamas, which espouses an overtly sectarian ideology and fights in the name of Islam. To quote from their manifesto: “we will be its soldiers and the firewood of its fire, which will burn the enemies.”

The world is called upon to condemn suicide bombers. But can we ignore the long road they have journeyed on before they have arrived at this destination? September 11, 1922 to September 11, 2002 - eighty years is a long time to have been waging war. Is there some advice the world can give the people of Palestine? Should they just take Golda Meir’s suggestion and make a real effort not to exist?

In another part of the Middle East, September 11th strikes a more recent cord. It was on the 11th of September 1990 that George W. Bush, Sr., then President of the U.S., made a speech to a joint session of Congress announcing his government’s decision to go to war against Iraq.

The U.S. government says that Saddam Hussein is a war criminal, a cruel military despot who has committed genocide against his own people. That’s a fairly accurate description of the man. In 1988, Saddam Hussein razed hundreds of villages in northern Iraq, used chemical weapons and machine guns to kill thousands of Kurdish people. Today we know that that same year the U.S. government provided him with $500 million in subsidies to buy American farm products. The next year, after he had successfully completed his genocidal campaign, the U.S. government doubled its subsidy to $1 billion. It also provided him with high quality germ seed for anthrax, and helicopters and dual-use material that could be used to manufacture chemical and biological weapons. So it turns out that while Saddam Hussein was carrying out his worst atrocities, the U.S. and the U.K. governments were his close allies.

So what changed? In 1990, Saddam Hussein invaded Kuwait. His sin was not so much that he had committed an act of war, but that he had acted independently, without orders from his master. This display of independence was enough to upset the power equation in the Gulf. So it was decided that Saddam Hussein be exterminated, like a pet that has outlived its owner’s affection.

The first Allied attack on Iraq took place on January ‘91. The world watched the prime-time war as it was played out on T.V. (In India in those days you had to go to a five-star hotel lobby to watch CNN.) Tens of thousands of people were killed in a month of devastating bombing. What many do not know is that the war never ended then. The initial fury simmered down into the longest sustained air attack on a country since the Vietman War. Over the last decade American and British forces have fired thousands of missiles and bombs on Iraq. In the decade of economic sanctions that followed the war, Iraqi civilians have been denied food, medicine, hospital equipment, ambulances, clean water - the basic essentials.

About half a million Iraqi children have died as a result of the sanctions. Of them, Madeleine Albright, then U.S. ambassador to the United Nations, famously said, “It’s a very hard choice, but we think the price is worth it.” “Moral equivalence” was the term that was used to denounce those of us who criticized the war on Afghanistan. Madeleine Albright cannot be accused of moral equivalence. What she said was just straightforward algebra.

A decade of bombing has not managed to dislodge Saddam Hussein, “the Beast of Baghdad”. Now, almost 12 years on, President George Bush, Jr. has ratcheted up the rhetoric once again. He’s proposing an all-out war whose goal is nothing short of a regime change. The New York Times says that the Bush administration is following, quote, “a meticulously planned strategy to persuade the public, the Congress, and the Allies of the need to confront the threat of Saddam Hussein.” Andrew. H. Card, Jr., the White House Chief of Staff, described how the administration was stepping up its war plans for the fall, and I quote, “From a marketing point of view”, he said, “you don’t introduce new products in August.” This time the catch-phrase for Washington’s “new product” is not the plight of Kuwaiti people but the assertion that Iraq has weapons of mass destruction. “Forget the feckless moralizing of peace lobbies”, wrote Richard Perle, a former advisor to President Bush, “We need to get him before he gets us.”

Weapons inspectors have conflicting reports of the status of Iraq’s weapons of mass destruction, and many have said clearly that its arsenal has been dismantled and that it does not have the capacity to build one. However, there is no confusion over the extent and range of America’s arsenal of nuclear and chemical weapons. Would the U.S. government welcome weapons inspectors? Would the U.K.? Or Israel?

What if Iraq does have a nuclear weapon, does that justify a pre-emptive U.S. strike? The U.S. has the largest arsenal of nuclear weapons in the world and it’s the only country in the world to have actually used them on civilian populations. If the U.S. is justified in launching a pre-emptive strike on Iraq, why, then any nuclear power is justified in carrying out a pre- emptive strike on any other. India could attack Pakistan, or the other way around. If the U.S. government develops a distaste for, say, the Indian Prime Minister, can it just “take him out” with a pre-emptive strike?

Recently the United States played an important part in forcing India and Pakistan back from the brink of war. Is it so hard for it to take its own advice? Who is guilty of feckless moralizing? Of preaching peace while it wages war? The U.S., which George Bush has called “the most peaceful nation on earth”, has been at war with one country or another every year for the last fifty.

Wars are never fought for altruistic reasons. They’re usually fought for hegemony, for business. And then of course there’s the business of war.

Protecting its control of the world’s oil is fundamental to U.S. foreign policy. The U.S. government’s recent military interventions in the Balkans and Central Asia have to do with oil. Hamid Karzai, the puppet President of Afghanistan installed by the U.S., is said to be a former employee of Unocal, the American-based oil company. The U.S. government’s paranoid patrolling of the Middle East is because it has two-thirds of the world’s oil reserves. Oil keeps America’s engines purring sweetly. Oil keeps the Free Market rolling. Whoever controls the world’s oil, controls the world’s market. And how do you control the oil?

Nobody puts it more elegantly than The New York Times columnist, Thomas Friedman. In an article called, “Craziness Pays”, he said, “The U.S. has to make it clear to Iraq and U.S. allies that…American will use force without negotiation, hesitation or U.N. approval.” His advice was well taken. In the wars against Iraq and Afghanistan as well as in the almost daily humiliation the U.S. government heaps on the U.N. In his book on globalization, The Lexus and the Olive Tree, Friedman says, and I quote, “The hidden hand of the market will never work without the hidden fist. McDonalds cannot flourish without McDonnell Douglas…and the hidden fist that keeps the world safe for Silicon Valley’s technologies to flourish is called the U.S. Army, Air Force, Navy, and Marine Corps.” Perhaps this was written in a moment of vulnerability, but it’s certainly the most succinct, accurate description of the project of corporate globalization that I have read.

After the 11th of September 2001 and the War Against Terror, the hidden hand and fist have had their cover blown - and we have a clear view now of America’s other weapon - the Free Market - bearing down on the Developing World, with a clenched, unsmiling smile. The Task That Never Ends is America’s perfect war, the perfect vehicle for the endless expansion of American imperialism. In Urdu, the word for Profit, as in “p-r-o-f-i-t”, is fayda. Al Qaida means The Word, The Word of God, The Law. So, in India, some of us call the War Against Terror, Al Qaida versus Al Fayda - The Word versus The Profit (no pun intended.)

For the moment it looks as though Al Fayda will carry the day. But then you never know…

In the last ten years of unbridled Corporate Globalization, the world’s total income has increased by an average of 2.5 percent a year. And yet the numbers of poor in the world has increased by 100 million. Of the top hundred biggest economies, 51 are corporations, not countries. The top 1 percent of the world has the same combined income as the bottom 57 percent and that disparity is growing. And now, under the spreading canopy of the War Against Terror, this process is being hustled along. The men in suits are in an unseemly hurry. While bombs rain down on us, and cruise missiles skid across the skies, while nuclear weapons are stockpiled to make the world a safer place, contracts are being signed, patents are being registered, oil pipe lines are being laid, natural resources are being plundered, water is being privatized, and democracies are being undermined.

In a country like India, the “structural adjustment” end of the Corporate Globalization project is ripping through people’s lives. “Development” projects, massive privatization, and labor “reforms” are pushing people off their lands and out of their jobs, resulting in a kind of barbaric dispossession that has few parallels in history. Across the world, as the “Free Market” brazenly protects Western markets and forces developing countries to lift their trade barriers, the poor are getting poorer and the rich richer. Civil unrest has begun to erupt in the global village. In countries like Argentina, Brazil, Mexico, Bolivia and India, the resistance movements against Corporate Globalization are growing. To contain them, governments are tightening their control. Protesters are being labeled “terrorists” and then being dealt with as such. But civil unrest does not only mean marches and demonstrations and protests against globalization. Unfortunately, it also means a desperate downward spiral into crime and chaos and all kinds of despair and disillusionment which as we know from history (and from what we see unspooling before our eyes), gradually becomes a fertile breeding ground for terrible things - cultural nationalism, religious bigotry, fascism and of course, terrorism.

All these march arm-in-arm with corporate globalization. There is a notion gaining credence that the Free Market breaks down national barriers, and that Corporate Globalization’s ultimate destination is a hippie paradise where the heart is the only passport and we all live happily together inside a John Lennon song. (”Imagine there’s no country…”) But this is a canard.

What the Free Market undermines is not national sovereignty, but democracy. As the disparity between the rich and poor grows, the hidden fist has its work cut out for it. Multinational corporations on the prowl for “sweetheart deals” that yield enormous profits cannot push through those deals and administer those projects in developing countries without the active connivance of State machinery - the police, the courts, sometimes even the army. Today Corporate Globalization needs an international confederation of loyal, corrupt, preferably authoritarian governments in poorer countries to push through unpopular reforms and quell the mutinies. It needs a press that pretends to be free. It needs courts that pretend to dispense justice. It needs nuclear bombs, standing armies, sterner immigration laws, and watchful coastal patrols to make sure that it’s only money, goods, patents, and services that are being globalized - not the free movement of people, not a respect for human rights, not international treaties on racial discrimination or chemical and nuclear weapons, or greenhouse gas emissions, climate change, or god forbid, justice. It’s as though even a gesture towards international accountability would wreck the whole enterprise.

Close to one year after the War against Terror was officially flagged off in the ruins of Afghanistan, in country after country freedoms are being curtailed in the name of protecting freedom, civil liberties are being suspended in the name of protecting democracy. All kinds of dissent are being defined as “terrorism”. All kinds of laws are being passed to deal with it. Osama bin Laden seems to have vanished into thin air. Mullah Omar is supposed to have made his escape on a motorbike. (They could have sent TinTin after him.) [Laughter] The Taliban may have disappeared but their spirit, and their system of summary justice is surfacing in the unlikeliest of places. In India, in Pakistan, in Nigeria, in America, in all the Central Asian republics run by all manner of despots, and of course in Afghanistan under the U.S.-backed, Northern Alliance.

Meanwhile down at the mall there’s a mid-season sale. Everything’s discounted - oceans, rivers, oil, gene pools, fig wasps, flowers, childhoods, aluminum factories, phone companies, wisdom, wilderness, civil rights, eco-systems, air - all 4,600 million years of evolution. It’s packed, sealed, tagged, valued and available off the rack. (No returns). As for justice - I’m told it’s on offer too. You can get the best that money can buy.

Donald Rumsfeld said that his mission in the War Against Terror was to persuade the world that Americans must be allowed to continue their way of life. When the maddened king stamps his foot, slaves tremble in their quarters. So, standing here today, it’s hard for me to say this, but “The American Way of Life” is simply not sustainable. Because it doesn’t acknowledge that there is a world beyond America. [Applause]

But fortunately, power has a shelf life. When the time comes, maybe this mighty empire will, like others before it, overreach itself and implode from within. It looks as though structural cracks have already appeared. As the War Against Terror casts its net wider and wider, America’s corporate heart is hemorrhaging. For all the endless, empty chatter about democracy, today the world is run by three of the most secretive institutions in the world: The International Monetary Fund, the World Bank, and the World Trade Organization, all three of which, in turn, are dominated by the U.S. Their decisions are made in secret. The people who head them are appointed behind closed doors. Nobody really knows anything about them, their politics, their beliefs, their intentions. Nobody elected them. Nobody said they could make decisions on our behalf. A world run by a handful of greedy bankers and C.E.O.’s whom nobody elected can’t possibly last.

Soviet-style communism failed, not because it was intrinsically evil but because it was flawed. It allowed too few people to usurp too much power. Twenty-first century market-capitalism, American style, will fail for the same reasons. Both are edifices constructed by the human intelligence, undone by human nature.

The time has come, the Walrus said. Perhaps things will become worse and then better. Perhaps there’s a small god up in heaven readying herself for us. Another world is not only possible, she’s on her way. Maybe many of us won’t be here to greet her, but on a quiet day, if I listen very carefully, I can hear her breathing. Thank you. [Applause]

Thank you.

I just want to say that, you know, I was so terrified of coming to America, because, when you read the papers and when you watch whatever you get to see on TV, which is Fox News, you know, in India [laughter], you know… this corporate media just makes out as if everybody in America is, you know, a clone of George Bush. [laughter] I’m just so glad that I came because it just reaffirms my faith in humanity to see you here and to not have tomatoes thrown at me.

Thank you. [Applause]

Heebner

Ken Heebner, manager of CGM Focus fund, is warming up to financial stocks according to this WSJ article. Heebner, who has one of the best performing mutual fund records over the last decade, has been loading up on financials. According to his fund’s Sept. 30% portfolio report, the fund held 40% in financials although the current exposure is not has high. He uses two less known metrics when analyzing finance companies. One is the “price-to-tangible book value”, while the other is “price-to-preprovision earnings”. An interesting tidbit is that Heebner launched a private partnership he started in June called Wayfarer Capital LP. It will be worthwhile keeping an eye on this investment vehicle given his impressive track record.

Financial stocks were also the highlight of a New York Times article today. Well known fund manager Ron Muhlenkamp “expects regulators to move to a system where valuations are less sensitive to day-to-day price fluctuations but provide better estimates of long-term worth.” The result, says Muhlenkamp, will be higher stock prices for many financial firms.

These are contrarian-like calls from two successful fund managers. Sometimes the most money is made by looking in areas of the market that no one wants anything to do with — but only time will tell if Heebner’s and Muhlenkamp’s bullishness on financials will pay off.

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The Manipulation of Gold Prices - James Conrad

http://seekingalpha.com/article/109210-the-manipulation-of-gold-prices?source=front_page_most_popular_articles

There is no other leveraged commodity market where short sellers increase their positions, materially, as the price rises, and increase them even more when prices are exploding, except gold and silver. The reason traders don’t normally do that is that it exposes short sellers to unlimited liability and risk. Yet, in both March and July 2008, and on countless occasions over the past 21 years, vast numbers of new gold and silver short positions were temporarily opened up, with the position holders seemingly unconcerned about the fact that precious metals had just risen exponentially, and that there was a very real potential they would bankrupt themselves with unlimited upside potential. Normal traders would not expose themselves to such unlimited risks.

I conclude, therefore, that over the last 21 years or so, “fake” precious metals supply in the form of promises of future delivery have habitually been increased when prices increase until increased “supply” managed to overwhelm increased demand, leading to a temporary price collapse. This is compounded by the fact that the futures prices on COMEX tend to dictate the “official” report price for the precious metals elsewhere.

After the market is broken, shell-shocked leveraged long market participants have always been thrown out of their positions by margin calls, and/or have been happy to sell contracts back to the short sellers at much lower prices. This process has always allowed short sellers to cover short positions at a profit. If for some reason naked shorts needed to deliver, they could always count on various European central banks (and some say the Fed basement repository) to backstop them, releasing tons of physical gold into the market. It seemed that there were always another 34 tons or so of gold dumped at strategic times to bring down fast rising prices. Meanwhile, huge physical market demand in Asia and severe shortages buffered the downside. Because of the physical demand, prices steadily increased but, perhaps, at a much slower pace than would have been the case in the absence of market manipulation.

Rarely was there ever a serious short-squeeze. Rarely, that is, until Friday of last week when the deliveries demanded by non-leveraged long buyers reached record levels. In spite of an avalanche of complaints from gold and silver investors, the CFTC (Commodity Futures Trading Commission) has never bothered to audit even one vault to see if the short sellers really have the alleged gold and silver they claim to have. There is a legal requirement that, in every futures contract that promises to deliver a physical commodity, the short seller must be 90% covered by either a stockpile of the commodity or appropriate forward contracts with primary producers (such as miners). Inaction by CFTC, in the face of obvious market manipulation, implies a historical government endorsed price management.

Things, however, are changing fast. As previously stated, the first major mini-panic among COMEX gold short sellers happened last Friday. As of Wednesday morning, about 11,500 delivery demands for 100 ounce ingots were made at COMEX, which represents about 5% of the previous open interest. Another 2,000 contracts are still open, and a large percentage of those will probably demand delivery. These demands compare to the usual ½ to 1% of all contracts.

The U.S. economy is in shambles. Both commercial and investment banks are insolvent. European central banks no longer want to sell gold. China wants to buy 360 tons of it as soon as humanly possible, and as soon as it can be done without sending the price into the stratosphere. A close look at the Federal Reserve balance sheet tells us that Ben Bernanke eventually intends to devalue the U.S. dollar against gold. There has been a vast expansion of Fed credit, which has risen from $932 billion to $2.25 trillion in the last two and a half months. The Fed has bought nearly all toxic bank assets that were supposed to be purchased pursuant by the $700 billion Congressional bank bailout.

Official bailout funds have been used to buy equity interests in the various banks instead. By avoiding the use of monitored Congressional funds, the Fed has embarked on a secretive campaign to buy toxic assets. They have refused to give any accounting of their activities, even though they are using taxpayer money to do this. The Fed has refused, for example, to comply with a “freedom of information act” request from Bloomberg News. That refusal is now the subject of a major lawsuit.

The Federal Reserve has embarked on the biggest money printing surge in history, though the world economy has yet to feel its effect. To prevent newly printed dollars from causing immediate hyperinflation, these newly printed dollars have been temporarily sequestered into the banking industry’s reserves, rather than being released for general use. This was done in a number of creative ways.

First, the number of “reverse repurchase agreements” has been increased to $97 billion. A “repurchase agreement” is a non-recourse method by which the Fed increases the money supply by paying dollars for collateral. The collateral, in this case, are toxic defaulting mortgage bonds that banks want to be rid of. The cash enters the system and theoretically stimulates the economy because it supplies banks with money to make loans with.

A “reverse repurchase agreement” is the exact opposite. It is a method of reducing the money supply by selling bonds to the banks, and taking the cash back out of the system. In this case, the Fed gave banks cash for toxic defaulting mortgage bonds. Then, it took the same cash back by selling the banks new treasury bills just received from the U.S. Treasury. The Fed, in turn, bought these T-bills with the newly printed dollars. The banks, having gotten rid of toxic assets, were allowed to transfer private risk to the taxpayers. This process bolsters bank balance sheets by privatizing bank profits, and socializing bank losses.

At the same time, the U.S. Treasury has been very busy selling newly printed Treasury bills to anyone foolish enough to buy them. To a large extent, the fools reside overseas, but some reside inside this country, and the sale of these U.S. bonds has resulted in a substantial inflow of foreign reserves to the Treasury. Banks have also been offered favorable interest rates on both reserve and non-reserve deposits held at the Fed.

This was combined with what is probably a tacit agreement by which the banks were given the money and led to redeposit most newly printed cash back into the Fed, in a category known as “Reserve balances with Federal Reserve Banks”. This category has ballooned from $8 billion in September to $578 billion on November 28th.

On October 9, 2008, the Federal Reserve began paying interest on deposits at Federal Reserve Banks. The overnight rate happens to have dropped way below the “official” federal funds rate. Meanwhile, rates paid by the Fed on required deposits are only .1% less than the federal funds rate, and on voluntary deposits only .35% less than the federal funds rate. Accordingly, U.S. banks can engage in a dollar based one-nation carry trade, which further sequesters the newly printed dollars.

Banks are borrowing from the Fed, then taking the same money, redepositing it, and earning a spread on the interest rate differential. Banks can also deposit newly printed dollars into a category known as “Deposits with Federal Reserve Banks, other than reserve balances.” This category also earns interest in a similar way, and has risen from $12 billion to $554 billion in the same time period. The funds will eventually be used for direct lending from the Fed to open market borrowers, at huge levels of risk that even the free-wheeling cowboys who run things at America’s private banks are not willing to accept.

That being said, most money center banks in America are certainly NOT risk averse, even now. People who are bailed out of foolish decisions never become risk averse. They are, however, very insolvent, and, aside from the non-recourse provisions of Fed repurchase agreements, they would prefer, for bad publicity reasons, not to default on their obligations to the Fed. Aside from the newly printed dollars given to them by the Fed and the recent transfer of all risk to the taxpayers, they have no liquidity of their own with which to make new loans. That is why they aren’t making any. The Fed will eventually make the loans itself and take all the risk, while using the private banking system as merely a means for delivery.

Right now, however, the Fed wants to sequester the new dollars, until the U.S. Treasury has finished the major part of its funding activities. That will allow the Treasury to borrow money at very low rates. The Fed intends to feed money into the system, but at the minimum rate needed to prevent the DOW index from staying under 8,000 for any significant period of time. Right now, most measures are designed simply to stop U.S. banking laws from automatically requiring the closure of most big banks.

The extent of manipulations engaged in by this Federal Reserve is mind numbing. The total number of sequestered dollars has now reached well in excess of $1.2 trillion dollars. That means that Fed credit, so far, has been effectively increased only by about 10%, over the last 2.5 months, rather than 150% that appears on the surface of the Fed balance sheet. The rest is temporarily sequestered.

Back in July, the U.S. Treasury, through the ESF (Exchange Stabilization Fund), sold billions of euros and, I believe, established a dollar sequestering “derivative” by paying interest, perhaps in Euros, to foreign money center banks. This was designed to keep dollars out of circulation, overseas. It was the beginning of the dollar bull back on July 15th.

I had thought, at the time, with good reason, that the U.S. would run out of foreign exchange and would be forced to close down the operation within a few months. I underestimated Ben Bernanke.

Instead, the Fed managed to establish currency swap lines with various foreign nations, under the guise of supplying them with dollars. This need for dollars arose partly as a result of the actions of the Fed, in sequestering Eurodollars in July, and partly as a result of the multiple credit default events which triggered over $2.5 trillion worth of selling in the stock and commodities markets, as 50 to 1 leveraged players were forced to cover about $50 billion worth of credit default insurance obligations.

In truth, the Fed needs the foreign currency more than the foreign central banks need dollars. The Fed is using its new foreign currency resources, in part, to control the value of the dollar, and to ensure that U.S. bailout bonds are sold for the highest possible prices at the lowest possible long term costs. Anyone who buys long term Treasury bills is going to lose a fortune of money in the long term.

The Fed has also taken a number of steps beyond those already discussed to restrict aspects of the normal money supply which most strongly affect exchange rates. For example, they only allowed “currency in circulation” to rise by $33 billion in aggregate, while at the same time increasing foreign reverse repurchase agreements to reduce foreign availability of dollars by $30 billion, and reducing the “other liabilities” category dollar availability by another $7 billion. Since it is likely that “other liabilities” involve foreign held dollars, this resulted in a net deficit of $4 billion on foreign exchange markets, as compared to September, 2008.

All these actions, taken together, have supported the dollar overseas, and led to a breakdown of the commodities markets. The adverse effect of a paradoxically rising dollar has been especially severe in dollar dependent commodity producing nations, such as Ukraine.

The net effect is that the U.S. dollar, in spite of terrible fundamentals, is now King of the Currencies once again, at least temporarily. The rising value of the dollar happens also to support naked short sellers of gold and silver, on COMEX, and these are old friends of the Federal Reserve. Supply and demand ultimately determine the price of gold but, in the shorter term, it is inversely tethered to the dollar. When the dollar is artificially high, gold prices will often plunge artificially low.

But, in short, the Fed currently has gained complete control over the value of the dollar. It can now adjust and micromange the dollar on a day-to-day basis. All it needs to do is open and close the “dollar spigot.” When they want the dollar to rise, the Fed can reduce the number of sequestered dollars. When they want it to fall, they simply ease up, releasing dollars into the financial markets. There is only one problem. Real investors are fleeing the stock market, and stock indexes are becoming more and more dependent upon government cash in order to avoid collapse.

People are liquidating holdings in mutual funds, and redeeming against hedge funds at a fantastic rate. This has created heavy downward pressure on stock prices. If the DOW falls below 8,000 for any significant amount of time, most big American insurance companies will be forced to recognize huge losses on their portfolios, and will become insolvent. Insolvent insurers, like insolvent banks, must be closed by their regulators as a matter of law. Obviously, mass insurer bankruptcies would be yet another major destabilizing slap in the face to an increasingly unstable economy.

The Fed now has only two ways to stop this. One is by brute force. It can buy securities directly, through its primary dealers, thereby supporting and pumping up stock prices. It has done a lot of that in the past few weeks, but this method is highly inefficient and costly. It is better to catalyze upward market movement rather than force it. Catalysis of markets involves opening up the money spigot a bit, allowing some of the sequestered funds to bleed back into the system. This allows the stock market to rise or stabilize naturally, as the equivalent of inflation is created mostly in the stock market without substantial bleed through. At the same time, however, opening the money spigot reduces the value of the dollar and causes gold prices to rise. Rising gold price adversely affects COMEX short sellers who are, as previously stated, old friends of the Federal Reserve.

Gold buying enthusiasm, everywhere but at the COMEX, is at record levels, whereas stock market investing appetite is low. For this reason, when the Fed tried to constrict the money supply on Monday, it caused more damage to the stock market than to the price of gold. Gold declined by over 5%, but the S&P 500 collapsed by over 9%. The next day, the Fed eased up on the money supply spigot, allowing the dollar to fall and the stock market to reflate. If the Fed repeats this performance over and over again, stock investor psychology will be seriously harmed. Withdrawals from mutual and hedge funds will accelerate. The stock market will sink at an uncontrollable rate, and the world will surge onward toward Great Depression II, much worse than the first. At some point, there will be nothing the Fed can do about it, no matter what manipulations it attempts. Hopefully Ben Bernanke is aware of the dangerous nature of the game he is playing.

The Federal Reserve must now make a tough choice. In the past, Federal Reserve Chairmen may have felt it necessary to support regular attacks on gold prices to dissuade conservative people from putting a majority of their capital into gold. Now, however, the world economy needs much higher gold prices in order to devalue paper money, not against other currencies in a “beggar thy neighbor” policy, but against itself. This can jump start the system. If the Fed continued to support gold price suppression, that would collapse the stock market far deeper than they can afford, most insurers will end up bankrupt, and there will be no hope of avoiding Great Depression II.

I think Ben Bernanke is aware of this. Gold shorts will be abandoned, to avoid financial catastrophe. In commenting, I take a practical view, accepting what appears to be so, without passing judgment on the acts and omissions of the last 21 years.

Anyone who reads the written works of our Fed Chairman knows that Bernanke’s long term plan involves devaluing the dollar against gold. This is the exact opposite of most prior Fed Chairmen. He has overtly stated his intentions toward gold, many times, in various articles, speeches and treatises written before he became Fed Chairman. He often extols the virtues of former President Franklin Roosevelt’s gold revaluation/dollar devaluation, back in 1934, and credits it with saving the nation from the Great Depression. According to Bernanke, devaluation of the dollar against gold was so effective in stimulating economic activity that the stock market rose sharply in 1934, immediately thereafter. That is something that the Fed wants to see happen again.

It is only a matter of time before gold is allowed to rise to its natural level. Assuming that about half of the current increase in Fed credit is eventually neutralized, the monetized value of gold should be allowed to rise to between $7,500 and $9,000 per ounce as the world goes back to some type of gold standard. In the nearer term, gold will rise to about $2,000 per ounce, as the Fed abandons a hopeless campaign to support COMEX short sellers, in favor of saving the other, more productive, functions of the various banks and insurers.

Revaluation of gold, and a return to the gold standard, is the only way that hyperinflation can be avoided while large numbers of paper currency units are released into the economy. This is because most of the rise in prices can be filtered into gold. As the asset value of gold rises, it will soak up excess dollars, euros, pounds, etc., while the appearance of an increased number of currency units will stimulate investor psychology, and lending and economic output will increase, all over the world. Ben Bernanke and the other members of the FOMC Committee must know this, because it is basic economics.

Many venerable names in banking agree, although none have gone so far as to take their thoughts to the natural conclusion. Both JP Morgan Chase’s and Citibank’s analysts, for example, are predicting a huge rise in the price of gold. That is interesting because GATA has come up with fairly compelling evidence that JP Morgan Chase (JPM) and HSBC (HBC) may have been big COMEX naked short sellers in the past.

Goldman Sachs (GS) is also a huge bullion bank, which allegedly is heavily involved in downward gold price manipulation. However, this month, both HSBC and GS took lots of deliveries of gold from COMEX. Given the size and bureaucracy at such firms, it is certainly possible for the majority of traders to be entirely honest, while others, at the same firm, may be totally corrupt.

More important, however, than dwelling on the accuracy of conspiracy theories is the fact that huge international banking firms normally do not take metal deliveries from futures markets. They normally buy on the London spot market. The fact that they are demanding delivery from COMEX means one of two things. Either the London bullion exchanges have run out of gold, or these firms are finding it cheaper to buy gold as a “future” than as a spot exchange.

Smart traders at big firms may be buying on COMEX to sell into the spot market, for a profit. This pricing condition is known as “backwardation”. Backwardation is always the first sign that a huge price rise is about to happen. In the absence of backwardation, there is no rational explanation as to why HSBC, Bank of Nova Scotia (BNS), Goldman Sachs, and others are forcing COMEX to make large deliveries.

The fact that this backwardation is hidden from the public eye is not surprising. In spite of the ostensible existence of a so-called “London fix”, 96% of all OTC transactions are secret and unreported. The transactions happen solely between two parties, and are done opaquely, in complete darkness. The current London fix may well be just as fake as the bank interest rate reports that comprised LIBOR proved to be, just a few months ago.

It won’t matter much if you purchase gold at $750, $800, $850, $900 per ounce, or even much higher. All of these prices will be looking extraordinarily cheap in a few months. The price of our pretty yellow metal is about to explode, and it is probably going to soar, eventually, to levels that not even most gold bugs imagine. COMEX gold shorts will be playing the price a bit longer, in an attempt to shake out some remaining independent leveraged longs. Once that is finished, however, and it will be finished soon, the price will start to rise very quickly.

Disclosure: The author holds physical gold and is long positions in GLD and gold futures.

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The financial crisis and the developing world

Jomo K.S. was professor in the Applied Economics Department, University of Malaya, and founder chair of IDEAs, or International Development Economics Associates. In 2007, he was awarded the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. In 2008, he was appointed to the United Nations High-Level Expert Commission to Study the Reform of the International Monetary and Financial System chaired by Nobel laureate Professor Joseph Stiglitz.

Question: The stock markets in developing countries - the “emerging markets” - are tumbling. What are the consequences for ordinary people? Does it matter?

Jomo: So far, stock markets in emerging economies have plunged by about 50% on average, some by more than 60% (China, Russia, for example) - much more than the average drop of about 30% in the rich countries.

It does matter to ordinary people. In most emerging markets, not only rich people, but many middle income households own equities. The losses in equity markets will have direct impact on their income and wealth.

For the poor, who don’t own any stocks, the indirect impact may also be significant: As stock markets plummet, the solvency of banks and firms depend on how much capital they own. If the value of their capital plunges, even solvent firms will suddenly look overleveraged and face problems.

Banks are trying to shore up their capital positions and many have stopped lending. This leads firms to cut investment spending and use remaining earnings to cover operational costs, which may lead them to start laying off workers.

So, the overall impact will be felt by all. Much will depend on how governments respond with counter-cyclical and social protection policies, and following the economic liberalisation of recent decades, the latter is unlikely to be a major policy priority.

Is there a rational explanation for why international financial capital is pulling out from developing countries?

Yes, there are a few explanations. When there is a global crisis, international investors (pension funds, mutual funds and hedge funds) become more risk averse, reducing exposure to emerging markets, which are considered to be riskier than other investments (such as the US Treasury notes).

Some international institutional investors are forced to withdraw by “margin calls” at home: their losses in developed country markets force them to withdraw some of their investments from emerging markets.

More fundamentally, the global crisis will seriously weaken growth worldwide. As a consequence, earnings in emerging markets will fall, reducing investor interest in emerging market stock.

In light of the financial crisis, what trends do you expect to see in foreign direct investment (FDI) in developing countries in the next one to two years? What impact will this have on developing country economies?

Shrinking economies in the US and other rich countries seem certain to shrink export opportunities for developing countries. How will this affect them, and how do you suggest they adjust? Are there lessons about relying so heavily on exports to drive economic development?

Fifty percent of US imports are from developing countries. So, shrinking demand in rich countries will have significant impacts on developing countries. In fact, a slowdown in exports of developing countries, particularly in Asia, is likely to lead to a significant slowdown in industrial production, as well as GDP, in many developing countries. In Latin America and Africa, export growth has mainly been driven by primary commodities.

Various issues of the UN’s World Economic and Social Survey have reiterated the risks of heavy dependence on exports which do not have strong linkages with the domestic economy, particularly primary commodities. Such economies tend to be vulnerable to external shocks.

High commodity prices, responsible for the last half-decade of rapid growth in many developing countries, have begun to decline in the last half-year, with the price of oil dropping by almost 70% in the last four months.

In the short run, developing countries should stimulate domestic demand, so as to offset weakening foreign demand, as China has been doing. For the poorer countries, the scope for doing so is more limited; they may need more foreign aid to cope with the drops in export earnings because of weakening commodity prices and global recession.

In the long run, however, they need to engage in active investment and technology policies to diversify their economies and reduce dependence on commodity exports.

What lessons does the financial crisis hold for proponents of financial liberalisation in developing countries? Do you think pressures for financial liberalisation will abate - and if so, for how long?

For developing countries, at least three things are important.

First, affordable financing should be available for productive long-term investments not disrupted during downturns. Development banks can help ensure long-term, large-scale investments which rely heavily on government resources. Commercial banks should also have incentives to support productive investments. Deeper financial markets, especially bond markets, can also play useful roles in emerging market economies.

Second, financial regulation should be strengthened. Existing approaches to regulation should be appropriate to new conditions and challenges. Now, in most countries, banks have to increase provisioning against bad loans after they encounter problems. Such requirements are pro-cyclical, tightening credit when it is needed most. Regulatory frameworks need to be counter-cyclical, in this case, building capital reserves during good times to provide resilience for bad times.

Third, countries should have appropriate capital controls in place to avoid undesirable and excessive capital inflows when not needed, and to stem sudden, disruptive large outflows.

Thankfully for the US, the Fed has a broader mandate than most other central banks today, which are often required to focus almost exclusively on containing inflation, whereas the Fed is obliged to sustain growth and employment.

Is there a developing country perspective that is distinct from the general commentaries in rich countries?

Once again, developing countries will have to bear the brunt of the global financial crisis originating in the US and other developed countries. The financial positions of many developing countries are much stronger than they were at the time of the financial crises in Asia and Latin America, given their strong foreign reserve positions and generally better fiscal balances.

Yet, this does not mean these countries are immune to the crisis as suggested by those who claim that the larger developing countries have “decoupled” from the US economy.

The financial crisis is likely to lead to a severe and possibly protracted downturn in the global economy which will depress commodity prices and foreign investments once again.

Further, the US dollar is likely to continue to depreciate. The brief resurgence this fall is not likely to last, given the huge US trade and budget deficits. As most reserves of developing countries are held in dollars, those with strong foreign reserve positions will incur massive losses.

@ AIG Promoting Sharia

First, let’s remember what Sharia is and is not.

But now American taxpayer dollars are being used to promote products based on Sharia?

In fairness to AIG, there are many who do not understand the political Islamic supremacist nature of Sharia.

AIG’s Jim Crain told me that he had no comment on AIG’s Sharia product linkage to the Islamic supremacist Sharia ideology, but stated that with “this business venture” it was not AIG’s intent “to enter into the political arena at all.” Jim Crain stated that he did understand that Sharia is viewed as a political ideology, and commented “that is becoming more apparent as the days go on.” (I would conclude from this that I was not the first person who has called Jim Crain about this.) He stated that “it is entirely possible” that the public is going to think that AIG is taking a political position that is pro-Sharia. Jim Crain concluded our discussion by stating “I am going to pass your concerns on to our senior management and legal.”

I GET MONEY: The Truth About Tithing

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GM Makes a Compelling Case for Government Aid

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This opinion piece was written by Bonnie Erbe. I’m copying it up onto here so those of you who didn’t read it in the paper can see it in its full…glory…here.

It will be years before we know whether the government bailouts of financial institutions were a good idea or not. While we’re in the midst of bailing out the planet (or so it seems) one question comes to mind. If Citicorp, why not GM?

Congress will hear from the big three automakers today on whether to bail out the auto giants and meanwhile, their executives are devising a business plan to explain to members of the House and Senate how taxpayers’ dollars will keep the companies, including GM, alive. But if the U.S. government is going to bail out Citicorp, the once-largest bank in the country, why not do the same for GM, the once-largest automaker in the world?

JOB IMPACT HUGE

Former Labor Secretary Robert Reich has some great thoughts on the topic. In a commentary for Marketplace Radio, he notes Citicorp has lost a huge chunk of market valuation, which hurts the company’s executives, shareholders and creditors. But if it went into Chapter 11, mutual fund shareholders and people holding Citicorp CDs would have their assets protected. If GM tanks, on the other hand:

“…General Motors has a far greater impact on jobs and communities than Citigroup. Add parts suppliers and their employees, and the number of middle-class jobs and blue-collar jobs dependent on GM is many multiples of Citi. And the potential social cost of GM’s demise, or even major shrinkage, is much larger–including entire communities whose infrastructure and housing may become worthless.”

As we have heard by now, the ramifications through the U.S. economy would be massive if GM were to collapse.

Jobs–high-paying factory jobs–would leave our now service-oriented economy never to return to the U.S. Job losses, with parts suppliers and other subcontractors included, would number more than 2 million. Those jobs would be resurrected in developing countries where labor is much cheaper. Why help other countries to feast on the carcass of our once-strong manufacturing sector? Congress should not go easy on GM if it does approve a bailout, but Congress has shown no sign of going easy on the auto giant. [Note that the word 'but' is used where the word 'and' should be.] The idea of setting auto executives scurrying to produce a business plan is nothing short of brilliant. I’ve got suggestion for what such a plan should include. But first and foremost it should be focused on one word and one word alone: green. [Green, the very kind of vehicle which loses the American auto industry the most money.]

No more SUVs and gas-guzzlers. Even in truck division, GM could make its heavy-duty vehicles much more fuel-efficient and price them so that they could only be purchased by commercial ventures. [THAT'S really in the American spirit! Also, trucks are the American manufacturers most purchased vehicles...]

Private citizens who want to drive guzzlers should be priced out of the market [Again, such a pro-freedom attitude.] and should instead be forced [FORCED! Where are we, the USSR in 1970?] into low-mileage cars. GM created this mess when it chose to cater to America’s sick addiction to gas-guzzlers instead of leading the market in the proper (i.e. green) direction. [What exactly are Bonnie Erbe's qualifications to suggest what the auto-industry ought to do?] Now’s the time to lead, not cave in. [Yes, business should never do what the market wants...that makes NO sense.]

Dan Beuke of BusinessWeek writes:

“End of discussion about higher mileage rules. For years, honest efforts to boost fuel efficiency were snuffed out in Washington by Detroit and its fellow travelers in Congress. Enough. I say we build right into bailout legislation a 40-mpg average for cars by 2020. That’s up from 27.5 today, and a big step up from the 35 mpg goal that Detroit is supposed to achieve. I don’t care how they get there: Build cars that burn corn cobs–or For Sale signs, for that matter. Just get there.”

NATION CAN’T AFFORD LOSS

America cannot afford to have GM go under any more than it could afford to lose Citicorp, AIG, and all the rest. And the stock market seemed to understand that this week as GM stock went up by 30 percent in midday trading on Wednesday on hints that Congress was closer to acceding to GM’s come hither pleas.

I know there’s no such thing as fairness when it comes to business and money, but what’s sauce for Citicorp ought to be sauce for GM, too.

Also, I copied this exactly as it is in the newspaper. It is in the 12-02-2008 Herald and News on page A6. Any spelling mistakes are my typos. Anything in brackets are my inputs and thoughts.

City Manager -Investment Advisory ( Chennai)

AVP level profile with a multinational financial services company. The candidate will be heading the city and will be responsible for the business numbers to be achieved from all th branches in the city. Requires at last 5-6 years of prior experience in handling multiple products and teams across branches.

Candiadtes should possess sound knowledge about Indian Capital markets, investment advisory skills and should be well versed with selling of equity products, equity mutual funds and Insurance.

MEMO FOR BARACK OBAMA FROM URI AVNERY

For: the President-Elect, Mr. Barack Obama.

From: Uri Avnery, Israel.

The following humble suggestions are based on my 70 years of experience as an underground fighter, special forces soldier in the 1948 war, editor-in-chief of a newsmagazine, member of the Knesset and founding member of a peace movement:

1. As far as Israeli-Arab peace is concerned, you should act from Day One.

2. Israeli elections are due to take place in February 2009. You can have an indirect but important and constructive impact on the outcome, by announcing your unequivocal determination to achieve Israeli-Palestinian, Israeli-Syrian and Israeli-all-Arab peace in 2009.

3. Unfortunately, all your predecessors since 1967 have played a double game. While paying lip service to peace, and sometimes going through the motions of making some effort for peace, they have in practice supported our governments in moving in the very opposite direction. In particular, they have given tacit approval to the building and enlargement of Israeli settlements in the occupied Palestinian and Syrian territories, each of which is a land mine on the road to peace.

4. All the settlements are illegal in international law. The distinction sometimes made between “illegal” outposts and the other settlements is a propaganda ploy designed to obscure this simple truth.

5. All the settlements since 1967 have been built with the express purpose of making a Palestinian state – and hence peace - impossible, by cutting the territory of the prospective State of Palestine into ribbons. Practically all our government departments and the army have openly or secretly helped to build, consolidate and enlarge the settlements – as confirmed by the 2005 report prepared for the government (!) by Lawyer Talia Sasson.

6. By now, the number of settlers in the West Bank has reached some 250,000 (apart from the 200,000 settlers in the Greater Jerusalem area, whose status is somewhat different.) They are politically isolated, and sometimes detested by the majority of the Israel public, but enjoy significant support in the army and government ministries.

7. No Israeli government would dare to confront the concentrated political and material might of the settlers. Such a confrontation would need very strong leadership and the unstinting support of the President of the United States to have any chance of success.

8. Lacking these, all “peace negotiations” are a sham. The Israeli government and its US backers have done everything possible to prevent the negotiations with both the Palestinians and the Syrians from reaching any conclusion, for fear of provoking a confrontation with the settlers and their supporters. The present “Annapolis” negotiations are as hollow as all the preceding ones, each side keeping up the pretense for its own political interests.

9. The Clinton administration, and even more so the Bush administration, allowed the Israeli government to keep up this pretense. It is therefore imperative to prevent members of these administrations from diverting your Middle Eastern policy into the old channels.

10. It is important for you to make a complete new start, and to state this publicly. Discredited ideas and failed initiatives – such as the Bush “vision”, the Road Map, Annapolis and the like – should by thrown into the junkyard of history.

11. To make a new start, the aim of American policy should be stated clearly and succinctly. This should be: to achieve a peace based on the Two-State Solution within a defined time-span (say by the end of 2009).

12. It should be pointed out that this aim is based on a reassessment of the American national interest, in order to extract the poison from American-Arab and American-Muslim relations, strengthen peace-oriented regimes, defeat al-Qaeda-type terrorism, end the Iraq and Afghanistan wars and achieve a viable accommodation with Iran.

13. The terms of Israeli-Palestinian peace are clear. They have been crystallized in thousands of hours of negotiations, conferences, meetings and conversations. They are:

13.1 A sovereign and viable State of Palestine will be established side by side with the State of Israel.

13.2 The border between the two states will be based on the pre-1967 Armistice Line (the “Green Line”). Insubstantial alterations can be arrived at by mutual agreement on an exchange of territories on a 1:1 basis.

13.3 East Jerusalem, including the Haram-al-Sharif (“Temple Mount”) and all Arab neighborhoods will serve as the capital of Palestine. West Jerusalem, including the Western Wall and all Jewish neighborhoods, will serve as the capital of Israel. A joint municipal authority, based on equality, may be established by mutual consent to administer the city as one territorial unit.

13.4 All Israeli settlements – except any which might be joined to Israel in the framework of a mutually agreed exchange of territories - will be evacuated (see 15 below).

13.5 Israel will recognize in principle the right of the refugees to return. A Joint Commission for Truth and Reconciliation, composed of Palestinian, Israeli and international historians, will examine the events of 1948 and 1967 and determine who was responsible for what. Each individual refugee will be given the choice between (1) repatriation to the State of Palestine, (2) remaining where he/she is living now and receiving generous compensation, (3) returning to Israel and being resettled, (4) emigrating to any other country, with generous compensation. The number of refugees who will return to Israeli territory will be fixed by mutual agreement, it being understood that nothing will be done that materially alters the demographic composition of the Israeli population. The large funds needed for the implementation of this solution must be provided by the international community in the interest of world peace. This will save much of the money spent today on military expenditure and direct grants from the US.

13.6 The West Bank, East Jerusalem and the Gaza Strip constitute one national unit. An extraterritorial connection (road, railway, tunnel or bridge) will connect the West Bank with the Gaza Strip.

13.7 Israel and Syria will sign a peace agreement. Israel will withdraw to the pre-1967 line and all settlements on the Golan Heights will be dismantled. Syria will cease all anti-Israeli activities conducted directly or by proxy. The two parties will establish normal relations between them.

13.8 In accordance with the Saudi Peace Initiative, all member states of the Arab League will recognize Israel and establish normal relations with it. Talks about a future Middle Eastern Union, on the model of the EU, possibly to include Turkey and Iran, may be considered.

14. Palestinian unity is essential for peace. Peace made with only one section of the people is worthless. The US will facilitate Palestinian reconciliation and the unification of Palestinian structures. To this end, the US will end its boycott of Hamas, which won the last elections, start a political dialogue with the movement and encourage Israel to do the same. The US will respect any result of democratic Palestinian elections.

15. The US will aid the government of Israel in confronting the settlement problem. As from now, settlers will be given one year to leave the occupied territories voluntarily in return for compensation that will allow them to build their homes in Israel proper. After that, all settlements – except those within any areas to be joined to Israel under the peace agreement - will be evacuated.

16. I suggest that you, as President of the United States, come to Israel and address the Israeli people personally, not only from the rostrum of the Knesset but also at a mass rally in Tel-Aviv’s Rabin Square. President Anwar Sadat of Egypt came to Israel in 1977, and, by addressing the Israeli people directly, completely changed their attitude towards peace with Egypt. At present, most Israelis feel insecure, uncertain and afraid of any daring peace initiative, partly because of a deep distrust of anything coming from the Arab side. Your personal intervention, at the critical moment, could literally do wonders in creating the psychological basis for peace.

My brother-in-law

My sister and brother-in-law were down this weekend, and the conversation turned to the money they lost   stock market this year.  They had an investment in Vanguard’s Target 2020 fund, within an IRA, and it is down quite a bit this year, along with most every other mutual fund.

He had impulsively pulled out the money about a month or two ago, not being able to stomach any more declines.  The problem was that because this was in an IRA, and since he is not 59 1/2 yet, he had to pay a penalty and will be taxed on it as well.  So now he is second-guessing himself.  He kept asking me, “should I put it back in?  And if so, when?”.

I gave him the common sense advice that one often hears in the personal finance world: if you are a long term investor, you shouldn’t have taken it out in the first place.  He is 51, and wants to retire in the next 7-10 years.  I suggested to him that he may want to consider just constructing a CD ladder out of the remaining money with ING Direct or another online bank, as this will allow him to sleep more soundly at night.  Why did I give him such conservative investing advice?  Because he really doesn’t NEED the money for retirement anyway, as my sister works for the state, makes good money and has solid job security, and will receive a large pension and health insurance for life once she retires.  Plus, he will also receive a pension from the electrical union to which he belongs.  And their house is paid off, with minimal other expenses, and no children living home or in college.

He is not convinced though.  We were looking at Vanguard’s site, and he noticed that the intermediate term gov’t bond fund has done well this year.  So he said to me, “maybe I should put it all in that fund”.  I talked him out of that, pointing out that he was making the classic case of chasing performance.  Simple, prudent diversification is the key, and again, if he can’t stomach the drops, he should be invested in a conservative FDIC-insured investment like CD’s. Here is a great primer on CD laddering from Trent Hamm over at The Simple Dollar.

So, he wants to think about it for a couple of weeks.  I understand his hesitation to get back into the market and his general sense of “what do I do now?”  This type of bear market has not been seen since the Great Depression, and it is causing a lot of anxiety among investors.  I think the only thing to do, if you are a long term investor, is to continue to dollar cost average, keep your eye on your goals, and DON’T make any impulsive decisions without thinking it through first.  Maintain a nice emergency fund of 6-12 months living expenses, control your spending and debt, and focus on the important things in life, like family, friends, and good health.

If we believe in capitalism and the long term prospects for America, then we can assume the market will go on to new heights over the longer term.  I do happen to believe this, and am going to continue to maximize my 401(k) contributions and also my contributions to savings and investments outside of my 401(k).

The High-Octane Ethanol Lobby

WHEN WORD OF THE INTERNAL REVENUE Service decision came to Thomas Daschle’s Capitol Hill office the Friday afternoon before Thanksgiving, the South Dakota Democrat was deep in debate on the Senate floor, and the celebration had to begin without him. On returning to his office, with its rustic decor of buffalo hides and Indian headdresses, he found the members of his staff literally jumping with joy.

For 18 months, Daschle had been the point man in the campaign to win tax breaks for a substance called ethyl tertiary butyl ether, or ETBE. When added to gasoline, its developers claim, the catalyst can reduce automotive carbon monoxide emissions by 20 to 30 percent.

Aside from its environmental promise, however, what gives ETBE its special political charm is that 40 percent of the catalyst consists of ethanol - and virtually all of America’s ethanol comes from corn. Over the past decade, a coalition of farm-state legislators, grain processors and trade groups has successfully fought to keep in place a generous, highly controversial ethanol tax credit. And the I.R.S. announcement is a giant step on the road to extending that tax credit to ETBE.

The campaign for the ethanol derivative illustrates how a little-known lobby for an obscure farm byproduct can deploy formidable clout in Washington. Tens of thousands of farmers called, wrote or faxed their support for the tax credit. Endorsements arrived from four Cabinet secretaries, the Environmental Protection Agency administrator and 75 senators. ”I’ve never seen anything like this,” says Douglas Durante, Washington representative of the Clean Fuels Development Coalition, one of ETBE’s most active supporters. ”To get 75 senators to agree that it’s summer and not winter is nearly impossible.”

Yet the tax credit was not universally popular. Senator Bill Bradley attacked both the proposal itself and the notion that it should be accomplished by means of an I.R.S. ruling. ”This is an issue for Congress to decide here on the floor,” the New Jersey Democrat told his colleagues, ”under the clear-eyed scrutiny of the American taxpayers, who once again see the long arm of the Government reaching deeper and deeper into their pockets to benefit a handful of special interests.”

The Treasury Department’s support of ETBE is only the latest chapter in a political saga that dates back to the gas lines of the mid-70’s. Seeking to reduce the nation’s dependence on imported oil, the Carter Administration touted gasohol - a mixture of gasoline and 10 percent ethanol - as one answer. But when the first plants went on-line in 1978, wholesale ethanol cost 80-cents-a-gallon more than wholesale gasoline. Federal and state tax exemptions - the Federal credit alone now equals 60 cents for each gallon of ethanol sold to gasoline blenders - helped make up the difference; gasohol now accounts for 8 percent of the 110 billion gallons of gasoline sold annually.

While public concern about imported oil has waxed and waned, gasohol producers have received more than $4.6 billion in Federal and state tax exemptions since 1980. A major benefactor has been Archer Daniels Midland Company, based in Decatur, Ill., which produces 75 percent of the nation’s ethanol. The company is the largest agricultural processor in the United States, with 1989 sales of $10 billion on products ranging from pasta to pet food. Over the years, critics have charged that the tax breaks amount to nothing more than ”corporate welfare” for A.D.M. and its chairman, Dwayne O. Andreas, a generous contributor to both political parties. But efforts to trim these favors have fallen victim to the ethanol lobby.

Today, the ethanol industry has reached a crossroads. The introduction of ETBE could expand the market for ethanol. On the other hand, state tax credits have been reduced in recent years, and the construction of new ethanol plants has halted. Even more critical, the Federal tax credit is due to expire in 1992, and without it the ethanol industry will die. With several tax bills being debated in Congress, and legislators seeking ways to reduce the nation’s deficit, the ethanol credit is coming u