November 16, 2008
Terrific article in Portfolio by Michael Lewis of Liar’s Poker fame. Notable Excerpt:
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.
October 10, 2008
In today’s WSJ, John Steele Gordon addresses the question:
How could the richest and most productive economy the world has ever known have a financial system so prone to periodic and catastrophic break down? One answer is the baleful influence of Thomas Jefferson.
Jefferson, to be sure, was a genius and fully deserves his place on Mt. Rushmore. But he was also a quintessential intellectual who was often insulated from the real world. He hated commerce, he hated speculators, he hated the grubby business of getting and spending (except his own spending, of course, which eventually bankrupted him). Most of all, he hated banks, the symbol for him of concentrated economic power. Because he was the founder of an enduring political movement, his influence has been strongly felt to the present day.
It’s so interesting that today’s financial crisis can be traced back to the fight between the Federalists and the Anti-Federalists – between Jefferson and Hamilton. I can’t help but to compare today’s congress with Jefferson circa 1790: well-intentioned and in positions of great power, but with an acute lack of financial sophistication.
August 27, 2008
** In order to make the blog more interesting, I’m starting a new category called Stuff I Like **
SIGG Water Bottle
These things are impossibly cool. I finally broke down yesterday and bought one. At $20 for the small bottle, I’m sure someone, somewhere is making a ton of money!
Tilex Fresh Shower
I love having a clean shower, but I hate scrubbing. I’ve been using this product on my new shower for over a month and it still looks good as new!
High Thread Count White Sheets
There’s something nice about bright white sheets. These are luxurious and soft — worth every penny.
August 25, 2008
Paul McCulley of PIMCO on why global interconnectedness has complicated the picture for central bankers:
The mobility of capital combined with the mobility of information across countless interconnected nodes, hindered occasionally by politics and the transparency tolerance of various governments, gives the largest holders of capital something of a “God-complex” in today’s global economy. Small banks expand to become mega-banks, regional banks consolidate to become universal banks, and foreign central banks “self-insure” to become sovereign wealth funds. Wealth and capital supercede the common CEO, the everyday purchasing manager, and humble central bankers of today in velocity, mobility and connectivity. Global central bankers in particular need to catch up quickly.
The article in a nutshell:
- Global asset prices are deflating
- This is having a contractionary effect on the real economy and causing a decrease in aggregate demand (or, at least the growth of agg demand in certain countries)
- The problems of the financial system – whose collateral is these falling assets – is resulting in a reduction of available credit.
- Central banks are doing everything they can to liquefy the banks and to ensure the world that they will not let the big banks fail. But it’s not having enough of the desired effect – cost of capital is still too high for the banks.
I’m not sure what McCulley’s prescription is, though he seems to suggest that central banks should pay more attention to asset prices. I think by now we should realize that asset prices are as important to consumption and demand as consumer prices (blogged about here).
August 24, 2008
Here are a couple of pics from the Kenny Chesney concert last night Raleigh. I went with a big group of my new friends from school.
That was my third KC concert (second one blogged about here) and I had feelings of deja-vu when he played some of the same songs I’ve heard at every concert. It’s weird to repeat things after a multi-year break. I felt the same way visiting the Calgary airport a few weeks ago.
It makes me think about how random life is and also about how much has changed in my life… mostly for the better!
August 20, 2008
My friend Alan got me tickets to an Obama Town Hall in Raleigh last night. It was fun and our seats were amazing!
August 13, 2008
Here’s a neat satellite image of the Beijing National Stadium. Click on the picture for the link to the NASA website with details about the image.