Tuesday, September 30, 2008

Fun With Charts 

Just a little something I whipped up while drinking my coffee this morning, courtesy of this link:

Since the chart is served up without the benefit of my usual artless bloviation, the numbers above the bars are percentages (as in 65% of evil, horrid Rethugs whose seats were considered relatively safe voted "no" on the bailout, while 85% whose seats were vulnerable voted the same way. 38% of Democrats whose seats were considered relatively safe voted "no" on the bailout, while 72% whose seats were vulnerable voted the same way).

I suspect what you see in it will be influenced by your political orientation. But then so many things are, these days.

Feel free to argue over what it all means, and how we got here ensmarten the author of this post (now if *that* isn't a low bar, I don't know what is!) in the comments section :p

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Just Say No to Fear? 

Via Greg Mankiw:

Warren Buffett has said, "you should get greedy when others are fearful and fearful when others are greedy." If he is right, [and the information Greg links to strongly supports that contention] then this is the time to get greedy. There is no doubt that most everyone else is fearful.
There is a strong argument to be made that during a crisis of market confidence, the most patriotic thing the average American can do is register a vote of confidence in the U.S. economy by doing what our own Congress just signally failed to do: investing - intelligently and prudently - in the future of our own economy at a time when prices are artificially low and the value of basically sound investments is virtually sure to rise from where it is today.

The question that interests me is, what would you do if you had a million dollars to play with today and you were a patriotic American? I would like to think such people still exist, but maybe I'm just smoking crack again.

At any rate, it promises to be a very interesting month.

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Monday, September 29, 2008

Word 2003 vs 2007 

Something I did not know: saving a Microsoft Word document in 2007 format saves a lot of memory compared to saving it in 2003 format. I have a digital copy of my schedule on my computer (in 2003 format), and when I copy-and-pasted it into a 2007 document, the difference was fairly large: 14KB to 70KB. Overall, that doesn't seem like very much, especially for someone with lots of hard drive space, but if you're someone who has a LOT of documents on a smallish laptop, 2007 might be a good idea.

Not to mention, of course, the improved UI. That's the main reason I like it.

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How will the financial crisis affect high-end hookers? 

According to this article in Slate, maybe not the way you might think.

Sex workers of the past waited on street corners, outside bars, and around parks, and their transactions were fleeting and usually for a few dollars. Today's high-end sex workers see themselves as therapists, part of a vast metropolitan wellness industry that includes private chefs and yoga teachers. Many have regular clients who visit them several times per month, paying them not only for sex but also for comfort and affirmation.

The cost may be thousands of dollars for an evening of leisure. Few people outside of the corporate work force can afford this price tag. And, in good times, Wall Street came calling.

But bad times seem not so bad either, at least in the short run. After the dot-com bubble burst and again in late 2006 when the housing market began to flatten, the high-end women I interviewed in New York and Chicago reported upticks in business. Their clients were coming to them for a mix of escape and encouragement. As Jean, a New Yorker and a 35-year-old former paralegal turned "corporate escort" (her description) told me, "I had about two dozen men who started doubling their visits with me. They couldn't face their wives, who were bitching about the fact they lost income. Men want to be men. All I did was make them feel like they could go back out there with their head up."
Uh, read the whole thing?

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Breaking News 

OK - obviously what is needed today is a serious news story to stimulate the nation's vast untapped intellectual strategic reserve:

Human milk tastes like watermelon juice, apparently - but I don't know that first-hand, only from watching Friends. The world seems divided on the issue: two or three people think that it's no different from cow's milk, and there's nothing to stop an adult from drinking it. And everybody else, in the whole world, thinks that's absolutely minging.

And yet, those two or three people are making a lot of noise: only a month after Kate Garraway floated the idea that all women should breastfeed each other's children, as well as each other, or something like that, Peta, the animals rights group, has asked Ben & Jerry's to use human breast milk instead of cow's milk. "If Ben & Jerry's replaced the cow's milk in its ice-cream with breast milk, your customers - and cows - would reap the benefits," wrote Peta's Tracy Reiman.

A Swiss restaurateur, meanwhile, who attempted to use breast milk in cooking, has run aground on the scarcity of European legislation on the matter. "They are not on the list of approved species such as cows and sheep, but they are also not on the list of the banned species such as apes and primates," said Rolf Etter of the Zurich food control laboratory. So monkey milk is illegal. Who knew?

Garraway is being deliberately controversial for Channel 4 (there ought to be a verb for this behaviour, it is so prevalent), Peta is defending animals any way it knows how, and the Swiss chappie is being really, really Swiss. So I've no brush to tar them all with, but I will point out the following: you can't just go and get some breast milk from Unigate.

My understanding of breast-milk banks is that even having a newborn baby is not sufficient; you also have to prove that both your own breasts are unavailable - perhaps a dog has made off with them. And the reason these banks are so stingy, and have none left over for making ice-cream or poaching wiener schnitzel? Because it comes out really slowly. To get a decent amount ... well, imagine a dairy farm, only with women.

Breast milk banks????

Mein Gott im Himmell -- the horror!!! Must we now lie awake at night and worry about vast, untamed herds of American businessmen making panicked runs on Ben & Jerry's?

Well thank-you-very-much, PETA. As if it weren't difficult enough filling in for the absent host of this blog, now we have yet another thing to worry about.

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Bailout WTF? 

I mean really. If we needed any further evidence of Congress' detachment from reality, this is it. Looks like they picked the wrong week.

I guess the FDIC will have to do it.
Citigroup will assume the first $42 billion on losses tied to Wachovia’s riskiest mortgages and will pay the Federal Insurance Deposit Corporation $12 billion in preferred stock and warrants. In exchange, the F.D.I.C. will absorb all losses above that amount.

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The Sacred and the Profane 

Deborah Howell on the controversial Oliphant cartoon:
... a Pat Oliphant cartoon posted on washingtonpost.com Sept. 9 is still generating angry e-mails. The cartoon showed Sarah Palin speaking in tongues, John McCain saying she has a "direct line" to God and God saying that he couldn't understand her "dam' right wing . . . gibberish."

More than 750 readers from around the country -- more than I heard from about the financial crisis -- told me they were mightily offended. Many were Pentecostals, whose worship can include speaking in tongues; complaints also came from mainline Christians and from Charles Martin, a Buddhist in Boulder, Colo., who said "it offends me."

McCain and Palin are certainly fair game, but most of those offended by the cartoon felt it mocked all Pentecostals. Most cartoonists don't go out of their way to lambaste religion. But the pope is a frequent editorial cartoon character, as are God and St. Peter at the Pearly Gates.

Most complainers thought that the Oliphant cartoon appeared in print. It didn't. I showed it to several Post editors. While it was clever in some ways, most editors -- including me -- would not have run it. The Post has a policy against defaming or perpetuating racial, religious or ethnic stereotypes. That was why The Post did not run the Danish cartoons about the prophet Muhammad.

Oliphant wasn't surprised that it didn't run in print. "Many publications are too timid" to run some of his work, he said, but "the Web is giving us more of a solid venue."


A few observations.

First of all, I can't help but be pleased with Howell. Like Kathleen Parker and Ruth Marcus, she has shown willingness to advocating views that don't make her popular with her political fellow travelers. I find myself agreeing with her from time to time, and in today's overly politicized environment, that is a welcome development.

Secondly, it's interesting to compare this with the Tom Toles controversy a while back:
It is instructive to note how those who are quick to be offended by viewpoints they disagree with can't wait to condemn their opponents for expressing the same sense of outrage via far less intrusive and extreme means. Witness today's letter in the Washington Post, in which the Joint Chiefs of Staff took the rare step of expressing their "disappointment" at a recent Tom Toles cartoon. Readers of the lefty AmericaBlog were outraged that America's military leaders should presume to exercise the First Amendment freedoms they have bought and paid for in their own blood. You see, the tolerant Left supports the troops... so long as can be conveniently silenced.

AmericaBlog tells us that the Pentagon is "trying to censor" a top political cartoonist:
The Joint Chiefs of Staff just sent a menacing letter to the Washington Post over a cartoon.

Here are the "menacing" words the Joint Chiefs used to "try to censor" the media:
We were extremely disappointed to see the Jan. 29 editorial cartoon by Tom Toles.

You all know what happens when military folks are "disappointed", don't you? They whip out their phone books and beat up people like Joel Stein. Of course this hasn't actually happened, but that doesn't stop people like Stein from implying that it will.

The Toles cartoon controversy was interesting because it resulted in accusations of censorship in response to an extremely mild letter to the editor - this after liberal blogs deliberately attempted to intimidate and harass members of the press into suppressing non-approved versions of "the truth". One can't help but note the similarities to the Obama Truth Squad, which (no doubt from the loftiest of motives) deployed Missouri law enforcement officers to make sure voters only hear the Obama campaign's officially sanctioned version of "the truth".

Barack Obama might do well to listen to the Canadians (h/tip Glenn S.) on the question of free speech:

Continue reading....

Note: because this is a lengthy post and because it contains a word which may offend some people (and which I did not feel comfortable using without permission on Tigerhawk's site, though I do so deliberately in the context of a post on political correctness and the bounds of acceptable discourse) I have chosen to leave the second half of this post over at my site. I don't feel at all uncomfortable about it given the subject. Please consider yourselves forewarned, however :p

- Cassandra

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It's the Liabilities 

not the assets, that are gobbling up the global financial system at the moment.

Letting Lehman collapse may have sent the "right" message to investors and lenders about moral hazard, but that message could have been sent with a government assisted merger (like JPM/Bear). The problem is that the message was received by all financial system lenders - the repo market, the prime brokerage system and large depositors. And they are moving their money from the weak to the strong. That was what got WAMU and Wachovia.

It may be that the government is going to have to up the FDIC insured amount to stabilize bank liabilities. Or we will see more of this.

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Behind the UAE firewall 

We arrived in Dubai in the early afternoon and were met by a driver dispatched by our local distributor. All quite normal, except that the driver was allowed to drive out on the tarmac and pick us up right at the foot of the Emirates Airlines 777 that had brought us here. All the other passengers had to get on a bus and go to the terminal, but our new best friend drove us to a VIP lounge of some sort, took our passports and our baggage tags, instructed us to have something refreshing to drink, and returned 20 minutes later having accomplished all petty bureaucratic tasks. I could get used to that.

Anyway, this afternoon we changed into comfortable shoes and explored Dubai on foot and by bus, boat, and taxi. I took many fascinating pictures which I had hoped to share with you, but could not upload them to Flickr. It seems that the United Arab Emirates blocks Flickr for containing "prohibited content" under the country's Internet Access Management policy. I was surprised, but should not have been. Female modesty is very important in these parts.

Too bad. I had an excellent "mystery photo."

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Sunday, September 28, 2008

From the tarmac: The deal in pictures 

Stuck on the tarmac at Kennedy, hoping someday to leave for Dubai, reading The Corner. On the tentative Paulson plan "deal" struck in the wee hours this morning, there are two pictures that made it on the Grey Lady's web site. Picture one would send the Dow down hundreds of points tomorrow. Picture two, not so much.

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My whereabouts: Dubai, then Spain 

I am heading out of the country, first to Dubai on business and then back to Spain for a week-long trip with Mrs. TH in celebration of our 20th wedding anniversary. Posting will be off-hours and on strange subjects, but perhaps that will be more of a feature than a bug for many of you. I am hopeful that my co-bloggers will keep the home fires burning.

I have never been to Dubai, and am very much looking forward to it. If the transporting awesomeness of the Emirates Lounge at Kennedy Airport -- whence I blog -- is any indication, it is going to be as luxurious as it is fun. Indeed, the lounge itself is so nice that I have half a mind just to hang out here for the next few days.

Anyway, the New York Times put out something of a primer on Dubai about a week ago, focusing on the intersection between the divine and the commercial:

In Egypt, and across much of the Arab world, there is an Islamic revival being driven by young people, where faith and ritual are increasingly the cornerstone of identity. But that is not true amid the ethnic mix that is Dubai, where 80 percent of the people are expatriates, with 200 nationalities.

This economically vital, socially freewheeling yet unmistakably Muslim state has had a transforming effect on young men. Religion has become more of a personal choice and Islam less of a common bond than national identity.

Dubai is, in some ways, a vision of what the rest of the Arab world could become — if it offered comparable economic opportunity, insistence on following the law and tolerance for cultural diversity. In this environment, religion is not something young men turn to because it fills a void or because they are bowing to a collective demand. That, in turn, creates an atmosphere that is open not only to those inclined to a less observant way of life, but also to those who are more religious. In Egypt, Jordan, Syria and Algeria, a man with a long beard is often treated as an Islamist — and sometimes denied work. Not here in Dubai.

“Here, I can practice my religion in a natural and free way because it is a Muslim country and I can also achieve my ambition at work,” said Ahmed Kassab, 30, an electrical engineer from Zagazig Egypt, who wears a long dark beard and has a prayer mark on his forehead. “People here judge the person based on productivity more than what he looks like. It’s different in Egypt, of course.”

No one can say for sure why Dubai has been spared the kind of religion-fueled extremism that has plagued other countries in the region. There are not even metal detectors at hotel and mall entrances, standard fare from Morocco to Saudi Arabia. Some speculate that Dubai is like Vienna during the cold war, a playground for all sides. There is a robust state security system. But there is also a feeling that diversity, tolerance and opportunity help breed moderation.

Read the whole thing, and ask yourself this: Will Dubai's "alumni" have the energy and influence to transform the Arab world when they return to their more conservative countries, or will the great weight of that culture suffocate them or drive them away?

Check back tomorrow for pictures.

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Saturday, September 27, 2008

A short note on executive function 

One of the big one-way arguments in the current election season involves the question of "executive experience." Most people who have never been executives in some organization larger and more impersonal than a family do not know what an executive's function is, would not be able to describe it, and in all events believe that it is over-valued by some enormous margin. There have been countless books on the subject from Peter Drucker alone, but all descriptions of executive function involve a combination of analyzing choices, making decisions, persuading and inspiring people to execute those decisions, bearing the final responsibility for those decisions, choosing people who also know how to do these things, and leading them to act in ways that further your own decisions.

Suffice it to say that there are many people with executive titles who are not actually executives but rather gamers of the bureaucracy. There are also many people who aspire to be executives with absolutely miserable preparation for the job. Most lawyers fall in this category; I know, I am one, and required massive revisions to my cognitive style over many years before I became an even remotely effective executive. For my money, this is why the Democrats, who almost compulsively nominate lawyers for executive positions, have an uphill battle in persuading those Americans who understand what it means to be an effective executive.

Anyway, experienced executives know certain things that other people just do not know. This is one of them:

That said, I will humbly offer one insight from my too-many years of this and that: Always... no, never... here we go - there are generally a number of plausible strategies available at a moment of decision. Picking one and pursuing it with commitment will probably lead to success; waffling and switching strategies every six months generally will not.

Exactly. If you choose poorly at any momentous juncture you might not succeed, but if you waiver after your decision you almost certainly will not. Commitment to the course of action is often more important than the course of action itself. Not always, but more often than not. Many Americans -- other than symbolic analysts (such as lawyers, academics, and journalists) who can think and argue but do not know how to lead -- understand this instinctively. That is why the charge of "waffling" works, and why so many people in the Democratic elites do not understand why it works.

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Yard sign wars: The update 

There is some discussion on Instapundit of yard-sign prevalence and what it might mean for the election. Regular readers know that I have had my own struggles with people stealing or dismantling my McCain signs, although things seem to have calmed down recently. I attribute this to TigerHawk Teenager's suggestion that I replace every torn down McCain sign with two new ones. We are up to six now, and the local Obamaniacal vandals seem to have gotten the message.

That said, I am told there is only one other house in all of Princeton that has a McCain sign. That in a town where there is probably no residential block without an Obama sign, and some houses have three or four.

But there is something to this idea that things are much more balanced in more normal places. A radio car driver dropped me off at my house on Wednesday evening, saw my McCain signs, and said that he wished he had one. I said I had extras (about 20, I think), so I offered him one. He jumped at the chance, and then asked for another for his daughter. So there is a limo driver somewhere in central Jersey with a McCain sign. He must have a different impression of "greedy CEOs" than Barack Obama.

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"There is no perfect" 

Paul Kedrosky is also burned out on our political class:

Take your third deep breath in ten days. Because we stand at a precipice in U.S. markets. Congress is playing political brinkmanship with the biggest financial decision of our generation. We just had the largest bank failure in U.S. history. Credit spreads have widened to the point of gibbering meaninglessness. And some people are still nattering about what might be the perfect variant of the Paulson bailout plan.

Listen. There is no perfect. As Voltaire wrote, "Le mieux est l'ennemi du bien". The perfect is the enemy of the good. No plan is perfect; no plan will be static. But standing on the precipice and inching every closer to the abyss is stupid and suicidal. We need to ease the pressure in the system by moving to allow losses to be written off over longer periods, by getting bad paper out of institutions so counterparty trading can happen, and perhaps by some easing as well. Take preferred shares along the way, absolutely, but credit markets can't be left like this for much longer.

Some people don't care. A few just haven't thought it through, but others are so wrapped in their anti-Wall Street vendettas, their ideological purity and their Calvinist moralizing that they would rather see everything come down around their ears -- look at all the shiny creative destruction! -- than worry that it's their economy too.

There is more, including bad words.

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Paul Newman has died 

Paul Newman has died at age 83. While I did not share his politics, I loved him as an actor, respected him as a humanitarian, and admired the way he lived his life. The lives and deaths of celebrities rarely trigger any emotional reaction in me, but when Mrs. TH told me the news a few minutes ago I felt a bit wistful. I'm going to miss him.

Here is a handy list of his movies assembled by a helpful Amazonian. I had forgotten some of them.

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There be pirates 

The New York Times is running a very interesting story about the pirates of Somalia, who have made a great living seizing vessels far into the Indian Ocean and holding the crews and cargo for ransom. This has been a successful strategy, because in any given case it is easier to pay than fight. The once stalwart Brits have called off the Royal Navy because they cannot figure out how to navigate international human rights law, while Sarkozy's France has found its inner Boosh.

In the current case, however, the pirates may have grabbed the wrong ship:

The gun-toting, seafaring thieves, who routinely pounce on cargo ships bobbing along on the Indian Ocean, suddenly found themselves in command of a vessel crammed with $30 million worth of grenade launchers, piles of ammunition, even battle tanks.

Turns out that Ukraine sold a bunch of weapons to Kenya, and the hostages include Russians.


Both Kenya and Ukraine are American allies, so the United States Navy is in hot pursuit.

Proud, nationalist Russia does not want the United States to rescue their people, so their navy is not far behind.

This is not going to end well for the Somali pirates who grabbed the ship in question. Even if the Americans would hold their fire to protect the hostages, a close examination of the Vladinator's record indicates that he cares more about Russians not yet taken hostage than those who already have been.

Finally, as a chief financial officer I was very interested in this sticky risk-of-loss issue:
The $30 million in Ukrainian arms were bought by the Kenyan government, one of America’s closest allies in Africa.

“This is a big loss for us,” said Alfred Mutua, a spokesman for the Kenyan government.

But, Mr. Mutua was quick to add, since the ship had not reached Kenya yet, the cargo was still the Ukrainians’ responsibility.

The Ukrainians do not ship Ex-Works? If I were selling weapons to Africa, I would want to be paid via letter of credit and have risk of loss to pass my on my dock.

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Hey, there really are two Americas 

There certainly are two Americas. There is "the America" that believes that this video will hurt the McCain/Palin ticket, and the America that reacts, well, otherwise.

CWCID: Glenn Reynolds.

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The root cause of the financial meltdown? 

Barack Obama asked that we explore the origins of the present financial crisis, and blamed the failed policies of the Bush administration. This video, while a single-minded in its identification of the villain, is the antidote.

I am not persuaded that the CRA was the only cause of the current crisis -- I think not -- but it is a lot more persuasive than blaming the "failed policies" of the Bush administration.

CWCID: Power Line. And Miss Ladybug!

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Friday, September 26, 2008

Articulate differently 

Southern white Republicans -- Lindsey Graham and Haley Barbour come specifically to mind -- really ought to stop describing Barack Obama as "articulate." Even I cringe.

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Biting the hand that feeds them 

Republicans know that contrary to popular belief Wall Street contributes millions more to lefty candidates than righty ones. This is one of the alleged reasons for conservative opposition to the Paulson plan, among other things. Sadly for Wall Street, its love of the left is entirely unrequited.

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The debate post 

I'll be live-blogging the debate here until I cannot take it any more.

The first question is on the "financial recovery plan." We will learn whether my fantasy comes true.

Obama leads with the "main street" focus: We have to move swiftly, and wisely. We have to make sure we have oversight. We have to make sure taxpayers have the possibility of getting their money back and getting gains. We have to make sure none of that money goes to "pad CEO bank accounts". We have to deal with the root cause, homeowners.

We also have to recognize that this is the final culmination of eight years of failed policies of George Bush supported by John McCain. A strong answer, closing with an attack.

McCain: A tender moment for Ted Kennedy, a segue into a bit about the bipartisan work going on to solve the problem. "The point is we are finally seeing Republicans and Democrats sitting down together and coming down with a package." Long speech about how he "met with the House Republicans," and now they are part of the solution. Gotta create jobs, and that involves eliminating our dependence on foreign oil. Seriously?

I'm notoriously tone deaf about this sort of thing, but I think Obama won the first exchange.

In the rebuttal phase, Obama says "last year I wrote to the Secretary of the Treasury" to make sure he "understood" the problem. That was pretty damned condescending, but maybe will play well. McCain calls him on it -- "I, too, warned about all this stuff" -- and then lapses into a discussion of Eisenhower on the eve of D-Day, and the letter of resignation he drafted in the event of his failure, and the lack of accountability in today's political climate.

McCain is now decrying "excesses and greed," which may be effective but is absolutely annoying. We corporate tools need somebody to represent our interests. Where's my candidate?

I love, however, the veto pen schtick, "and you will know their names."

Obama says that he suspended requests from "my home state until we cleaned it up"? Somebody has cleaned up Illinois? That would be impressive.

Obama with the "CEOs" again, this time in a discussion about tax policy. What happened to the foreign policy debate?

McCain is Mr. Fiscal Conservative tonight, which I suppose he has to be with his party's president proposing a $700 billion, even if we all know it is not real spending.

Obama, meanwhile, closes "corporate" loopholes, abuses "corporations" that "ship jobs overseas," and generally wants to blame corporations for all that ails us. Obama's scorn for "corporations" is such one is forced to wonder whether he wants to power the modern economy with proprietorships and partnerships.

McCain just used the word "festooned" (with reference to earmarks). That was the TigerHawk Father's single favorite word. He is smiling down on us tonight.

Mrs. TigerHawk: "Jim Lehrer has totally lost control of this. Does anybody remember the question?"

Stephen Green:

But I’ll give Obama this much credit: “Loopholes” is usually a Republican complaint. He’s taken that one away. But now he’s talking health care and against free markets and this is a foreign policy debate?

McCain: Senator Obama has the most liberal voting record in the United States Senate. It's hard to reach across the aisle from that far to the left." Obama smiles, apparently genuinely. It was a nice line, and good for Obama to get in the game. Al Gore would have sighed heavily.

I'm falling behind here, but I agree with the commenters that McCain needs to cut more deeply here. He has had a number of good shots, including (as one commenter points out) Obama's ties to Fannie and Freddie.

Does McCain need to keep saying "many, many, years"? It seems to me that this is a double-edged sword.

Green, again:
McCain would freeze spending on everything but defense and such. Obama says, “yes, but…” Which has been his entire performance so far tonight. That’s playing defense. That’s playing to lose.

But McCain has passed up gutting him on several opportunities. Now here comes Obama: "It was your president who presided over this orgy of spending." Right, and that is McCain's biggest vulnerability. McCain: "It is well known that I have not been elected Miss Congeniality in the United States Senate or with this administration."

Forty minutes in, an actual foreign policy question: What are the lessons of Iraq.

McCain: "The war was very badly mishandled." He traces his history of opposing the administration policy, the final triumph of his strategy, and the prospect of "victory and honor." Weak, though, in his articulation of the consequences of defeat.

Obama was, sadly, stronger in his response, focusing on the decision to go into the war. McCain, however, scored a big hit with the "no hearings" point, though, and Obama fell back on a lame legalism -- "they do not go through my subcommittee". Then this: "John, you like to pretend that the war started in 2007!" Nice hit.

On the Iraq exchange, what do you guys think? Are either of these guys persuading anybody? The consensus in this room is that neither of them are changing any minds.

Obama is getting irritated, and the interrupting thing will not help him. I should know, being one of the world's worst interrupters.

Why does Obama say "Tall-ee-bon"? Is it really pronounced that way? At least he does not say "meal worker". And "Pawkistan"?

Obama: "And I've said this to President Karzai". Has apparently been saying lots of things to lots of people.

McCain: "On this issue of aiding Pakistan: If you are going to aim a gun at somebody, you had better be prepared to pull the trigger. ... "we've got to get the support of the people of Pakistan, not launch strikes against it. You don't say that out loud."

I think McCain is crushing Obama on the Pakistan argument. McCain's best riff yet.

Another commenter is noting that McCain actually appears less irritated and more cool than Obama. I agree. McCain is getting under his skin, and staying calm himself. Has he even once given us the creepy smile and said "my friends"? If so, I missed it.

Dueling bracelets? Goddamn. Mrs. TH: "And I also have an ankle bracelet!" Please, we need a new debate rule. If one guy says he has a bracelet, the other guy moves on to another punch line.

Althouse notices the weird pronunciation thing. Mrs. TH: "Obama's been pronouncing it that way since he got back from Berlin."

The question of nuclear weapons in Iran.

McCain is strong on the threat, but then moves too quickly into the "league of democracies." The linkage between McCain's view of the Iranian threat and his proposed solution is too tenuous. If Iran is as bad as he says, we need to be willing to do a lot more.

Obama swings to the right of McCain on Iraq! Look at all those centrifuges! The policy of the last eight years has been ineffective! Time to do more "tough negotiation." What, pray tell, will we do to gain leverage in those negotiations? Obama does not say.

Losing interest during Obama's rambling point about nuclear weapons in Korea. Completely lost track of the point. Any of you guys get it? Spain!

OK, McCain's also getting lost in Korea. I got the point about the South Koreans being "three inches taller," but did everybody else?

I am, however, enjoying the race to demonize Mahmoud Ahmadinejad. If Obama calls him "vile" again he will miss his chance to negotiate with him without preconditions.

McCain needs to go a little easier on the "he doesn't understand" stuff. One more time and it will be annoying to the average guy. That said, McCain took the outlier position on the invasion of Georgia from the start, and gradually the rest of the world came around to his point of view. True, and I'd give you a link to my post on the subject if I had the energy.

At 10:15 (9:15 her time), Ann Althouse notices a "my friend."

Stephen Green:
Don’t get me wrong — McCain is hardly my dream candidate. Unfortunately for me, and the nation, Cal Coolidge has been dead for quite some time now.

What, no mention of Warren Harding, (possibly) our first African-American president?

The "another 9/11" question: What is the likelihood of another attack?

McCain: "A lot less than it was the day after 9/11." Takes credit for the 9/11 Commission, which is a big move to the center. Strong move on torture, too, and "working closely with our allies." His base secure -- or just in love with Sarah Palin -- McCain moves for the center.

Sidebar: I've gotten a couple of emails that observe that these are two pretty strong candidates. At the risk of irritating my loyal readers, I do think that our choices this year are better, all candidates considered, than they have been in a very long time.

The TigerHawk Cousin, here tonight sharing the joy, is tiring of the Ronald Reagan references. I think that is right -- he left office twenty years ago, and lots of Americans do not really remember him.

Obama takes the position that "al Qaeda is stronger than ever before," more or less. First, the weight of evidence is against him. Second, why is that an argument that helps Obama? And now he is talking about veterans care. Not against that, just as I am not against apple pie, but how does veterans care help us deal with al Qaeda?

Wow! McCain just said that Obama was "stubborn," just like George Bush! I am speechless, and even Obama thought that was a good 'un.

McCain closes: "I guarantee you that as president I will heal the wounds of war." Strong. John McCain, the man's candidate.

Finished. Your take?

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My harmonious fantasy 

I've been busy all day doing the day job and now am preparing for guests to arrive, so I am hopelessly behind on the news. I did have a "presidential debate" fantasy today, though, and I shared it with a friend over email:

I’ll give you an alternative theory, and a very positive one. That the two of them have basically agreed to do a simultaneous endorsement [of a modified financial intervention plan]. That would be good for the country (McCain’s message) and “change” (Obama’s), [insofar as it would represent a moment of genuine bipartisan leadership in the middle of a presidential campaign].

Of course, I could be wrong.

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Blue moon watch: The New York Times looks at Obama's advertising 

All that yelling at the refs seems to have paid off for team McCain. The New York Times is finally writing a story about the plus ça change Obama campaign. The lede is barely recognizable as copy from the Times.

Two weeks ago, Senator Barack Obama’s presidential campaign gleefully publicized a spate of news reports about misleading and untruthful statements in the advertisements of his rival, Senator John McCain. Asked by a voter in New Hampshire if he would respond in kind, Mr. Obama said, “I just have a different philosophy, I’m going to respond with the truth,” adding, “I’m not going to start making up lies about John McCain.”

Yet as Mr. McCain’s misleading advertisements became fodder on shows like “The View” and “Saturday Night Live,” Mr. Obama began his own run of advertisements on radio and television that have matched the dubious nature of Mr. McCain’s more questionable spots.

The question is whether this turning of the worm is the start of a trend or a one-off concession to bolster the paper's flagging credibility.

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Thursday, September 25, 2008

The political class is failing the test 

Calculated Risk links to the various news stories that describe the collapse of negotiations today over the Paulson plan. Even taking much of the MSM reporting, blog coverage, and gum-flapping of politicians with a grain of salt, this much has become clear if it was not already obvious: Our political class has become completely dysfunctional not only when the stakes are trivial, but when they are actually, genuinely, enormous. After today, neither the Congressional leaders nor the presidential candidates of either party can be said to be taking this international crisis more seriously than their own political careers. It is as disgusting as it is tragic.

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An interesting change of heart from Brad DeLong.

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Moose and the Talmud 

I am going to climb out on a limb and say that without the blogosphere an asinine comment by Alcee Hastings in support of Barack Obama's candidacy would not morph into a debate over whether moose meat can be kosher. Who is going to argue that this is not a great thing?

CWCID: Glenn Reynolds, who makes an especially bad pun.

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Bad news for Republicans 

Well, this is not good news: Zogby says that McCain could win an electoral college landslide.

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Always talking book 

Bill Gross just volunteered to manage the TARP fund for free.

Well, duh. Who wouldn't want an insider look at how these transactions are valued and carried by the largest market maker in the business?

Gross is smart, but he is beyond self-serving.

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Biting off their nose to spite their face 

Watching CNBC just now, John Harwood (the Washington correspondent) said that conservative opposition to the Paulson plan did not spring only from adherence to "free market principles." Conservatives -- unnamed, of course -- had also expressed resentment toward Wall Street because it has been a huge source of political contributions to the Democrats.

Now, I've long thought that the popularity of the Obama campaign on Wall Street was foolish and mostly driven by the industry's Manhattan milieu rather than self-interest, so I absolutely understand the interests of conservatives in some payback. Let us not, however, exact our revenge by allowing the financial system to seize up. If it does, far more wealth will be destroyed elsewhere than on Wall Street.

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Wednesday, September 24, 2008

Literary history news from the Adirondacks, with a personal angle 

The Nature Conservancy has acquired Follensby Pond, a fairly large and quite remote private lake near Tupper Lake, New York. Follensby is reputed to be the largest private lake in the eastern United States, and is freighted with greater historical significance than most because it was the birth place of an American literary and cultural movement:

The pond was the location of the Philosopher's Camp where Ralph Waldo Emerson, William James Stillman, Louis Agassiz, and others helped birth the Transcendentalist movement, often cited as a important precedent for the modern environmental movement....

“The philosophers’ camp at Follensby may have been as much intellectual firepower—in the humanities and sciences—as ever gathered together in the U.S., at least under the open air. What one would give to have been privy to those conversations. In due time, we'll all be able to see the scene that inspired them so,” said Bill McKibben, author and Middlebury College scholar-in-residence.

My family actually has a personal connection to Follensby. Roughly 100 years ago -- perhaps 50 years after Emerson -- Follensby fell into the hands of my great-grandfather, Ferris J. Meigs, who owned the Santa Clara Lumber Company and a nice chunk of what is today the Adirondack Park. His family, including my grandmother and her sisters, spent their summers on Follensby when they were young. Our grandmother used to regale my cousins and me with stories of that idyllic place, which seemed to have moved her almost as much as her more famous predecessors. Sadly, I have never been there, but perhaps my chances have improved with the passing of the property to the Nature Conservancy. Either way, my grandmother was a great old school conservationist, and would have approved, I think, that the Nature Conservancy will now protect Follensby forever.

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Bailout developments reax 

The president's speech was useful and important. It was scary, on the one hand, but free of partisanship. Like him or not, it all needed to be said. I especially liked the part about him not letting the defaulting mortgagors off the hook for their share of the blame. People bought houses they could not afford. My mother -- and indeed my grandmother -- told me never to do that in very clear terms. Deadbeat is as deadbeat does, even if the mortgagee was an idiot.

[MORE: Text here. This is the part I liked, and which only a second-term president could say:

Easy credit — combined with the faulty assumption that home values would continue to rise — led to excesses and bad decisions. Many mortgage lenders approved loans for borrowers without carefully examining their ability to pay. Many borrowers took out loans larger than they could afford, assuming that they could sell or refinance their homes at a higher price later on.

Optimism about housing values also led to a boom in home construction. Eventually the number of new houses exceeded the number of people willing to buy them. And with supply exceeding demand, housing prices fell. And this created a problem: Borrowers with adjustable rate mortgages who had been planning to sell or refinance their homes at a higher price were stuck with homes worth less than expected — along with mortgage payments they could not afford. As a result, many mortgage holders began to default.

Point is, both lenders and borrowers screwed up, but there was no blaming the lenders for the borrowers screwing up.]

On McCain's "suspension" gambit, what she said.

Posturing though it may be, I like it that Barack Obama and John McCain have it within themselves to issue a joint statement. There have been plenty of candidates in the last two decades who would not have risen even that small distance.

Then again, maybe McCain killed a done deal.

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PETA is nothing if not a source of comedy gold:

People for the Ethical Treatment of Animals sent a letter to Ben Cohen and Jerry Greenfield, cofounders of Ben & Jerry's Homemade Inc., urging them to replace cow's milk they use in their ice cream products with human breast milk, according to a statement recently released by a PETA spokeswoman.

Gag me with a spoon.

Good publicity stunt, though. If you did not know what PETA was before, you will now.

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The signs on the door are changing quickly 

Financial businesses are changing ownership at breathtaking speed, and this raises the bar for a quick change in "colors".

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Police state watch 

This idiotic policy notwithstanding, you know you do not live in a police state when any group of clowns can put a sign on the farookin' National Archives calling for the impeachment of the sitting president.

You know we live in a police state when...

Sorry for the fuzziness; used my Blackberry for that one.

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The Paulson Bernanke Proposal 

I find it interesting and illuminating that two brilliant investors - one equity oriented and one fixed income oriented - have voiced strenuous support for the $700 billion investment proposal from the Treasury Department. I find it especially so because both Warren Buffett and Bill Gross are noted supporters of the Democratic Party, and have generally been very critical of the current administration.

I hope the Congressional Leadership is listening.

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Self Defeating 

Left wing media bias, that is.

Joe Biden has in lightspeed pinned the gaffe-o-meter. From publicly asking a paraplegic to stand up, to citing an FDR presidential speech on TV in 1929 (which of course could not have happened), to criticizing an appalling political ad which had been approved by Obama (and then reversing course), and so many others, Biden has been true to himself - he is a hip-shooting idiot.

Of course, those of us who care about these things and are over 40 knew this. We remember all the other idiotic things he has said and done - though we don't actually dislike him. He seems like an affable enough guy. I went to high school with plenty of guys like him. But he simply cannot help himself. His job is to talk, and he cannot stop the stupidities from erupting from his throat.

And this is where the fact that most mainstream media are actively pulling for the Democrats is in fact self - defeating. The MSM deludes itself into believing that they shape views rather than simply provide a communications medium. They believe they can make Palin seem like something other than she is -- which is to say competent, intelligent, accomplished and well spoken - and make Biden seem like something other than he is - which is to say a blithering idiot.

Because they believe in that "power" - and may also themselves be too ignorant to understand that Biden is a fool and Palin is not - they don't really allow the Democratic campaigners to adjust to the market reality - that Biden is an enormous risk and liability. Beyond lacking intellect, he is not careful with his thoughts and words.

In fact, had the MSM not been completely in the bag for Obama, they would have lambasted his selection of Biden immediately, rather than fawning over the selection. They would have pointed out his many flaws and liabilities and run him off the ticket so quickly (or even preemptively prevented his appearance on it), Obama would have had a second chance to pick Hillary or Warner or Nunn or somebody with an ounce of intellect, competence and discretion. Instead, they squandered their credibility attacking Palin, and she demonstrated her capacities and popularity and does so daily. By attacking her and her family so grotesquely, they attacked every Wal-Mart mom, every guns and bible clinging rural man and woman. Now the MSM looks all the more biased, sexist, elitist and urbanist.

And they delude the Democratic Party and the Obama campaign into believing that Biden is an asset, not a liability, and they are stuck with him. When you are biased, and you preach bias, you miss truths which become self-evident to non-believers. Therein lies the value of objectivity. It allows these truths to be absorbed and adapted to. Obama is trapped. He cannot adjust at this late date. He now has to run the risk that Biden will not devastate the painstaking effort he has put into the last 4 years one night, taking on the pitbull with lipstick.

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Criminalizing optimism 

Oh, goody. Another headline-grabbing business failure begets another FBI investigation in search of "fraud."

The FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc and insurer American International Group Inc and their senior executives for potential mortgage fraud, CNN reported on Tuesday.

The FBI did not provide specifics but said the inquiries were part of a broader probe, CNN said.

The bureau is trying to determine whether anyone in those financial institutions, including their senior executives, had any responsibility for providing "misinformation," CNN reported.

This is such a bad idea. Nobody makes a huge pile of bad loans -- or issues credit default swaps to guarantee derivatives thereof -- because they deceive other people. They make bad loans because they deceive themselves. Will the FBI be able to find a few ambiguously stinky emails among the billions that no doubt reside on the servers of AIG, Lehman, Fannie and Freddie? No doubt. Is it always possible after the fact to say that an executive was too optimistic, perhaps to the point of fraud? Of course it is -- he would not have made the crappy loans otherwise. The question is, do we really want all public companies to be run as if the consequences of failure is criminal prosecution? If you answer "yes," then you are saying that we should abandon the American propensity for risk-taking that has, in the main -- occasional bailouts going back to Alexander Hamilton notwithstanding -- made us the land of opportunity.

CWCID: Glenn and Megan.

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Joe Biden and FDR's vast powers of communication 

This is a beautiful moment.

Joe Biden:

"Part of what being a leader does is to instill confidence is to demonstrate what he or she knows what they are talking about and to communicating to people ... this is how we can fix this," Biden said. "When the stock market crashed, Franklin Roosevelt got on the television and didn't just talk about the princes of greed. He said, 'look, here's what happened.'"

Megan McArdle:
I certainly feel better knowing that come next November, I might have a savvy politician like Joe Biden explaining complex financial matters to me. And also, how the governor of New York managed to get his own financial show ten years before the first regularly scheduled television broadcast.

I don't care who you are, that's funny.

You can easily imagine other such gaffes.
"Part of what being a leader does is to instill confidence is to demonstrate what he or she knows what they are talking about and to communicating to people ... this is how we can fix this," Biden said. "When the battle of Bull Run went badly, President Grant got on the television and didn't just talk about the brilliance of General Lee." He said, 'look, here's what happened.'"

"Part of what being a leader does is to instill confidence is to demonstrate what he or she knows what they are talking about and to communicating to people ... this is how we can fix this," Biden said. "When the Japanese attacked Pearl Harbor, John F. Kennedy got on the television and didn't just talk about the 'day of infamy.'" He said, 'look, here's what happened.'"

Only rank partisanship prevents the press from busting a gut over this one.

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Palin and press access 

I woke up this morning, snapped on CNBC to see how much poorer I was going to get today, and was rudely and without warning treated to a clip of Keith Olbermann complaining with his usual reserve that it was outrageous that the press was not admitted to witness Sarah Palin's meetings with foreign leaders. CNN has more, and the lefty bloggers are in high dudgeon.

Thing is, where was all this outrage when Barack Obama was having private meetings with European leaders? Politicians, even candidates, are actually allowed to have private meetings. The undisguised desire of the press to witness a gaffe does not make that wrong.

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Tuesday, September 23, 2008

Bill Clinton regards Sarah Palin 

Bill: "I come from Arkansas, I get why she's hot..."

Hey, if the campaigns can use quotations like this in their advertisements, why can't I?

And Bill Clinton is not the only powerful man who has noticed. This picture is good for Henry and good for Sarah. Henry gets to hang with Sarah -- which you know he thinks is just great -- and she gets to learn some foreign policy. No, really. You can learn more about foreign policy in an evening with Henry Kissinger than most Senators learn in a career.

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Washington and the bailout 

Over lunch, while our help desk fixes my computer remotely, I've caught a bit of the Senate hearings at which Secretary Paulson and Chairman Bernanke are testifying. I also listened in on a conference call with Congresspeeps Ed Royce (R-CA) and Melissa Bean (D-IL) over the regulation of the insurance industry post AIG. I have several quick observations.

First, Paulson is not as articulate as I hoped he would be, and Bernanke looks terrified. Not comforting. The Senators are digging in, mostly intelligently, and the weak responses are begetting more questions. The markets are noticing; the DJIA has fallen from around +20 to -150 in the last 90 minutes or so.

Second, Christopher Dodd, who was one of the big critics in the press, is sounding as or more supportive as any of the others. Tennessee Senator Bob Corker, a Republican, has been more critical although intelligently so.

Third, Royce and Bean are pushing federal regulation of the insurance industry. Good, for that is about a century over due. Their argument is that one of the reasons why regulators did not know that AIG was leveraged "sixty to one" is that each state only sees a piece of the picture. "One world class regulator" for insurance is the solution (supposedly), and Royce and Bean believe that the state interests who have long opposed this move will lose this time because of the AIG catastrophe.

Fourth, Bean was stuck on the question of limiting executive compensation in companies that participate in the Paulson plan. She said that Paulson had argued (as he has) that firms we want to participate might not because of the limits. Bean said she was surprised that executives would not act "for the good of the shareholders and the country" just because their compensation was limited. Barney Frank, who is on CNBC today, says that we should have limits on executive compensation in "all corporations," but that our only leverage is over the companies that participate in the program. "We would then look to broadening it next year to all public companies." Camel's nose.

The issue of executive compensation generally deserves a long post. Suffice it to say that if you impose legal limits on executive compensation you will drive the best people into private companies where there are no such limits. Why? Because the limits on the table relate to bonuses and increases in the value of the company's equity and severance payments. All three exist for a reason, the first two because top people do not work brutal hours a week under enormous stress for a mere salary, and the third because top people do not leave a job they have for another one without financial protection against their quick termination.

MORE: Others have a different view, at least on the smarts of the Senators.

STILL MORE: Apart from the populist blathering about executive comp, I thought the Senators actually did a good job. The DJIA has now recovered into positive territory. I wonder if this is because people who have their doubts about the vast hugeness of the Paulson plan got some comfort that the Senate is making them think this through in steps. Of course, the extent of one's comfort is a function of whether one believes that we are on the precipice, or not. Perhaps equity investors are again more positive than they ought to be.

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Regarding the money markets 

Megan McArdle explains the money markets, and what happened to them last week. Not the whole thing, mind you, but the "breaking of the buck" and the part about the FDIC guaranteeing money market mutual funds.

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Kurtz on Ayers and Obama 

Stanley Kurtz, who has been digging through the papers of the Chicago Annenberg Challenge, reports his findings. Newshounds know that the CAC is the political/educational organization founded by Bill Ayers and on the board of which Barack Obama served. Its papers give one of the few documented glimpses into Obama's relationship with the radical left, the extent and breadth of which his campaign has assiduously de-emphasized, perhaps to the point of being misleading.

Kurtz has not yet uncovered anything really hideous, so I do not think this will hurt Obama much, even at the margin. I do, however, agree with this important point:

The Obama campaign has cried foul when Bill Ayers comes up, claiming "guilt by association." Yet the issue here isn't guilt by association; it's guilt by participation. As CAC chairman, Mr. Obama was lending moral and financial support to Mr. Ayers and his radical circle. That is a story even if Mr. Ayers had never planted a single bomb 40 years ago.

Right. It is not that Obama "knew" these people or went to pot-luck suppers with them. It is that he actively participated in and served on the board of an organization with an explicitly left-wing and arguably radical mission to transform education. With so few real insights into Barack Obama's true opinions, his association with Ayers and the CAC is freighted with more than "gotcha" significance. In both the real history and the Obama campaign's reaction to it, there is an important story about Barack Obama. The direction of that story remains unclear, and that is how Obama wants it to be.

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The "Frozen North" 

Michael Barone's post on the impact of Sarah Palin in "the Frozen North," meaning the Dakotas, Minnesota, and Wisconsin, is well worth your time. Note especially his discussion of the Germano-Scandinavian political tradition, which will be interersting to various members of my family.

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Monday, September 22, 2008


McCain has a quarter to a third of my school supporting him, I believe. Tomorrow will be the most literal litmus test that can be devised, as we're wearing T-Shirts that correspond to our affiliation. Blue for Obama, Red for McCain, Purple for Libertarians and undecided voters, Green of course for Greens, and Tie-Dye (Tye?) for the Anarchists.

Tomorrow will be an interesting day indeed.

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A question for our readers: What was the greatest "foreign policy blunder" in American history? 

It has become virtually an article of faith on the left and the transnational professional class that the invasion of Iraq was the "greatest foreign policy blunder" in American history. See, e.g., Jimmy Carter, Ramzy Baroud, Teddy Kennedy, Robin Cook, George Galloway, Harry Reid, and Jim Leach (it pains me to include him, he being the only politician for whom I've actually knocked on doors). And these are just some of the guys who used the word "blunder," one of the many terms of opprobrium assigned to this war.

Regular readers know that I believe that the Iraq war has improved our strategic position over many of the "alternative histories" of the last six years, but I also know that my position is in the deep minority. But even if invading Iraq turns out to have been a bad idea, was it really the "worst foreign policy blunder" in American history?

I had a delightful conversation today with a professional historian who proposed a number of other decisions that turned out worse, and I added a few of my own. Here are our candidates for the "worst foreign policy blunders" in American history. Please tear into these and add your own suggestions in the comments.

In chronological order:

1. The Mexican War. This "blunder" might take two forms. My friend argues that it set the stage for the Civil War, or at least the version we fought, and it gave the South (which supplied most of the men) a lot of military experience that cost the North dearly. I believe that the blunder was in allowing slave politics to get in the way of grabbing all that we had conquered. Had we imposed the treaty that we could have imposed, our border with Mexico would be much shorter than it is today and there would be four or five more Arizonas down there.

2. The Spanish-American War. That war has brought us nothing but trouble. Not only would Cuba have turned out differently, but our occupation of the Philippines bought us an extended counterinsurgency and put us directly into confrontation with Japan when no such conflict was necessary. It was America's one real "imperialist" moment, and it has definitely cost us more than it got us.

3. The conclusion of World War I. My position is that our intervention was enormously costly both at the time and in history; by 1917, it did not actually matter to us whether Germany "won" at the expense of France, and it might have prevented both the rise of fascism and the success of the Soviet Union. My friend argues that Woodrow Wilson's meddling with the post-war settlement and our signing of the Treaty of Versailles was the real error, but I did not dig deeply enough to understand why.

4. The "isolationism" leading up to World War II. We sent entirely the wrong signal to Japan in particular, but also Germany and the Soviet Union.

5. The Truman administration's decision to push to the Yalu after the victory at Inchon. It brought the Chinese into the war, cost us and the South Koreans tens of thousands of lives, and did not improve the American position in the end. In addition, it gave the Chinese a continuing interest in North Korea's survival that persists to this day.

6. The Kennedy administration's decision to support the coup that took out Ngo Dinh Diem, the last strong leadership in South Vietnam. There is a strong argument that he could have won that war as early as 1965. (This is the main story behind Mark Moyar's fantastic revisionist history of the first phase of the war in Indochina, Triumph Forsaken.)

7. The circumstances of our withdrawal from Vietnam. We defunded the war and left the country after we had learned to wage successful and effective counterinsurgency. It could have and would have been won had we stayed the course.

8. Our total failure to retaliate -- and I use that term advisedly -- for the Islamist attacks on the United States during the period from 1979 - 2001, with the sole exception of pinprick cruise missile strikes after the attacks on the African embassies in 1998. The administrations of Jimmy Carter, Ronald Reagan, and Bill Clinton essentially told Islamists that America would exact no price for killing or otherwise attacking its people.

Your corrections, suggestions, howls of outrage, and heartfelt concurrence are equally welcome.

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John McCain's eighth house? 

I took this picture one hour ago, also with the camera in my Blackberry. Sent it to a friend, who responded that it is John McCain's next house. I increasingly think not, but perhaps that is my mood talking.

John McCain's next house?

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Where's TigerHawk? 

I took this picture with my cell phone two hours ago. Where was I sitting?

Mystery Photo

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Cliff Asness is mad as hell 

Cliff Asness runs AQR, a large quant hedge fund. Cliff is a brilliant, thoughtful, and incredibly amusing fellow, and he's mad as hell about the short selling restrictions being imposed by the SEC.

At the risk of restating the obvious, short-sellers play a vital role in any free market. In a world where everyone can only hold long positions, managers have less incentive to work hard, improve stale business models or keep their companies competitive and efficient (sound anything like government bureaucracy?). Short-sellers keep companies, managers and markets honest, and without them the disciplining mechanism is much weaker.

Frankly, I expect some confused socialism from the Brits, but not from our “small government” Republicans (for the record, on matters of economics, I consider myself from the small-government libertarian wing of the Republicans). I now feel quite party-less as I’m reasonably sure Obama would’ve nationalized all industries in similar circumstances, while “hoping” this “change” would work.

Now, after executing the short-sellers in a show trial, the S.E.C. chairman, Christopher Cox, and Treasury Secretary Henry Paulson are probably going to review a parade of soldiers and tanks with 10 old men in coats and big hats, and then perhaps go rest at their dachas in the Crimea. Then again, my socialism analogy, however accurate, may not be the best one possible. After all, I believe the last country to outlaw shorting was Pakistan.
Read the whole thing.

(My own view of short selling has been greatly influenced by David Rocker, who used to run a large short fund and is now retired. He has a million stories about ill treatment because of his preferred strategy. In one tale a CEO refused to take his questions during an investor meeting because he had a short position in the company. He waited around to confront the CEO one on one and the CEO angrily asked him "Why the hell should I talk to you?" Rocker replied, "I'm the only one in this meeting that you know will be buying your stock. You should be trying to convince me to buy it now rather than at the lower price I think I'll be able to get it for later." I thought that was a brilliant reply.)

Cliff, by the way, would point you towards his disclosure statement that accompanies anything he writes for the public. An excerpt:

AQR's legal department would like me to add that I am criminally insane and barred by an order of rhetoric protection from speaking on AQR's behalf. Anyone trading on my advice, or a client, consultant, employee or Iraqi insurgent thinking he has been wronged by my attitudes or opinions can have a $250 out-of-court settlement right now if they'll sign a waiver, otherwise we'll break you. Oh, and we lied about the $250, but seriously, we will break you. Please note, nobody can predict where markets will go in the short-run and sometimes even the long-run. When I point out individual things in the marketplace that I think are strange, or wrong, it doesn't mean I have the perfect answer or can easily make money from it for my clients, for myself, or certainly for you reading this blog! Furthermore, if you read one guy's opinion on a blog and do anything based solely on that, you are an idiot.

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Oil, again 

Oil is surging again in price, apparently in anticipation (and reflection) of a much weaker dollar. The supposed culprit is the bailout, and perhaps that does explain the reaction of traders. The prices of oil stocks are also rising rapidly, slowing what would otherwise be a huge decline in the DJIA. The question is whether this surge, like the one in June and July, is sustainable given the direction of consumption in the rich countries, particularly the United States. I think not.

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Bailout: The Democrats respond 

Blogging from the back of the big health care conference, I see that the Congressional Democrats have responded with a counterproposal to the Paulson plan. The initial press accounts are incoherent, but it is not clear whether that is the fault of the reporters or the underlying proposal. This, for instance, is a real puzzler:

According to the proposal, Treasury may not purchase, or commit to purchase, any troubled assets unless it "receives contingent shares in the financial institution from which such assets are to be purchased equal in value to the purchase price of the assets to be purchased."

Huh? If the Treasury bids, say, $100 million for an equivalent amount of "toxic" mortgage-backed securities, it gets those securities which are presumably worth $100 million. Does it also get an additional $100 million in "contingent shares"? That is how the story reads, so we are hoping that it is Reuters that is idiotic, rather than the Democrats.

In any case, I am all for crushing the equity. The Treasury should do this by bidding a clearing price for toxic assets, rather than book value or some other notional amount. Doing this by effecting a takeover of each and every financial institution for which it would provide liquidity strikes me as counterproductive in the extreme. Why would anybody agree to that deal, and why would we want it as a country or an economy? It seems to me that the Democrats must know this, and are trying to derail the Paulson plan or at least make it politically very costly for the Republicans.

MORE: Tom Maguire has given this proposal, including the precise text inaccurately reported by Reuters, the usual close inspection:
Dodd is calling, in effect, for random equity issuance with no underlying cash in order to dilute some owners if the Treasury chooses to sell assets at a loss, regardless of why or when that loss may have occurred. This does not bring new government equity into the system but may create enough uncertainty to deter private investors from joining in. That is stabilizing? How in the world will any of these firms attract new capital investors (if that is what is needed) with that random cloud over their heads? How will a prospective new investor in a firm evaluate the joint probability that (a) the assets sold by the firm a few years ago have depreciated and (b) the Treasury will actually sell them rather than ride it out?

Krugman will support this because it looks punitive and onerous to Wall Street. But this is daft.

Stabilize the current system, crush the old equity, and attract new equity. Choose any two, but do not attempt all three.

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Health care blogging coming up 

I am in Washington attending "The National Congress on Health Reform," so I am liable to commit some serious off-topic blogging over the next couple of days. Apologies in advance. It is a subject that interests me both professionally and as a blogger, and I even agree with the lefties on this key point: We ought to reform the system in a fairly comprehensive way. However, I also ask questions that the progressives rarely discuss, but should.

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Cubs Clinch! 

Just in case you missed it, the Cubs clinched the NL Central on Saturday with a win over the Cardinals. We won't get too carried away, as they won the division last year and were promptly swept by the Diamondbacks. But Cubs fans should enjoy the moment, which is not one we experience with much frequency.

Of course this has the potential to be a historic year, as the Cubs have not won a World Series in 100 years (or appeared in one in more than 60). It's premature to start handicapping the odds of either event happening, however, as there is still baseball to be played.

With other NL playoff spots still TBD, the Trib runs some scenarios by us for the final week of the regular season.

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Whither the dollar? 

I was ruminating over the weekend over the staggering financial events of last week, and what the likely effects might be in the intermediate and long term. There are many unanswered questions about the new bailout plan, and while the stock market clearly thinks it is the answer (or did Friday) I think it very much remains to be seen.

Many of the economists I read fear that one of the consequences of a bailout of this kind could be a loss in global confidence in the dollar and the ability of the US to honor its debt. This would be an off the charts worst case scenario, but I think we've seen enough over the past year to justify being open minded about the possibility.

So the question I pose this morning is what can you or I do to insulate ourselves from such a calamity? Let's take a poll!

In the event of a US dollar crisis, I would like to have a significant amount of my net worth invested in:

A) An index of foreign currencies.

B) Gold and silver

C) Productive farmland

D) Single-malt Scotch

E) Can I have some of each, please?

F) It is unpatriotic to have a non-dollar strategy.

MORE from TigerHawk: Let's make this a real poll!

In the event of a US dollar crisis, I would like to have a significant amount of my net worth invested in:
An index of foreign currencies
Gold and silver
Productive farmland
Single-malt Scotch
Can I have some of each, please?
It is unpatriotic to have a non-dollar strategy
Free polls from Pollhost.com

I might add that I am a dollar bull over the long term. Yes, we may abuse the heck out of our currency and the next couple of years may be rocky, but where are you going to invest in the long term? Europe? Japan? Russia? Dubai? The United States remains the best rich country in the world for starting and growing a business.

Unless, of course, we screw it up.

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So, you think it is 1929? 

Those of you who are pondering comparisons of the current financial crisis to the Great Depression might be interested in this timeline of events during that traumatic time. There is "evidence" in there for every political position, but at least two points stand out at the moment: The economy was really bad back then, contracting by double-digit amounts year after year, and the government took far too long to act boldly. Read the whole thing.

CWCID: A loyal reader, who happens to be a lawyer and an economist.

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Limits of Liquidity 

With all due respect to Paul Krugman and Tom Maguire, the argument over the Treasury paying 'premium' prices seems misplaced.

The trouble is that we really don't know how much these "Mortgage-related" assets could be worth. It is the uncertainty of their valuation that makes capital raising difficult. The capital providers don't know how much more of their fresh new money will simply be marked down and not earn a return.

Krugman, taking an unusually dim view of government, is sure that the Treasury will 'overpay' and suggests that if they don't , it won't help financial institutions. Krugman may be wrong here, as simply removing the cloud of uncertainty will clear the path for capital raising in future.

Maguire notes that simply providing liquidity against these assets will help free up capital. However, if they are worth $0.05 on the dollar, this will simply provide the near total loss of capital at the low end of mortgage-related asset valuations.

The trouble is we don't know how these assets will behave because we haven't seen home prices behave this way, borrowers haven't been this leveraged and we haven't put as much 'structure' around mortgage instruments in the past.

The capital adequacy of several large banks hangs on $0.05-$0.10 cents of difference in ultimate value of their mortgage portfolios. If the price is good enough to remain solvent, providing certainty will be a big help. If it isn't high enough, simple liquidity won't be enough.

I predict only institutions that can achieve certainty *with* capital adequacy will sell in this structure. Plus maybe those already in liquidation.

(1) Comments

Sunday, September 21, 2008

There are definitely days when this would come in handy 

Why pump something so banal as oil through a pipeline when you can send Stoli:

The accused built a 2-kilometre pipeline through a reservoir that marks the Russian-Estonian border, and managed to pump 6,200 litres of spirits across before getting caught.

"It might sound weird and unbelievable but it's a very real criminal case," Mari Luuk, a spokesman for Estonian prosecutors, told AFP.

The smugglers – 11 Russians and Estonians – face up to five years in prison if convicted.

Vodka is vastly cheaper in Russia than in its ex-Soviet neighbour Estonia, which joined the EU in May 2004. Top of the line vodka can run to hundreds of pounds in Russia, but the man on the street often satisfies himself with bottles costing as little as £2.

The men were caught after Estonian tax officials found 1,159 litres of untaxed alcohol hidden in a truck in Tallinn, the capital of Estonia.

The find led them to the pipeline, submerged in a reservoir near the Estonian border town of Narva, which the Russian-led smuggling ring used between August and November 2004.

More often than they ought to be, taxes are the mother of invention.

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A few thoughts before I re-enter the fray.. 

Last week was certainly a week to remember. I wish I'd the time to discuss it in this forum, but it was all-consuming.

Wednesday, about midday, we stared into the abyss. Many of you know that the world of short bond maturities is dominated by financial issuers. None of this could be sold. The dealers had so little financing that even non-financial paper was bid at huge discounts. Two-week obligations of heretofore unquestioned credits was bid at levels that would break the buck in just about any money fund with two or three transactions. Shareholders were leaving money funds, forcing the transactions that would seal their doom.

Othes, like my old blogmate Megan, have been accurate about GLB not being the cause of this. Another notion out there is that regulation has been lax during the Bush years. This is simply untrue. Between the post-Enron documentation frenzy and the post-Patriot act money-laundering frenzy, regulators have staffed up and been empowered over the last years in ways I have never seen in my 20 year career. In fact, in ways my colleagues with 40-50 years in the industry have never seen. Compliance departments have staffed up to 3 or 4 times their prior levels to deal with the added regulatory inquiries, requirements and monitoring programs.

One regulator has decided they need staff permanently on-site in my shop. They've never given a good reason for this, other than perhaps our offices are much nicer than theirs, and they can bill us for inventing new databases and reports that we have to create as they take advantage of our digs.

No, there has been no shortage of regulation, just a shortage of regulation that has to do with systemic safety and solvency. Regulators have been obsessed with e-mail retention, policies, procedures, desk manuals, 'know-your-customer' files, control self-assessments, speed of audit follow-up, even encouraging staffing up for 'regulatory risk'!. Most of the regulatory focus has been on matters clearly designed to support private litigation, such as retention of documents and correspondence, and policy description and attestations (like Sarbanes-Oxley).

Meanwhile, not one of them noticed that Tier 1 Capital had become a bankrupt concept, or that structure substitutes for leverage.

We have been force fed a super-sized trucker meal of stupid paper-pushing requirements while the basic risks of asset leverage went unaddressed. Frankly it was symptomatic of the Lawyering-down going on in this the country, where process and paper trail takes precedence over substance and ethics. If you think this idiocy is somehow the product of only one party, I politely submit your partisanship has severely clouded your judgment.

One final thought: This is about much more than mortgages. Seems the Treasury realized that when they amended their proposal.

I hope this week is better than last, but I'm not sure the Paulson Plan is going to get us all the way there as formed.

(3) Comments

Filkins channels Yon, and a warning 

Everybody and his brother linked to Dexter Filkins' article in today's New York Times on the changes in Iraq since his last tour there, as well they should have. It is excellent, and you should read it now if you glided past the link earlier in the day.

I happened to be in Princeton's Barnes & Noble this evening, and the tables out front are packed with books that assume, as if it were beyond debate, that Iraq has been an American defeat. One book included a preface written in December 2007 that denied that the surge had done anything but make matters worse. There is now almost irrefutable evidence that the authors of such books were prisoners of wishful thinking. Unfortunately, the readers of such books do not necessarily know it.

In any case, the antidote to all that defeatism is Michael Yon's outstanding Moment of Truth in Iraq: How a New 'Greatest Generation' of American Soldiers is Turning Defeat and Disaster into Victory and Hope, a tour de force in combat journalism. He spares nobody, especially not the Bush administration and the Army, for failing to understand the nature of that war and, particularly, that in the first four years we got crushed in the "media battlespace" even as we were killing jihadis by the truckload. One of the most important features of the Petraeus strategy was understanding that; Yon does not say it, but Donald Rumsfeld may have had to go for the Petraeus strategy to have succeeded.

Anyway, I laboriously an excerpt from the end of Yon's book so you can see how closely Filkins new opinion resembles his in all the important ways. Both are worth reading in their entirety. Note especially the warning at the end of the excerpt from Yon.

So Mosul is complicated, and it will take a while. But after five years of blood, toil, and mountains of treasure, Iraq is coming into brighter days. Violence is down. Iraqis who previously wanted dollars when I shopped in their stores now prefer to be paid in Iraq dinar. The civil war has ended. People are coming home. People say, "Thank you, thank you, thank you."

Iraq is one nation. Those who suggest that Iraq should be partitioned, noting Iraqis often do not get along and the Sunni-Shia rift is profound, miss the crucial reality that Iraqis consider themselves foremost to be Iraqis. The conflicts between Iraqi Sunni and Shia are largely political, not theological. Al Qaeda, now the main instigator of civil war, is thoroughly discredited and strategically crushed in Iraq. Today, al Qaeda's attempts to incite sectarian violence only backfire.

Iraqis are willing to fight for Iraq.

A good deal of this war was American soldiers and Iraqis sitting together, drinking tea, and working out problems like businesspeople. Religion rarely came up in these meetings. Just because Iraqis have "Allahu Akbar" on their flag doesn't mean they're foing to blow up the World Trade Center any more than "In God We Trust" means we're going to attack Communist China.

Iraq does not hate America. If they hated us, I'd be urging an immediate troop withdrawal, because there would be no hope of winning this war. If the Iraqis hated us, we would be fighting the Iraqi Police and the Iraqi Army. Instead, we're fighting alongside them.

Several times I have told Iraqis, "One day Iraq and America can be good friends." They look at me in disbelief. "What do you mean?" they say. "We already are good friends."

At this point no nation on Earth knows more about Iraq than the United States. Iraqis have an affinity for things American. You see it everywhere. There's a gym in the Dora neighborhood of southern Baghdad named "Arnold Gym." Arnold Gym is little more than a bench and a few free weights, but the kids who work out there not only admire the governor of California, whom they have never met, but also the American soldiers whom they see every day. In Mosul in 2007, Command Sargeant Major James Pippin taught the local children to raise their index fingers and pinks and say, "Hook 'em horns." The kids had no idea what that meant, and neither did I, but they did it every time a Humvee passed because they respected CSM Pippin, who got shot, then mostly healed up after many painful months, and returned to the battle.

There are lots of kitchen accidents in Iraq. Kids get burned. American soldiers can't take it when they see a kid get burned. If they are in the neighborhood on a mission and they see a burned kid, they will cancel the mission to get the kid to an American aid station, which, technically, they shouldn't be doing. But a lot of tough soldiers get weak knee'd when they see a kid in trouble. They'll shoot insurgents all day and all night and can't get enough of it, but when they see a kid hurt, they'll stop and drive off with the kid. Thousands upon thousands of these obviously spontaneous actions had a profound effect on how the Iraqis see us. They knew we did a lot of stupid and overbearing things, even brutal and criminal things at times. But they also could not deny that, on the whole, our people had a heart for them, or at least for their kids. And who couldn't like Iraqi kids? Practically everywhere the kids loved to see the soldiers, and the soldiers loved to see the kids.

War is ugly. But if you are going to fight at all, it's important to fight to win. We have created the conditions for peace in Iraq. But our job is not finished. The worst thing that could happen now would be surrendering when victory -- real victory, not just empty triumph -- is so close.

When our troops start drawing down, as they should when the conditions are favorable, the drawdown must be done methodically, for reasons both strategic and logistic. A hasty withdrawal would only empower our enemies and allow al Waeda to regenerate. Politics dictates that politicians talk about withdrawal. The truth is right now we need more troops here, so we can get out of these tanks and other armor in Mosul and start walking the streets. The higher truth is that we are so close to winning, winning in the big sense of seeing Iraq be free and democratic, united and at peace (by local standards), that it would be a crime to hold back now. Maybe creating a powerful democracy in the Middle East was a foolish reason to go to war. Maybe it was never the reason we went to war. But it was within our grasp now and nearly all the hardest work has been done.

Whoever becomes our next president in January 2009 must be prepared for an uptick in violence in Iraq shortly after the inauguration. Insurgency is a political war, waged on the news cycle, and our enemies might well try to create an illusion of strength. If the new president is panicked by an illusion and pulls our troops out, we and the Iraqs likely will pay the price for decades, perhaps generations to come. If we precipitously withdraw our troops, all of the tremendous progress we are seeing will be lost....

Moment of Truth in Iraq: How a New 'Greatest Generation' of American Soldiers is Turning Defeat and Disaster into Victory and Hope

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