Gabe Ledeen speaks

Here is a thought provoking article from Gabe Ledeen, a good friend and a fellow Marine officer (we went through all our basic training together).
http://article.nationalreview.com/?q=YTYxMjIyMGE3MDhjMGNiZWRkMjg5Nzc0OGI4OWIxNTE=

Summary: Nobody wants to admit it, but some people are truly %$%holes and need to be slapped.

Prof. Fama sums it up

http://www.dimensional.com/famafrench/2009/01/bailouts-and-stimulus-plans---addendum-12809.html

Fama and Krugman have been debating in the blogosphere...

Here is Fama's reply to Krugman:

Again, here is my argument in three sentences.

1. Bailouts and stimulus plans must be financed.

2. If the financing takes the form of additional government debt, the added debt displaces other uses of the same funds.

3. Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses."

---------------

I hope this stimulus can magically employ resources into areas that are more productive than their current usage (which of course brings up the question, if there were more productive uses for them , why aren't they there right now???)

Hedge Fund Article

The team over at http://www.finalternatives.com/ 

posted an article about your's truly....

http://www.finalternatives.com/node/6778

Really cool website

You wouldn't believe what some local churches have been posting on their signs!

here is another one they did the next day...

Pretty cool, eh? You can do this too at the website churchsigngenerator.com. Thanks to Andy Kern for the tip :)

Guantanamo...

An old college buddy took a really great picture the other day while at the coffee shot. It really captures the tension between 'ideals' and 'reality.' Having dealt with these issues in real-life situations in the military, I lean more towards reality--I'm not sure it will ever be the case that all human beings decide to 'agree' on ideals, and thus survival of the fittest principles still apply. As we have seen throughout history, it always comes down to guns, germs, and steel.

The paradox of all of this is that the society/religion/group who gets to tell everyone else what the best 'ideals' are, typically used, or had the threat of using, violence and other 'immoral' methods to attain their position of having the power to espouse ideals... talk about a circular logic...I can't even figure out where the story begins and where it ends...ha!

My guess is Obama will outlaw Guantanamo, but the realities of the world will force him to open up shop covertly in another part of the world. With this solution, we erase the negative extranalities associated with being labeled as 'torturers', but still maintain our ability to engage radical personalities.

http://knaddison.com/image/fail-win/freedom-win-safety-fail#comment-3019

Barack Obama intangibles

So I've been sitting here in London these past few days. Each night I turn on the 'tellie' and watch the talk shows and local news station. It is amazing how big Obama is in the United Kingdom. Everyone is super excited about him being the new American president. They are glowing about how great America is and how they can become more like us.

In addition, I'm a teaching assistant for a class that includes a group of global financial executives (managing directors, heads of banks, etc.). The group is quite reflective of the major countries in the world. The day Obama was being sworn in the students were very happy. They kept asking me, "Wow, aren't you so happy this is going to happen? This is an amazing change for the world! We are so excited!!!"

So here is my conclusion from these recent observations:

Obama is the ultimate marketing tool for America and has really elevated our status in the world. This is in sharp contrast to this time last year when I was in Europe and I almost felt like everyone was giving me the "evil-eye" because I was American.

I'm inclined to believe that even if Obama was a communist-loving, left-wing nutjob, his value as a diplomat would be worth the costs! I wonder how many right-wingers and angry republicans have factored this IMMENSE value Obama brings to the table. Diplomatic, political, military, humanitarian, and economic efforts will be much easier going forward. Bush may have believed in the go-it-alone strategy, but there is a huge problem with that approach--it costs WAY too much money! I see Obama as a vehicle to lower free-riding costs when we address global problems such as terrorism, pollution, and economic issues. Bravo!

The Real Afghanistan Part 2

Note: click on pictures for a bigger image

The biggest thing over the past several weeks has been the wheat distribution. Basically, no wheat has been distributed at all. It is the goal of the US to develop local governments in Afghanistan's provinces that can distribute wheat without all of it disappearing. These district sub-governors have a mixed record of reliability. So we try to establish checks. The wheat is stored on the FOB until these local leaders can figure out a way to give it out. When it is distributed, the ANA (Afghan National Army) and US Army will provide security.

The negotiations leading up to this were pretty funny. All kinds of propositions were made. Some wanted to sell the wheat and distribute it fairly to the "people". Another group wanted to store all of it at one location, they would hold they key, and then distribute it. Parts of the wheat have already started turning up in local mills being converted into flour and sold. The primary reason the leaders do this is to make money, the secondary is to maintain their own power base, and to say "I am giving you some wheat, the Government of Afghanistan is giving you nothing. Why should you support the government?"

This was overcome by using an EA-6B Prowler, which is a 30+ year old plane originally designed to jam and destroy enemy radar sites. It can also broadcast radio signals. The information operations department came up with some messages in the local languages and has broadcast them over several days. This actually worked. People started asking the local leaders when their wheat was coming. This helped speed up the lengthy negotiations my Lieutenant Colonel had to deal with. These meetings over chai and sweets were very long, and involved the local Afghan leaders making the same corrupt recommendations. The ANA leadership and the US Army stood their ground, and eventually the Afghans agreed with them. Or, they have a mind-blowingly smart plan that will undermine anything close to a fair wheat distribution. They're smart, and it would be a shame to underestimate them.

On another night we were on an overnight patrol and had formed a vehicle patrol base. An observation post heard some shots fired. We are typically tied to the US Army on the road and it took them a while to respond. Additionally, it is really dark at night here. There is no city to light up the sky, and it is painfully slow driving blackout on the bad roads. When we arrived, some bandits or insurgents (it can be hard to tell the difference) had shot and killed a truck driver, stolen his money, and set his truck on fire. The fire went out quickly, and the local police got the body and shipped it to his family.



Days later, the local police responded quickly to the same thing. Only, the bandits had kidnapped and then released the drivers of a truck carrying a grader for road construction. The police pinned them down on a finger, or ridge, and exchanged inaccurate AK-47 gun fire. The intel guys got a call via a satellite phone, and then we (US Army, ANA, and ETTS) headed down to check it out. By the time we arrived, the truck had burned, but the grader was okay, and the bandits were still sporadically shooting at the local police. After arriving the Army Captain started talking to the police, and then the lead vehicle was shot at by AK-47 fire. This was a terrible idea on the bandit's part. AK-47s are not very accurate over 350-400 meters, and we have much bigger guns, including MK-19s. These shoot grenades over 2000 meters. Also, they were on a hillside, and no houses or civilians were within 800 meters. So, this is one of the few times collateral damage was not an issue. Basically, these guys had five automatic weapons returning fire within seconds. Then the US Army decided to call for artillery.

Admittedly, watching artillery hit is awesome. Launching a round from miles away and having it hit within half a football field is impressive. You see the explosion before you hear it, and it makes a tremendous noise. The US military and ANA are expected to be professional and not yell or cheer while it is impacting. Not so for the police or locals. They loved it. They were smiling and laughing. I guess they hoped these guys wouldn't be a problem anymore.

Working with the ANA continues to provide daily challenges. They are terrible at vehicle maintenance. The training team's vehicle mechanic gives them a 0.5 out of 10. The logistics officer is also working with the supply officer to steal as much as humanly possible. The only thing that could make this worse is if the ANA had a finance officer working with them. The logistics officer also wants to transfer his assistant, the most competent ANA soldier, because he knows the assistant is on to him. I really dislike the logistics officer.

That is about it. Attached are pictures of a typical Afghan road in our area, and the mountains and terraces.

market intervention continues...

http://www.watertowndailytimes.com/article/20090115/NEWS02/301159967/0/FRONTPAGE
Wish I was a cattle farmer...maybe I should buy a new herd, then have the government turn around and tell me I have to kill them off--and get paid a premium for it...makes perfect sense...or how about we do what we did in the depression and pay farmers to burn their fields to reduce the supply...that way we can keep prices high to stem deflation--great idea...

I am happy to see this wasn't passed, but fear these things will become more prevalent in the future...

Bush gives a shout out to the Krissoff family!!

President Bush mentioned my best bud in the Marine Corps, Nate Krissoff, who tragically died in an IED attack in Iraq when we were deployed to Iraq (he was in Fallujah, I was in Haditha). He also talked about his dad, who signed up at age 60 to join the service (his son, Austin, also serves as a Marine officer--talk about a dedicated family...sheesh!)

Here is the text from the speech:

We see it in Staff Sgt. Aubrey McDade, who charged into an ambush in Iraq and rescued three of his fellow Marines. We see America's character in Bill Krissoff, a surgeon from California. His son Nathan, a Marine, gave his life in Iraq.

When I met Dr. Krissoff and his family, he delivered some surprising news: He told me he wanted to join the Navy Medical Corps in honor of his son. This good man was 60 years old -- 18 years above the age limit.

But his petition for a waiver was granted, and for the past year he has trained in battlefield medicine. Lt. Commander Krissoff could not be here tonight, because he will soon deploy to Iraq, where he will help save America's wounded warriors and uphold the legacy of his fallen son. In citizens like these, we see the best of our country -- resilient and hopeful, caring and strong.

These virtues give me an unshakable faith in America. We have faced danger and trial, and there is more ahead.

http://edition.cnn.com/2009/POLITICS/01/15/bush.speech.text/

Here is a picture of Nate Krissoff, Eric Earnhardt, and I at some bar in Okinawa, Japan.

Chicago weather

Wow, we made Drudgereport.com front page

Embedded

My book is almost done...few short months. It is featured in the Naval Institute Press Spring 2009 Catolog.
Here is the link
and the entry...buy a copy and when I see you I'll sign it. Thanks to all those who have supported me so far!!!

Flip flop financial press

This is pretty dang silly: "Stocks slide as falling oil hurts energy companies." Over the past few months the headlines were: "Stocks slide as RISING oil hurts the economy."
...talk about lost in the sauce...

Historians weigh in

Now historians are sharing their thoughts on the upcoming depression...hat-tip: Katie Gray :)
http://hnn.us/articles/59481.html

Obama and his team really seem to understand our problems and are talking the right talk--sometimes. I'm just worried they are mere mortals and not miracle workers (nor do they have the ability to allocate resources in the most efficient and effective manner--this is a communist philosophy, actually).
Here's a nice post by Mankiw


I'm still waiting for our country to make a policy that allows all immigrants with Ph.D.'s in math/science or with proven entrepreneurial skills into our country (many are waiting in the wings). Let them invent things and let the market determine what ideas work and what ideas don't. We could then offer them a break on a house if they pay 20% down (soaks up supply of housing and help fix that problem), and ramp up research spending in fields we think will be the future (alternative energy, high tech, biotech, etc). My biggest concern is that once we print all this money, or add all this debt, to pay for all this 'stimulus', in a few years when the stimulus ends we need to have something that actually drives the economy besides the printing press...

source: http://www.ritholtz.com/blog/2009/01/words-from-the-investment-wise-11108/

Our paper is on fire!

http://empiricalfinanceresearch.blogspot.com/2009/01/valueinvestorsclubcom-performance.html

A paper written by Andy Kern and I has caught fire recently. Just in the past 3 days we've had over a 1000 hits and hundreds of downloads off SSRN.

...now we just gotta get it published somehow!

Porn Industry Bailout

http://www.ajc.com/business/content/business/stories/2009/01/08/flynt_porn_bailout.html

I agree. Sex is more important than autos, services, and all this other stuff. If the US economy doesn't have sex, we won't have a population. Zero population creates 0 GDP, which would be a 100% drop from here. If anyone deserves a bailout from "bailout nation" its the porn industry.

Housing Solution Commentary

Last night on Charlie Rose Joe Stiglitz and Martin Feldstein talked about solutions to the current economic crisis. Prof Stiglitz and Feldstein are two of my favorite economists in the world. When they speak, I listen--and learn.

The debate last night was on how to stop the carnage in the economy. Smartly, Stiglitz and Feldstein pointed towards housing as the root of the current problem and the solution to the current problem.

Their basic idea is that we write down all mortgages that are under water. For example, if a homeowner has a 250k mortgage and their house is only worth 200k, the banks and government need to come in and write down that loan to 200k for the homeowner or he will be incentivized to foreclose, which will lead to further declines in housing, more liquidations, etc. I completely agree with these guys that this is really one of the ONLY solutions that truly attacks the problems we are facing (printing more money, more govt spending, lowering rates, etc. is all bunk).

The problem with this 'solution' is that it has serious consequences. What are the costs of doing this policy? Essentially, taxpayers will be bailing out homeowners who overpaid for housing and all those who were conservative and prudent will end up paying for all those who were greedy and made poor decisions. Even if the banks are forced to take all the writedowns, taxpayers will indirectly be paying for this because the government is giving the banks taxpayer money to build up their balance sheets to take on these write downs. Either way they divvy up the 'write-down' costs, taxpayers will get screwed.

We are really stuck between a rock and hard place...

We are in a situation where the only "solution" to keep the economic crisis from getting much much worse is by essentially nationalizing home owner debt and having a huge transfer of wealth from prudent taxpayers to overzealous homeowners. This solution sucks and is not really even on the table--yet. My guess is that once Obama and his buddies realize that writing down under water mortgage debt is one of the only TRUE ways to curb the core of our economic problems, they will be forced to take this option--or let the economy takes its course and sink into the harsh recession/depression it deserves. Conservative homeowners will be pissed off they have to pay for all of these 'idiots,' but the political ramifications of 'letting the economy sink' may be to big to fight.

So here is another 2009-2010 prediction--a plan that write's down much of the nation's underwater homeowners and transfers wealth from smart Americans to greedy, dumb Americans. I hope it doesn't happen...but fear politicians will not have the backbone to let the US economy experience some 'tough love'!

fair value accounting study

The SEC has a study for all those reading the bogus opinion pages and rhetoric from banks and other failed institutions who want to blame poor risk management, stupidity, and greed on fair value accounting.
http://www.sec.gov/news/studies/2008/marktomarket123008.pdf

I pointed out in a previous post that banning fair value accounting was silly http://www.welcometotheadventure.com/2008/11/silly-solutions-to-financial-crisis.html. The SEC's reports confirms this assertion in 259 pages of analysis.

Next time you hear a banker complain that fair value accounting is causing them to go bankrupt, ask them how many subprime loans they handed out.

Quick reminder regarding Middle East culture...

In case you're one of those people applying your cultural lense to another group of people...watch this video to be reminded just how different you are.

Save some dough

http://www.auctionbloopers.com/

This is a very interesting concept. Type in an item you want to buy and this site will transfer you to ebay and purposely mis-spell the item. The idea is that misspelled items on ebay will attract fewer buyers and therefore give you a chance at better bargains (decreased demand, holding supply constant, should lower prices in equilibrium).

I've read some reviews online and it seems like this actually works. 

Gordo Banks fishing trip--Merry Christmas!

This holiday season my family vacationed near San Jose Del Cabo, Mexico, which is very close to Cabo San Lucas, Mexico. We had a heck of a crew attend: Bob, Anne, Bill, Jill, Ty, Cliff, Amy, Em, me, Katie, Janet, Royce, Aaron S., and the infamous Henry B. Despite some serious adversity, the trip was an astounding success.

Anyway, on with the show....

If you want to dive into the photos here is the link. (there are a lot of pictures because I compiled shots from all attendees)


If you want to do some serious deep sea fishing with the top panga operator on the planet, head to http://www.gordobanks.com/ and set up a fishing trip with my Uncle Eric.

Here is a map of where we were...


View Larger Map



1. We started off at 2:50am digging our car out of a snowbank in chicago...we arrived almost 22 hours later (after multiple flight delays) with no luggage, tired eyes, and an appreciation for the great Cabo weather!

From 2008.12.23.mexico_arrival

2. We picked up a few clowns at the airport. Henry B. showed up, but first we had to wrestle him away from the Mexican police.

From 2008.12.23.mexico_arrival

3. Fishing was great. We caught multiple Dorado and even landed a couple of hammerhead sharks--awesome! Here are all the fishing pics

From 2008.12.23_30.gordo_banks_fishing

4. There were multiple baseball games played on the beach and unfortunately we lost most of them. In the shot below my dad is mocking us because his team won.

From 2008.12.23_30.beach_activities

5. Grandma Ginny hooked up an amazing Christmas Eve dinner at a fancy place in Cabo San Lucas. Here is the crew enjoying themselves with a hefty dose of Margaritas(Katie was sad she was pregnant and unable to take part in the drunken festivities)

From 2008.12.24.christmas_eve_cabo_dinner

6. We did a no-gift Christmas, but my mom, Ty, and Em, backed out of the deal and got us some stocking stuffers. My cousins received a Wii for Christmas so we played that for a good portion of the morning. In the pic below Brian and Tina are playing with their marshmellow shooters Ty made them...the teachers will love that.

From 2008.12.25.la_playita_christmas

7. Lots lots more...we played a rowdy game of times up, poker, spoons, Tina and Em gave us a personal concert, more poker, more baseball, etc. All great fun.

From 2008.12.23_30.san_jose_del_cabo_vacation

Here is Katie attempting to administer a game of Times up with a crowd of drunk, inconsiderate, jerks who all want to bend the rules. The biggest scam in the game was when Grandpa Bob played the word 'erehwon' which is apparently the title of a 19th century novel that is 'nowhere' spelled backwards--next time we are going to enforce some rules on words you can use to stump the other teams.

From 2008.12.23_30.san_jose_del_cabo_vacation

Finally, Aaron S.'s tshirt caption captures the great thing about Mexico.

From 2008.12.23_30.beach_activities