Friday, February 27, 2009


It's the day after and the greater part of Obama's plans are now disclosed. The pundits are screeching or yahooing, depending on whether they are of the right or left species. Part of modern discourse seems to require that everything be a momentous event. Maybe this is a psychological need to think one lives every year in historical times. Yet most of these characterizations are just buncombe.

Observations on "Le Plan d'Obama"

1. The proposed tax rises on capital gains and dividends are less than feared - 20% is fair.
2. The change to the estate tax is fair: exemption for up to $7 million.
3. Ordinary income tax on hedge fund managers' pay is long overdue.
4. He is not gutting the military (yet).
5. The tax rises on the "quartaires" sound large, but AMT offsets mean those are less than one might think except for incomes around $1 million or more.
6. The health care plans are just a continuation of the long term trend of the past 50 years.
7. The discontinuation of the nuclear waste facility is troublesome and foolish.
8. The carbon cap & trade is stupid and likely to fail.
9. The alternative energy push will fail, just as it did in the 1970s.
10. The mortgage deduction limits are a continuation of the trend to consolidate the income tax system into a more muscular AMT.

So except for the greenie shift, I must yawn and say it's better than feared. It's certainly better than the lurch that we lived through from Bush I to Clinton. And it's better than Carter or Nixon or LBJ. Not as good as Reagan.


Lurching continues.

On Wednesday I bought some GOOG, CCJ and GE for Fido Fund. About the GOOG, is it not clear from the demise of daily newspapers that more and more advertising moves to the Internet, hence to GOOG ? More and more local ads move there, too. CCJ is uranium. Even if the US is foolish about adding to nuclear power, the rest of the world is not. GE is just too cheap - the nonfinancial parts of its business are being given away.

On Thursday I bought a wee bit of CX, EEFT and CETV for Obama Fund. The restaurant stocks I want are still too expensive to let me hit my profit target of 3x gains.

Word of the Day

"Captious" - adjective [$10] from the card file
Captious means given to finding fault or raising petty objections.
Sentence: One might say I am being captious by listing my observations on the Obama budget, but I think it's more of a course correction than a revolution so am urging calm, not more fear. Let's hope Congress makes it better, not worse.

Le Mot du Jour

"Marqué" - adjective; this word is the past participle of the verb, "marquer" which has a regular 'er' conjugation.
Marqué means marked, stamped, pronounced.
Marquer means (transitive) to mark, brand, label, stamp; to show; (intransitive) to stand out.
La Phrase: Le plan d'Obama est marqué par plus de modération que j'ai craint.
Sentence: The Obama plan is marked by more moderation than I feared.

Thursday, February 26, 2009

Obama Plan Emerges

This morning Obama submits his budget which will show in some detail his spending and taxing plans for this administration. He seems to be keeping his promise to raise taxes significantly on persons making more that $250,000 per year. What shall I call that group ?

They aren't millionaires, for sure. They aren't even rich. Perhaps some variant of "quarter" fits best. For now, I'll use "quartaires".

One leak this morning suggests he intends to be more severe than expected on quartaires. I refer the denial of mortgage interest deductions to that class. This will raise taxes quite substantially on younger quartaires who live in California and New York and other high home cost areas. So the younger, dual income couple stretching for that McMansion through debt is not going to have as much spending power.

This change is part of a trend that I've mentioned before, viz. that the AMT is the future of the Federal tax code: more specifically, a graduated AMT having no deductions for anything.

I'll think and write more about this as more details come out.

One investment is obviously a winner: municipal bonds. At today's prices, they are a screaming buy for quartaires.

Special Quiz: What is the significance of today's blog title ? (see below for answer - no peeking !)

Word of the Day

"Plangent" - adjective [$10]
Plangent means loud, reverberating.
Sentence: Plangent cries of pain can be expected from New York, California and Washington DC metropolitan areas if Obama's elimination of mortgage interest deductions for quartaires is implemented.

Le Mot du Jour

"Parvenir" - verb, conjugated like "venir"
Parvenir means 1. to get to , to reach, to achieve; (intransitive) to succeed or get on with life, to arrive.
La Phrase: On espère que le plan d'Obama parvienne succès.
Sentence: People hope that the Obama plan achieves success.

Quiz Answer: The three letters that fixated the nut, Gen. Jack Ripper in that great movie, Dr. Strangelove were P, O and E: Peace on Earth, Purity of Essense, etc. The recall code was quodliteral, having three letters only. Today's title contains OPE, which was the correct recall code for the nuclear bombers. Let's "hope" Obama's recall code for economic disaster succeeds better than in the movie.

Wednesday, February 25, 2009

The Looting

First, I guess Obama doesn't like $10 words. The Blabberg reporter-ette is practically gushing about his use of simple, monosyllabic words. Maybe he knows his audience.

Back to the looting ...

This story about the Merrill Lynch bonuses gets sleazier and sleazier.

WSJ: "Monday's court filing alleges that the board set the bonus pool on estimates that were off by $7 billion. Once Merrill had a better indication of the firm's fourth-quarter performance, Mr. Thain didn't go back to the board to give them the chance to reduce the bonus payout "even though results are suppose to be a key component in setting bonus pools," Mr. Cuomo claimed in the filing."

Hogs at the trough ... vikings looting the monastery ...

Smash that window and grab the loot before the cops arrive.

So how well run was Merrill Lynch ? Here's a clue:

FT: "Ineffective internal controls at Merrill Lynch caused the firm to understate its 2008 losses by more than $500m, the investment bank said on Tuesday in its annual report. Merrill, which was acquired by Bank of America on January 1, shocked investors last month with the disclosure of a $15.3bn loss for the fourth quarter of 2008 and full-year losses of $27.1bn. But in its revised figures, Merrill disclosed that its losses for 2008 were $27.6bn."

"The additional $500m in losses appear to have come from the discovery that Merrill used a flawed model for measuring the value of derivatives that were used in its hedging strategy."

"Auditor Deloitte & Touche concluded that Merrill had “not maintained effective internal control over financial reporting” as of the end of 2008."

"According to the annual report, the discrepancy in valuation involved internal swaps used between Merrill and its affiliates. In 2008, the report said, Merrill “began using a different set of yield curves to value certain intercompany swaps”.

"In its opinion, Deloitte said “several mitigating internal controls were not operating effectively and therefore failed to identify the intercompany difference that resulted” from reliance on the two different yield curves. In addition, Deloitte said Merrill management did not apply proper accounting guidelines to one hedge entered into during the fourth quarter, involving long-term borrowings."

In simple terms, one arm of the firm valued the SAME swap to be $500 million more than another part. Obviously that entire "swap valuation" cesspool is a complete shambles.

Does anyone else smell a fraud ?

Word of the Day

"Dichotomy" - noun [$10] from the card file
Dichotomy means a division or the process of dividing into two especially mutually exclusive or contradictory groups.
Sentence: Washington's ruling class has yet to realize that a dichotomy exists between a successful bank and one run according to government rules, viz. that a private bank must make a PROFIT. Profits are the key to resolving the financial crisis.

Le Mot du Jour

"Souhaiter" - verb; regular -er conjugation
Souhaiter means 1. to wish for; 2. (+ que) to hope that
La Phrase: En buvant mon café ce matin, je souhaitais que M. Geitner lise toujours ce blog.
Sentence: While drinking my coffee this morning, I was hoping that Mr. Geitner always reads this blog.

Tuesday, February 24, 2009

The Chart

I refer often to a 100 year Wall Chart on the wall (of course) of my office to see what the current situation looks like from a very long term point of view. The chart has various stock indices, GNP, earnings per share and major economic events marked in a 100 year period. It's a logarithmic scale, of course. The chart also permits one to add some facts to what today is often simply bloviating opinions.

Today's headline says the Dow Industrials has dropped to a low of 12 years. That is true.

Quiz: when did this occur last ?

Answer: 1974. Near the end of 1974, the Dow Industrials dropped below 600, which was roughly the level it has in the 1962 panic twelve years earlier.

Quiz #2: When did this event ( a 12-year low) occur before that time ?

Answer #2: 1932. In mid 1932, the Dow Industrials dropped below the low of 1914 when the NYSE re-opened after World War I commenced. That 1932 drop also broke under the Dow Industrial of 11 years prior in the post World War I recession.

In both cases, the exact bottom might not have been that day. But ... you can guess that those times were rather good times to stage in long term investments. And were poor - ultrapoor - times to sell out in fear.

OK, enough of the "All is well".

Word of the Day

"Aurochs" - noun (plural is same) [$10]; a Mencken word
Aurochs means an extinct wild ox, Bos primigenius, ancestor of dometic cattle and formerly native to many parts of the world. Also called urus.
Sentence: Have the bulls of Wall Street gone the way of the aurochs, or have they developed the ability to hiberate while the bears romp unchecked?

Le Mot du Jour

"S'effrondrer" - verb, pronomial; regular -er conjugation
S'effrondrer means to collapse, to plummet.
La Phrase: Hier, Les Bourses américaines se sont effrondrées de nouveau.
Sentence: Yesterday, the American stock markets collapsed again.

Monday, February 23, 2009

What the World Needs Now Is ...

Some INFLATION, not love.

US CPI year over year for January was zero - nada - nil - nought - zéro - nulle - el-zippo. However said, that's too low. This was the lowest reading since 1955, 54 years ago.

For all the talk about "cures" and "fixes", this is the easiest one. Some inflation would induce people to buy real assets: that means homes, buildings, land, etc. And it would drive the worry-worts out of Treasury bills into productive investments.

Think about it: instead of spending cash to bail out people who overspent on McMansions or used home equity loans to funds vacations, etc., some inflation would increase the values of the homes of those who did not.

Let's have some inflation ... NOW! Print money !

What to do with the money printed ? Easy ... start bidding on those so-called "toxic" assets and bidding on foreclosed homes. Re-sell them with 2% loans to young people. Sell the "toxic" assets to private equity with 2% non-recourse funding. Just print the money and get it into the system. Heck, printed money costs nothing, and the government will make 2% - a fair profit.

Money makes the world go around. Print money now !

Word of the Day

"Lief" - adverb [$10] archaic, from the card files, Shakespeare and Mencken.
Lief means gladly, willingly.
Sentence: (from Wimpy of the old Popeye cartoon) - I would lief pay you Tuesday for a hamburger today.

Le Mot du Jour

"Payer" - verb, transitive. This verb has two possible conjugations: one is a regular -er type and one has the y change to i before a mute e and for the future stem.
Payer means to pay.
La Phrase: Je serais bien content de payer à mardi un hamburger aujourd'hui.
Sentence: I would be glad to pay Tuesday for a hamburger today.

[ I fixed an earlier error :( ]

Note: The dictionary says that when used with "pay", the English word "for" is not translated.

PS: I'm not sure if today's "La Phrase" is good French, but technically I think it's correct.

PPS: The word "payer" an example of how French can be more readily learned by English speakers - much vocabulary of English comes from French, or both languages take it jointly from Latin.

Friday, February 20, 2009

Smart Investment

Not mine. I'm writing about China ... again.

FT: "Brazil and China signed a landmark agreement on Thursday that will ensure long-term supplies of oil to China while delivering much-needed financing to help Brazil develop enormous reserves of oil and gas recently discovered in its coastal waters. ... Petrobras, Brazil’s publicly traded but state-controlled oil company, will supply China with between 100,000 and 160,000 barrels of oil a day. In return, China will supply loans of up to $10bn (£7bn, €8bn) to help Petrobras and its private-sector partners develop the so-called “pre-salt” fields."

China is also build lots of nuclear power plants.

Meanwhile, Barry and Nancy are hitting the bong, listening to "Green Tambourine" and sipping green tea, and listening to their green yogis bloviate about "global warming'. And investing in "green energy". What fools !

Meanwhile, in Europe ...

[FT] "Members of the European parliament walked out in protest on Thursday after Vaclav Klaus, the Czech Republic president, said the institution suffered a “democratic deficit” and likened its workings to those of eastern Europe during the communist era. In his first address to the parliament, Mr Klaus characterised the institution as one that alienated voters and offered no credible opposition. He argued that decision-making powers should be pushed out of Brussels and back to individual member states.

"Mr Klaus said: 'Here, only one single alternative is being promoted and those who dare thinking about a different option are labelled as enemies of European integration. Not so long ago, in our part of Europe we lived in a political system that permitted no alternatives.' "

He does have a point. The bureaucrats running the EU do seem afraid to hold real elections and to create a representative United States of Europe. They don't want nations to hold referenda on ratifying the Lisbon treaty.

Otherwise, it's more of the same whining and handwringing. By the way, the problems in Europe show this is not a purely American problem.


They still have the flu ... or is it pneumonia. ? Or ???

Today is option expiration day, so anything can happen as the beefers fight it out.

Yesterday I did a small asset allocation trade, taking some excess cash and buying the VNQ - a Vanguard real estate trust index fund. My real estate holdings were below target allocations by quite a bit.

NYTimes suspends its dividend ... so the spoiled rich & powerful will now bear some of the pain they love to pontificate for the common man.

Word of the Day

"Repine" - verb, intransitive [$10]; from the card file.
Repine means 1. to be discontented or low in spirits; complain or fret; 2. to yearn after something.
Sentence: Some leadership out of Barry might help the stop the endless repining of the ruling classes - woe is us ! - and motivate positive actions to rebuild the future.

Le Mot du Jour

"Maladresse" - noun, feminine.
Maladresse means 1. clumsiness, awkwardness; 2. tactlessness. Examples: Quelle maladresse ! how tactless ! Maladresses de style - awkward or clumsy turns of phrase.
La phrase: L'adminstration d'Obama montre de maladresse par ses premières actions.
Sentence: The Obma administration shows some clumsiness through its initial actions.

Thursday, February 19, 2009


That "exhausted" in French.

Markets seem exhausted. I'm tired of following the stock markets myself. But I still do.

I read that mutual fund managers are still hogs slurping at the trough, even as their customers are down to skin & bones.

WSJ: "Franklin Resources Inc.'s chief executive, Gregory Johnson, made $5.3 million for fiscal 2008 through September while many of the firm's 115 mutual funds were losing money."

I suppose that behavior is no surprise.

China is making smart, long term investments.

WSJ: "A senior official said Wednesday that China is looking at ways to use its nearly $2 trillion of official foreign-exchange reserves to help companies make investments abroad. His comments followed reports that officials have proposed tapping the reserves to set up a fund for overseas energy acquisitions. Also Wednesday, Australian mining company Fortescue Metals Ltd. disclosed preliminary talks with China Investment Corp., the country's $200 billion sovereign-wealth fund ..."

Meanwhile Barry [aka Obama] and Nancy invest US stimulus money in windmills. Sigh ...

Word of the Day

"Asperity" - noun [$10] from the card file
Asperity means 1a. roughness or harshness, as of a surface, sound, or climate: The asperity of northern winters; 1b. severity; rigor; 2. harshness of manner, ill temper or irritability.
Sentence: Markets have reacted with asperity at Obama's so far amateurish efforts to create stability and growth.

Le Mot du Jour

"Exprimer" - verb, transitive - regular -er conjugation
Exprimer means to express. S'exprimer means to express oneself.
La Phrase: L'homme du bunker tâche de s'exprimer avec éloquence dans son blogue.
Sentnce: Bunkerman tries to express himself with eloquence in his blog.

Wednesday, February 18, 2009

Two P words and a PS

I just spotted a tidbit in FT: "More than two dozen feeder funds held more than $20bn with Mr Madoff, tarnishing the reputation of some of the biggest private banks and hedge fund specialists, as well as Santander, the Spanish bank. Operators of the feeder funds included some big names in fund management, including Union Bancaire Privée, the Swiss private bank, Tremont, owned by OppenheimerFunds, the US asset manager, and Pioneer Alternative Investments, part of Italian bank Unicredit."

My emphasis. What financial arsonist do we know who works for Oppenheimer ?

On another matter, again from FT: "Russia has won $25bn in loans from China in return for agreeing to supply oil from new fields in eastern Siberia for the next 20 years as Moscow seeks funds to see its oil industry through the financial crisis. ... But analysts warned that Russia could have to divert crude supplies headed to the west in order to meet the terms of the deal as it faces a deepening decline in production this year. “There is no way Russia can deliver that amount of oil right now without taking it away from existing export routes to the west,” said Chris Weafer, chief strategist at Uralsib investment bank in Moscow. "

I expect more Chinese opportune investments to secure supplies of resources.

Hmmm ... I also note they are not making grandiose (delusional) plans to invest in "Green" energy.

Another fraud emerges (WSJ): "The Securities and Exchange Commission charged Texas financier R. Allen Stanford with an $8 billion fraud, alleging in a civil complaint that he lured investors with promises of high returns on certificates of deposit but poured their money into a "black box" of hard-to-trade assets."


Don't bet the farm on these market lows holding. The bears are going to bust them open to look for new sellers lower. They have big short positions to cover and need real sellers.

PS: Why does anyone listen to Elmer anymore ?

Word of the Day

"Puissance" - noun and adjective [$10]
Puissance means (noun - archaic) strength, power; (adjective - literary) having great power or influence, mighty.
Sentence: When will the Obama realize the presidency requires puissance, not pusillanimity.

Le Mot du Jour

"Relancer" - verb, transitive - regular -er verb with the 'c' becoming 'ç' in 1st person plural and before an 'o' or an 'a'.
Relancer means 1. to throw back (again) (+ an object); 2. to start again, to revive; 3. to boost, to stimulate.
La Phrase: Hier Obama a singé son plan qui devrait relancer la machine economique.
Sentence: Yesterday Obama signed his plan that should stimulate the economic machine.

Tuesday, February 17, 2009

More Suspicious ...

Yesterday's post laid out a suspicion started by a "voice" - what I call those little occurrences, events, or worries that one often ignores ... to one's peril. An article in Today's WSJ articulated an aspect of that in more depth.

***Excerpt begins***

"John McCain Was Right."

That's one headline we ought to see when President Barack Obama puts his name to the stimulus bill in Denver later today. But we won't. And the reason points to a glaring double standard on bipartisanship.

When Mr. McCain accepted the Republican nomination for president, he noted that while he and his opponent both spoke about moving beyond partisan divisions, only one of them had a history of working with members of both parties to get things done. "I have that record and the scars to prove it," he said. "Senator Obama does not."

Only a month ago, with Mr. Obama holding a dinner in Mr. McCain's honor, it wasn't hard to imagine the two coming together on the big challenges facing our nation. But now Mr. McCain has come out strongly against the stimulus in a spirited dissent suggesting that the whole process was a "bad beginning" for someone who promised a new spirit of bipartisanship. That ought to give White House Chief of Staff Rahm Emanuel pause, if only because it wasn't all that long ago that Barack Obama was speaking the same way.

In a passage from his 2006 book, "The Audacity of Hope," he sounds like a Republican complaining about the stimulus. "Genuine bipartisanship," he wrote, "assumes an honest process of give-and-take, and that the quality of the compromise is measured by how well it serves some agreed-upon goal, whether better schools or lower deficits. This in turn assumes that the majority will be constrained -- by an exacting press corps and ultimately an informed electorate -- to negotiate in good faith.

"If these conditions do not hold -- if nobody outside Washington is really paying attention to the substance of the bill, if the true costs . . . are buried in phony accounting and understated by a trillion dollars or so -- the majority party can begin every negotiation by asking for 100% of what it wants, go on to concede 10%, and then accuse any member of the minority party who fails to support this 'compromise' of being 'obstructionist.'

"For the minority party in such circumstances, 'bipartisanship' comes to mean getting chronically steamrolled, although individual senators may enjoy certain political rewards by consistently going along with the majority and hence gaining a reputation for being 'moderate' or 'centrist.'"

As a rule, complaints about the "lack of bipartisanship" generally represent the whine of the losing side. With regard to Mr. Obama's handling of the stimulus, however -- his first big test as president -- they have a more interesting subtext. For one thing, his promises of a postpartisan future in some ways became the substance of a campaign built on lofty but largely undefined invocations of "hope" and "change."

Michigan Rep. Thaddeus McCotter suggests, for example, infrastructure as one area popular with some of his fellow Republicans. Had Democrats added, say, a few more infrastructure projects, perhaps a half-dozen Republicans in the Senate and as many as 30 or 40 in the House might have signed on. But the White House went the other way.

"President Obama has never been able to say 'No' to the left of his party," he says. "So instead of having Rahm Emanuel keeping Congressional Democrats in line, they left this bill to the most partisan members of Congress, starting with Nancy Pelosi."


***Excerpt ends***

John McCain was very gracious on election day eve, promising to support Obama's leadership for the good of that Nation. That he now leads opposition is troubling.

As is the unwillingness of Obama to insist on a lot more true infrastructure spending in the stimulus bill.

The stimulus does still represent Federal demand for goods and services, partly as funding for the states that otherwise would be forced to cut spending. So it's a net positive for the economy to replace some consumer demand with Federal demand.

By the way, follow this logic: the economy is hurting because consumers cut spending because they are cutting back debt. So the Federal government issues debt to fund replacement spending. That's the simple economic logic. The potential problem is that the Federal spending might be for items/services that no one truly wants, while consumer spending is for items/services the consumer does want. That is a dislocation that might cause trouble in the future.


Poor beginning, in part to catch up to Europe's falloff yesterday. The Chinese stimulus does seems to have some traction.

This talk about a "Buy America" part of the stimulus bill being protectionist is idiotic. It's US taxpayer money purportedly being spent to stimulate the US. So obviously it has to be spent here. The secondary effects go worldwide, though.

Word of the Day

"Objurgation" - noun [$10] from "Objurgate" - verb, transitive [$10] literary
Objurgate means to chide or scold.
Sentence: So far, Bunkerman's objurgations of Obama are limited to pointing out errors and worries. Events will determine whether those objurgations grow into full opposition.

Le Mot du Jour

"Décevoir" - verb, transitive; irregular - conjugated like recevoir and devoir
Décevoir means to disappoint.
La Phrase: L'administration Obama déçoit l'homme du bunker jusqu'a present.
Sentence: The Obama adminstration is disappointing Bunkerman so far.

Monday, February 16, 2009

Political Leadership

Reading H. L. Mencken early this morning (5AM), I came upon a column written in 1934 about political leadership that I thought was applicable today as we wonder if Obama has it.

[Excerpts from "The Impossible H. L. Mencken, page 430-431.]

[referring to a good leader]

"The most reflective sort of people have confidence in his fundamental decency. They may believe that he is unwise on occasion, but they do not believe he is knavish. There are obviously things that he will not do, even to continue in office. But all his qualms and points of honor are bound, soon or late, to alienate the low down variety of politicians, who have no more notion of honor that so many street-walkers, and with them go the simian half-wits who are their customers. It is useful, in politics, to be decent, if only because it is so rare, but only up to a point. After that it is hazardous ...


"... The science of government is really very simple, else the world would have gone to pot long ago. The country will remain safe enough for all practical purposes so long as it is in the hands of a man of character, honest, gallant, and mellowed and moderated by a sense of humor. Most Americans, I take it, still believe that [Roosevelt then, Obama now] answers to these specifications. He will have a free hand while he can keep them thinking so."

Can Obama control the knaves and fanatics ? Can or will he eventually stand up to Princess Pelosi ? I wonder ...

Something is troubling me ... why is he taking the control of the Census into the White House ? That cannot be a good sign. It's actually in the style of Hugo Chavez, to politicize and corrupt a simple process of counting people. We'll see, but I am now suspicious.

Word of the Day

"Lave" - verb, transitive [$10] literary, from French
Lave means 1. wash, bath; 2. (of water) wash against, flow along.
A. [from Mencken referring to Chester Arthur] "But he was no village guzzler like Harding: he preferred vintage wines to hard liquor, and permitted only the best to lave his tonsils."
B. On Friday evenings, Bunkerman laves his throat (and would lave his tonsils if he had any) with a finely mixed Golden Kryptonite martini.

Le Mot du Jour

"Détendre" - verb, transitive - regular -re verb conjugated like rendre.
Détendre means 1. to release, to slacken, to relax. Se détendre [VPR] means 1. to loose its tension, to become slack; 2. to relax, to calm down, to become less tense.
La Phrase: Un verre de vin rouge me détend.
Sentence: A glass of red wine relaxes me.

Friday, February 13, 2009

Back from the Beast

Like Jonah, I survived a stay Belly of the Beast, viz., Manhattan, New York City. At least the weather was balmy, but very, very windy. The Acela train is by far the best way to travel from Boston to NYC and back. The train was comfortable and on time, while the planes were delayed up to three hours due to the wind. And as usual, my ties received fine compliments from unknown beautiful women. New York fashion is still buried in black, so my colorful ties and fine suits stand out. Someone has to show a bit of life.

My bilingual blog efforts are paying off. I see my readership in France is growing [from FT]:

"France on Friday will press for tighter controls on hedge funds, urging other big industrialised nations to strengthen regulation of the industry and compel banks that lend them money to hold more capital.

"Paris wants the European Union, and eventually all leading economies, to beef up indirect regulation of hedge funds via their prime brokers, the banks which provide them with loans and other services.

"Under plans to be floated by Christine Lagarde, French finance minister, banks could face higher capital requirements to reflect the riskiness of their hedge fund clients, a proposal likely to be resisted by banks that are already struggling to raise capital."

France montre le chemin. [France shows the way.]

Good move. Obama, get moving on this. Hedge funds are the "root cause" of the financial crisis.

Here's news of more hedge fund skulduggery [from WSJ]:

"The Securities and Exchange Commission is investigating whether several hedge funds traded improperly after being given advance notice by a research analyst of his negative report on a prominent insurer, people familiar with the agency's investigation said.

"The investigation comes amid a civil-court case brought by the insurer, Fairfax Financial Holdings Ltd. That case, filed in a New Jersey state court in 2006, unearthed documents indicating that executives at the hedge funds discussed the coming report of the analyst and made bets that the company's stock would decline.

"Companies routinely bar analysts from distributing reports to investors before publication to prevent the trading of nonpublic information. Analysts who give out information that isn't public but is market-moving and violates company policy can violate the securities laws. It also is improper for investors to trade using information that they know they've received improperly.

"In the civil suit, Toronto-based Fairfax alleged that the hedge funds, the analyst and his firm conspired to profit by driving down the company's stock, which is listed on the New York Stock Exchange. The suit alleges that SAC Capital Advisors, Third Point LLC, Kynikos Associates LP and others acted together, paying the analyst, his investment firm and other defendants in the suit to spread false and defamatory information about Fairfax from 2002 through 2007."

The article provides considerable evidence from emails between SAC Capital Advisors and Kynikos. Sigh ...

This behavior of hedge funds should be no surprise to readers of this blog.

Why are these market Vikings allowed to continue raiding ?


From the reversal yesterday, it's clear that early weakness in stocks was caused by short selling hedge funds. They cover on any sign of strength or positive rumor. But in its absence, they are trying to break support levels to create more panic and fear.

Word of the Day

"Cathexis" - noun [$10] and "Cathect - verb, transitive [$10]
Cathexis means a concentration of emotional energy on an object or idea.
Cathect meansto concentrate emotional energy on (an object or idea).
Sentence: The American public has cathected upon Obama as the agent to improve their lives. Will he perform or flop ? Cathexis can dissipate quickly when weakness appears. He needs to show firm hand in dealing with the Pelosi et al whose sleaze shows no bounds.

Le Mot du Jour

"S'écrouler" - verb, pronomial; regular -er conjugation.
S'écrouler means to fall down, to collapse, to crumble.
La Phrase: L'adminstration Bush se sont écroulée par l'incompétence et les nombreuses erreurs.
Sentence: The Bush administration crumbled through incompetence and numerous errors.

Wednesday, February 11, 2009

The End of Good Music ... a reprise

[This post is mostly from one I made in the summer of 2007 - I was reminded of this proof last evening and think a reprise is needed. I've made a few alterations. By the way, I will be traveling to NYC - the Beast - this afternoon and staying there through Thursday evening. No post for Thursday.]

I might as well start some trouble ;-)

Here are three postulates about the quality of recorded music.

1. No excellent music has been written since December 31, 1947.
2. No excellent music has been recorded since December 31, 1954.
3. The principal class of exceptions to Rules #1 and #2 is for (a) Broadway productions, (b) Classical Music, or (c) from great singers who choose to perform in the old ways.

For now, Rule #1 is an axiom based on the general level of complexity and taste. I'm working on a proof. ;-) I'm going to sketch out the proof for #2 and then provide examples to adduce #3.

I think I can "prove" the postulates #2 and #3 for the whole class of recorded music [in the US] considered as an ensemble. Perhaps there are a "few" exceptions, but these are mere outliers - singularities - and don't represent any substantial class.

Consider the widely accepted and empirically proven economic principal of "division of labor" in creating a complex good. Recorded music is a complex good, requiring skilled labor in four different skills: writing music, lyrics, instrumentals and singing. Few individual people have all four skills at any high level, even when an entire population is the source.

Assume the quality "Q" of any recorded music can be represented as the product of a normalized "skill" number [cf. an "IQ" in the skill] of the contributor in each skill, which are symbolized by M, L, I, and S for skills in music, lyrics, instrumentals and singing.

Q = M x L x I x S

The quality of "written music with lyrics" is M x L as each skill is required. For a big band jazz, lyrics are not required, BUT the performance requires many individual performances - at least 10 for a "big band". Hence its Q included I^n where n is at least 10. A "band" would require more than one I - perhaps 3 or 4.

Now assuming the likelihood of each skill being present in any single individual is independent, clearly the highest Q can be reached by selecting four individuals [more for bands]: one each with high M, L, I and S. And just as clearly, if we are required to choose only one individual, the probability of a large product of the single person's levels of M, L, I and S is exceedingly small. I think I could prove this mathematically, but I haven't done much applied math for a few years. But it does seem evident visualizing the distributions.

In 1947, Les Paul and Capital Records created the first multi-track recording where Les Paul played each of eight tracks with his electric guitar. This invention broke the requirement for the selection of many individual performers to create the sound of a "band" on a recording.

In the early 1950s, Les Paul and Mary Ford created revolutionary recordings where Paul's multi-track guitar playing was combined with Mary Ford's singing and rhythm guitar playing were records on separate track and overdubbing. This invention broke the requirement for separate performers for I and S.

In 1954, the eight track tape recorder was developed, which was the core technology for multi-track recording for the next 30 years until the digital age commence. This invention broke the requirement for the selection of many individual performers to create the sound of a "band" on a recording. This invention massively reduced the time and cost for creating complex sounds from very few performers.In 1953-4, the rock & roll era began, producing growing demand for a performer to write his/her own music and lyrics - for some unknown reason, perhaps part of the "idol" phenomena. This greatly reduced the likelihood of high M and L numbers in a recorded performance.

So by 1955, the economics of creating recorded music at low cost [necessary to maximize profit] required finding a few artists of simply above average skills and using technology to create complex sounds for a band and a song. No longer were separate EXCELLENT performers combined, but merely "GOOD" performances were combined from a few people. Almost no one was excellent in all the required skills necessary for recorded music. Combining several "good" quality skills of a person with perhaps one "excellent skill of those persons creates merely a slightly above average "good" recording.

Hence nothing excellent has been recorded since December 31, 1954. QED ;-)

Rule #3 provides examples that arise when the recording does NOT follows "modern" creation methods and hence adduce support for the proof.

Exception (a) follows immediately when the distinctions of the economic of Broadway are considered. A relatively few number of very high priced tickets are sold. And all the artists MUST perform separately live. There is NO value added for having the same person write the musics and lyrics. All performers are excellent and all music and lyrics are selected from the best available. So this class of music is a clear exception to Rule #2.

Similarly for (b) , recordings produced by orchestras of classical music have no division of labor loss of quality.

Finally, examples for (c) are Julie Andrews and Judy Garland - both simply sang great songs in their fine styles with music and lyrics written by others and accompanied by others, so their songs are excellent overall.

That proves Rule #3. QED ;-)

So a Julie Andrews performance of a Broadway hit show is still excellent. But a Bob Dylan performance of a song is merely good. The lyrics might be good, but the singing is ... horrible. ;-)

That should start some trouble :-)))))))

PS: Remember George M. Cohan of "Yankee Doodle Dandy" fame - that's a great movie. And although he wrote the lyrics and musics and danced in his Broadway productions, not even such a star deigned to perform the instruments for the orchestra of the productions.

PPS: I've been thinking about this for quite awhile. Some of the dates were chosen with the help of my father-in-law, who was listening to music during the key dates. I figured I needed to post this on the Internet to claim "precedence" for my proof ;-)

Addendum: I made a few changes, but the proof still holds up well, combining historical facts in technique and style, and the economic force of "division of labor"

Word of the Day

"Cogent" - adjective [$10]
Cogent means 1. having power to compel or constrain; 2. appealing forcibly to the mind of reason: convincing.
Sentence: Tim Geitner yesterday did not deliver a cogent speech to add to buyers' confidence, so when all the traders' bailed out en mass as usual, no buyers were bidding for stocks..

Le Mot du Jour

"S'enivrer" - verb - regular -er conjugation.
S'enivrer means to get drunk; to become intoxicated ('de' with)
La Phrase: Les baissiers s'ont enivré de joie hier quand Geitner a fait un flop.
Sentence: The bears got drunk with joy yesterday when Geitner flopped.

Tuesday, February 10, 2009


I guess Wall Street is not the nation's sole repository for greed.

WSJ: "In a jolt to the baseball world, superstar Alex Rodriguez said Monday in a television interview that he used performance-enhancing drugs while with the Texas Rangers from 2001-2003. Though certain performance-enhancing drugs were banned at that time, baseball had no penalty system for their use before 2004. Still, an admission of guilt from the top player in the game sent shock waves."

I guess the Hall of Fame will have to put in a separate wing for players from the 1990s era up to the early 2000's. I wonder if the current system is as strict as that of the Olympics ?

A player's reasoning is pretty simple: steroids mean better numbers which means higher pay on a new contract. For Aroid, it paid off as the Yankees paid him a huge sum in 2004. Sigh ...

Babe Ruth did it on hot dogs and beer ... and was a nice guy to all. No Barry Bonds snarls ... no dope.


Proof of easing of the credit markets continues as Cisco sells $4 billion in bonds.

Asia has some problems - the cure is for their consumers to start spending some of the money in those "boodle bags".

The stimulus will pass the Senate today as debate was closed on in a Senate vote last evening.

Let's see what Geitner has dreamed up. I hope he reads this blog.

Word of the Day

"Capacious" - adjective [$10]; one from the files
Capacious means capable of containing a large quantity.
Sentence: The key for Geitner's plan will be to leverage the remaining TARP funds with the Fed's capacious balance sheet - only that will have sufficient size to offset the massive debt market dislocations caused by hedge fund speculation.

Le Mot du Jour

"Se méfier" - pronominal verb - regular -er conjugated like épier
Se méfier means to distrust, to mistrust; followed by "de" + the object of distrust.
La Phrase: L'homme du bunker se méfie des autorités à moins que ils obéissent à ses écrits.
Sentence: Bunkerman distrusts authorities unless they obey his writings.

Monday, February 9, 2009

Mind Numbing Complexity

Over the weekend I pulled a description of the CMBX index and its associated derivatives from the Internet. "CMBX" stands for commercial mortgage backed securities index. Although I am no novice to structured securities, I was quite surprised at the mind-numbing complexity. The list of parties and acronyms runs on and on: CDS, PAUG, Floating Rate Payer, Fixed Rate Payer, Total Return Swap, Synthetic CMBS ...

"As in the CDX and ABX indices, all administrative issues for the CMBX are handled by Markit(R), who publishes various information including index comparison and price data."

So the black box is run by another black box. No one really knows what's going on.

Who in their rational mind plays in this game ? Like the ultra short ETFs, these are simply trader vehicles to gamble and loot money from the customers, who are fooled à la Madoff into thinking they are part of a great money machine.

The entire financial intermediary industry (banks, insurance companies, pension funds, investment banks, investment companies, mutual funds, etc.) should be prohibited from participating. Warren Buffet was right - these are weapons of mass destruction being handled by testosterone-laden jocks on trading floors. Get rid of it all.

The Solution to the Problem of the Banks


Providing structures for the banks to make profits will attract private capital and the banking sector will be revitalized. Perhaps Geitner's ideas about guarantees could work, if banks or private capital can borrow from the Fed at around 0% and buy the "toxic" assets with some kind of wrap guarantee from the Treasury. That would get them out of the system, as the Brady Bonds did in the early 1980s for Third World loans in default.


I see Lloyd Blankfein, head of the super beefer Goldman Sachs, reads this blog. From his writings in FT today: "In this vein, all pools of capital that depend on the smooth functioning of the financial system and are large enough to be a burden on it in a crisis should be subject to some degree of regulation."

That means hedge funds.

Word of the Day

"Baneful" - adjective [$10] from the file
Baneful means 1. poisonous; 2. productive of destruction or woe.
Sentence: Baneful financial product derivatives have contributed immensely to the credit market turmoil as too much money became tied to them.

Le Mot du Jour

"Envenimer" - verb; regular 'er' conjugation.
Envenimer means (transitive) to make septic, to poison, to inflame, to aggravate.
La Phrase: Les produits dérivés enveniment les établissements financiers.
Sentence: Derivatives poison financial institutions.

Friday, February 6, 2009

Zzzzzzzzzzzz ...

I overslept, so a short post.

Here is another example of how Wall Street was nuts.

***quote begins***

WSJ: Deutsche Bank Fallen Trader Left Behind $1.8 Billion Hole

The fall of Boaz Weinstein, once one of Wall Street's hottest traders, speaks volumes about why financial firms still are reeling from the shattered global markets.

As a chess master, poker and blackjack devotee and top trader at Deutsche Bank AG, Mr. Weinstein made big bets using complex financial instruments, generating large returns for the bank and about $40 million in annual pay for himself. But in 2008 the group he ran saddled the bank with $1.8 billion in losses, erasing more than two years of trading gains.

On Thursday, the German banking giant reported a 2008 loss of $5 billion (€3.9 billion), its first one-year loss in over five decades and a reminder that financial firms are not out of the woods. In an earnings conference call, Chairman Josef Ackermann described the market environment as a "series of earthquakes with constantly changing epicenters."

***quote ends***

Why oh why would ANY corporation let some guy take such risks with shareholders money ?

Word of the Day

"Natiform" - adjective [$1000]
Natiform means resembling or having the form of the buttocks. Natiform complements Samuel Johnson's fine word, "asshead" in the physical sense. From "World Wide Words" - "[Natiform] derives from Latin nates, plural of natis, a buttock. It has never been used to refer to the buttocks themselves, instead always to some anatomical feature that contains a deep cleft."

Sentence: (from OED 1898 usage) The skull assumes a peculiar and characteristic shape, to which the term natiform has been applied.
Current Sentence: I suppose that one could alter "natiform" into a humorous pejorative, "natiface" or perhaps even "natihead" as a erudite version of "butthead".

[I wonder if James Fenimore Cooper was having a bit of obscure fun with the name of his character, Natty Bumpo ?]

Le Mot du Jour

"Se réveiller" - a reflexive verb
Se réveiller means 1. to awake, to wake up; 2. to be roused, to be reawakened; 3. to reawaken, to stir again.
La Phrase: Je me suis réveillé trop tard.
English: I woke up too late. [I overslept.]

Thursday, February 5, 2009

Hogs at the Trough

Once again this writer is gratified by news stories bearing proofs for his old, but edgy, positions. In this case, the characterization of all the rich and powerful in DC being "hogs at the trough". The relevations of Tom Daschle - purported friend of the poor - making $5 million in a couple years of light work for lobbying firms.

Here is one more example.

From WSJ: "WASHINGTON -- The White House's nominee for Director of the Central Intelligence Agency, Leon Panetta, has earned more than $700,000 in speaking and consulting fees since the beginning of 2008, with some of the payments coming from troubled financial firms and from a firm that invests in contractors for federal national security agencies, according to financial disclosures released Wednesday"

Gosh, nice work if you can find it.

Word of the Day

"Apotheosize" - verb, transitive [$10] from the file
Apotheosize means to exalt to divine rank.
Sentence: The propaganda campaign in the press to apotheozie Obama suffered a setback recently as a few of his appointments were shown to examples of DC cupidity and hypocrisy.

Le Mot du Jour

«Dérégler» - verb, transitive - a regular 'er' verb with the shift é to è before a syllable with a mute e in its conjugations.
Dérégler means 1. to affect the work (of a machine, etc.); 2. to unsettle, to upset, to disrupt.
La Phrase: La démission de Tom Daschle a déréglé la administration d'Obama.
English: The resignation of Tom Daschle unsettled the Obama administration.


Skimming Le Figaro, I found this story I had not heard before. Only in NYC:

***Quote begins ***
Il se fait appeler «Bill le renfloueur» : pendant deux jours, un homme mystérieux a distribué des billets de 50 et 100 dollars aux passants à Times Square. Mais sa démarche n'est pas tout à fait désintéressée.

Les Etats-Unis connaissaient déjà Joe le plombier, voici maintenant Bill le renfloueur : en deux jours, «Bailout Bill», comme il se fait appeler, est passé de l'anonymat total à la célébrité. Il faut dire que ce quidam a en quelque sorte lancé son propre plan anticrise, en distribuant des billets de banque aux passants, en pleine rue, à New York, mardi et mercredi .
***Quote ends***

In simple terms, a mysterious fellow now dubbed "Bailout Bill" passed out $50 and $100 bills (US currency) to passersby in Times Square. Le Figaro had a good photo of a young man holding one for the camera.

Wednesday, February 4, 2009


The Daschle nomination buys the farm - good, he's a sleazeball. I suppose one should not be surprised that one of the rich & powerful ruling class - who is so insistent on taxing the common man - turns out to evade taxes of large sums.

Gold is over $900 again and I read that Americans are paying premiums to buy Kreugerrands. That gets an "F". Don't do it. Wait. I still have plenty of gold, having re-bought some via GLD on the stock market around $750 in a retirement account to save taxes. I'd buy more on a pullback to the long term trend line.

This is a short post as I had to clear some snow for Mrs. B early this morning, and take out the trash and some donations. More snow clearing to come this afternoon.

Word of the Day

"Affray" - noun [$10] and verb, transitive (archaic) [$10] from the files
Affray means (noun) a noisy quarrel or brawl; (verb) to frighten or to disturb as in affray the peace.
Sentence: The metaphor of hedge funds in continual affray in the markets fits quite well. They even affray the common man by causing wild swings in stock prices.

Le Mot Du Jour

«Éclatant, e» - adjective
Éclatant means 1. bright, brilliant; 2. glaring, radiant; 3. dazzling, shattering; 4. loud ringing.
La Prase: L'administration éclatante d'Obama a foiré quand il a nommé Tom Daschle.
English Sentence: The dazzling administration of Obama slipped up when he nominated Tom Daschle.

Tuesday, February 3, 2009

CEO Blunders

One of the biggest risks to a corporation's future comes from blunders of the CEO and the Board of Directors in making large acquisitions near the top of the market. We can see this playing out in the RTP FUBAR. Rio Tinto overpayed for aluminum maker Alcan, taking on much debt. And RTP's CEO foolishly turned down BHP's merger offer.

So now RTP has too much debt in a weak market for it's products. What doe sit intend to do ?

"The Australian reports the co and Chinalco (ACH) are setting up a mammoth $20 billion deal that would give China stakes in Australia's largest iron ore operations and key aluminium projects, while solving Rio's debt problems in one fell swoop. As part of the deal, it is understood Chinalco would increase its stake in the dual-listed miner to between 15 and 20% through the issue of more than $5 billion of convertible notes. " [From online]

Good job ... buying high, selling low. That's pretty normal for corporate CEOs. They do it with stock buybacks all the time, too.

The corporate boards of directors really need to be restructured to give shareholders real power, not the current rubber-stamp variety. That could solve a lot of problems that are now appearing: over paid executives, excessive risk, etc.


Credit markets are really improving a lot - I've noticed a large number of new issues that were well-subscribed, even in junk bonds.

Word of the Day

"Besotted" - adjective [$10]
Besotted means 1. infatuated; 2. foolish, confused; 3. intoxicated, stupefied.

"Besot" - verb, transitive [$100]
Besot means 1. to intoxicate or stupefy with drink; 2. to make stupid or foolish (a mind besotted with fear and superstitions.); 3. to infatuate, obsess (He is besotted by her youth and beauty.)

Sentence: Was it drink that besotted the mind of Lyndon ... oops George W. Bush as he adopted that foolish post-invasion, "Rodney King" Iraq pacification strategy? Or was he simply a weak mind under the influence of McNamara .. ooops Rumsfeld ?

Le Mot du Jour

"Sot / Sotte" - adjective (m/f) and noun (m/f)
Sot means (adjective) silly, foolish, stupid; (noun) fool, idiot. Sotte is the feminine form for both the adjective and the noun.
La Phrase: La crise financière révèle beaucoup de sottes conduites des banques.
English Sentence: The financial crisis is revealing a lot of foolish behaviors of the banks.

[There are other French words for "foolish" or "stupid", such as bête and stupide. I wasn't sure about the position of the adjective, but the dictionary example for "sot" placed it before the noun.]

Monday, February 2, 2009

A New Feature

As a motivational tool for myself, I am adding a new feature to View From The Bunker, viz., another Word of the Day - this one will be French. The old "Word of the Day" continues unchanged. I now have a new list of interesting or obscure words to draw from, besides my own readings. The admixture of French should be fun. Of course, my French is clumsy and I will make many errors. Corrections are appreciated.

First, in French, Bunkerman is "L'homme du bunker", literally, the Man of the Bunker. That's how they say things in French. In French, "homme" means "man". "Du" means "de le", viz., "of the." Or more generically, it could be "l'homme de bunker", but since I am unique, no doubt, I think "l'homme du bunker" is correct. I suppose over time l'homme du bunker might contract to "Homme-bunker" - no jokes please.

London is getting six inches of snow - the most since 1990. Uh ... where is global warming ? Of course I've recently heard that more snow is caused by global warming, as is less snow. Heck, everything is caused by global warming and man.

European markets are down as are US futures. Another bad day beckons. I guess the Davos pessimism was infectious.

Tom Daschle seems to have underpaid taxes. Uh ... he figured that free car and driver were not income. As a senator, that is true - the rich and powerful give themselves all sorts of breaks. And he claimed charitable deductions that were unwarranted. Why are we surprised he felt himself to be Homo Superior to the rest of the common men and women.

The Steelers won a very exciting Superbowl. I saw the first half, including that 100 yard interception runback. Then it was my bedtime, viz., 8PM. Oh well. I also watched a bit of the Puppy Bowl in the Animal Planet channel, including part of the Kitty halftime show. Both were lots of fun and a relief from the pomposity of the Superbowl.

Word of the Day

"Vomiturient" - adjective [$1000]
Vomiturient means of or characterized by a desire to vomit.

"Vomitous" - adjective [$100]
Vomitous means 1. of, pertaining to, or causing vomiting; 2. (informal) repugnant, disgusting, nauseating: vomitous business methods.

Sentences: Upon reading the details of the so-called Stimulus Plan over the weekend, I became vomiturient. The details are quite bad as most of the money is neither stimulus nor useful expenditure. The vomitous stimulus bill passed by the House needs considerable modification by the Senate.

Le Mot du Jour

"Amour-propre" – noun, masculine; the plural is amours-propres.
Amour-propre means pride, self-esteem.
La phrase: L’amour-propre excessif, ou l’orgueil, était un grand péché en Grèce ancienne.
English sentence: Excessive pride, or hubris, was a great sin in ancient Greece.

NOTE : “Orgueil’ directly translates as “hubris”. It’s a masculine noun, too. “Péché” means “sin”. So a sinner is “un pécheur” for men and “une pécheresse” for women.

The sin of pride is “le péché d’orgueil”.
The sin of the flesh is “le péché de chair”
A youthful indiscretion is “un péché de jeunesse

By the way, “La phrase” means “the sentence” in French. One must include the definite [‘the’ = le/la for m/f] or indefinite [‘a/an’ = un/une for m/f] articles with the nouns in French. That’s why one sees all those “le” and “la” words before French words. The “le/la” is contracted to l’ before words beginning with vowels.

For most places, my source is the Collins Robert French Unabridged Dictionary, eighth edition.