Ivory Terminal

AIG, WaMu, and Wachovia are now all bailed out or dead, we are left to deal with the residuals. I will have to get over my shock that Citi was allowed to buy anyone, but barring that, we are left with some interesting residuals.

The house showed an example of free thought today by voting down the unaccountable gift package. Many seem to be upset that the stock market fell after the package voted down, but I will serve as the umpteenth person to remind everyone that this package should not be designed to bail out equity investors, and the market was already disapproving of the bailout package when it was thought that it would pass.

Since I am not allowed to be short in the market (United States Socialist Republic?) today, I held a net long position, and I sure got hammered. That said, I am glad the bailout did not pass in current form, and I look forward to a much more interesting week in government, culminating with the VP debate.

Everyone buckle in…

There is a republican proposal to eliminate the capital gains tax for two years to solve the financial crisis. This shows an amazing lack of understanding of economics from the Neo-Conservative camp. At least they are not trying to hide their ignorance.

This is already being taken apart by the informed world for the numerous violations of economic principles, and I hope the population can see through it immediately. I am impressed that a plan was submitted that would do even less to adress the core issues that caused the crisis in the first place. Maybe this was a White House approved move designed to make the Treasury/Fed plan look better?

Washington Mutual is dead and gone. AIG already got bailed out. How long will Wachovia last in current condition?

I am waiting to have to wade through the quotes tomorrow morning from conservative politicians about how poor WaMu was an unnecessary loss because a bailout was not agreed upon soon enough. Hopefully the public will be able to see though the text.

I wonder what kind of haircut the investors forced to cover short positions took? Damn those speculators, if only we could have protected this solvent company from the horrible rumors…

If the Treasury of the United States truly believes that purchasing “illiquid” assets at face maturity value will result in a minimized loss for the American people, why have they not proposed instead changing the accounting rules to mark to hold for these assets?

Assuming $700 Billion is simply a starting point, I can see my personal share of this obligation topping $5,000.00. I think most Americans will want someone held accountable for an obligation of that size. The administration that changed America’s tolerance for secrecy seems to have finally reached too far, and quite a few normally passive Americans would like to see the fundamentals regarding their proposed seven hundred thousand million dollar down payment.

The investors that forced irresponsible behavior by proxy should face principal losses, and the firms that did not have the foresight to protect themselves should not be shielded from the natural change of the guard.

Trying to explain how many of these firms got into their respective positions using an individual as an analog starts to sound absurd. A man takes out 30 insurance policies on a car he does not own, etc. I believe the causes of this crisis will be communicable to the public, both in cost and stupidity, and the result will not be pretty. Everyone is avoiding accountability for the mortgage debacle, and the buck (or 700,000,000,000 of them) should stop somewhere before distributed tax receipts.

Before I begin, I want to mention that I have nothing unique to offer about the shift to US financial socialism today.  This was a weekend to keep up with the news.  I would recommend Bloomberg.

When the Macbook Air first came to light, I was puzzled by it.  It was over-priced, under-powered, and in my opinion, a “niche vanity item” designed to bolster the rest of the product line.  I imagined people going into Apple stores to see it, and then be swayed towards cheaper or more powerful non-anorexic models.

I thought I had found mobile computing perfection in a powerful 15” and a basic netbook, and I had no complaints until I left the finance world and became a student.  After a few short days of trekking around with the under-powered EEE 701 (I did not upgrade because no one made a perfect replacement for me yet, Dell came closest), and then switching to the huge power-hungry 15”, I had a new set of requirements:  Small, light, OSX, Windows (thanks to the clear OS religion on my campus).  I realized I was bested, went to an online forum, and walked away with a pristine entry-level Macbook Air for about $1100 after the dust settled.

After coming to terms with my hypocrisy, I began to migrate all of my programs from the EEE and Macbook Pro.  My first major hurdle was Windows.  I opted for an XP Pro install through Parallels, to keep HDD space devoted to Windows to a minimum.  After many attempts, I took a gander online, and realized that it would be better to give this one up.  Next up was Vista though Boot Camp, reluctantly giving 32 of 74 precious GBs to MS.

Installing Vista was an interesting experience.  The computer did not seem willing to restart automatically, giving me a couple of scares since I was worried I was going to break the thing in half by touching it.  After the install got through, it was time for the Boot Camp drivers off of the Leopard disc (more on this later).  After all was said and done, I had a Vista install that I believe was running at 800*600, and I could not right click or access the internet.  Vista took the time to tell me that my “Windows Experience Index” was 1.0, I believe the lowest possible.

After reading up on the MacRumors forums, I learned that the drivers to make the Air work were all contained on the install discs specific to the computer.  After repairing all of the drivers, I have a three pound laptop that runs quietly under stress, and has a “Windows Experience Index” of 3.5, which is not too far behind the 4.4 that my last laptop posted.  Not bad for something that runs off of a now-outdated ipod HDD.

The OSX side of things is spectacular, Ubuntu runs with no problems in Parallels, and I am falling in love with the little machine.  I am glad that I have a powerful workstation at home, but the Macbook Air is more than enough computer for my portable needs as a student.  Now I understand…

This is going to be short since it is coming from the phone, but as the details of the proposed bailout emerge, I cannot help but wonder if this is a long-term solution, or simply a shift of loss from the privileged few financials (how privileged?  Let’s explore leverage ratio limits later) to the many taxpayers, designed to get us another four years of neo-con leadership. There is a clause that says that Paulson et al will not have to answer to anything resembling a court, and there is also rumor that the bailout will not involve the transfer of toxic debt at market price. It turns out that the only people paying retail are the taxpayers. The fact that this is being led by an administration that denounces regulation and taxes at every opportunity is simply astonishing. I will have to get my thoughts together when I get in front of a keyboard, but I am starting to feel like the neo-con movement will either result in revolution or socialism. Either that or they are trying to get the government in such a massive pile of debt that services absolutely must be cut in the future.

Considering the $600 per earner rebate checks totaled up to something in the neighborhood of $150 Billion, a $700 Billion bailout would total to almost $3k for each of those earners if my math is close, which it should be considering the amount of time I have been spending studying for my math courses…

WachoStan:  Sounds just like a former Russian state, with more debt!

HSBCachs:  Say it out loud.

LloydsHBOS:  You might not think this one is funny.  Must be British humor.

CountrywideLynch:  Sure to be popular in the South!

AIGovernment:  It is what it is.

FannieMayCostTaxpayersHalfATrillion:  FMCTHAT.  Shortened by the lobbying firm that made up P-A-T-R-I-O-T to “F-THAT”.

Currently, the front page of Amazon has a comparison between the book sales of Sarah Palin and Joe Biden.  Palin is currently winning the contest, 62% to 38%.  On the surface, this looks like a landslide.  Skeptical, I took a look at both books, and then things got exciting!  Please see vitals below:

Author:  Biden, Joe Biden.  Palin, Kaylene Johnson (with no assist from Palin).  Winner:  Biden.

Length:  Biden, 400 pages.  Palin, 159 pages.  Winner:  Biden.

Amazon Reviews:  Biden, 42, 4.5 stars.  Palin, 16, 4 stars.  Winner:  Biden.

Amazon Price:  Biden, $12.75.  Palin, $8.77.  Winner:  Palin.

Honorable mention that would have been a point deduction if tied:  The Palin book has “hockey mom” in the title.

Point score of Eric’s unscientific IT test:  Biden 3, Palin (should be Johnson…) 1.

I expect better from Amazon…

Let’s rock?  I do not believe a big media event would hinge on ipod offerings.  When Atom was announced as a reality, everyone looked to Apple to see what they would do with such a chip.  So far, we have heard nothing.

The Dell Netbook was released this week to a lot of fanfare, and lacking a beatdown offering from Apple, it looks like a winner to me.  I think Tuesday’s “one more thing” is going to be a multitouch netbook killer.  There are now half a dozen netbook offerings that are all virtually identical, leaving the market wide open for a cannonball out of Cupertino.  

Whether it is a forking of the Macbook Air line, or a completely new product, I think it is coming.

In much of the election coverage I browse, the Intrade Political Futures Market is mentioned if listen long enough or read far enough; usually as in indication of the “wisdom of the crowds”.

On Wednesday, I was released from my draconian investment bank trading clause, and after I spent the morning closing my covered former employer’s accounts and opening my own brokerage accounts, I tried to open a small Intrade account for good measure.  I have been kept away from investments I freely elected, and while on the multi-year personal trading vacation, I started following the Intrade markets since people that I look up to in the political and investment worlds mention them often.

Traditionally, when you open a brokerage account you fund through a wire transfer from a bank account.  When I was presented with a credit card option, I chose it, figuring I would keep my personal banking information out of the picture while dealing with a relative unknown.  After I entered my information and requested to fund through my credit card, I received a message that the bank behind my credit card refused to deal with the company.  Normally, this is a huge red flag, and I immediately paused my registration.  There is no way I am allowing an institution that my credit card company will not work with to have my personal (uninsured from fraud loss) bank account information.  

I decided this event warranted a little Ivory Terminal Investigation (we need some flak-vests and hats with a nice “ITI” logo).  After a quick online search, I decided the questionable legality of Intrading as a US citizen was going to require some advice from my lawyer friends.  There is a little set of words called the Unlawful Internet Gambling and Enforcement Act (UIGEA, 2006) which unleashed a flash-flood on my parade.  After asking way too many questions on a Saturday (one friend even threatened to send me a bill if I did not accept the answer), I decided that Intrade was a little risky.  If my funds were somehow denied after a withdrawal request, I would arguably not be able to use US law to retrieve them.

Still determined to find a way to monetize the political process, and selfishly make my opinion part of the “wisdom” of the crowds, I found the Iowa Electronic Markets (IEM).  This market is American, not-for-profit, and has been around long enough to get no-action letters from the Commodity Futures Trading Commission (CFTC) prior to Clinton’s election to the White House.  Success!

Based on my non-binding decree, the IEM will be the official political futures market for IT members, and weekly balances will be compared for bragging rights at 7pm ET every Tuesday (we need to keep some kind of tradition around here).  There is a $500.00 limit, so we need to agree upon a starting balance. 

Now that the above is settled, I turn my attention to the media coverage of Intrade.  Assuming that most Americans obey the UIGEA, the Intrade predictions market is made up of foreign nationals and those willing to violate an omnibus online gaming law, not exactly a cross-section of American voters.  Learning this, I must question the use of the Intrade market as a media bellwether.  I would argue that the IEM, being open and accessible to participants from the United States, would be a better gauge of the “wisdom” of the voting crowd.  

Shockingly, the IEM (with an assumed larger percentage of American traders) has the generic Democrat winning the race by a larger spread than Mr. Obama commands on the Intrade market.  I would love to have access to the data for the two exchanges, allowing an analysis of the makeup of each market.  Short of this, I am stuck with my assumptions.

In the mean time, my check will be in the mail to Iowa on Monday, and I will go on assuming that the herd is not to be followed.