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Archive for February 24th, 2009

Pick-Up Lines

So some guy decides to impersonate a scrub major league baseball player impersonating other major league baseball players?  How Shakespeare.

Deadspin article

One of the enjoyable aspects of the Madoff saga – one of the few enjoyable aspects, as some people lost a significant amount of money, and not all of the people were complete jerks – was seeing Cialdini’s Influence in action.  No one would believe someone who came up to him asking for money to invest in some odd scheme that paid an equity return with fixed income volatility.  But tell someone that the scheme is complicated, secret, and besides, he isn’t nearly cool enough to invest, and all of a sudden people are joining country clubs for the chance to beg their way in.

I wish I could claim to be immune to this, but more than once I have stood in line for a nightclub knowing full well that there were plenty of other places serving beer that would actually be friendly about it.

Anyway, the beauty of this particular scam is that the impersonator, whoever he is, is clearly not a famous person.  He cannot walk into a bar and have people come up to him.  But by claiming to be someone famous and letting the other person challenge him, he can then back down to being “just” a random major league baseball player.  No one knows every big leaguer by name and face – no Keith Olbermann, not Bill James, and certainly not an adult movie actress – and apparently the sheer possibility that the guy might be in the show was enough for the actress to spend the night.

That’s a smooth talker.

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Way to stand up for your beliefs:

Republican Governors Showing Courage

I actually wish there were real strings attached.  I wish the government told states that if they want to get Federal funds they need to take on the issues that got them into this mess – abolish Prop 13 in California, abolish rent control in NY, building a decent public school system in the Deep South.  But that would have been too difficult and would have interfered with Rush Limbaugh’s position that the Republicans should control the share of the economy that corresponds with their percentage of the popular vote.

Of course, if Rush would like to move to this curious kind of proportional governance, I would like to withdraw 54% of our troops from Iraq immediately.

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Case-Shiller 20 was down 18.5% year over year for December.

(31.2%) change for the SF area, although curiously there are still folks who will claim that the drop is in outlying areas and core SF/Peninsula will hold up fine.  Sure it will.

NY is actually one of the better performing markets, down (9.2%) year-over-year, and it cannot be because the core Manhattan economy was only nine percent worse in December 2008 than December 2007.  Instead, I would argue that it is precisely because the downturn in Manhattan is so sharp that buyers and sellers cannot trade (one of the necessary preconditions to end up in an index of sales).  If the economy rebounds quickly, this will all be a bad dream and folks will go on as before.  But my bet is that the trinity of death, divorce, and moves will force some folks’ hands, and in this market their units are worth far, far less than a year ago.

That’s true even in Miami, despite the cheerleading from Mr. Perez-Chanquet.  No, prices are not low enough as they are, not so long as there continue to be increasing job losses.  Ask yourself this – if the S&P is now trading for its 1997 values, why aren’t houses?

More over at the Krug and Calculated Risk

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Mean Girls

What were the odds that five years on, five members of the Mean Girls cast would have more promising careers than Lindsay Lohan?

Rachel McAdams, Tina Fey, Amanda Seyfried, Lacey Chabert…even Amy Poehler.

Would make a compelling commercial to keep kids off drugs.

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Pull the Plug

The government is supremely unable to get with the concept of sunk costs:

Wall Street Journal

The government owns AIG.  Why not do what any other investor would do when faced with a company whose obligations far, far outstrip its ability to repay them?

Declare bankruptcy.  Just walk away.  If the insurance assets have been adequately ring-fenced, nothing will happen to them, and if they have not, that is where our capital injections ought to be focused.  Bankruptcy is not a sin; it is a recognition that good resources should not be thrown after bad.

It is somewhere between silly and insulting to say that the taxpayer will be repaid with a “lucrative Asian life insurance arm”.  A truly lucrative business could cover its parent’s obligations, which AIG’s subsidiaries clearly cannot do either individually or in aggregate.

Why should the government contribute hundreds of billions of dollars to honor AIG’s promises?  If AIG had, say, promised to build a full size replica of the Taj Mahal out of nothing more than Graham crackers and diamonds in Beulah, North Dakota, would we somehow feel honor-bound to finish the job?  What right does AIG have, or did it ever have, to dictate the allocation of hundreds of billions of dollars in taxpayers’ money?  If AIG were to be downgraded and billions of dollars were due to its trading partners, those payments would be owed because of promises AIG made.  Promises it cannot deliver.  Why should we deliver for them?

Will AIG’s failure be a kick in the teeth for Goldman Sachs and European banks and, just perhaps, the Chinese government?  Sure.  But muddling on is no strategy, not when the bleeding is continuing.  The sooner we shoot it the sooner we can have the discussion about how much aid we are going to provide to the financial services industry based on the criteria we choose, not that AIG chose for us several years ago.  It’s an important distinction.

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