I spent a day in the Boston metro area yesterday -



The leaves are just beginning to turn in New England. I saw deep ruby red, amber, orange, brown - it was very nice. As you might have guessed I had lunch at Legal Sea Foods in the airport after work. I enjoyed an outstanding fried clam roll, a cup of chowder and an iced tea. I think I might have been the only one drinking a non-alcoholic beverage! The lady to the right of me was enjoying a snifter of cognac, which I thought was a little odd for a 3pm beverage choice. The man to the left of me was enjoying raw oysters. I have it in me to give that sort of stuff a try, but growing up we never, ever ate anything remotely "risky" in the eyes of our grandmother. By risky, I mean seasoned, spicy, slimy, raw, shellfish or anything foreign. Or maybe by risky I mean fun. As a result I never learned how to properly eat shellfish, so at a restaurant I have a tad bit of a phobia regarding looking like an idiot by eating the food in the "wrong" way. I did take a step this summer though - during the Taste I stopped by the cajun stand with the crayfish. Twist, pull, suck. (Ok, I now regret phrasing it that way).

New England is an interesting place, full of honest, hard-working people. These are people with firm handshakes that will look you in the eye. They also seem to have a regional sense of humor that some people may not understand - in fact, if you aren't paying attention you might think you just got insulted or otherwise screwed with. Personally I enjoy people like that, but the key to it all is the deadpan. New England is full of stone-faced comedians.

I think I finally realized my dream housing setup. A small cottage with a little boathouse and a dock off the Atlantic coast for the summer, and a beach house on the Pacific coast for the winter. I really liked the coastal, pseudo-seafaring vibe I picked up as I looked down along the shoreline. That might be one of the most relaxing places in America!

Maybe you've heard of this, maybe you haven't:

AIG, after receiving their bailout, sent their executives on a $400,000 vacation at a posh resort in California. Here's the invoice -



Although a lot of trash is peddled on The Smoking Gun, you've still gotta love it.

This is a redefinition of the word "hubris." The American people hate corporate America today, and who could blame them?

Former Mr. Gay UK 'slit boyfriend's throat then marinated his diced flesh with fresh herbs' -

His defense was that the other guy was trying to rape him. I wonder i forensic evidence will bear that out... not that I ever plan on following this story.

10am on a Friday, and there was a line to the door. Get some jobs people - my God! What are these lazy bourgeois doing? Paying taxes is "patriotic" so get cracking - we're in a mess, you know!

There have been some ideas floating around the past few days, but the one I've been particularly interested in is the use of this vast pool of funds to purchase preferred stock in the troubled firms, rather than purchasing the illiquid debt. Having the government buy the distressed debt is foolhardy, for a few reasons. Firstly, nobody really knows what the debt is worth. Secondly, despite what your politicians were telling you, the federal government has nowhere near the capability to administrate the management of such a large problem effectively, and considering the downside it would be absolutely crazy to do so. Thirdly, and perhaps you agree with me, it is insane to pool $700b into a fund and hand it over to the same people who created this mess to begin with. There has to be another way to increase liquidity in our markets and I think a few people have found the answer.

George Soros has present a plan to the Dems, which isn't actually new, but hopefully with his cajoling the politicians can be convinced to take a more rational path. Now, the article makes a point of highlighting potential problems because, well, Soros is Soros and a lot of people in America hate his intrusion into our politics. Nevertheless, nobody should question his financial acumen and when the guy speaks, people should listen. I can't imagine liberal Democrats agreeing to lowering the corporate tax rate and I can't imagine Republicans agreeing to forcing the Treasury to back mortgages that have been renegotiated, but we'll see.

I think buying the preferred stock is the way forward because it will inject capital immediately into the credit market without the need to buy the bad debt. Buying the bad debt is an unacceptable risk to the American people. The truth of the matter is that these firms could have already sold this bad debt, but why take 10 cents on the dollar when the government may offer you 30? With this method taxpayers will actually have assets - something tangible to hold onto, rather than debt that is impossible to value. With preferred stock comes enhanced voting rights as well. The government, on behalf of the American people, will ensure that the fox is not guarding the hen house and will limit executive compensation. If some banks don't want to play ball and fail, so be it. This is America - we have smaller banks lined up to take advantage of the big boys and their hubris, and would cut off an arm for the opportunity to do so. Generally speaking, smaller banks are more efficiently managed anyway.

I would advocate for lowering the corporate tax rate to encourage skittish foreign investors to stick around, or even bring aboard new investment. The reality of America is that if this gets any worse, more foreign investment will be pulled and we will suffer a long lasting depression, not a recession. We need to encourage businesses and let them know that we want them to stay here and make money. My first instinct when I read this was to wrinkle my nose at the thought of suggesting "corporate welfare" in the midst of this problem. However, we have the second highest corporate tax rate in the world. We could get away with it previously because doing business in America was a premium opportunity that businesses would fight each other for. That is no longer the case, at least for now. The days of getting away with having the second highest corporate tax rate in the world are over if we want to maintain a robust economy through this mess. Foreigners have absolutely no confidence in our ability to move forward, so they are refusing to participate. We have to fix that.

As for the little guy - I'm the last guy in the world to suggest a socialist tenet as a solution to a problem, but there is no acceptable free market solution to the mortgage mess from the Main St. perspective. Economists say that the free market will work out the mess, but they openly admit that some people may fall through the cracks. I'm unsure about how acceptable that is - some people should have never taken the loans out to begin with while others are legitimately getting screwed through no fault of their own. I'm also unsure about the ability of the Treasury to unravel the mortgage mess in the way Soros describes. Where would the money come from anyway? We have $700b we're going to "invest" with, and if Obama gets elected we will have $1 trillion in new spending, not to mention $53 trillion in unfunded liabilities with SS, Medicare, Medicaid, etc. that NOBODY wants to reckon with. How does a CBO estimate of 25% base federal tax rate at the turn of the century for the poorest Americans sound? How does a CBO estimate of 88% corporate tax rate sound? With that kind of scenario we may see the end of America as we know it in this very century and nobody wants to talk about it! Are we going to produce yet another $1 trillion to back mortgages, some of which should have never been written? If you make $40,000 per year, you obviously should not be in a $400,000 house, so I envision that the end game will involve people losing their homes regardless of the scenario.

No amount of financial deftness will make unaffordable housing affordable. That is, unless home prices in distressed areas drop 40% like some suggest they will do. In that case, the judges can rewrite the mortgages based on a more reasonable base asset value and mitigate any potential fallout. In any case, I don't believe Americans will bail out Wall St. without a solution for homeowners tacked onto the plan, and I'm fairly sure Democrats will insist on some sort of measure. In my view, it is necessary just like being forced to deal with all of this garbage is necessary. People that legitimately need help and are getting the shaft deserve the government's attention; more so than the baron robbers who are the first in line, begging for mercy. To what degree the government is going to intervene remains to be seen, but I'm in full support of an intervention in the housing market as long as it is done intelligently.

Financial scaremongering is the activity du jour on Capitol Hill. Let's not be naive - we have a serious problem that could potentially collapse our economic system, so we have to be big boys and girls about this and take one on the chin to save the house of cards from falling. However, we're smarter than this. We know better than to rush a bad plan through simply because President Bush, Secretary Paulson and congressional leadership are feeling pressure to fix the problem immediately. Are we even sure how immediate the problem is? Do we really have to push a bill through in 48 hours when maybe a week of serious, well thought out discussions would serve us better?

In this midst of this panic they are playing the blame game, and to be honest if I were King of America I'd fire every single one of them, eliminate the concept of seniority, make it illegal to serve more than two consecutive terms and ask the American people to start over with their government by voting in an entirely new Congress. Those politicians who encouraged reckless borrowing (aka forcing lenders under the threat of criminal action to provide affordable loans to low income people, based on 'stated income'), prevented regulation of Fanny and Freddie (Demos), prevented regulation of the financial markets (Repubs) should no longer have viable political careers. Our Congress has well-earned their 9-10% approval rating - we have the worst Congress to have ever been assembled.

Anyway, you know how I feel about politicians.

You know what I find works best? Old fashioned manual labor. No matter how rich I become or where I go, there will always be a part of me that will revert back to my working class upbringing, which instinctively compels me to work with my hands. I like working with ideas to get paid, but I like working with my hands to keep my soul at ease.

While I was warming my hands with the fire on Wall St. this morning I ran across this story. Scientists have allegedly proved it! Eating a meat-free diet makes you up to six times more susceptible to brain shrinkage.



Regarding the blowup on Wall St. - I wanted to make a comment since (e:jim) said something in the chatter that made me consider it. The thing about investment banks is that they are generally not lending institutions, but borrowing institutions. They do not affect the everyday life of Americans in the same way as a lending institution. I don't think there is any doubt that more regulation on Wall St. is needed, and regardless of who is elected it is definitely coming. However, there is no divine right for investment banks to be in business. It was their own incredible stupidity for backing these so-called strategic investment vehicles (or whatever the term is, depending on the company) with bundled mortgages that were never going to be paid back. If they crash and burn, so be it.

I don't want today's confusion to necessarily worry people who are wondering what this all means. The most damage to everyday Americans has been caused by lending institutions, who gave out money freely to people who clearly couldn't afford what it was they were borrowing. Even worse, many of these companies encouraged this type of reckless borrowing. Investment banks like Lehman borrow money just like individuals do, except at much larger scales and for different reasons. Their mistake was in borrowing money to make investments backed by what is now essentially bundled junk debt. They couldn't borrow more money to keep the ship afloat, which is exactly why Lehman is walking the plank. This is also why Merrill Lynch sold up before it got too late.

Consumers can begin gulping if a big boy like Citigroup folds. Having the financial sector in turmoil is bad for the economy, and therefore is bad for America, but Lehman is not a Fanny or Freddie, whose decisions directly affect millions of lives. It is ironic that it is the lending institutions are getting bailed out, since they were the ones who really made the big mistakes that are costing people their houses. I would never advocate for an investment bank to be bailed out. Bear Stearns was bailed out, but according to some circles they are "too big" to be allowed to fail. It remains to be seen how many more banks fit into that category, but based on the government's mood I wouldn't count on any more bail outs for publicly traded, mismanaged companies in the future. Free markets are about survival of the fittest - I think I'm going to nominate Lehman Bros. for a Darwin Award, if at all possible.

My friend Brandon, who used to live downstairs, is in Houston and did not evacuate. I really, really wish that he did, but now that there is pretty much no running away he is bunkered down. He got supplies and stocked up, but according to him power should be out by midnight.

I'm really worried. I tried to call him but getting a line is pretty much impossible.

The Politico, which is a site I read multiple times daily, has recently posted in its "Arena" page a group of statements from experts commenting on the strange focus on the trivial. What causes it and to what degree is the media responsible?



It is a worthwhile read and a lot of salient points are made. Personally, I'd suggest that the media certainly is complicit in focusing on silly stuff. If the topic isn't about politics then it is about "celebutards" such as Paris Hilton and such. News is sensationalized for the same reasons in the US as they are anywhere else - to make money. It isn't as if the mainstream guys are doing good business, particularly in print. I think the media is desperate to compete for attention and are generally willing to extend remarks on the most trivial of topics if it means gaining an edge.

Gallup Poll: McCain Rides Wave, Opens Gaping Lead Among Independents



I have to admit, I'm very surprised by this. I expected McCain to get a bit of a bump after the convention, but a 15-point lead? Truly unexpected. There are a variety of factors that contribute to this shift, but it is a fairly obvious statement that Gov. Palin and her appeal has drawn more voters to the GOP. Love her or hate her, obviously she's been effective at getting middle America and political independents on John McCain's side.

Actually, if you read the data you'll see that among voters that are purely independent, McCain has a 20% increase over Obama among those individuals.

At this point the parties are entrenched in their choices, so very little shifting is going to occur. It remains to be seen how many conservative Democrats will shift over - according to this Gallup data the number of conservative Democrats favoring McCain over Obama has increased from 15% to 25%. Also unknown is how much further the numbers will increase on the GOP side as a result of additional enthusiasm among conservatives, who have helped to pull McCain's numbers higher as well.

Former Mayor of SF stokes Democrat Fears of the "Palin Effect"

Willie Brown, former mayor of San Francisco, is one of the most colorful and interesting politicians you'll ever meet. If you ask me, it is too bad that SF term limits allowed Gavin Newsom to slither into office. The man has had a very interesting political career in California that started in the 1960's. Anyway, he wrote a piece that appeared in the SF Chronicle that very much surprised me.

Overall I thought Willie was astute in his analysis of the Palin effect, love it or hate it. The only thing I really would take issue with is Mayor Brown's assertion that the press will treat Palin as the have Obama. Beeeeeeee Essssssss. That has already been proven wrong.

As an aside, Willie has a funny entry at the very bottom, addressing the recent string of restaurant robberies in Oakland (think Pulp Fiction):

By the way, there's a new dining tip for people going out in Oakland.

Be sure to order soup.

That way when the robbery starts, you can slip off your jewelry and drop it into soup so the robbers won't see it.

Ok, now that is funny. I wish we had more politicians capable of social commentary like this. It might actually endear them to us!