"As far as penis problems go, Andrey's is a relatively pleasant one."

Knifecrime Island

“Of course they all go about with knives because it’s exciting. Horrifying! I think they’re bored stiff. Nobody’s said, ‘Hey boys, I want you lot in my ship now, we’re off to have a really immense adventure.

There has been a recent spate of knife murders in London with two fatal gang related stabbings of teenagers within the last week alone"

- The Awl

Postmodern Finance

Davis Square III’s 209-page prospectus spelled out the risks for potential investors. “Characteristics” of replacement collateral wouldn’t necessarily be the same as those of existing assets, it said.

So not only is my investment shit, but I will not select the particular garbage I wish to own?

It also spelled out Goldman Sachs’s investment guidelines, which allowed as much as half of Davis Square III to be bonds backed by subprime mortgages, given to people with bad or limited credit histories. Among other constraints, TCW needed to meet collateral ratings requirements and maintain a mix of lenders and types of debt....

By December 2008, more than 170 AIG-insured pieces of CDOs, including parts of Davis Square III, had been taken over by a U.S. taxpayer-funded asset pool called Maiden Lane III after the street where the Federal Reserve Bank of New York is located.

Goldman Sachs and TCW’s parent, Paris-based Societe Generale SA, were paid the most before and after the New York Fed reimbursed AIG’s customers in full. Societe Generale got $16.5 billion, more than any other firm. Goldman Sachs was second with $14 billion. Together they accounted for almost half of the payouts.

New York-based Goldman Sachs was the biggest underwriter of CDOs taken over by Maiden Lane III. TCW managed about twice as many CDO assets that ended up in Maiden Lane III as anyone else, according to the AIG list and data compiled by Bloomberg....

Among other overseers of AIG-guaranteed CDOs were Ellington Management Group LLC’s Michael Vranos, a former teen Mr. Connecticut bodybuilder who ran the top-ranked mortgage-bond underwriter in the early 1990s, and Michael Barnes, whose Tricadia Capital Management LLC is so secretive that, when asked to discuss CDO reinvestment, said, “We as a policy do not comment on anything.”...

CDOs are investment pools made up of anything that provides a flow of cash. They can contain loans to companies used in leveraged buyouts or securities backed by commercial and residential mortgages, auto loans, credit-card receivables, even pieces of other CDOs.

Underwriters such as Goldman Sachs split CDOs into classes, or tranches, categorizing them by how likely they were to continue paying. The biggest group, called the senior classes, accounted for 93 percent of Davis Square III and got top ratings from Moody’s, according to a September 2004 Fitch Ratings analysis. In exchange for being first under the waterfall of payments, senior-class investors received less interest...

One of Lucido’s earliest purchases for Davis Square III was a $12 million slice of Abacus 2004-1, a CDO created by Goldman Sachs in July 2004 and filled with credit-default swaps, according to the prospectus.

By 2007, Goldman Sachs had moved so many securities into Abacus 2004-1 that much of the collateral didn’t exist when the CDO was created, according to data compiled by Moody’s. While AIG insured parts of Abacus deals, Goldman Sachs didn’t change the collateral in the pieces AIG insured, DuVally said.

No! Former Sec. of Labor Reich!

Robert Reich And Tyler Cowen: The New Kings Of Comedy

“Has the government ever been the innovator of a new sexual position?” Cowen asked to big laughs.

Rising from his seat onstage, the diminutive Robert Reich, Clinton’s labor secretary and now a Berkeley professor, took up the challenge.

“I ask you,” he said bluntly, “do I look like Big Government?” The audience roared

Links

Narwhal Attack!

1. I have spent the past hour trying to determine if Ellen Page of Juno (and INCEPTION!) fame is gay. According to an SNL skit in 2008 the answer is yes. She is a confirmed ladyist.
2. Megan McArdle...No...Talk about your wedding, start preparing a response to DeLong. Anything but that.
3. Here-

   I don’t buy this at all. It’s clearly an accounting gimmick, but DeLong suggests it doesn’t matter because the massive Medicare savings in future decades will somehow wipe out these extra long-term care liabilities. So we keep making promises to cover more and more conditions in the future–promises made to specific people, and at the same time we keep promising that there will also be huge cuts in Medicare, many of them dubious or unspecified. When the Republicans suggested that the Dems might be planning to follow the European model, that is pull the plug on granny when the cost-benefit analysis says the procedure isn’t worth it, the Dems got all indignant, claiming the GOP was using scare tactics. They probably were. But I’m not scared about plugs being pulled, I’m scared the cost savings won’t materialize and we’ll end up with European-style taxes. Of course Krugman says there’s nothing wrong with that. I suppose he’s right, if you don’t mind a 25% cut in (PPP) per capita GDP. My hunch is that the American people won’t look at things that way.

4. If We Were Friends with John Paulson

Breaking Bad

Lost a whole Sunday to this show.

Greatest quote ever...

"You act like you've never seen a severed human head on a tortoise before!"

?

But the thought that Megan Fox is somehow too obviously hot, too mainstream, the Coldplay of masturbation, is just plain silly.

More wisdom from individuals financially incentivized to speak truth.

What do you think the passing of the health care bill will mean for the economy?
...In fact, if you look at the two areas of our economy where the government has very large and growing exposure, it’s residential real estate and health care. And both at the end of the day are fairly nonproductive, long term, for our economy. Putting more and more money into housing and keeping us healthy in our golden years doesn’t necessarily make us a more productive society. We should be devoting more of that money to technology and education.
-Jim Chanos

Bill Gross says it. It is true.

Or as Paul Kedrosky put it, "Buy what I buy. I do."-

The trend promises to get worse, not better. The imminent passage of health care reform represents a continuing litany of entitlement legislation that will add, not subtract, to future deficits and unfunded liabilities. No investment vigilante worth their salt or outrageous annual bonus would dare argue that current legislation is a deficit reducer as asserted by Democrats and in fact the Congressional Budget Office. Common sense alone would suggest that extending health care benefits to 30 million people will cost a lot of money and that it is being “paid for” in the current bill with standard smoke, and all too familiar mirrors that have characterized such entitlement legislation for decades. An article by an ex-CBO director in The New York Times this past Sunday affirms these suspicions. “Fantasy in, fantasy out,” writes Douglas Holtz-Eakin who held the CBO Chair from 2003–2005. Front-end loaded revenues and back-end loaded expenses promote the fiction that a program that will cost $950 billion over the next 10 years actually reduces the deficit by $138 billion. After all the details are analyzed, Mr. Holtz-Eakin’s numbers affirm a vigilante’s suspicion – it will add $562 billion to the deficit over the next decade. Long-term bondholders beware.

Somalia

Mogadishu then:


And now:

One 17-year-old boy remembered the day last June when Shabab fighters chained him to a gurney and dragged him in front of a huge crowd.

“Ismael Khalif Abdallah,” the fighters said, reading out the boy’s name, “is a thief. He has been robbing people. It’s time to punish him.”

For the next 10 minutes, the men sawed through Ismael’s wrist bones. Then they cut off his foot. Just recounting the pain and terror makes Ismael’s hairless face break out in sweat.

“Now what?” he says, struggling to light a cigarette with his stub of an arm.

"Myth 6"

The HCR bill will allow communists control of our vital bodily fluids.

Status: TRUE: Yeah, this one is totally real. But, to be fair, there aren't that many communists left, and those that there are don't actually want that many bags full of lymph and phlegm.

Duke of Wellington responds to GOP

Something to Remember

"This is most visible by its unsubtlety in politics, especially political punditry. If you’ll indulge moment of ideological asymmetry here, I find it even more pervasive on the left than on the right. Think of the endlessly multiplying theorists who, ostensibly defending the interests of the downtrodden common man, operate on the premise that everyone has been hoodwinked by corporations, crooked politicians and the military-industrial complex — everyone but them. But even outside this realm, certain types of claims set off my brain’s automatic find/replace:

• “The Bush Regime plays the American public like a fiddle” = “I have psychic powers (to recognize and avoid the techniques of said fiddling)”
• “That work of art is pretentious” = “I have psychic powers (to know the artist’s intention)”
• “Most people are lazy” = “I have psychic powers (to know others’ willingness to work)”

This is why, when I hear someone I haven’t met described as “opinionated,” I tend to assume that means “dumb,” “delusional, “too insecure to not to have an opinion,” “believes themselves to possess superhuman brain abilities” or various permutations thereof. If only they’d just chill out a little bit. Maybe shoot a documentary or two."

-Colin Marshall

"The Big Short"

If you read the Portfolio essay he wrote in 2008 you've heard much of the material in this book before. I like how he shows that the CDOs and synthetic CDOs made of CDS by his valiant shorts kept the market humming into 2007. The $9 billion loss at Morgan Stanley is astounding and deserves its own tome.

Best quote:

"The first sign that Spider-Man had no interest in Deutsche Bank's dark dealings came at a Speech that morning, given by the CEO of Option One, the mortgage originator owned by H&R Block."

Old Time Atlanta

Comedy Idea

I just thought of a great character Zach Galifinakis could do in his standup.
Healthcare Policy Wonk/Virulent Racist. Here are some ideas...

"We can see in Massachusetts that cost increases attributable to the state for the subsidies required to ensure universal access to health insurance led to the eventual imposition of capitation on health care providers.This may result in great opposition from paitents who fear their doctors are being incentivized by the state to slash medical costs by limiting necessary procedures and tests. If black people would cut back on Colt-45s and Dutch Masters than maybe they would be able to get that fifth ultrasound they think they need."

DEATH

Great NPR story on DEATH. A horribly named Detroit band that sounds exactly like a black version of the Stooges.

"In the 1970s, the music of Detroit could be split into two powerful scenes: the black soul, funk and R&B of Motown and the white rock 'n' roll of The Stooges, MC5, Bob Seger and Alice Cooper. Somewhere in the middle was Death."

"...David Hackney's idea for a band name didn't help. "Our name of the band was Rock Fire Funk Express," says Bobby. "David convinced us to change the name of the band to Death. His concept was spinning death from the negative to the positive. It was a hard sell."

In case you forgot

While it’s mostly liquidating assets to pay creditors, Lehman is holding on to some units and properties including real estate, uranium stockpiles and private equity. Those units will continue to operate until sale prices of their assets recover, under Lehman’s plan.
-Alphaville

Nixon Time

5. On the curious absence of Negro spies: (July 5, 1971)

So few of those who engage in espionage are Negroes. …As a matter of fact, very few of them become Communists. If they do, they either, like, they get into Angela Davis — they’re more of an activist type. And they throw bombs and this and that. But the Negroes, have you ever noticed? There are damned few Negro spies.

-Great moments with Mr. Nixon.

Socratic dialog

Friend: I am going to take off a few days from work and fly down to Bermuda for a quick vacation.

You: But isn't that expensive? Won't that just add to your growing debts?

Friend: Yes, it is expensive. But my plan is deficit-neutral. I have decided to give up that half-caf, extra-shot caramel macchiato I order at Starbucks twice every day. I really don't need that expensive drink. And if I give it up for the next three years, it will pay for my Bermuda trip.

You: Well, then, how are you going to solve the problem of your growing debts?

Friend: I am going to figure that out as soon as I return from Bermuda.

You: But in light of your budget problem, maybe you should give up Starbucks and skip the Bermuda vacation. Giving up Starbucks could be the easiest way to start balancing your budget.

Friend: You really aren't any fun, are you?

-Greg Mankiw

Stock Operator

The day after his visit to the Stork Club last week, Jesse Livermore turned up for lunch in the bar of the Sherry-Netherland Hotel. Tense, distraught, he took a table by himself, spoke to no one, from time to time took out a little memorandum book and jotted while he ate his lunch. Then he left. At 4:30 that afternoon he was back again. He ordered two old-fashioneds, sipped them slowly. Suddenly he rose from his table and went into the lobby. Ten minutes later an attendant found him slumped in a chair in the ground-floor men's room. At his feet was a 32-calibre automatic. Blood ran from the hole behind his ear. In the memorandum book police found an eight-page note to his wife. Over & over it repeated: "This is the only way out. ... I am tired of fighting. ... I am unworthy of your love. ... I am a failure."

Survival. Propane Important.

I've played this over in my head before and decided there are two lifestyles. Nomadic and Static. The following considers staking out a territory for a "home base" where one is secure for the rest of his days. It also assumes "the grid" is down. No electricity or internet, some plumbing works.

Pre-Phase Phase (I'm not good with phases)

* Before Anything: Eat Exotic Fresh Fruits while they are around. They come from so far away that, odds are depending where you live, you will never ever get to have Banana, Pomegranite, Starfruit or Mango again in your life. Savor every bite. Make Fruit Leathers and Freeze what you cannot stomach to consume. You will also need to bone up on Vitamin C while you're doing the most work.
* Unless you plan on maintaining and protecting cows for the rest of their/your life... you're unlikely to have a fresh glass of cold milk ever again. There are dehydrated milks (Klim) but it's not the same.
* Bacon. Eat all of what you can find. Cook it all up and dehydrate what you cannot stomach. Even if you hate it. You will never have the opportunity to consume bacon again.

Phase 1 - Fuel for your Future

The world is going to be vastly different in only 5-years time. Buildings will collapse from non-maintained roofs. Cars and Trucks won't operate off of stale fuel. Uncut lawns will overgrow and cripple streets along with freeze/rain cycles. Animals will grow unchecked and rampant predation will resume. Insects will rule the fields. There is no more weather channel, internet or food store. It will become an inhospitable world very shortly, you need to prepare.

* Refined Gasoline and Diesel will be useless in 2 years. You CAN make your own fuels (Combustion/Steam, Biodeisel) but there is a much much simpler answer.
* Propane is everywhere and it's shelf life is longer than yours. Walmarts, Home Depots and Millions of Tanks behind people's homes, half full from the previous Summer's BBQ Season. Safely, stockpile the conventional tanks (using trucks while they're still useful) making sure to properly maintain them.
* If you're lucky enough to be near gas stations with those huge above ground tanks, secure passage to them and secure their protection. Map out every one of them in a 50-mi radius. Expend the furthest ones first. O-Rings and valves can corrode and fail on the conventional ones, but the big boys aren't as likely to fail. Don't ever think about moving them.
* Store canisters away from your domicile but within reasonable distance with good ventilation. Keep Oil-Based paint nearby and paint them every few years to stave off rust.
* Go out and find Propane Powered Appliances. Forklifts, Bobcats, Refrigerators, Lanterns, Ovens, Weed Wackers, Generators. You'll need to know the location of nearby warehouses, camping supply stores.
* Yes, if you really want to you can dick around with Solar Panels / Wind Turbines and work on a battery farm and keep some modern conventions. DVDs will work for 10-40 years depending on the press and plastics involved.
* Keep growth down inside the compound. The rest of the world will become overgrown, last thing you want are a ton of thornbushes and poison ivy invading your space. Keep your paths clear with weedwackers and machetes. The roads won't completely overgrow in your lifetime, but at least clear the cars out of the way with bulldozers while you still can.

Phase 2 - Secure your Food

There's a ton of food still around in the world that'll be good for the next decade. Rice and Beans, Canned Fruits and Veggies. The Average Domesticated Human relies on these foods and cannot subsist "off of the land."

* One of the first things you should consider doing is getting a freezer farm up and operating off of generators (or using propane freezers which can be found for RVs.) Scour the lands for processed meats, hoping that they're still in a frozen state. Fruits, Veggies, Variety. Nobody will be farming these things anymore and odds are, the world will eventually become too inhospitable for you to maintain a farm without insects plaguing it.
* Sysco Trucks are refrigerated and can probably stay cool a week or two, and are likely chock full of the meals you'd otherwise be served after they've been microwaved at Olive Garden, Johnny Carino's, Applebees, TGIFridays, McDonalds, etcetc. If they haven't been looted already, they're a great solution to a "freezer farm." Now that you have all the time in the world, figure out how to use RV Propane Freezers to keep these trucks cool. Move them to your home, reinforce them in concrete and keep them free of bugs and animals.
* The Nearby Ocean may become tarnished in 2-5 years as runoff from humanity's downfall pours off the coasts and out of the unmaintained sewers. If you're a sailor and can sail out a couple miles for some mahi-mahi to freeze, that's awesome. Also, after the death of Gasoline, you can probably rig a Propane-Powered Weed-Wacker to be an Outboard Motor for a boat.
* Hunting is useful if you know what you're doing. Avoid protein poisoning by eating fats. Cook well-done, always. There's no cure for food poisoning now.
* Find a nearby river where no humanity is upstream for your water source. Use a Propane Forklift to carry a water back in a large container. Treat it with Chlorine Dioxide, Bleach or use Ceramic Filters. There's probably still usable water in water towers but no telling if whatever killed humanity has contaminated those.
* Incinerate your leftovers (there shouldn't be any...) to keep down on insect infestation.

Phase 3 - Home Compound

Insects and animals will grow plentifully without humans now. Wild Dogs, Bears, Coyotes, Mountain Lions, Feral Cats are all now the enemy. Malaria, Lymes Disease, Bebesia can be carried by insects and with Rabies, will likely grow out of control without human intervention.

* Secure an area, preferably within a high-walled region to keep bears and other predators away. Chain Link Fences need to be painted to prevent rusting. Paint them with motor oil a couple of times in the summer (if you don't give a rat's ass about the environment now)
* Drive Vehicles over to your Compound while they still work. Mobile Homes, School Buses, Fire Engine Tankers & Ladders, Electrical Contractor Cherry Pickers (for Hunting Blinds), Flatbeds, Box Trucks.
* If you can do it singlehandedly, transport the biggest few Yachts you can find to your compound. Ever see the inside of those things? Home away from home. Might be a nice place to spend the night if you need to feel like you're civilized again.
* Construct a cinder-block-based shelter away from Hurricane-Prone or Earthquake Prone Areas. Something very secure that'll survive hard rains, winters, and can keep out animals and insects, but simple to maintain and secure.
* Use Carbon Monoxide Detectors hooked up to a battery system. All this propane will generate Carbon Monoxide.
* If you can remove the septic tank, use RVs for their bathrooms then drive out with the forklifts and dump it somewhere... downwind.

Phase 4 - Self Preservation

* Stockpile Medicine. Most pills will lose effectiveness after 2 years. Painkillers should be kept nearby. Doxycyclene for Lymes Disease will (effectively) last 2 years. Some Pharmacies may have Mepron which is for Malaria.
* Treat every wound as if it's going to infect and kill you. Alcohol Wipes and Topical Antibiotics in small packets are long-lasting as well.
* ALWAYS BRUSH YOUR TEETH. Learn to brush your teeth with Baking Soda. Toothpastes will inevitably harden in their tubes or liquify into an unusable congealment. There are no dentists anymore. If you get a cavity, you're probably screwed bigtime and will need to take care of it yourself.
* Hone your skills. You're now the worlds only Mechanic, Electrician, Farmer, Hunter, Gatherer and Doctor. Books are a remarkable resource.

Phase 5 - Recreation

* Find the closest highway and burn all the gasoline you can syphon out of all the cars around in a Maserati, Ferrari or Ford Focus by risking your fucking life. This insane maneuver might help you keep some sanity... but in 2-years-time gasoline will have gone stale and most cars will sit where they were.
* There are some propane based cars and Go-Karts. Offhand, I don't know where I'd find one around here so I'm in a bad position... the internet will be down and "propane go-karts" won't be found in phone books.

Phase 6 - Keep your mind busy

* Write about what you've done. Every day. Write your thoughts, your transgressions, your hopes, your angers. As you fill books, put them in some permanent enclosure of sorts, sheltered from the elements.
* Gather up Atlases, Medical Books, Dictionaries, Encyclopedias, Put them all in the same place. Who knows what evolution has in store? Perhaps in a couple hundred million years, some badger learns to make fire and read and wonders about the rusted steel girders hes found in the mountains? It's your legacy and you can't accept the fact that this is the end of intelligent life. Write for them. Explain what transpired. If only to keep your mind busy and your heart steady.

Final Phase - Seal your fate.

You are the last of your kind. Evolution may replace humans with another Sentient Creature capable of interpreting the past, but for now, this is it. As representative for humanity, you do not want to suffer. No sense in bleeding to death over the course of several days pinned underneath a mountain of rubble.

* Always have the ability to kill yourself nearby. Holster a classy 6-shooter in your shoulder, at your ankle or your hip at all times.

Uninformed Investment Advice

Short the euro. Short the euro. Short the euro. μικρό το ευρώ.

Economic Items

• About 19 per cent of US manufacturing workers are 54 and older, roughly the same as for the workforce as a whole, according to the Bureau of Labor Statistics. However, only 7 per cent of manufacturing workers are under 25 years old – half that of the wider workforce.
• Through the end of last year, gold was up about 29 percent since its 1980 peak. In that same period, Treasuries rose about 1,090 percent. The S&P 500 earned more than 2,300 percent with dividends reinvested over the three decades. Even cash in the average U.S. checking account outdid gold, gaining 92 percent.
• Luxury goods are easy to fake. Premium goods are not. As the world’s best fakers, the Chinese are well-positioned to appreciate that difference. Truly premium products (Audi, Nikon, Apple) are difficult to fake because their value lies in their superior functionality. Luxury goods are easy to fake because their prime function — to tell time, or to carry your makeup — costs very little. The rest is about conventional status messaging, wrought through expensive materials and labor, scarcity and branding — and these can easily be subverted to produce knock-offs. I suspect luxury brands will find they have a far harder time gaining a foothold in China than premium brands, because the Chinese are uncommonly pragmatic.
• Buffet on Healthcare (Charlie Munger mailed a $20k check to the New Yorker for this article.)