The tax man cometh.

I hear Obama and McCain each claiming that their tax plan will be better than the other guy's tax plan. Unfortunately the US personal income tax is so complex and loaded with gotcha's and loopholes that nobody knows what will happen, no matter who wins. All we taxpayers can figure is the man who wants to spend more will raise taxes more. So far, Obama is miles ahead on the spending front. He plans to offer free health insurance to everyone. That's gonna cost so much it will bankrupt the country.
All of Obama's tasty goodies will have to be paid for some how. Once a federal goodie is offered , it can never be revoked, so each of Obama's pricey goodies will burden us taxpayers for ever and ever. We will have to pay for them somehow, taxes, borrowing, or just plain printing the money, none of which is good for the economy.
Obama's goodies mean taking money away from industry, investment, research and development and just consuming it.

Will a one hour speed bump save the market?

The Dow is down 400 points and the market has only been open for 20 minutes. There is talk about a one hour timeout of trading should the market drop 1100 points. Will just one hour allow enough time to reset all the computers (which sell when the market drops) and reset the investors who will be in solid panic mode?

Alternative Energy subsidies

Interesting NYT article here. Apparently nuclear energy enjoys a $1.59 per Megawatt hour subsidy where as wind and solar get $20 per Megawatt hour. Let's see, I pay $160 per Megawatt hour up here. So the 1% subsidy doesn't make much difference. The $20 for wind and solar seems a bit much, especially as neither wind nor solar goes into my car or my furnace, my big energy costs.
What does hurt is the green anti nuclear stand. I'm still paying off the damage they did to the Seabrook nuclear plant back in the 1970's. "Stranded cost recovery" right on my electric bill every month, thanks to the Clamshell Alliance. Plus a whopping big share of the cost of a nuclear plant is the humungous pile of paperwork the greens have saddled the industry with.

$150 million "alert system" scratched

An unnamed Homeland Security system to provide unclassified but sensitive warnings of terrorist threats to first responders and all levels of government has been "put on hold". With luck Congress may be able to kill the entire $150 million boon doggle.
The way you pass threat warnings is by email. Everyone reads their email. If the contents are sensitive, or even classified, encrypt the email. Problem solved.

Let's get petty

The MSM are now trashing Sarah Palin over the cost of her wardrobe. How petty (and sexist) can you get? She has to appear in public daily, travel (which clothes hate) and as a national political candidate she has to appear well dressed. Of course she needed more clothes to campaign in.
Plus, women have to work harder than men to appear well dressed. A dark suit, clean white shirt, well shined shoes and a tie and a man is good to go. Women's dress is infinitely more complicated. Any reasonable woman would need more decent outfits to campaign nationally.

Roasting Ratings Agencies on Wall St

Sen. Henry Waxman, that bald headed twit, held hearings today to roast Moody's, Standard and Poor's and the other bond rating services. The raters gave AAA ratings to "mortgage backed securities" which later tanked and took down the financial markets. Although the roasting is well deserved and fun to watch, it misses the point.
The goodness of the "mortgage backed securities" was no better than the goodness of the mortgages backing them. There is no way a bean counter in a Manhatten office can know how good a mortgage in California or Florida is. To evaluate a mortgage, you have to know the value of the real estate (which requires a visit to the property and local knowledge) , the income of the borrower (which is privacy protected) and interview the borrowers. No way a bean counter at a rating agency can do this.
The buyers of the "mortgage backed securities" should have known this. Once a mortgage maker knows he can sell the mortgage for cash, and all the risk is passed to the buyer, then he will make a mortgage to anyone with breath in his body. We should close the entire secondary mortgage market because it is impossible to know the soundness of any mortgage backed security.

Strange Capitol

So, now we come to really strange forms of "capitol". In return for US taxpayer money the bailed out banks are required promise to sell their stock to the government at today's (depressed) price, sometime in the future. The idea being that the taxpayers are entitled to a cut of any of the bank's future earnings in return for putting up barrels of money. The paperwork to do this is called a "warrent". We used to call them stock options in industry.
According to a Wall St Journal article, these "warrents" would be carried on the books of the bank as "capitol". Wow. First of all, the warrents aren't readily saleable, which makes them questionable as capitol. Second of all, the government owns the warrents, not the bank, so I fail to see how they contribute to the bank's capitol whatsoever, neglecting matters of proper pricing and liquidity.
Then the WSJ writer goes on to worry about how fluxuations in the value of these warrents would make the bank's capitol fluxuate.
Something does not compute here.

Bank Capital?

So, let's run a bank. We accept money from depositors and buyers of bank stock. We lend this money at interest. Question, how much money can we lend? All of it? Not hardly, someone will make a withdrawal and we have to have cash in the till to pay out. Sometimes a loan won't be paid back, and a decent bank can't fail just 'cause one lowlife stiffs them on a loan. So, how much money do we keep on hand as protection against rainy days?
Experience and federal law suggest a bank ought to keep about 10% on hand as "capital" or "capital reserves". The commercial banks adhered to this. The "investment banks" aka stock brokerage houses, ignored this rule, went down as low as 3%, and are now all dead. RIP Drexel Burnham Lambert, Merrill Lynch, Lehman Bros, Bear Stearns, and company.
Now keeping plain old cash in the vault is secure, but that's a lot of cash that isn't earning interest. Can we count ultra safe securities, T-bills say, as "capital reserves"? Well OK. How about blue chip stocks and bonds? Perhaps. How about riskier stuff like mortgage backed securities? Well, we allowed that to our sorrow.
Next question, after we demand that banks keep a certain amount of capitol on hand, and after we allow things other than cash to serve as "capitol", how do we count said capitol? Do we count the stocks and bonds and riskier stuff at purchase price or at current market value? Speaking as a depositor, I say count every thing at current market value. The purpose of the capitol is to pay off depositors and cover bad loans. To do any good, the capitol must be converted into cash, the stocks and bonds sold. "Capitol" that cannot be sold at all, or only sold for very little money is worth little to nothing when it comes to paying off the bank's obligations.
Hence the "mark-to-market" rule which banks hate. Under "mark-to-market" the bank must count as capital only the market value of securites. The rule was put in after the Enron scam which involved carrying worthless stuff on the books at purchase price.

New York Times strikes out again

Columnist writes about the hardships of a career in science and engineering. He bemoans lawyers starting salaries of $145000 whereas he claims a physics PhD starts at a mere $45,000. I don't know what universe this commentator lives in, both in the real world, a bachelor's degree in chemical, electrical, mechanical or civil engineering starts at $50K or better, right out of school, and reaches $100K with just a few years industry experience. For every lawyer starting with a big firm right out of college, a hellofva lot 'em work part time and never rise much beyond doing residential real estate closings.
Engineers get to design the next Iphone, the next game machine, space ships, aircraft, buildings and every thing else that gets made. It's more rewarding than doing closings.

Campaign Sign Maintainance

Got a call from down state yesterday, someone defaced one of our scarce 4 by 8 foot McCain Palin signs, the one down at Clark's Trading Post. So I drove down to inspect. Ran right thru Franconia Notch in the strangest weather ever. A low low cloud scraping the ground and flowing up thru the notch like water.
Found the defaced sign. Some highly mature and principled person had written a rude word across the sign in black spray paint. Their spray can must have been low on paint 'casue they only defaced one side of the sign. So I drove into North Woodstock and bought a can of white paint at the NAPA auto parts store, along with some masking tape. About 10 minutes work of masking and spraying refreshed the white lettering, and the sign, if not good as new, as least looked OK from the road.
Let's say it's just some kids...

Radar Recon on the Taliban

The RAF is taking delivery on their new recon aircraft, Astor, named after the radar rather than the airframe. (Airborne Standoff Radar). It's a twin engine jetliner (a Bombardier Global Express) with the radar mounted in a canoe shaped pod underneath the fuselage. It is said to be sensitive enough to detect men walking on the ground. It's a smaller and cheaper version of the USAF Jstars and Rivet Joint. Size reduction comes from leaving off the 20 odd flying radar observers and just data linking the radar "take" to a ground station, resulting in a much smaller aircraft overall.
The computers onboard that do all the work are running Windows. Aviation Week interviewed a British official. He said "There are lots of things we would like to do better-- such as faster boot times...." Later one he admits that rebooting the Windows computers can take as much as finve minutes. That's Windows for you, sluggish and crashprone.

The Great Chipmunk Escape

Chipmunk spent a day lurking under the washing machine. Cat's attention span wavered, and last night chipmunk scurried across the living room and dove under a bookcase. It must have gotten hungry, there isn't much worth eating in the cellar. Any how cat got another tour of chipmunk guard duty, but never scored.
This morning, while cat was out, chipmunk reappeared. I was able to herd it out the open front door and back into the woodpile. I do hope it finds something to eat and drink after a day long fast under the furniture.

Gm, the Bad and the Ugly. Buying Chrysler.

GM senior management just demonstrated yet again a complete lack of common sense. They have a car company that has too many factories, too many over paid workers, too many dealers, no decent products, worthless stock, a credit rating in the toilet, and money is running out. And they are wasting time dickering to buy Chrysler, a second car company in just as bad, or maybe worse shape? For what?
Chrysler is so worthless that Daimler gave it away to Cerberus. If memory serves Daimler paid $30 billion for Chrysler ten years ago and they dumped it for a couple of billion in stock, not cash last year. That's 'cause Chrysler's liabilities in terms of plump UAW pensions far outweighed any money it could ever make.
GM cannot afford it, hell, GM can't afford to buy toilet paper for the company restrooms. Why in the name of all that's holy are they thinking of making their problem bigger? GM needs to fire all their senior management starting with CEO Rick Wagonner and going down about three levels from there. The GM suits have performed one disaster after another, going back 20 years when they threw away billions of dollars just to get Ross Perot off their board.

The Good news from GM, Volt is coming

A long article on the coming Chevy Volt in Popular Science. The project is real. The battery will be lithium ion. They have two battery suppliers, both of which have delivered prototype batteries to GM. A123 Systems from Massachusetts and Compact Power Inc from Korea. The battery specs call for 40 mile range, weight less than 400 pounds, push the car from 0 to 60 in 8 seconds, a ten year 150000 mile service life, and store 16 kilowatt hours, which is close to the electricity my house uses in a day.
Ten "Mali-volt" test vehicles (Volt drive train in a Malibu body) are running around GM test tracks. The first Volt prototypes will hit the track this month. The batteries are under test, both charge/discharge cycling and oven testing to evaluate life. Battery life is critical, the battery is the most expensive part of the car. If it fails under warranty GM will loose money, if the car gets a reputation of battery dying at 50000 miles resale value will nosedive.
The Volt project is real, not vaporware. GM will bring the car to market in 2010. If it works properly, it ought to sell for something in the mid thirties, which is Prius money. Prius sells briskly even though it's too costly to make economic sense. With a 40 mile battery range, plenty of Volt owners could go for months on just electricity, no need to buy gas at all.
With luck, Volt will give GM a real product, something that people buy 'cause they like it.

Why I won't vote for Obama

1. Obama has promised repeatedly to pull the Army out of Iraq as soon as possible (ASAP). That will turn Iraq over to Islamist extremists, Al Queda, the Taliban, the Wahabis, the Iranians, there is no lack of them. Once that happens, the rest of the middle east will follow. With the exception of Israel, no middle east government has the strength to resist the call to Jihad. Without American support, the tender young government in Iraq will fall, and the Islamists will win. The Iranians will get nukes, and dominate the region. The Saudi's will collapse and Amadinajad will own all their oil. Once this catastrophe happens, there is no recovery. We will have to live with world oil supplies controlled by our enemies.

2. Obama will turn today's stock market crash into a long lasting depression. He and his people believe in the goodness of government furnished health care, housing, easy mortgage money, education, child rearing, alternate energy and countless other expensive goodies. They don't understand that the money to furnish all these goodies has to come out of taxpayers and industry. He doesn't understand that squeezing the necessary funds out of taxpayers will cripple our economy and turn the US into Europe, a place with no growth, 10% unemployment, a declining birth rate and a hostile underclass.

3. Who will Obama appoint to the Supreme Court? Tony Rezco? Jeremiah Wright? Bill Ayres? Does Obama have any friends who aren't leftwingers? The country is stuck with Obama's choices for thirty years.

An Obama administration will damage the United States in ways that cannot be repaired for a generation.

Mighty Hunter has struck out

Yesterday I'm sitting on the deck, soaking up some Indian summer warmth before the winter starts. From under the deck comes the crash of falling firewood. Damn, I think, that cat is getting clumsier than ever. A few minutes later cat trots up the stairs with a chipmunk in it's jaws. Musta been hiding in the woodpile. As usual, cat heads right into the house, planning to disembowel and eat chipmunk on the living room rug. I move to intercept cat. Cat drops chipmunk on the rug.
Chipmunk has been doing a good job of playing dead. Comes to life and runs for it. It's fast, and leads a merry circus around the house, cat in hot pursuit. Instead of zooming out the open door, chipmunk dashes down the cellar stairs. I turn on the lights and find cat patrolling the washing machine. Chipmunk has more patience than cat, it's still in the basement. Cat is still doing occasional washing machine patrol, but so far without success. That's why it's name is Stupid Beast.

Knight Rider meets Baywatch

Watched this revival of the old (70's? 80's?) TV action adventure show. Like the original, the show features a hunky secret agent driving a talking car. In the original show the car had an impressive voice, deep, well modulated, calm, and knowledgeable as Mr. Spock. Michael, the good looking male lead, had a deep relationship of trust and friendship with the car. To the exclusion of girls it seemed.
The revival fixed that right up. Michael now has two girlfriends, one who he has been sleeping with, and a real cutie who wants to start sleeping with him. The scene is California beach/surfing, with the car, (black Mustang) simmering in a sandy sun struck beach parking lot while Michael, and his cutie, step over acres of bikini clad tanning girls and rub elbows with hunky surfers. I kept wondering if the Mustang's upholstery would melt after parking all day in the sun.
The plot is a bit difficult to follow. After a shoulder launched anti tank missile strikes home on the car, there is an explosion, fire, smoke, and then the camera closes up on a smoking crater where the car had been. They cut to commercial. After the 5 minute commercial break, the show returns, and we are underwater, looking at the car, converted to a cozy minisub, with Michael and the cutie inside. Just how the car got over the 500 foot cliff and into the water, ahead of the missile, without so much as a splash is left to the viewer's imagination. The dialog is weak on proper names, so I missed the name of the first girlfriend and the gorgeous Asian American cutie.
I may watch it next week to see if the cutie is still in the show. Her bikini was cute too.

Fake Science goes unchallanged

Fox & Friends was interviewing an anti childhood vaccine person this morning. This person first said "one in six American children has a developmental disorder". Oh really? I personally know better than 100 children and only two of them suffer from "developmental disorders". That's less than one in fifty, a far cry from one in six.
Then the person went on to call mercury "the second worst neurotoxin known to man". Right. Cobra venom, cyanide, arsenic, sarin, and mustard gas move over, mercury is the new king of poisons. The mercury amalgam fillings in my teeth have been there a hellova long time and they ain't killed me yet.
Needless to say, the Fox newspersons never challanged any of this, or even asked for evidence.
Want to bet none of them ever took high school science, let alone college level science?

The fundamentals of the economy are sound

At least they were when McCain said this. Fundamentals are GNP growth (2.7%) and unemployment (6%). Exports are up. Despite Obama's mockery, these are good numbers. If GNP is growing, we aren't in a recession. Six percent unemployment used to be considered normal.
The financial world is sliding down the chute, but the real economy is still doing reasonably OK.

Things McCain should have said last night

1. Name a few names responsible for the Wall St disaster and promise vengeance. Start with Barney Frank and Chris Dodd, then add some targets of opportunity.
2. Point out there are only two exit strategies from war, victory or defeat. He wants victory, what does Obama want?
3. His $5K tax credit plan puts the self employed, who have to purchase their own insurance, on the same footing as the corporate employee who gets his free.
4. In response to the "what will you cut now that the USA is broke" question, suggest ending all farm subsidies, ethanol subsidies, federal highway construction, energy bills, and earmarks. Close down the education dept since education is a state matter, like wise health and human services cause welfare is a state matter.
5. Produce a list of reforms to prevent the Wall St disaster from happening again.

Do we need the "secondary mortgage market"?

Secondary, as in a mortgage trading market, like the stock market. Fannie and Freddie started the thing and look how it turned out. Used to be, up until about 1980, that banks and savings and loans wrote mortgages with their own money. Since their own money was at risk, they used to check out the borrowers pretty closely to insure that the loan would be paid back.
Once a secondary market exists, the original lender can sell his mortage thus avoiding all risk. Which encourages writing riskier mortgages, 'cause once sold, you don't care anymore. Up til now the secondary market has encouraged a whole lot of people to sign mortgages too big to pay off, financed speculators buying houses to flip them, jacked up the price of housing, and financed building acres of houses that can't be sold. And pushed the entire economy over a cliff into the next great depression. Do we need this?
We could eliminate the entire secondary mortgage business with a simple law stateing that mortgages are non transferable. A mortgage is a contract between a single borrower and a single lender, and cannot be sold. As a mortgage holder I like this. I sign a mortgage with the XYZ bank, and that's that. I don't have to worry that XYZ will sell me and my mortgage to someone awful.
The banks, real estate people, builders, and contractors all claim that they need the secondary market to raise the cash to do the mortgages. In effect, the banks borrow the cash on the secondary market and then lend it out again. I say that banks can raise all the money they need by just paying decent interest on savings deposits.
Eliminate the middle man. Make the banks responsible for writing mortgages that will get paid off. Cut the price of mortgages and put all the secondary mortgage market people to work doing something of real economic value.

Dow is down 400 points by 10:30. Click too fast and post twice

Ouch

Dow is down 400 points by 10:30

Ouch

Regulation? Isn't Sarbox enough?

We shouldn't let the Democrats get away with calling for regulation as a cure for the $700 billion bailout problem. There was plenty of regulation, with Sarbanes Oxley the latest installment. Sarbox has reduced the number of initial public offerings to zero, and driven the merger and acquisition business off shore. Plus it has made the bean counters rich and the rest of us poor. Republicans have tried to regulate Fannie and Freddie since 2003 but Democrats, fearing to loose the gravy train of Fannie and Freddie money, defeated all attempts. Today's $700 billion disaster is the direct result of that Democratic policy.
Used to be, before Obama, that deregulation meant ending government price fixing. Over the years regulation (price fixing) of ground freight rates and air fares was phased out. Deregulation brought mass air service at good prices, and vastly cheaper shipping. Every thing we buy got shipped from somewhere, so lower freight rates benefit us all.
The Obama folks now blame the $700 billion catastrophe on "Republican Deregulation". That happens not to be the truth. The $700 billion was caused by democratic opposition to regulating Fannie and Freddie, not by lowering freight rates and air fares.

Health Care vs Obama & McCain

McCain wants to level the playing field between employees and the self employed. Right now employees get health insurance thru their company and it's tax free. The self employed have to buy their own health insurance with their after tax dollars. McCain wants to even this out. Everyone gets a $5K tax credit (subtract $5k from your income tax bill), and the employees pay income tax on their health insurance benefit , just like they do for their salary. So both the employed and the self employed get the SAME tax treatment for health insurance.
Obama has been attacking McCain's proposal saying it would cause employers to drop health coverage. I fail to see the logic of this argument.
Speaking as one who has worked as an independant contractor and as an employee of big corporations, McCain has a fair plan. It's unfair to give corporate employee's favorable tax treatement and deny it to the self employed.

Everyone wants McCain PALIN signs

We get a lot of traffic at the Republican election HQ. Everyone asks for yard signs and bumper stickers with Palin name on them. We have made a couple of resupply runs down country, but cannot keep up with demand. Most of the time they have to settle for a plain "McCain" sign, of which we still have a goodly number left over from the primary.
Palin is wildly popular up here. Although surely Palin was nominated to appeal to women, in actual fact she is immensely appealing to men as well. The men walking into HQ uniformly admire Sarah, saying a woman that cool and that tough is just what the country needs.

Sarah Palin Debate

I watched it. Sarah was great. Poised, confident, feisty, and speaking some real substance. Biden was smooth, but his words just sounded good with no real substance behind them. I guess 30 years experience allows one to reel off platitude upon platitude without skipping a beat. I'll score it even. Sarah did not crush Biden, but heh, you can't have everything. Biden keep quoting damning "facts" which need some serious fact checking. For instance Biden repeatedly rapped John McCain for a "$4 billion tax break for Exxon Mobil". I never heard about that one. I do know Biden voted for the last "energy bill", and we all know that was a package of goodies for the oil business.
I thought Gwen Ifill's questions were poor, that pastor at Saddleback had much better ones. For instance "What decision do you regret the most". That's a job interview classic, which gives a dumb jobseeker an invitation to confess to bad stuff. Sarah at least knew the standard response for that one. Or "Which situation is worse, Iran or Pakistan". Hell, we all know the answer to that one, both are disasters with no good solutions in sight.

Children for Obama, on U Tube

The kids are cute, but the level of political indoctrination is kinda creepy.

Playing the blame game

Why is Wall St in trouble? At root, too many non performing mortgages. Too many mortages granted to borrowers who couldn't afford to keep up the payments. And/or too many mortgages granted that were more money than the property is worth. Used to be, banks only granted mortgages with monthly payments less than a third of the lender's income, and in amounts less than the value of the property. Banks were careful lending money, lest they lose it.
Then Fannie and Freddie came along to buy mortgages off the banks, the risk to the bank went away. Once sold, the bank is out of jail free, the loan can go into foreclosure and it's no skin of their nose. Fannie and Freddie bought more and more mortgages and then started buying sub prime mortgage bonds. They borrowed money all over the world and poured it into shaky mortgages. House sales, house prices and housing starts went up. As long as they could sell mortgages to Fannie and Freddie, the banks kept making them. In short, Fannie and Freddie's willingness to buy mortgages and sub prime mortgage bonds created the bubble.
Way back in 2005 a bill to put a cap on Fannie and Freddie's borrowing power went up the Hill. It was supported by Paul Volker, Alan Greenspan, John McCain, the Wall St Journal, and the Bush administration. It was opposed by Barney Frank and Chris Dodd, and failed to pass. If it had passed, we wouldn't be where we are now.
In short, an attempt at regulation was defeated by the very democrats calling for more regulation today.
Fannie and Freddie used to make massive campaign contributions. Barney, Chris and a certain Barack Obama were the top three recipients of this largess. You get what you pay for.

Election Headquarters in Littleton

So we got open. We have banners, signs, bumper stickers and a store front. The location is close to ideal, center of Main St Littleton. Good foot traffic. The McCain Palin signs are flying out the door. The just "McCain" signs, left over from the primary, just don't have the attractiveness of the McCain Palin signs. This reinforces my view that picking Sarah Palin was one of McCain's best decisions.
It's autum leaf season up here, and the number of out of state tourists is impressive. Fully a third of the walkins at the HQ are out of staters. They all ask for signs, saying that they are unobtainable back home. One advantage for being a battle ground state. It's also impressive just how many tourists we get and from so far away (Texas, California, Ohio) Although Littleton is a fine north country small town, it lacks the amenities of say, Boston. All we have to draw tourists is the fall foliage, the Franconia notch scenery, and the up country ambiance. It's pleasing that such simple things draw so many tourists.
Had a reporter from the local paper (Littleton Courier) drop in yesterday, looking to write up a story. Naturally, we were overjoyed at the prospect of publicity. We chatted with him for as long as he could stand it, named names, gave him everything thing we could remember or think of. The reporter then mentioned that he had just come from the Democratic election HQ just up the street, and the democrats had told him they were not authorized to speak to the press and he would have to contact Concord or Manchester. Hmm. Are these democrats a political party or an underground conspiracy?

Republican Election Headquarters in Littleton NH

It all started last week. The Grafton County committee chairman called a meeting of the "North of Franconia Notch" republicans. He spoke of the need to get out the vote up here. Some thing caught fire, and the dozen of us sitting round the table decided to open a storefront Republican HQ in Littleton. Things move fast. There was an empty storefront, right in the center of town. Money was raised, publicity sought. Had a work night to get it going last night. People and tables and ladders and vacuum cleaners appeared. The lights work, toilet flushes, the store window is full of campaign signs. Grand opening is Saturday. 4 PM.

To bail or not to bail, the $700 billion question

Watched the TV to see if Wall St was going to get $700 billion in my taxes and everyone else's taxes. A vast waste land. Fox talked about McCain canceling/postponing Friday's debate and what Obama thought about that. Endless campaign chitchat of little interest. A complete lack of information on the bailout. Like how many votes does it have? What are the terms? What amendments are the democrats pressing for. Does any Congress critter support the administration proposal? What happens if we do nothing? What do business leaders, labor leaders and academics think? Fox is beyond clueless.
The president came on at 9PM. He should have said "Cough up $700 billion or the Great Depression comes back". Trouble is, people would take him seriously and start selling every stock they own. So he couldn't say that. In fact, TV viewers ought to remember that responsible officials, in being responsible, will minimize the trouble lest they make it worse. Sen Chuckie Schumer pushed IndyMac bank into bankruptcy a couple of months ago with just a memo badmouthing their financial position. Of course Chuckie isn't a responsible official.
It's clear to me that the real issue is how much cash to put into the banks. All the talk about the evils of bad mortgage backed securities clogging the system is just talk. The banks are out of money. Paulsen wants to pour tax dollars into the banks to keep them afloat. To make things look a little better, he calls it "buying illiquid assets", but illiquid is a nice way of saying worthless. So it gets down to giving the banks a big Christmas present.
The original proposal was Paulsen becomes Santa Claus, with the power to decide who gets how much. Nice deal for the Treasury Secretary. On the other hand, he will do a better job than the pork loving Congress. Far as I can see, Congressional calls for "oversight" really mean Congress wants to hand out the money to their special friends, rather than letting Paulsen do it.
The bailout would be more palatable to us taxpayers if the senior management of the bailed out firms got hurt. Like no bonuses, ever, put the company jet on E-bay, cancel all severance (golden parachute) payments, stock options, and other goodies. Trim retirement benefits back to Social Security levels. Top management salaries reduced to $1 a year. No salary in the entire company to exceed $100K. Companies claim they pay top salaries to attract top talent. Any company dumb enough to buy sub prime mortgage securities doesn't have top talent. Might as well save a few big ones by skinning them down to the bone. Besides, I enjoy a little payback as much as any other man.

Punting thru the Pundits, on Sunday

Watched Meet the Press, Washington Week, and the McLaughlin Group talk about Wall St this morning. With one exception, the pundits and Henry Paulson (guest on both ABC's Stephanopolis show AND NBC's Meet the Press at the same time) spoke in vague generalities. Or flagellated the entire country for greed, or "things that go up must come down". Little to no fingerpointing.
The one exception, Mort Zuckerman on the McLaughlin Group. He said Fannie and Freddie kicked off the sub prime mortgage disaster by buying sub prime bonds. He, the Wall St Journal, McCain, and the Bush administration have been calling for Fannie Freddie regulation for years, but Fannie and Freddie killed it with campaign contributions to Obama, Dodd, Biden, and Barney Frank, plus a vigorous lobbying effort on the rest of the Congress. Regulation of Fannie and Freddie means putting a lid on the amount of money they could loan and forbidding them from buying sub prime mortgage bonds. Zuckerman also faulted the SEC chairman for loosening the capital requirements on banks. Used to be, back before 2000, banks were only allowed to lend up to 11 times their capital. The SEC under Cox raised that to 30 times, and the now defunct Bear and Lehman were up to 33 times when they croaked.
Why does the capital to loan ratio matter? Simple, some loans default. To keep the bank alive after losses, the bank needs some of its own money in the till. Under the 11:1 capital rule, a bank could survive a loan loss of nearly 10%. Under the 30:1 rule, all it takes is a 3% loss and the bank is broke.
McCain is right to call for the head of the SEC chairman. The SEC's job is to prevent a Wall St disaster. The chairman has clearly failed in that mission.

Highland Games in New Hampshire

The annual Highland Games festival was held at the Loon Mt Ski resort. Scotsmen of all kinds, (real, synthetic, and American) come to wear their kilts and watch dances, games, caber tossing and the like. It's a slow weekend up here, summer is over and the autumn leaf season hasn't started, so anything to draw the tourists is a good thing. Weather was perfect, warm and cloudless and sunny.
Next door classic American roadside tourist attraction, Clark's Trained Bears, opened to take advantage of the tourist traffic. By noon the parking lot off US route 3 was full of happy tourists, there to ride the steam railroad, watch the trained bears perform, and savor the lovely Fall weather.
The Ammonousic Valley Railroad Association was invited to set up the big portable HO train layout and run it thru the weekend. Setup was Friday, a simple two hour job. Saturday we brought down the HO model trains to run for the fascination of 12 year old children. All day crowds flowed past the layout and ohhed and ahhed as the tiny steamers whirred around the track. For providing the entertainment, we got a free lunch.
Clark's collection of antique equipment was in beautiful repair. They had an 80 year old railbus with fresh paint smoother and glossier than a new car. They had three steam engines steaming, brass all polished, pulling carloads of tourists around the property. Rich clouds of wood smoke rising from the stacks, white clouds of steam from the whistles and pop off valves. Diesels just don't put on the show that steamers do.

Bond Insurance brings down AIG

AIG has been insuring sub prime mortgage bonds. Lots of them. Investors looking at AIG liablilities see nothing but disaster, as trillions of dollars of insured bonds get ready to default. It won't help AIG today, but a lesson learned from this. Don't insure bonds, any kind of bonds, ever again.
The availibility of insurance allowed greedy but clueless investors to buy risky bonds and feel good about it because they were insured. Trouble is, when times get bad, ALL the insured bonds default at the same time. No insurance company is wealthy enough to make good when everything fails at once. So, the investors are left with worthless bonds, and worthless insurance. A bond so risky that it needs insurance is too risky to sell. If the insurance hadn't been available, those bonds wouldn't have been sold, which would be a good thing.

Georgia gives the Space Shuttle new life

After years of talk about retiring the Space Shuttle, now the NASA people are talking about squeezing a few more missions out of the old bird. The original NASA plan was to shut down the Shuttle and then use the money saved to build a new ground to orbit system (Ares). In the years between the last shuttle flight and the first Ares flight, we would use the Russian Soyuz capsule to get to the International Space Station.
Well, after Georgia, relying on the Russians for access to space doesn't seem so pleasant.

Stereo Missile Warning

In this day and age of shoulder launched SAMs, combat aircraft now carry missile warning electronics. One version of same, when it sees an incoming missile, gets on the aircraft intercom and cries out "Missile! Missile! Missile!". The Swedes have improved on that.
Human ears are very good at telling the direction of a sound. The Swedish system plays with the timing and phase of the sound going to the pilot's left and right earphones. This gives the sound a direction left/right and up/down. Naturally the system makes the sound come from the direction of the incoming missile. The pilot instantly knows which way to turn to evade.
Clever idea.

A Grafton Country Wedding

Big event. My niece got married on Saturday. This happened out of doors at the family farm. Saturday was a single day of sunshine sandwiched inbetween two solid weeks of rain and the remnants of Hurricane Ike. Scads of guests, set up a huge white tent for the reception. Filled an aluminum canoe with ice, and beer. Squeeze bottles of Deep Woods Off set between the water pitchers and the salt and pepper shakers. Hordes of wedding guests turned up days in advance to pitch in and spiff up the place. A couple of years worth of home projects got finished off and looking good. Vows were said at two in the afternoon. The beer lasted until 2 AM the next morning.

Windows XP gets the slows

Daughter returned from overseas last weekend, bringing back her Compaq/HP 6516 laptop with the slows. Apparently the machine caught something awful from a flash drive in the Kirghiz Republic. It boots slow and runs slow. Takes 3 minutes to boot. Runs so slow as to cause static while playing music.
So, we ran AVG anti virus, Spybot Search and Destroy, Ad Aware, Microsoft malicious software removal tool, Malware bytes, and UnHackMe. No improvement. Uninstalled a good deal of HP bloatware on general principles, found a patch that allowed us to see hidden files. Studied Task Manager's process list, looking for strange processes. No joy. Something is lurking in the laptop and we can't see it. If you can't see it you can't kill it.

Poltical Thing

TV was full of 9/11 remembrances all day yesterday. This lasted up and into the NewsHour with Jim Lehrer. They had some pundit on, talking about 9/11 and he said something like "It's too bad that 9/11 became so political."
Hmm. Unprovoked attack in peacetime with higher casualties than Pearl Harbor. And this guy thinks it shouldn't affect the politics of the United States? Pearl Harbor got us into WWII and ended with nuking the enemy. By those standards, the American response to 9/11 was quite restrained and civilized.

Kim Jong Il may be ill. Or dead or dying

North Korean dictator Kim Jong Il failed to appear on the reviewing stand for the North Korean version of a Fourth of July parade. He hasn't been seen in public for several weeks, creating speculation that he is dead or dying.
If so, the world gets to see if the North Koreans have a succession plan. Last time, Kim Il Jong managed to pass the dictatorship to his son, Kim Jong Il without a ruckus. If there is an heir apparent this time, I never heard of him. If the seccession doesn't pass smoothly to someone, the country may fall apart. Leading to a sticky situation.
The South Koreans will face intense pressure to intervene to maintain order and rescue numerous relatives from the chaos that will break out. The Chinese will be under pressure to intervene to maintain North Korean as a buffer state. They certainly don't want the pro American South Koreans to expand North and become their new neighbor. The possibilities for serious trouble are obvious.

Lipstick on a Pig

Fox news has been replaying Obama's "Lipstick on a pig" comment all day. Much as I enjoy watching the media bash democrats for a change, and much as I like Sarah Palin, I'm prepared to give Obama a pass on this one. It's a well worn cliche, I use it myself upon occasion. Obama is pretty bright, and he likely knew the cliche would draw a chuckle from the crowd. It's a zinger, but Sarah has tossed a few good zinger's Obama's way ("kinda like a community organizer only you have real responsibilities") . So maybe Obama is entitled to a zinger or two himself.

Freddie and Fannie

We taxpayers are gonna take a solid hit on this one. It's probably necessary, Fannie and Freddie bonds were sold all over the world and were regarded as good as US treasuries. If we default on the Fannie/Freddie bonds, it will weaken the credit of the United States, making it much more expensive, maybe impossible, to sell the bonds that keep the US government solvent. Right now the US enjoys the reputation of the safest haven for money on the planet. Anyone can invest in the US and not get ripped off, not get nationalized, and not get inflated to death. Even the Chinese, who don't like us very much, buy our T-bills 'cause they are safe. If the Americans welsh on the $5 trillion worth of Fannie/Freddie bonds, the rest of the world will not soon forget. And the world wide river of money flowing into the US will dry up. So the treasury had to step in.
Big question, what to do next? Do we really need Fannie and Freddie to finance houses? Up till the 1980's banks financed mortages from deposits. To get more deposits, the banks used to pay real interest on savings accounts. Today the banks pay depositors dirt, and prefer to raise money by selling bonds on Wall St bearing a hellova lot more interest than they will pay a depositor. Or, they sell the mortgage outright to Fannie, Freddie, or a gullable Wall St brokerage house like Bear Stearns. Trouble with the "sell the mortgage" plan, is that once sold, the mortgage issuer is off the hook. Assuming enough gullable buyers, the issuers will write terrible mortgages and sell them off for good money. That is the cause of the sub prime catastrophy.
So where do we go now? I think we ought to wind down Fannie and Freddie, over a ten year period. Have them buy ten percent fewer mortages each year until in 2018 they close their doors for good. Prohibit them from dabbling in the sub prime swamp. Prohibit them from lobbying Congress and from hiring ex politicians.

Want can I say about Sarah Palin?

Darn little that hasn't been said by others. She has dominated the media for the last week.

Technical experience vs people skills

The airwaves are full of talk about experience, who has it, who needs it, who brings what experience to what ticket. "Foreign affairs experience" is spoken of with bated breath, as if it were the unified field theory revealed but to a few. Actually, foreign affairs are about the same as domestic affairs, only the foreigners can't vote against you. So you can push them a little harder than domestic opponents and still get reelected.
A president comes into office and is immediately overwhelmed by a zillion professional advisers from the bureaucracy, the military, the intelligence services, the lobbyists, the congress, the press, academia, the party, and every joe citizen with access to email. There is no lack of experts on any question under the sun. The trick for the office holder, is to find the few truly knowledgeable advisers and filter out the zillions of loudmouths with mere opinions. Everyone has an opinion, only a few truly know what they are doing.
In this respect, Sarah Palin is well experienced. Taming the Alaska political machine, winning the governorship, acheiving an 80% approval rate, raising five children, dealing with a husband who races snowmobiles, and cutting a tough deal with big oil, shows a rare understanding of people and negociation therewith.
If God forbid, something should happen to McCain, Palin looks tough enough to carry on. And, she shares McCain's views, so a succeeding Palin Administration would not negate everything a McCain administration managed to accomplish. Her practical experience exceeds that of Obama.

Island of Seven Cites by Paul Chiasson

Sub Title Where the Chinese Settled when they discovered America. The author discovered a big, previously unknown stone walled settlement at the top of Cape Breton Island. It's in the gulf of St Lawrence, right on the northern end of Novia Scotia. The author gives a solid, spare no obscure reference, review of European exploration records of the area, going back before Columbus, and finds no mention of a European settlement on the spot. He suggests that Chinese voyagers from the heroic era of Zhang He (1400's) settled on Cape Breton to work a gold mine. He points to strong Chinese influences on the local Micmac Indians, matters of dress, advanced knowledge of navigation, sailing, and medicine. The Chinese were sailing to East Africa, and there is a Chinese map from the 1400's showing both sides of Africa, good evidence that they had rounded the Cape of Good Hope, a century before Bartholomew Diaz.
Chiasson points to favorable ocean currents that could carry a ship from Cape of Good Hope to the St Lawrence. The Chinese vessels were capable of round trip voyages from China to East Africa. Any ship with that sort of range could make the trip from an East African harbor to Canada.
Personally, I feel the voyage length is extreme, and there are plenty of more inviting sites to settle in North America than Cape Breton Island. Also, the Atlantic westerly winds would sooner or later drive a Canada bound Chinese vessel into a European port.
Since, it's a fascinating thesis, and the site on Cape Breton Island deserves excavation by a professional archeologist.

New Orleans dodges a bullet, barely

Thank the good lord, the levees held, and New Orleans didn't flood, again. On the other hand, it was close. That video of the water sloshing over the top of the Industrial Canal levee is sobering. If the water rose another foot, it would have poured over the top and filled New Orleans up just like last time. Sounds like a lot more expensive, federally funded levee raising is in order.

Democrats slam Palin

Chatting with some democratic neighbors. "I can't understand how he could pick some one with just a journalism degree from Idaho. Couldn't he find someone from a decent school?" "And then she had that child, when she knew it was going to be defective."
Yuck.

"The Strongest Tribe" by Bing West

Great book on the Iraq war. Tells the story from the beginning right up to a couple of months ago. Tells of the combat, the units engaged and what they did, the political maneuvering in Washington and Baghdad, and gives thumbnail sketches of colorful American soldiers doing their best under tough circumstances.
Bing West, the author, was a Marine infantry man in Viet Nam, so he knows something about counter insurgency warfare. He has spent much time in Iraq, out in the field, ever since 2003. West is a well informed man with practical experience and first hand observations.
West details policy blunders by Washington and by the generals, but shows how the sheer excellence of the American fighting men overwhelmed the enemy and turned defeat into victory. US troops never flinched, never faltered, and always ran toward the sound of the guns. They endured back to back tours in Iraq, 120 degree summer heat, IED explosions, and enemy snipers. Out in the wild west of Anbar province, the front line soldiers made the connections with the tribal sheiks that sparked the Anbar Awakening and won the war. They used email and blogs to keep home front political support alive. With guys like this, anything is possible,
Great read.

Sarah Palin will be a great VP

That's the consensus of Republicans up here. Everyone loves her. Every one admits they never heard of her before McCain picked her, but they think she is great. The general feeling is any one who can raise five kids AND become state governor has got a lot on the ball. The other observation is that the other names (Romney, Huckabee, Guiliani and company) are boring and dull. Up here a gutsy and independent pick plays better than a conventional and boring pick.