Tue, Mar 18 2008
DON HARROLD GOES OFF ON CRAMER, BEAR, AND THE FED
Tell it like it is, bro:
Tue, Mar 18 2008
CHILDHOOD'S END - GOOD NIGHT, ARTHUR
One of the most amazing humans of the last 100 years died today.
Writer Arthur C. Clarke dies at 90
[Science fiction author Arthur Clarke poses near his personal satellite antenna at his home in Colombo, Sri Lanka in this Jan. 28, 1977 file photo. (AP Photo)]
COLOMBO, Sri Lanka, Associated Press - Arthur C. Clarke, a visionary science fiction writer who won worldwide acclaim with more than 100 books on space, science and the future, died Wednesday in his adopted home of Sri Lanka, an aide said. He was 90.
Clarke, who had battled debilitating post-polio syndrome since the 1960s and sometimes used a wheelchair, died at 1:30 a.m. after suffering breathing problems, aide Rohan De Silva said.
Co-author with Stanley Kubrick of Kubrick's film "2001: A Space Odyssey," Clarke was regarded as far more than a science fiction writer.
He was credited with the concept of communications satellites in 1945, decades before they became a reality. Geosynchronous orbits, which keep satellites in a fixed position relative to the ground, are called Clarke orbits.
He joined American broadcaster Walter Cronkite as commentator on the U.S. Apollo moonshots in the late 1960s.
Clarke's non-fiction volumes on space travel and his explorations of the Great Barrier Reef and Indian Ocean earned him respect in the world of science, and in 1976 he became an honorary fellow of the American Institute of Aeronautics and Astronautics.
But it was his writing that shot him to his greatest fame and that gave him the greatest fulfillment.
"Sometimes I am asked how I would like to be remembered," Clarke said recently. "I have had a diverse career as a writer, underwater explorer and space promoter. Of all these I would like to be remembered as a writer."
From 1950, he began a prolific output of both fiction and non-fiction, sometimes publishing three books in a year. He published his best-selling "3001: The Final Odyssey" when he was 79.
Some of his best-known books are "Childhood's End," 1953; "The City and The Stars," 1956, "The Nine Billion Names of God," 1967; "Rendezvous with Rama," 1973; "Imperial Earth," 1975; and "The Songs of Distant Earth," 1986.
When Clarke and Kubrick got together to develop a movie about space, they used as basic ideas several of Clarke's shorter pieces, including "The Sentinel," written in 1948, and "Encounter in the Dawn." As work progressed on the screenplay, Clarke also wrote a novel of the story. He followed it up with "2010," "2061," and "3001: The Final Odyssey."
In 1989, two decades after the Apollo 11 moon landings, Clarke wrote: "2001 was written in an age which now lies beyond one of the great divides in human history; we are sundered from it forever by the moment when Neil Armstrong and Buzz Aldrin stepped out on to the Sea of Tranquility. Now history and fiction have become inexorably intertwined."
Clarke won the Nebula Award of the Science Fiction Writers of America in 1972, 1974 and 1979; the Hugo Award of the World Science Fiction Convention in 1974 and 1980, and in 1986 became Grand Master of the Science Fiction Writers of America. He was awarded the CBE in 1989.
Born in Minehead, western England, on Dec. 16, 1917, the son of a farmer, Arthur Charles Clark became addicted to science-fiction after buying his first copies of the pulp magazine "Amazing Stories" at Woolworth's. He devoured English writers H.G. Wells and Olaf Stapledon and began writing for his school magazine in his teens.
Clarke went to work as a clerk in Her Majesty's Exchequer and Audit Department in London, where he joined the British Interplanetary Society and wrote his first short stories and scientific articles on space travel.
It was not until after the World War II that Clarke received a bachelor of science degree in physics and mathematics from King's College in London.
In the wartime Royal Air Force, he was put in charge of a new radar blind-landing system.
But it was an RAF memo he wrote in 1945 about the future of communications that led him to fame. It was about the possibility of using satellites to revolutionize communications — an idea whose time had decidedly not come.
Clarke later sent it to a publication called Wireless World, which almost rejected it as too far-fetched.
Clarke married in 1953, and was divorced in 1964. He had no children.
Disabled by post-polio syndrome, the lingering effects of a disease that had paralyzed him for two months in 1959, Clarke rarely left his home in the Indian Ocean island of Sri Lanka.
He moved there in 1956, lured by his interest in marine diving which, he said, was as close as he could get to the weightless feeling of space.
"I'm perfectly operational underwater," he once said.
Clarke was linked by his computer with friends and fans around the world, spending each morning answering e-mails and browsing the Internet.
In an interview with The Associated Press, Clarke said he did not regret having never followed his novels into space, adding that he had arranged to have DNA from strands of his hair sent into orbit.
"One day, some super civilization may encounter this relic from the vanished species and I may exist in another time," he said. "Move over, Stephen King."
___
On the Net:
The Arthur C. Clarke Foundation: http://www.clarkefoundation.orgTue, Mar 18 2008
NEXT DOMINOS
Bill Bonner: "A major failure on Wall Street usually means the end of a market downturn, says John Authers in the FT: Continental Illinois in '64, Drexel Burnham Lambert in '90, Kidder Peabody in '94 and Longterm Capital Management in '98.
But was Bear the end of the problem…or just the beginning?
"Wall Street waits for the next domino to fall," says an FT headline from yesterday.
In the aftermath of the Bear saga, investors started asking questions about Lehmann Bros (NYSE:LEH). The firm had to publicly announce that it was solid. Of course, Bear said it was solid too. And as Walter Bagehot remarked in 1873, "every banker knows that if he has to prove he is worthy of credit…in fact, his credit is gone.""
---
James Turk: "Let’s take a look at the big fish, namely, the commercial banks. In fact, let’s look at the biggest of them all to ask: “Will Citibank survive?” "
---
Reuters News: "Dozens of U.S. banks will fail in the next two years as losses from soured loans mount and regulators crack down on lenders that take too much risk, especially in real estate and construction, an analyst said. The surge would follow a placid 3-1/2 year period in which just four banks collapsed, all in the last year, RBC Capital Markets analyst Gerard Cassidy said in a Friday interview.
Between 50 and 150 U.S. banks -- as many as one in 57 -- could fail by early 2010, mostly those with no more than a couple of billion dollars of assets, Cassidy said. That rate of failure would be the highest in at least 15 years, or since the winding down of the savings-and-loan debacle."
---
Mish: "Lehman may not be Bear Stearns but it is still leveraged 30.7 to 1. Citigroup and many financials are hugely leveraged as well. Eventually the market will have to face a deleveraging of those assets. Huge additional writeoffs are coming. Furthermore, many homebuilders are going to go bankrupt and today does not change that. But that is not today's business.
Today's business is simple: The much anticipated end of world did not come. Looking forward however, the underlying economic fundamentals have not changed."
---
Paul Krugman: "Here’s one way to think about the liquidity trap — a situation in which conventional monetary policy loses all traction. When short-term interest rates are close to zero, open-market operations in which the central bank prints money and buys government debt don’t do anything, because you’re just swapping one more or less zero-interest rate asset for another."
---
Jim Sinclair: "All Is Well In La La Land: Lehman's conference call declaring no problems due to sufficient capital and a fine core business has the equity market up 250+ points and Lehman's shares are in the process of erasing previous losses. The general financials are following suit.
The Fed works with perception. The perception today is outlined in the title of this missive.
The implication that the Fed is the guarantor of all things financial is a repeat of the Weimar situation as the tools being applied will have the same results."
"The equity markets and the financial sector stocks love the Fed so why doesn’t everyone?
To understand the following article make sure you first understand the following:
Inflation is two fold. First it is the expansion of monetary aggregates which always result in price inflation.
Deflation is debt failure first. Debt failure clear of no monetary expansion will reduce prices.
We now have unprecedented monetary inflation on top of price inflation coming from the monetary and fiscal stimulus of 2000 to present.
We are headed to some degree of the Weimar experience, which can be summed up as debt failure, collapse in business activity and an explosive rise in prices for goods and services while a currency collapse took place.
That is a mouthful, but also totally accurate concerning the present situation."
---
Mogambo Guru: "So stocks are over-priced, bonds are over-priced, houses are over-priced, and government is over-priced and over-sized, at the same time as previous inflations in the money supply are showing up as inflation in consumer prices, at the same time as consumers are over-burdened with debt, at the same time as they are losing their jobs, at the same time as (courtesy of JMR Ed. S) the juxtaposed Bloomberg.com headlines announce "Producer Prices in U.S. Increase More Than Forecast, U.S. Consumer Confidence Declines to Five-Year Low, U.S. Consumer Confidence Declines to Five-Year Low, Goldman, Lehman May Not Have Dodged Credit Crisis, at the same time as JMR Mikael K. sends headlines from InformationClearingHouse.com that "Oil hits new peak at $102 a barrel as commodities boom. Dollar sinks to low ($1.50) against euro. Manufacturing data fuel US recession fears. U.S. Economy: Confidence Falls, Producer Prices Rise. U.S. new-home sales for January fall 2.8%. U.S. Home Foreclosures Jump 90% as Mortgages Reset. US mortgage finance firm Fannie Mae posts 2.1 bln loss. Key home price index shows record decline. Bush: US in 'slowdown' not recession.""
---
etcetera, etcetera, etcetera...
Tue, Mar 18 2008
NOT A BAILOUT, OH NO, NO
Tue, Mar 18 2008
KILL THE FED, DUMP BERNANKE
Billionaire Jim Rogers states the obvious, over and over again. Note the CNBC dim bulbs just not getting it:
Tue, Mar 18 2008
ALAN GREENSPAN IS COMPLETELY SENILE
His brain has clearly turned to cheesecake. To read his latest drivel you have to assume that not only is this drooling idiot completely blameless for the current fiasco, but no one could have possibly foreseen the blatantly obvious:
"Those of us who look to the self-interest of lending institutions to protect shareholder equity have to be in a state of shocked disbelief."
Are you shitting me, Alan? Just nip off and shoot yourself, you useless bastard.
We will never have a perfect model of risk
By Alan Greenspan
Financial Times, Sunday Mar 16 2008 13:30
The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.
Home price stabilisation will restore much-needed clarity to the marketplace because losses will be realised rather than prospective. The major source of contagion will be removed. Financial institutions will then recapitalise or go out of business. Trust in the solvency of remaining counterparties will be gradually restored and issuance of loans and securities will slowly return to normal. Although inventories of vacant single-family homes - those belonging to builders and investors - have recently peaked, until liquidation of these inventories proceeds in earnest, the level at which home prices will stabilise remains problematic.
The American housing bubble peaked in early 2006, followed by an abrupt and rapid retreat over the past two years. Since summer 2006, hundreds of thousands of homeowners, many forced by foreclosure, have moved out of single-family homes into rental housing, creating an excess of approximately 600,000 vacant, largely investor-owned single-family units for sale. Homebuilders caught by the market's rapid contraction have involuntarily added an additional 200,000 newly built homes to the "empty-house-for-sale" market.
Home prices have been receding rapidly under the weight of this inventory overhang. Single-family housing starts have declined by 60 per cent since early 2006, but have only recently fallen below single-family home demand. Indeed, this sharply lower level of pending housing additions, together with the expected 1m increase in the number of US households this year as well as underlying demand for second homes and replacement homes, together imply a decline in the stock of vacant single-family homes for sale of approximately 400,000 over the course of 2008.
The pace of liquidation is likely to pick up even more as new-home construction falls further. The level of home prices will probably stabilise as soon as the rate of inventory liquidation reaches its maximum, well before the ultimate elimination of inventory excess. That point, however, is still an indeterminate number of months in the future.
The crisis will leave many casualties. Particularly hard hit will be much of today's financial risk-valuation system, significant parts of which failed under stress. Those of us who look to the self-interest of lending institutions to protect shareholder equity have to be in a state of shocked disbelief. But I hope that one of the casualties will not be reliance on counterparty surveillance, and more generally financial self-regulation, as the fundamental balance mechanism for global finance.
The problems, at least in the early stages of this crisis, were most pronounced among banks whose regulatory oversight has been elaborate for years. To be sure, the systems of setting bank capital requirements, both economic and regulatory, which have developed over the past two decades will be overhauled substantially in light of recent experience. Indeed, private investors are already demanding larger capital buffers and collateral, and the mavens convened under the auspices of the Bank for International Settlements will surely amend the newly minted Basel II international regulatory accord. Also being questioned, tangentially, are the mathematically elegant economic forecasting models that once again have been unable to anticipate a financial crisis or the onset of recession.
Credit market systems and their degree of leverage and liquidity are rooted in trust in the solvency of counterparties. That trust was badly shaken on August 9 2007 when BNP Paribas revealed large unanticipated losses on US subprime securities. Risk management systems - and the models at their core - were supposed to guard against outsized losses. How did we go so wrong?
The essential problem is that our models - both risk models and econometric models - as complex as they have become, are still too simple to capture the full array of governing variables that drive global economic reality. A model, of necessity, is an abstraction from the full detail of the real world. In line with the time-honoured observation that diversification lowers risk, computers crunched reams of historical data in quest of negative correlations between prices of tradeable assets; correlations that could help insulate investment portfolios from the broad swings in an economy. When such asset prices, rather than offsetting each other's movements, fell in unison on and following August 9 last year, huge losses across virtually all risk-asset classes ensued.
The most credible explanation of why risk management based on state-of-the-art statistical models can perform so poorly is that the underlying data used to estimate a model's structure are drawn generally from both periods of euphoria and periods of fear, that is, from regimes with importantly different dynamics.
The contraction phase of credit and business cycles, driven by fear, have historically been far shorter and far more abrupt than the expansion phase, which is driven by a slow but cumulative build-up of euphoria. Over the past half-century, the American economy was in contraction only one-seventh of the time. But it is the onset of that one-seventh for which risk management must be most prepared. Negative correlations among asset classes, so evident during an expansion, can collapse as all asset prices fall together, undermining the strategy of improving risk/reward trade-offs through diversification.
If we could adequately model each phase of the cycle separately and divine the signals that tell us when the shift in regimes is about to occur, risk management systems would be improved significantly. One difficult problem is that much of the dubious financial-market behaviour that chronically emerges during the expansion phase is the result not of ignorance of badly underpriced risk, but of the concern that unless firms participate in a current euphoria, they will irretrievably lose market share.
Risk management seeks to maximise risk-adjusted rates of return on equity; often, in the process, underused capital is considered "waste". Gone are the days when banks prided themselves on triple-A ratings and sometimes hinted at hidden balance-sheet reserves (often true) that conveyed an aura of invulnerability. Today, or at least prior to August 9 2007, the assets and capital that define triple-A status, or seemed to, entailed too high a competitive cost.
I do not say that the current systems of risk management or econometric forecasting are not in large measure soundly rooted in the real world. The exploration of the benefits of diversification in risk-management models is unquestionably sound and the use of an elaborate macroeconometric model does enforce forecasting discipline. It requires, for example, that saving equal investment, that the marginal propensity to consume be positive, and that inventories be non-negative. These restraints, among others, eliminated most of the distressing inconsistencies of the unsophisticated forecasting world of a half century ago.
But these models do not fully capture what I believe has been, to date, only a peripheral addendum to business-cycle and financial modelling - the innate human responses that result in swings between euphoria and fear that repeat themselves generation after generation with little evidence of a learning curve. Asset-price bubbles build and burst today as they have since the early 18th century, when modern competitive markets evolved. To be sure, we tend to label such behavioural responses as non-rational. But forecasters' concerns should be not whether human response is rational or irrational, only that it is observable and systematic.
This, to me, is the large missing "explanatory variable" in both risk-management and macroeconometric models. Current practice is to introduce notions of "animal spirits", as John Maynard Keynes put it, through "add factors". That is, we arbitrarily change the outcome of our model's equations. Add-factoring, however, is an implicit recognition that models, as we currently employ them, are structurally deficient; it does not sufficiently address the problem of the missing variable.
We will never be able to anticipate all discontinuities in financial markets. Discontinuities are, of necessity, a surprise. Anticipated events are arbitraged away. But if, as I strongly suspect, periods of euphoria are very difficult to suppress as they build, they will not collapse until the speculative fever breaks on its own. Paradoxically, to the extent risk management succeeds in identifying such episodes, it can prolong and enlarge the period of euphoria. But risk management can never reach perfection. It will eventually fail and a disturbing reality will be laid bare, prompting an unexpected and sharp discontinuous response.
In the current crisis, as in past crises, we can learn much, and policy in the future will be informed by these lessons. But we cannot hope to anticipate the specifics of future crises with any degree of confidence. Thus it is important, indeed crucial, that any reforms in, and adjustments to, the structure of markets and regulation not inhibit our most reliable and effective safeguards against cumulative economic failure: market flexibility and open competition.
All news articles and images provided under the Fair Use Notice.