I don’t like all the u-tube videos floating around making fun of Muslims. But this one was so funny that I just could not help liking it in spite of my principles. Somebody has way to much time on their hands.
Some of the best innovations in the world are things that seem ridiculously simple in retrospect. Israeli field bandages are a good example. They seem so natural you wonder why it took people so long to come up with the idea. That is a sign of good design.
You can go here to learn about them. I particularly recommend watching the training video (unfortunately it is QuickTime so I can’t direct link). It will give you a good idea of why Israeli field bandages are becoming the new standard for military medics and other first responders.
The Fed cut made me furious, but this made me smile. So did this.
h/t Yves Smith
Felix Salmon thinks that the fact that Goldman Sachs is bailing out one of their own hedge funds to the tune of 3 billion dollars (admittedly, only about 2 billion of that was their own money) is a sign that smart money smells an opportunity. Is he right?
I will grant you that Goldman Sachs fits the definition of smart money. But I have to wonder if it is wise to take their pronouncement that “We are investing not because we have to, but because we want to” at face value. As this article in the Economist points out…
This makes sense. After all, prime brokers provide the finance that allows hedge funds to gear up their returns and lend them the stocks so they can sell individual shares short (ie, gamble that their prices will fall). And monitoring is made all the easier because three investment banks—Goldman Sachs, Morgan Stanley and Bear Stearns—dominate prime brokerage. The trio act as brokers for about 60% of hedge-fund assets.
But this is where the paradox appears. Hedge funds are supposed to be dispersing risk. But if their chief financiers are just three Wall Street banks, is this dispersion more apparent than real? Could banks have shown risk out of the front door by selling loans, only to let it return through the back door of prime broking? Take credit insurance. Banks that own corporate bonds may use the swaps market to hedge against a company defaulting. But if the other side of the swap is taken by a hedge fund whose finances are dependent on loans from that same bank, has risk really been transferred?
Maybe I am being too cynical, but it seems to me that Goldman Sachs has every incentive to make sure this system keeps working. Goldman could easily survive the fallout if its alpha fund went down. But could they survive the fallout of all the quant funds going down? At the rate losses were occurring (Alpha fund was down 13 percent in one week) they might have figured that they had to do whatever it took to stop the rot.
These are stories from the staff of the FDIC about bank shutdowns that they had to do. A sample….
At the Penn Square Bank closing, FDIC closing personnel were assigned portfolios of large, complex, distressed oil and gas loans to evaluate for potential recovery. A certain wildcat drilling company, whose owners were notorious for both their wild and extravagant lifestyles and their lack of success in the oil patch, had an $18 million loan outstanding. The loan initially was valued at a complete $18 million loss. A few days later, a local newspaper ran a front-page article proclaiming in the headline that the drilling company had hit an “Elephant Well.” As it now appeared that the borrowers were rich and their debt would be paid in full, the valuation estimate was changed to reflect full recovery of the $18 million loan. Nearly a week passed before it was discovered that the company had drilled into the Oklahoma Gas & Electric underground storage facility. Both claimed that they had no idea.
This week’s poem of the week is Ozymandias by Percy Bysshe Shelley. The reason for selecting this particular poem should be obvious.
For a long time, I have been worried about how many companies were borrowing money to buy back their own shares. So I enjoyed this fake letter/rant immensely.
Most people have strong feelings about Jim Cramer. Anyone who does not love him usually winds up hating him. We basically belong to latter category.
So why are we making one of this blowhard’s columns into this week’s essay of the week?
Believe us, we did not want to. But we wanted an essay that would clearly explain why everything is suddenly going boom now in the debt markets. And as much as we hate to admit it, Cramer has the clearest and most believable explanation currently out there. So we bit the bullet and made his column essay of the week.
Now we got to say that this column has all the usual Cramer sins. It is self promoting (for this reason we recommend that you skip the first page). It is has a ridiculous conclusion (so we recommended that you skip the last page). But if you start at the second page you will get clear and concise explanations for why the financial markets have suddenly stoped working.
Believe us, if we could have found a better explanation, we would have used it.
We have been dealing with to much serious stuff lately. This ought to brighten your day if you like to read about the sufferings of others…..
Being your own boss, setting your own working hours, working locally. Can you achieve a more relaxing lifestyle? There was a time, just a few days ago in fact, when I might have agreed with you.
On Monday we got an emergency call. Their driveway was flooded and the water was running downhill to fill the garage. But not to worry, it looked like rainwater not sewage. We leapt into the Plumbmobile with a happy heart and a rodding kit.
A few minutes later we were stood at the edge of a driveway, watching a glutinous brown river of mashed up tissue paper and ominous brown squidgy things snake past and pool in what was once a nice double garage.
The client appeared on the opposite bank of the River Stinks. “I think it might be sewage after all!” He cried.
And this is how they do it (from Der Spiegel)….
The saviors of the German financial sector came together early this month in a sterile conference room at the Düsseldorf headquarters of the IKB commercial bank. The head of Germany’s state development bank KfW, Ingrid Matthäus-Maier, looked anxious. Jörg Asmussen, a departmental head at the Finance Ministry, wrung his hands. His boss, Finance Minister Peer Steinbrück, called from his home in Bonn; other top leaders of German banks were also listening in.
Germany had been hit by a version of the crisis that surprised French investors on Thursday, sending stock markets from New York to Tokyo into unexpected dives. Debts arising from America’s so-called subprime mortgage sector had just caused IKB to falter.
The most thankless job fell to Matthäus-Maier. She had to tell those in attendance that KfW’s stake in IKB was in an unforeseen predicament. The niche bank specializes in the rather dull sector of financing mid-sized companies; but recently it had taken on risky investments in the United States. The bank’s management made some bad bets, and lost. Now it was teetering on the edge of insolvency, unless other German financial institutions chipped in with emergency funding.
Jochen Sanio, president of Germany’s banking supervisory agency BaFin, was pessimistic: If IKB folded, the failure might spread to other institutions, and maybe set off the biggest bank crisis since the Great Depression in the 1930s. Bundesbank President Axel Weber was less bleak, but made another troubling prediction: A chain reaction could endanger Germany’s banking reputation. The gathering of bankers and government officials decided to undertake the biggest rescue operation for a single bank that Germany has ever seen.