Destination Bankruptcy

From the New York Times: Rainy Days in Paradise.

Destination clubs came into their own five years ago, as a growing number of affluent travelers sought all the advantages of a fancy second home without the inconvenience of upkeep or the monotony of going back to the same place year after year.

For a one-time deposit of $40,000 to more than $1.5 million — depending on how luxurious the accommodations and how long the stay — and annual dues of $3,000 to $100,000, club members would have access to an array of multimillion-dollar properties in prime resort locations —a stone farmhouse in Tuscany, an oceanfront villa in Costa Rica, a slopeside chalet in Aspen, Colo. Before they arrived, the club’s concierge would have stocked the refrigerator with the family’s favorite foods, arranged airport transfers, booked tee times or made restaurant reservations.

And for a while, the clubs thrived. Many used the hefty deposits and readily available credit to start building their collection of properties. Then, taking advantage of rapidly rising real estate prices, particularly in luxury markets, the clubs used their newly grown equity to take on more debt and acquire more homes. That, in turn, allowed them to lure more members with an increasing portfolio of destinations.

But when the economy fell apart, it largely took the destination clubs’ business model with it. Home values have dropped, new credit has dried up and membership sales have plummeted, leaving many of the clubs with more bills than income. Several have filed for bankruptcy. Some have asked members for special extra payments to help them survive. And others have made significant cuts in business expenses.

In late January, High Country Club, which was founded in 2005 and quickly grew to about 375 members, filed for Chapter 7 bankruptcy, listing hundreds of creditors and debt totaling about $25 million.

Smaller clubs, like the 140-member Portofino and the 150-member Lusso, with residences that averaged more than $3.5 million, also filed for bankruptcy last year. And the exclusive Yellowstone Club World, a collection of properties from Tim Blixseth, the developer of the elite Rocky Mountain ski and golf resort called the Yellowstone Club, never got off the ground.

Kasey D’Amato, a dermatology physician assistant from Los Angeles, who joined High Country Club last July, paid a $40,000 deposit and about $4,600 in annual dues in exchange for 19 nights of travel a year. She and her husband, Stephen, had two vacations planned — Easter weekend in Aspen and a May trip to the Turks and Caicos — when the club went under.

“They just canceled the reservations,” Ms. D’Amato said. Beyond the lost vacations, she added, “No one likes to lose that kind of money.”

So what exactly did these fools get for their money? The illusion of "owning" something and the future "promise" of a vacation?

A really quick calculation shows that these illusions are quite expensive.

Whether you're average Joe or a billionaire, there's only one "correct" way to do these things. Pay as you go. Get your money's worth NOW independent of whether you plan to spend $500 or $500K on a vacation.

That Glitterin' Desert White Elephant

The New York Times reports: Laid-Off Foreigners Flee as Dubai Spirals Down.

Sofia, a 34-year-old Frenchwoman, moved here a year ago to take a job in advertising, so confident about Dubai’s fast-growing economy that she bought an apartment for almost $300,000 with a 15-year mortgage.

Now, like many of the foreign workers who make up 90 percent of the population here, she has been laid off and faces the prospect of being forced to leave this Persian Gulf city — or worse.

“I’m really scared of what could happen, because I bought property here,” said Sofia, who asked that her last name be withheld because she is still hunting for a new job. “If I can’t pay it off, I was told I could end up in debtors’ prison.”

With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.

Some things are clear: real estate prices, which rose dramatically during Dubai’s six-year boom, have dropped 30 percent or more over the past two or three months in some parts of the city. Last week, Moody’s Investor’s Service announced that it might downgrade its ratings on six of Dubai’s most prominent state-owned companies, citing a deterioration in the economic outlook. So many used luxury cars are for sale , they are sometimes sold for 40 percent less than the asking price two months ago, car dealers say. Dubai’s roads, usually thick with traffic at this time of year, are now mostly clear.

For many foreigners, Dubai had seemed at first to be a refuge, relatively insulated from the panic that began hitting the rest of the world last autumn. The Persian Gulf is cushioned by vast oil and gas wealth, and some who lost jobs in New York and London began applying here.

But Dubai, unlike Abu Dhabi or nearby Qatar and Saudi Arabia, does not have its own oil, and had built its reputation on real estate, finance and tourism. Now, many expatriates here talk about Dubai as though it were a con game all along. Lurid rumors spread quickly: the Palm Jumeira, an artificial island that is one of this city’s trademark developments, is said to be sinking, and when you turn the faucets in the hotels built atop it, only cockroaches come out.

It should be reasonably obvious that you can't build an economy on RE and finance because that's a bit like saying you are going to build your economy on a Ponzi scheme. We all know how that works out.

You actually need to produce something the world wants. Tourism might be it but tourism is too dependent on disposable income (and loose credit = Ponzi) to run an economy off of.

Dubai is this cycle's Rockefeller Center and Pebble Beach all rolled into one. Since they have absolutely nothing to offer to the world, they are going to get annihilated economically.

Just like the seven-star Al Burj, Dubai is a seven-star fuck-up!

Earnings, What Earnings?

That Japanese Obedience Clause

The Times Online reports: Panasonic orders staff to buy £1,000 in products.

Its electronic gadgetry is gathering dust on the shelves of high street stores, nobody is buying new fridges and the mountain of unsold plasma televisions is growing by the day.

However, in desperation, Panasonic has hit on the perfect counter-attack against the consumer slump: it has ordered every member of staff to go out and buy £1,000 of Panasonic products.

Large swathes of corporate Japan are expected to follow suit, either by directly commanding or indirectly “pressuring” employees to divert part of their salaries towards the goods that their employers produce.

Toyota has already tacitly applauded a “voluntary” scheme in which 2,200 of its top brass decided to buy new Toyota cars, and the president of Fujitsu recently e-mailed 100,000 staff and gently pointed out how nice it would be if “employee ownership rates” of Fujitsu PCs and mobile phones were a little higher.

A Panasonic spokesman said that because the “Buy Panasonic” request was made to management-level employees, the company did not expect refusal rates to be high.

The emergency directive, some Panasonic employees say, is a particularly cruel blow: the same 10,000 managers now being commanded to fork out for unwanted electronics were told two weeks ago that their salaries and bonuses would also be slashed.

Forcing your employees to snort your cocaine = FAIL.

Google Ads

Anyone else see a "correction" in the stock price coming?

More Failure for the Candy-Crappin' Unicorn™

The New York Times reports: Metamorphosis at Caterpillar Over Jobs.

Another casualty of the stimulus package became apparent while we were waiting for the final language of the reconciled bill to appear online. It appears that Caterpillar won’t be hiring back any of those 22,000 laid-off workers because of the President’s $789 (Ed: sic) stimulus package, despite the fact that President Obama alluded to words by the company’s executive just earlier today touting the measure.

With the very familiar logo of Caterpillar looming around him at one of the company’s hard-hit plants in Peoria, Ill., President Obama publicly repeated the promise that Caterpillar’s chief executive officer, Jim Owens, might be able to rehire some of the people who were laid off — if the stimulus were passed.

But oops. After the president left, Mr. Owens not only did a turnabout on rehiring; he also suggested there may be even more layoffs. Although he said he continued to support the stimulus package, it wouldn’t result in a reversal of layoffs for anyone: “I think realistically no. The truth is we’re going to have more layoffs before we start hiring again.”

The Candy-Crappin' Unicorn™ has failed again!

Bend Over Californicators, it's HICA time!

Bloomberg reports: California Lawmakers Reach ‘Framework’ on Budget Deal.

California Governor Arnold Schwarzenegger and legislative leaders are nearing an agreement to close a record budget deficit with tax and fee increases on items including gasoline and retail sales.

Under consideration are proposals to raise the state’s sales tax rate to 8.25 percent from 7.25 percent; increase the vehicle license fee to 1.15 percent from 0.65 percent of the value of the automobile; a 12-cent per-gallon excise tax on gasoline and a 0.25 percent surcharge on income taxes, according to a lawmaker briefed by party leaders who asked not to be identified because the presentation was confidential.

Raising taxes during a depression. That should work out well!

Catch me if you can ...

From Yahoo!: Calif. fraud suspect caught with $70,000 in boots.

A suspect in a nationwide mortgage fraud scheme who fled the country was caught at the Canadian border with $1 million in Swiss bank certificates and $70,000 stuffed in his cowboy boots, authorities said Wednesday.

Christopher J. Warren, 27, also was carrying four ounces of platinum valued at $1,420 an ounce when he was arrested early Wednesday while entering the United States at Buffalo, N.Y.

Court documents alleged they defrauded investors and mortgage companies of $100 million since 2006. The fraudulent deals involved 500 homes and condominiums in California, Florida, Nevada, Illinois, Colorado and Arizona, according to Internal Revenue Service affidavits.

Warren flew to Ireland on Feb. 3 on a chartered private jet, then traveled to Lebanon and Canada, acting U.S. Attorney Lawrence Brown said. Immigration officials were on the lookout for him when he took a taxi from Toronto to the border at Buffalo.

Authorities believe Warren also had brought to Lebanon $4 million to $5 million in gold, which he had shown some of the flight crew, but that has not been recovered, Brown said.

The "D" Word Surfaces

The Independent reports: 'This is the worst recession for over 100 years'.

Britain is facing its worst financial crisis for more than a century, surpassing even the Great Depression of the 1930s, one of Gordon Brown's most senior ministers and confidants has admitted.

In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. The Schools Secretary's comments carry added weight because he is a former chief economic adviser to the Treasury and regarded as one of the Prime Ministers's closest allies.

Mr Balls said yesterday: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out."

He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible".

The minister stunned his audience at a Labour conference in Yorkshire by forecasting that times could be tougher than in the depression of the 1930s, when male unemployment in some cities reached 70 per cent.

Philip Hammond, the shadow Chief Secretary to the Treasury, said Mr Balls's predictions were "a staggering and very worrying admission from a cabinet minister and Gordon Brown's closest ally in the Treasury over the past 10 years". He added: "We are being told that not only are we facing the worst recession in 100 years, but that it will last for over a decade – far longer than Treasury forecasts predict."

Shreddin' Time

Martin Wolf in the Financial Times asks the obvious questions: Why Obama’s new Tarp will fail to rescue the banks.

Has Barack Obama’s presidency already failed? In normal times, this would be a ludicrous question. But these are not normal times. They are times of great danger. Today, the new US administration can disown responsibility for its inheritance; tomorrow, it will own it. Today, it can offer solutions; tomorrow it will have become the problem. Today, it is in control of events; tomorrow, events will take control of it. Doing too little is now far riskier than doing too much. If he fails to act decisively, the president risks being overwhelmed, like his predecessor. The costs to the US and the world of another failed presidency do not bear contemplating.

The new plan seems to make sense if and only if the principal problem is illiquidity. Offering guarantees and buying some portion of the toxic assets, while limiting new capital injections to less than the $350bn left in the Tarp, cannot deal with the insolvency problem identified by informed observers. Indeed, any toxic asset purchase or guarantee programme must be an ineffective, inefficient and inequitable way to rescue inadequately capitalised financial institutions: ineffective, because the government must buy vast amounts of doubtful assets at excessive prices or provide over-generous guarantees, to render insolvent banks solvent; inefficient, because big capital injections or conversion of debt into equity are better ways to recapitalise banks; and inequitable, because big subsidies would go to failed institutions and private buyers of bad assets.

Why then is the administration making what appears to be a blunder? It may be that it is hoping for the best. But it also seems it has set itself the wrong question. It has not asked what needs to be done to be sure of a solution. It has asked itself, instead, what is the best it can do given three arbitrary, self-imposed constraints: no nationalisation; no losses for bondholders; and no more money from Congress. Yet why does a new administration, confronting a huge crisis, not try to change the terms of debate? This timidity is depressing. Trying to make up for this mistake by imposing pettifogging conditions on assisted institutions is more likely to compound the error than to reduce it.

Assume that the problem is insolvency and the modest market value of US commercial banks (about $400bn) derives from government support (see charts). Assume, too, that it is impossible to raise large amounts of private capital today. Then there has to be recapitalisation in one of the two ways indicated above. Both have disadvantages: government recapitalisation is a bail-out of creditors and involves temporary state administration; debt-for-equity swaps would damage bond markets, insurance companies and pension funds. But the choice is inescapable.

If Mr Geithner or Lawrence Summers, head of the national economic council, were advising the US as a foreign country, they would point this out, brutally. Dominique Strauss-Kahn, IMF managing director, said the same thing, very gently, in Malaysia last Saturday.

The correct advice remains the one the US gave the Japanese and others during the 1990s: admit reality, restructure banks and, above all, slay zombie institutions at once.

Looks like the Candy-Crappin' Unicorn™ has failed to crap out candy!

A Sane Voice (Halleluia!)

Charlie Munger opines in the Washington Post: How We Can Restore Confidence.

Our situation is dire. Moderate booms and busts are inevitable in free-market capitalism. But a boom-bust cycle as gross as the one that caused our present misery is dangerous, and recurrences should be prevented. The country is understandably depressed -- mired in issues involving fiscal stimulus, which is needed, and improvements in bank strength. A key question: Should we opt for even more pain now to gain a better future? For instance, should we create new controls to stamp out much sin and folly and thus dampen future booms? The answer is yes.

Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law.

Many contributors to our over-the-top boom, which led to the gross bust, are known. They include insufficient controls over morality and prudence in banks and investment banks; undesirable conduct among investment banks; greatly expanded financial leverage, aided by direct or implied use of government credit; and extreme excess, sometimes amounting to fraud, in the promotion of consumer credit. Unsound accounting was widespread.

There was also great excess in highly leveraged speculation of all kinds. Perhaps real estate speculation did the most damage. But the new trading in derivative contracts involving corporate bonds took the prize. This system, in which completely unrelated entities bet trillions with virtually no regulation, created two things: a gambling facility that mimicked the 1920s "bucket shops" wherein bookie-customer types could bet on security prices, instead of horse races, with almost no one owning any securities, and, second, a large group of entities that had an intense desire that certain companies should fail. Croupier types pushed this system, assisted by academics who should have known better. Unfortunately, they convinced regulators that denizens of our financial system would use the new speculative opportunities without causing more harm than benefit.

Considering the huge profit potential of these activities, it may seem unlikely that any important opposition to reform would come from parties other than conventional, moneyed special interests. But many in academia, too, will resist. It is important that reform plans mix moral and accounting concepts with traditional economic concepts. Many economists take fierce pride in opposing that sort of mixed reasoning. But what these economists like to think about is functionally intertwined, in complex ways, with what they don't like to think about. Those who resist the wider thinking are acting as engineers would if they rounded pi from 3.14 to an even 3 to simplify their calculations. The result is a kind of willful ignorance that fails to understand much that is important.

Moreover, rationality in the current situation requires even more stretch in economic thinking. Public deliberations should include not only private morality and accounting issues but also issues of public morality, particularly with regard to taxation. The United States has long run large, concurrent trade and fiscal deficits while, to its own great advantage, issuing the main reserve currency of a deeply troubled and deeply interdependent world. That world now faces new risks from an expanding group of nations possessing nuclear weapons. And so the United States may now have a duty similar to the one that, in the danger that followed World War II, caused the Marshall Plan to be approved in a bipartisan consensus and rebuild a devastated Europe.

The consensus was grounded in Secretary of State George Marshall's concept of moral duty, supplemented by prudential considerations. The modern form of this duty would demand at least some increase in conventional taxes or the imposition of some new consumption taxes. In so doing, the needed and cheering economic message, "We will do what it takes," would get a corollary: "and without unacceptably devaluing our money." Surely the more complex message is more responsible, considering that, first, our practices of running twin deficits depend on drawing from reserves of trust that are not infinite and, second, the message of the corollary would not be widely believed unless it was accompanied by some new taxes.

The whole article is terrific and worth reading!

That Slippery Sliding Slope

Yahoo! reports: Bank of England says Britain in 'deep recession'.

The head of the Bank of England said Wednesday that Britain was in a "deep recession" that would require further easing of monetary policy, including expanding the money supply.

"The UK economy is in a deep recession," bank Governor Mervyn King said at a news conference, who also gave his clearest sign yet that the Bank of England was ready to in effect print money to get the economy going again.

First, they were in a "slowdown"; then a "recession"; now it's a "deep recession".

By the time, they acknowledge that it's a flat-out "depression", it will be over.

Oh, and the money printing will fail.

What would you do if you were a Briton and had considerable savings? Move it into some other currency, most likely, the Yen. Or commodities. Or even gold.

You can't force people to spend if they don't want to.

Dumb and dumber, that's the problem with the central bankers!

Blame Canada!

From WTOP.com: Canadian bankruptcies soar 47 percent.

he number of Canadian consumers and businesses going bankrupt soared nearly 47 percent in December.

The Office of the Superintendent of Bankruptcy said Monday 8,299 individuals and businesses went bankrupt in December, up from 5,659 for December, 2007, a jump of 46.7 percent.

The latest numbers are a staggering sign of how quickly the Canadian economy has slowed.

The financial crisis and the global sell-off of commodities have hit the country hard since the summer. The country lost a record 129,000 jobs last month and central bank is predicting economic output will contract 4.8 percent in the first quarter.

Readin', Ritin' and Retardness

From CNN: US Treasury set to lay out financial plan.

The U.S. Treasury Department will likely lay out its framework plan for strengthening banks and dealing with the financial crisis early next week, a Treasury official said Monday.

The Treasury is working with other government agencies to craft a plan that will allocate the second half of a $700 billion financial rescue fund and further bolster the banking sector while also supporting credit markets and providing relief from home foreclosures.

Problem : $40T
Response: $350M (+ $800M)
Conclusion: FAILURE

Thank you for playing, Geithy-boy. You fail in 'rithmetic.

BORING. NEXT.

The Bitchin' Bitch-Slap!

The WSJ has thrown down the gauntlet: Why Be a Nation of Mortgage Slaves?

Preventing foreclosures has become a top priority of politicians, economists and regulators. In fact, allowing foreclosures to happen has merit as a free-market solution to the crisis.

If the intent is to help homeowners, then foreclosure is undoubtedly the best solution. Household balance sheets have been destroyed by taking on too much debt via the purchase of inflated assets. With so little savings, a household with negative equity almost implies negative net worth. Walking away from the mortgage immediately repairs the balance sheet.

Credit may be damaged, but homeowners can rebuild it. And by renting something they can afford, instead of the McMansion they cannot, homeowners are most likely to have some money left over each month that they can save toward a down payment on a house they can eventually afford.

If the intent is to help the credit markets, then foreclosure is undoubtedly the best solution. The securitization model has proven to be flawed. Slicing loans horizontally into tranches created asset classes that have conflicting interests in a dissolution strategy of the same underlying asset. The holder of a senior tranche would be agreeable to modification, since his position is secured; the holder of a junior tranche would essentially be wiped out. The lower tranches are worthless but are still legally an encumbrance, hindering any type of sale or work-out effort.

Consider a property that sold for $500,000 at the peak, financed with a $400,000 first lien and an $80,000 second lien, which is now worth $300,000. The second lien is worthless, but the lien will remain as a cloud which complicates any modification effort by the senior lien holder. There is no incentive for the junior lien holder to voluntarily agree to a modification. Foreclosure would be the best and finite action. It wipes the slate clean.

What is the market telling us? Dataquick recently released December sales data for Southern California, once the hotbed of speculative excesses supported by nontraditional financing. Foreclosures now dominate sales. Prices are down. Sales volume is up. New home construction is down. These are beautiful textbook illustrations of supply and demand driving price and market equilibrium.

Finally, loan modification is not only ineffective, it is evil. Coercing borrowers to continue paying a mortgage on a home that is hopelessly overvalued and not informing them of alternatives is predatory lending.

The media should interview those who had been foreclosed upon. Do they feel sorry or relieved? Are they rebuilding their credit, not to mention their lives? Do they miss the pressure of having to make payments they cannot afford on a McMansion that belongs to the lender?

The intent of modification programs to date is to create a generation of mortgage slaves. Fortunately, mortgage slaves can free themselves via foreclosure, and the masses are choosing to do so.

Come out, come out whereever you are!

The Global Pyramid Scheme

The Guardian pretty much gives away the whole plot: Global recession - where did all the money go?

It's a terrific interactive piece. The EE will tempt you (to read it all) with the best bits:

Lordy, Lordy!

From the Telegraph: Millionaire businessman shot his partner before killing himself.

Lord Howard Worthington, the former owner of a successful engineering firm, is thought to have shot 47-year-old Julie Rees at their £900,000 house before turning the gun on himself in fields behind the property.

Worthington, who bought his title around two years ago, is a former boss of EWS Manufacturing Ltd in Wolverhampton, where he worked until 2004. He is currently director of a building firm and, along with Miss Rees, ran a real estate agency. Both businesses were formed in 2007.

Real estate agency, eh, ol' chap?

The Deep South

From the Atlanta Journal: Atlanta condo sales fell 88% in second half of 2008.

Demand for condominiums in intown Atlanta has “evaporated,” with just 66 new units sold in the second half of 2008, according to Haddow & Co., a local real estate consulting firm that’s been studying the condo market since 1999.

That’s an 88 percent dropoff from the number of units sold in the first half of 2008. Just 645 new condos sold all of last year — 76 percent below the annual average of the previous eight years.

Those be some mighty impressive statistics, pardner!

Even Sherman didn't go through the South that fast!

Can I have a Cheerleader instead of the US Economy?

Cliff Diving

That Upside-Down Feeliing

The AP reports: LA Man Upset Over Job Kills Wife, 5 Kids, Himself.

A man fatally shot his wife, five young children and himself Tuesday after he faxed a note to a TV station claiming the couple had just been fired from their hospital jobs and together planned the killings as an escape for the whole family.

''Why leave our children in someone else's hands,'' Ervin Lupoe wrote in a letter posted late Tuesday on the KABC-TV Web site.

The station called police after receiving the fax, and a police dispatch center also received a call from a man who stated, ''I just returned home and my whole family's been shot.''

It was the fifth mass death of a Southern California family by murder or suicide in a year. Police urged those facing tough economic times to get help rather than resort to violence.

Aah, the joys of being a home-pawner! Enjoy them while you're alive!

The Complicated Principle of "Long Division"

The Journal Sentinel reports: City seeks $10 million from state to deal with foreclosures.

The City of Milwaukee has applied for $10 million from the state to help address foreclosures, according to Mayor Tom Barrett.

That money would be in addition to the $9.2 million the city has been notified it will receive from the U.S. Department of Housing and Urban Development.

The $10 million would come from the state's $38 million federal allocation for addressing foreclosures.

$10M/200,000(-ish) = 50(-ish.)

50 houses? That pretty much sums it up.

WHOOOOP-DEE-DOODLE-DOO!!!

The Messiah™'s Ethical Rules (in practice)

Politico.com reports: Geithner enlists lobbyist as top aide.

Newly installed Treasury Secretary Timothy Geithner issued new rules Tuesday restricting contacts with lobbyists – and then hired one to be his top aide.

Mark Patterson, a former advocate for Goldman Sachs, will serve as chief of staff to Geithner as the Treasury Department revamps the Wall Street bailout program that sent an infusion of cash to his former employer.

Last week, the White House announced the president had waived the ethics rules to clear the way for the nomination of William Lynn, a former Raytheon lobbyist, to be deputy defense secretary.

That was a quick fall from "ethics". LOL.

Nobody Expects the Art Liquidation

Bloomberg reports: Brandeis to Close Rose Art Museum as Endowment Slips

Brandeis University, anticipating a budget deficit of more than $10 million over five years, voted to close its art museum and sell a collection that includes pieces by Andy Warhol and Willem de Kooning.

The 49-year-old Rose Art Museum will close this year and seek buyers for about 6,000 pieces, Dennis Nealon, a spokesman for the Waltham, Massachusetts, school, said today. The collection was appraised at about $350 million in 2007 by the university, said Michael Rush, the museum’s director.

The private school has suffered investment losses, and spent other funds on a construction boom.

“It’s like a one-two-three punch: the economy tanks, they overbuilt at the peak of the market and their largest donor was hit dramatically by the Madoff scandal,” said Mark Williams, a Boston University senior lecturer who specializes in risk management and has studied Brandeis’s finances.

“These are extraordinary times,” Reinharz said in a letter yesterday to the Brandeis community. “We cannot control or fix the nation’s economic problems. We can only do what we have been entrusted to do -- act responsibly with the best interests of our students and their futures foremost in mind.”

Firstly, these are not "extraordinary" times. These are perfectly "ordinary" and "predictable" times. Just because, you failed to see the problem because of your instituitional bias means very little.

You gambled, you lost, you pay the price.

Secondly, education went through the same absurd "credit" cycle as everyone else. Pay gobs now, and forget about the true "total" cost. Now, you're getting whacked because you're simply not offering anything for the absurd amounts you charge. The students will not be showing up.

To be perfectly blunt, as a former academic, most education is fairly worthless. The most successful people aren't the smartest ones - it's the smartest ones who have NO debt. Even a cursory examination should be able to see the freakin' "obviousness" of this statement. (And that doesn't even count the fact that student debt is not dischargeable in bankruptcy!)

Finally, you are not going to get anywhere near the $350M appraised value in 2007. Peak prices have nothing to do with reality. You won't even be able to clear 60% of that value, if that.

Adios, losers!

Have Another Cosmo, Darling!

Bloomberg reports: Cosmo, Accused of Ponzi Scheme, Raised $370 Million, U.S. Says.

Nicholas Cosmo, founder of Agape World Inc. in Hauppauge, New York, was charged with defrauding 1,500 investors of more than $370 million, U.S. authorities said.

Cosmo operated a Ponzi scheme at least between October 2003 and December 2008 that raised more than $370 million from more than 1,500 individual investors and deposited that money into Agape World bank accounts, according to a 51-page affidavit by U.S. Postal Inspector Richard Cinnamo detailing the allegations against Cosmo.

Cosmo, arrested after he surrendered yesterday in Hicksville, New York, claimed he was putting investors’ money into bridge loans to businesses, according to the Cinnamo affidavit, which was unsealed today. Just $746,000 of the money was found in the bank accounts last week, Cinnamo said. Less than $10 million was loaned out, the alleged business of Agape World.

Instead, more than $100 million was invested in commodity futures trading accounts, with losses of about $80 million, according to Cinnamo.

Looks like there was "a gap" between illusion and reality.

Philosophers might argue that their agapē for money left their bank balances agape.

¡Viva México!

The LA Times reports: Mexico City opens the 1st of 300 planned soup kitchens.

With her modest earnings as a seamstress and her grown children out of work, Esperanza Jose is like thousands of Mexicans finding it harder to make ends meet. And so she decided to take advantage of the city government's new soup kitchen, the first of 300 planned by March.

"The truth is that there are a lot of people that now don't have jobs, and so if they're offering this, we should make the most of it," said Jose, 63. "Many people are embarrassed to come; but, well, we come with dignity."

As Mexico slips into the profound economic crisis circling the globe, unemployment is rising along with food prices. Inflation is running about 8% annually, but some basic "family basket" items such as cooking oil and rice are going up about 200% a year, said Cesar Cravioto, head of the city's Institute of Social Assistance.

City officials hope to dish out 65,000 free or inexpensive meals a day at the soup kitchens, he said.

"The crisis is hitting hard, and it worries us a lot," Cravioto said, noting that the number of people who receive unemployment payouts is expected to double this year in this city of 19 million.

No word on whether the "gorditas" are being downsized or rightsized yet.

Crashing Hurricane, Hidden Costs

Bloomberg reports: State Farm Plans to Leave Florida Residential Market.

State Farm Mutual Automobile Insurance Co., the largest home insurer in the U.S., plans to drop 1.2 million customers and withdraw from Florida’s residential market after a request for a rate increase was denied by state regulators.

The insurer cited risks from hurricanes and the rising costs of everyday claims from the state’s homeowners in an e-mailed statement today. The surplus from State Farm’s Florida unit fell by $201 million in the first three quarters of 2008, a period where no hurricanes hit the state.

That should provide cheer to the Florida market.

But always remember this gem, folks:

In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely.

"South Florida," he said, "is working off of a totally new economic model than any of us have ever experienced in the past."

A Layoff by any other name...

TheStreet.com reports: IBM Shares Fall After Job-Cut Report.

IBM shares were falling Tuesday after a report that the company sent layoff notices to more than 2,800 people in its sales and software groups in the U.S. last week.

In an "Employee Information Package," copies of which were reviewed by The Wall Street Journal, IBM listed workers that were selected to take part in its "current resource reduction action" by age and job title, but without names.

Poor Saussure! Nobody "gets" him about the "arbitrariness of the signifier". Even after all these years.

Congratulations to all the "current resource reduction activated" people!

That Deflating Feeling

(Source: SIFMA.)

Having problems dealing?

From Detroit News: GM, Chrysler press dealers to order cars.

General Motors Corp. and Chrysler LLC on Sunday urged dealers to keep ordering new cars and trucks in coming months despite an industrywide sales slump that has kept vehicles piling up on dealer lots.

During a meeting at the National Automobile Dealers Association convention, Chrysler told dealers it will launch a major push to get retailers across the country to order vehicles, and consumers to buy them, ahead of a March 31 deadline to convince the government the automaker can survive.

Dealers seemed willing to respond to the call for more orders, but consumers are likely to remain skittish about big-ticket purchases like cars with the economy in a recession. "Nothing has changed for consumers," said Paul Melville, an industry expert with consulting firm Grant Thornton LLP. "Credit is still tight, consumers don't have cash and the fear factor is still in existence."

Wesley Lutz, owner of Extreme Dodge/Hyundai in Jackson, went into Sunday's session prepared not to order any new vehicles this month but changed his mind after listening to Press.

Lutz now plans to place an order Tuesday even though he already has more than a 100-day supply of vehicles on his lot.

Press made a straightforward pitch to convince Lutz to order more vehicles.

"He said, 'Do you want the Kool-Aid or do you want reality?' " Lutz said after the meeting. "He promised us we'd still be open for business in April. That's pretty powerful."

He has a 100-day inventory.

And he's buying more.

Man, these dealers are st00pid.

Any dealers dumb enough to keep buying vehicles in the Greater Depression deserve exactly what's coming to them, and no, there will be no TARP to bail them out.

Keep a Stiff Upper Lip, Daah-link!

The Mail Online reports: Revealed: Day the banks were just three hours from collapse.

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse.

The Mail on Sunday has been told that the Treasury was preparing for the banks to shut their doors to all customers, terminate electronic transfers and even block hole-in-the-wall cash withdrawals.

Only frantic behind-the-scenes efforts averted financial meltdown.

If the moves had failed, Mr Brown would have been forced to announce that the Government was nationalising the entire financial system and guaranteeing all deposits.

But 60-year-old Lord Myners was accused last night of being 'completely irresponsible' for admitting the scale of the crisis while the recession was still deepening and major institutions such as Barclays remain under intense pressure.

Well, that should inspire confidence in the Pound.

BWAHAHHAHAHHAHAHAHHAHAHHAHAHAHAHAHHHHHHHHH!!!

There's that D-word again!

From the Telegraph: Britain on the brink of an economic depression, say experts.

Families must brace themselves for a slump of far greater severity and longevity than the recessions of the 1980s and 1990s, they warned. They said the current crisis will be of a scale to rival the biggest peace-time crisis in modern history — the Great Depression.

The warning was delivered by economists and politicians after the Office for National Statistics revealed that the economy shrank by 1.5 per cent in the final three months of 2008 alone.

The contraction follows a 0.6 per cent fall in gross domestic product (GDP) — the most comprehensive measure of Britain’s wealth generation — during the previous three months. This means Britain fulfils the criteria for a technical recession — two successive quarters of negative output.

The news sent the pound sliding to its lowest level since 1985. Sterling dropped more than three quarters of a cent to $1.3688 as investors speculated that the Bank of England may be forced to cut interest rates towards zero in response to the recession.

Britain is likely to suffer more than other economies due to its heavy reliance on the financial services sector, which has all but imploded in the wake of the economic crisis, experts said.

Others raised the spectre of an outright economic depression, often defined by experts as a peak-to-trough economic contraction of 10 per cent. Aside from the demobilisation periods following the First and Second World Wars, this kind of contraction has never taken place — not even in the 1930s’ Great Depression.

Roger Bootle, the managing director of Capital Economics, said: "I think there’s a very good chance this recession will be the worst since the 1930s. I suspect the economy could shrink by 6 per cent from last year to the end of next year — and that might not be the end.

The plight facing Britain is uncannily similar to the 1930s, since prices of many assets —from shares to house prices — are falling at record rates, but the value of the debt against which they are held remains unchanged.

Albert Edwards, a strategist at Société Générale, likened the British economy to a Ponzi scheme — a fraudulent debt mountain like that allegedly used by the New York hedge fund manager Bernard Madoff.

“What I find amazing is that people aren’t really nailing Gordon Brown and [Bank of England Governor] Mervyn King for this,” he said. “At least in the US they had the excuse of the arrival of sub-prime — a new sector of the market. We didn’t really have anything similar but we ended up with a bigger national Ponzi scheme than the US.”

Spread it!

Will the Last Journalist Please Turn the Lights Out?

Reuters reports: Moody's cuts New York Times rating to junk.

Moody's Investors Service on Friday cut its ratings on The New York Times Co (NYT.N) into junk territory, saying declining advertising revenues will continue to pressure the newspaper publisher's earnings.

Moody's cut The New York Times three notches to "Ba3," three steps below investment grade, from "Baa3." The outlook is negative, indicating an additional downgrade may be likely over the next 12-to-18 months.

What took so long?

Were they gamahauching the boards' grandmothers? (Ed: You can't say that!)

Banking Market Cap

Thain's World

How about saving the Pound?

This is hilarious!

British Banks to Gordon Brown ...

Bubbling Teapot, Crashing Mountain

The New York Times reports: A County in China Sees Its Fortunes in Tea Leaves Until a Bubble Bursts

Saudi Arabia has its oil. South Africa has its diamonds. And here in China’s temperate southwest, prosperity has come from the scrubby green tea trees that blanket the mountains of fabled Menghai County.

Over the past decade, as the nation went wild for the region’s brand of tea, known as Pu’er, farmers bought minivans, manufacturers became millionaires and Chinese citizens plowed their savings into black bricks of compacted Pu’er.

A pleasantly aromatic beverage that promoters claim reduces cholesterol and cures hangovers, Pu’er became the darling of the sipping classes in recent years as this nation’s nouveaux riches embraced a distinctly Chinese way to display their wealth, and invest their savings. From 1999 to 2007, the price of Pu’er, a fermented brew invented by Tang Dynasty traders, increased tenfold, to a high of $150 a pound for the finest aged Pu’er, before tumbling far below its preboom levels.

For tens of thousands of wholesalers, farmers and other Chinese citizens who poured their money into compressed disks of tea leaves, the crash of the Pu’er market has been nothing short of disastrous. Many investors were led to believe that Pu’er prices could only go up.

“The saying around here was ‘It’s better to save Pu’er than to save money,’ ” said Wang Ruoyu, a longtime dealer in Xishuangbanna, the lush, tea-growing region of Yunnan Province that abuts the Burmese border. “Everyone thought they were going to get rich.”

But that was before the collapse of the tea market turned thousands of farmers and dealers into paupers and provided the nation with a very pungent lesson about gullibility, greed and the perils of the speculative bubble. “Most of us are ruined,” said Fu Wei, 43, one of the few tea traders to survive the implosion of the Pu’er market. “A lot of people behaved like idiots.”

The Celtic Tiger

The Times reports: Irish property tycoon commits suicide

Irish police believe a well-known Dublin businessman, with extensive property interests in Britain, has killed himself.

Mr Rocca, 41, had a fortune which was put at €500million (£462.9m) in 2007 and he is thought to have completed 20 property deals in the UK during the last few years, worth about €300million in total, including €100 million for a distribution centre for retailer Argos in Bedford.

The body of property tycoon Patrick Rocca was found at his home at Porterstown, Castleknock, in west Dublin, yesterday morning.

He was found with a single gunshot wound to the head and a firearm nearby has been taken away by forensic investigators, but Gardai have said they are satisfied nobody else was involved.

Adios, PIGS!

That's Portugal-Ireland-Greece-Spain in case you didn't know it.

Bloomberg reports: Spain’s Debt Downgraded by S&P as Slump Swells Budget.

Spain had its AAA sovereign credit rating removed by Standard & Poor’s in the second downgrade of a euro-region government in five days, as the country’s first recession in 15 years swelled the budget deficit.

The risk of losses on Spanish government debt rose to a record, credit-default swaps showed, after S&P lowered the rating one step to AA+ and assigned it a “stable” outlook. It was S&P’s first reduction in Spain’s rating and puts it on the same level as Belgium and Hong Kong.

The cost of economic stimulus packages and bank bailouts is boosting budget deficits around the euro-region, fueling concern governments will have difficulty paying their debt. S&P cut Greece’s rating one step to A- on Jan. 14. A day earlier, it threatened to downgrade Portugal’s debt. S&P also reduced the outlook on Ireland’s rating to negative from stable.

The Really Long-Term Parking

From NewKerala.com: People flee Dubai abandoning cars at airport.

More than 80 vehicles found abandoned at the Dubai International Airport recently, according to police officials.

The Director of the General Department of Airport Security, Mohammed bin Thani, said 60 cars were seized recently. Another 22 were seized by Dubai Police when they were found abandoned in a prohibited area at the airport, according to another official from the traffic department.

The vehicles might have been left by people fleeing the country, apparently because they couldn’t repay loans after losing their jobs, police said.

Who gives loans to losers?
We do, We do.

Who are we?
Haitch-Hess-Bee-See

It's a Wonderful Time of the Year

From the Sun in the UK: Honda shuts UK site for 4 months.

BRITAIN’S motor industry suffered another blow yesterday as Honda extended its shutdown to four months.

Honda’s 4,200 UK workers were told production lines would stay idle from February until June 1. The Japanese giant had previously announced its plant in Swindon, Wilts, would close for two months.

The Banking Sector Song

(Funnier if you "get" it; translations will not be provided.)

Another Zero and we ain't talkin' ZIRP, baby!

From the Telegraph: Shipping rates hit zero as trade sinks.

Freight rates for containers shipped from Asia to Europe have fallen to zero for the first time since records began, underscoring the dramatic collapse in trade since the world economy buckled in October.

"They have already hit zero," said Charles de Trenck, a broker at Transport Trackers in Hong Kong. "We have seen trade activity fall off a cliff. Asia-Europe is an unmit­igated disaster."

Shipping journal Lloyd's List said brokers in Singapore are now waiving fees for containers travelling from South China, charging only for the minimal "bunker" costs. Container fees from North Asia have dropped $200, taking them below operating cost.

Industry sources said they have never seen rates fall so low. "This is a whole new ball game," said one trader.

Meow!

CBS reports of an emerging cat fight at the Fed: Fault lines emerge at Fed.

In a speech on Tuesday, Philadelphia Fed Bank president Charles Plosser publicly took issue with positions advocated by Fed chief Ben Bernanke.

In a breathtaking innovation in monetary policy, the Bernanke Fed since the fall has not only expanded its balance sheet from $900 billion to well over $2 trillion in its efforts to restore the credit markets to health but has stopped offsetting the expanding bank reserves.

On the other hand, Plosser urged the Fed to "proceed with caution" with the new policy. Others outside the Fed are much more strident and want plans in place immediately to reverse it. They believe an inflation storm is already in train.

"It is a huge disagreement," said Robert Brusca, chief economist at FAO Economics.

While the Fed chairman has made it a practice to run a more democratic central bank, the disagreements come at a crucial time when the Fed is striving to appear on top of the current financial market crisis and steep recession.

Bernanke argued that focusing on the size of the balance sheet misses the point, arguing the Fed's various asset purchase programs are not easily summarized in a single number.

But Plosser said that the growth of the Fed's balance sheet was a key metric.
"It is not appropriate to ignore quantitative metrics in this new policy environment," Plosser said.

Fed officials who pay attention to the money supply believe that the Fed's current policy of printing money never ends well and the danger of inflation is very high. They believe the Fed must withdraw the stimulus before there is any sign of inflation or it is too late.

Riga Mortis

The New York Times reports: Latvia Is Shaken by Riots Over Its Weak Economy.


Violent protests over political grievances and mounting economic woes shook the Latvian capital, Riga, late Tuesday, leaving around 25 people injured and leading to 106 arrests.

In the wake of the demonstrations, President Valdis Zatlers threatened Wednesday to call for a referendum that would allow voters to dissolve Parliament, saying trust in the government, including in its ability to deal with growing economic problems, had “collapsed catastrophically.”

For years, Latvia boasted of double-digit economic growth rates, but it has been shaken by the global economic downturn. Its central bank has spent a fifth of its reserves to guard against a steep devaluation of its currency, the lat, and experts expect a 5 percent contraction of the country’s gross domestic product in 2009. Salaries are expected to fall substantially, and unemployment is expected to rise.

Welcome to the Greatest Depression™. You can't devalue (because they borrowed in euros) so there's only one thing to do - default and that's called deflation. This is going to be a brutal lesson to those who've only lived in inflationary times.

Jumpin' Jack Flash

(Source: New York Post.)

American Beauty

No more cheap credit, no more US consumer. Decouple that, bitch!

Humming Along

From the St. Petersburg Times: Banker, mortgage broker charged in sex case

In April, a woman accused two employees of financial institutions of forcing her to perform oral sex, according to police.

One man, who worked for Bank of America, was arrested in October, police say. The second, who said he was a broker for First Rate Mortgage, was arrested Tuesday. Both were charged with sexual battery.

Does BoA have an oral statement about their liquidity swaps?

So Long, Club Med?

From Reuters: S&P cuts Greek debt rating due to global crisis.

Standard & Poor's cut its credit ratings on Greece's sovereign debt to A-/A-2 with a stable outlook on Wednesday, citing eroding economic competitiveness and a rising fiscal deficit exacerbated by the global downturn.

Which of Club Med (Portugal, Spain, France, Italy, Greece) pulls the plug on the EMU first?

The Latest Californication

The WSJ reports: California's Gold Rush Has Been Reversed.

On Jan. 24, 1848, James Wilson Marshall found gold at Sutter's Mill, in Coloma, Calif., sparking a mad rush of some 300,000 people desiring to strike it rich. San Francisco grew from a tiny hamlet to a boomtown in no time, and in 1850 California entered the Union as the 31st state.

With this history at their back, state leaders might have understood that people have a propensity to get up and move when a better life is to be had elsewhere. But no. After more than 150 years of being a destination, California is becoming a place entrepreneurs, investment capital and the hardy workers who made it a global leader in agriculture, technological innovation and scientific research are fleeing. This exodus is the marker of something deeper than a national recession. It's a sign that the attempts by state leaders to spend their way back to prosperity are killing California.

While it has the sixth highest tax burden in the nation, according to the nonpartisan Tax Foundation, California is facing a breathtaking $40 billion budget deficit this year. This comes on the heels of a decade-long spending spree. Last year the state budget was $131 billion, up from $56 billion in 1998.

And just as a fallen tree can divert the flow of water in a creek, bad economic policies divert the flow of investment. Entrepreneurs and investors, seeking the path of least resistance, leave when it becomes easier to make a living in more business-friendly states. In 2000, according to the state's Department of Finance, about 150,000 people moved into California. But in the years that followed the in-migration slowed, and in 2005 it reversed, when a net 52,000 people moved out. In 2008, the outflow topped 135,000 people.

Consequently, Idaho, Utah and Wyoming all have unemployment rates around 5% at a time when California is suffering an unemployment rate of 9%. Californians are moving east and creating jobs in their new home states.

This is like the biggest "DUH!!!" ever.

Citius! Altius! Fortius

The Vancouver Sun reports: City on the hook for billion-dollar Olympic village blunder.

Vancouver taxpayers are on the hook for the entire billion-dollar Olympic Athletes' Village project after the lender cut off funding to the troubled development, Mayor Gregor Robertson said Friday.

Now, the city is scrambling to renegotiate its deal with Fortress Investment Group before Feb. 15, when the money flow is to evaporate and construction will be halted unless a new deal is in place.

"The Olympic village is a billion-dollar project, and the city taxpayers are on the hook for all of it," Robertson said. "We are financially and legally committed to completing this project."

Bail me out before you go go ...

That's Gangsta!!!

New York Magazine reports: Madoff’s ‘Woman in Austria’ Goes Into Hiding.

Sonja Kohn, the feisty redheaded 60-year-old behind Austria's Bank Medici, scored around $2 billion for Bernie Madoff in Europe. Now, she's reportedly so terrified of the Russian oligarchs whose cash she lost that she's gone into hiding.

Hot-diggity, hope we get to see a gang-style execution!

The bee-yatch be retractin' an' you be a fool for listenin'!

After some back-pedaling and some more back-pedaling, the Messiah™ comes back with: Obama Calls for Sacrifice, Scaling Back Campaign.

President-elect Barack Obama said turning around the U.S. economy will require cutting back on some campaign promises and personal sacrifice from Americans.

“I want to be realistic here, not everything that we talked about during the campaign are we going to be able to do on the pace we had hoped,” Obama said in an interview on ABC’s “This Week” program, scheduled to air tomorrow. ABC posted excerpts of the interview, Obama’s first since returning to Washington as president-elect, today on its Web site.

Roll back the barrel, bee-yatches, this politician be rollin' back on everythin'. You be a fool to be believin' in him in the first place.

BWAHHAHAHHAHAHHAHHAHAHHAHAHHAHHAHAHHAHHHHHHHH!!!

Hail, Brittania!

(Source: WSJ.)

The House of Morgan

MIT Innovation

Reuters reports: Boston hedge fund shuttering after Madoff bet.

Hedge-fund firm GMB Capital Management, run by a Massachusetts Institute of Technology professor, is shutting a fund after losing more than $50 million on bad bets that included putting money with accused swindler Bernard Madoff, people familiar with the matter said.

The Boston-based GMB Low Volatility Fund L.P., which had more than $100 million in assets and was run by Gabriel Bitran of MIT's Sloan School of Management and his son, Marco, began liquidating late last year, the people said.

The fund once wooed investors with promises that it would rely heavily on the MIT professor's complicated algorithms to deliver low volatility where prices almost never change.

Instead, the father and son team seems to have done exactly the opposite -- funneling a big chunk of money to Madoff, a financier accused last month of having run a $50 billion Ponzi scheme, investors fumed.

BWAHAHAHAHAHHAHAHAHAHAHHAHHHHHHHHHHHHHHH!!!

Of all the dumbass ideas!

From Bloomberg: Brown Should Buy Britons’ Homes, Ex-BOE Officials Say.

Prime Minister Gordon Brown should buy homes on the verge of repossession to add money to the British economy and save families from being thrown out onto the street, two former Bank of England economists said.

If this were to come to pass, and if you were a Briton, what would you do?

Stop paying the mortgage immediately and make the government pay.

Isn't this freakin' obvious?

Do these so-called economists bother to "think" for twenty seconds before they flap their gums?

Nooooooooooooooo...

The folks over at the NASDAQ have created a new index, OMX Government Relief (^QGRI), to track firms that have been bailed out by the government. The index will track, with equal weight, companies of at least $1 billion market cap, that have come to Washington cap in hand. It's mostly TARP companies, but not necessarily all. The index, which was set at 1,000 on Monday, is already down to 941.42.

Let me entertain you...

CNBC reports: Madoff Exposure Spreads to Labor Union Pension Funds


CNBC has learned that one union, the Carpenters local in Syracuse, N.Y., has lost the majority of the $100 million to $150 million it had in pension money because of its dealings with Madoff, people close to the matter said. The union's money manager, J.P. Jeanneret Associates of Syracuse, didn't return a telephone call for comment.

Anything you can do, we can do better

Bloomberg reports: BOE Cuts Rate to Lowest Since Bank’s Creation in 1694.

The Bank of England cut the benchmark interest rate to the lowest since the central bank was founded in 1694 as policy makers tried to prevent the credit squeeze from deepening Britain’s recession.

1929? Bah, we can do better!

The Money Shot

From NY Daily News: Porn kings Larry Flint and Joe Francis go begging for a bailout.

Is the porn industry up next for a bailout? If porn titans Joe Francis and Larry Flynt have anything to do with it, it will.

Yes, ladies and gentleman, the titans of pornography are begging for a bailout.

Joe Francis, creator of the "Girl's Gone Wild" video series, and Larry Flynt, founder of Hustler, will ask Congress for a $5 billion bailout, according to TMZ.

Why does the porn industry need a bailout? Because apparently even porn is getting smacked by the recession.

XXX DVD sales have taken a hit - about a 22% hit, according to TMZ.

"With all this economic misery and people losing all that money, sex is the farthest thing from their mind," Flynt is quoted as saying on TMZ. "It's time for Congress to rejuvenate the sexual appetite of America."

Porn-tastic!!!

Mogul-ly Wogul-ly

From the Chicago Sun-Times: Real estate mogul found fatally shot in suburban wildlife preserve.

Steven Good, a major figure in Chicago real estate, was found shot to death Monday at a Kane County wildlife preserve, police said.

Mr. Good, 52, was the victim of a self-inflicted gunshot wound, police said. They said his body was found in a car parked at the Max McGraw Wildlife Refuge near East Dundee.

Kane County Coroner Charles West said the victim died of a gunshot wound, but he said circumstances remain under investigation. "At this point, there's no concern about foul play," West said.

Friends described Mr. Good as unfailingly upbeat and always on the hunt for business.

Looks like he's even more up-beat (beat-up?) now, huh?

She said she saw no signs anything was amiss. "He had unbelievable showmanship," Darling said. "He was just always on top of his game."

And now, he's at the bottom of a 6'x4' hole.

Those HeidelbergCement Shoes were too big for him

The AP reports: German Mogul Kills Self Over Financial Meltdown.

German billionaire Adolf Merckle has committed suicide after his business empire, which included interests ranging from pharmaceuticals to cement, ran into trouble in the global financial crisis, his family said Tuesday.

The 74-year-old's body was found Monday night near railway tracks at Blaubeuren in southwestern Germany, prosecutors in nearby Ulm said in a statement. They described the death as a ''railway accident'' and said there was no evidence that anyone else was to blame.

His family, which had reported Merckle missing after he failed to return home Monday, issued a brief statement saying he took his own life.

Merk-tastic!!!

Money Multiplier

The money multiplier has collapsed.

Each $1 increase in base monetary reserves only changes M1 by $0.95!

The money velocity has effectively collapsed.

The Fed can "print money" (= legitimize past credit inflation) but it can't force people to borrow.

Mushi mushi. Deflation here.

At least the weather is nice...

MSNBC reports: Calif. Taxpayers Due Refunds May Get IOUs.

If you expect you'll be getting a refund from California when you file your 2008 state income tax return, be prepared: you may instead receive a "registered warrant." Translation: an IOU.

California is rapidly running out of money. Blame it on the state budget deficit that continues to bleed billions of dollars from California's reserves. Facing inadequate credit to make up the difference, California's Controller John Chiang warns that by the end of February, the nation's most populous state may not be able to pay some of its debts, and instead be reduced to issuing those creditors IOUs.

PUNK'D!!!

Broken China

Not that China, the other China (via Yahoo!): Crystal, china maker Waterford Wedgwood collapses.

Waterford Wedgwood PLC, the maker of classic china and crystal, filed for bankruptcy protection on Monday after attempts to restructure the struggling business or find a buyer failed.

Waterford Wedgwood, which employs around 7,700 worldwide, is the latest in a burgeoning list of iconic British companies to succumb to the global economic slowdown and credit squeeze. Department store veteran Woolworths, the queen's tailor Hardy Amies, tea and coffee merchant Whittard of Chelsea and fellow ceramics stalwart Royal Worcester and Spode have all filed for bankruptcy protection in recent months.

Wedgwood has been an iconic name in British pottery for 250 years, after its founder Josiah Wedgwood opened the first factory in Stoke-on-Trent, central England, in 1759. It began making bone china in the 19th century.

Waterford Crystal traces its lineage to a factory opened in Waterford, southeast Ireland in 1783, although that business failed in the 1850s. The brand was revived by Czech immigrant Miroslav Havel in 1947.

Waterford acquired Wedgwood in 1986 to form the present company, listing on the stock exchange and expanding overseas in the 1990s before buying fellow Stoke-on-Trent ceramics maker Royal Doulton in 2005.

Much of the business has now shifted offshore, where it employs 5,800 people, including 1,500 people at a plant in Jakarta, Indonesia, which produces most of the company's ceramics. The majority of its crystal production has been handed to Eastern European subcontractors.

So they're basically a marketing firm with tons and tons of debt, a funny manufacturing unit out east, and a business model that depended on lots of people borrowing lots of money to buy their crapola.

Shocking that they failed. Quite shocking.

Luck be a lady tonight

From the Las Vegas Review Journal: TOUGH TIMES REMOVE SOME OF THE SHINE (yeah, the caps are there in the original, OK?)

Las Vegas is not just a place where people are born and live. It is an enterprise.

It is a deal people enter, a set of givens agreed upon: More is better. Biggest is best.

To live in Las Vegas is to stake your future on this enterprise -- for better or worse.

For the past 20 years, it has been for better. The unemployment rate was minuscule. Gleaming new casinos were built on "old" casinos like so many sandcastles on a beach. Hundreds of neat stucco houses promised a palm tree or a pool or both for nearly everyone with a paycheck.

When times were good, the buzz of a booming Las Vegas was a siren song for all types. Retirees, young families, Californians lured by low taxes, East Coast natives lured by high temperatures. For years, Las Vegas sat near the top of lists of fastest growing cities.

Growth was a dinner party topic. Did you see that new shopping center opened? Have you been to the new casino?

Donald "Butch" Youshaw and his girlfriend, Bernie Jones, heard the call.

"Come out West. Get a job. They're booming. They're hiring," they remember being told. "Casinos are going up. The housing market is going up."

In 2002, the couple drove across the country, towing his classic Mercedes Benz. Youshaw, along with his mother, a retired nurse, bought a three-bedroom stucco home. It had a fig tree in back and no stairs, good for his sister, who uses a wheelchair and was expected to join them.

Still, others seemed to be soaring. His neighbor was gobbling up investment properties as home values headed north. Youshaw imagined he might try his hand at real estate, but first he needed money to spruce up the home he already owned.

His mother saw an ad on television for a refinancing program. She called the number and got a new loan with ease and little clear explanation. But the loan came with hidden fees and higher monthly payments, and Youshaw fell $25,000 in arrears before the bank foreclosed. Stunned at how quickly his fortunes turned, Youshaw says, "I'm living like I did when I was 19."

Today he and Jones spend their days in a home they rent just blocks from the one he lost. Youshaw has pawned jewelry and even took out a payday loan at 200 percent interest to pay the gas bill. Today he and Jones spend their days in a home they rent just blocks from the one he lost. Youshaw has pawned jewelry and even took out a payday loan at 200 percent interest to pay the gas bill.

Pawn-tastic, isn't it?

Economic Updates

(Washington) Baby Goldilocks, daughter of the original Goldilocks and the US Treasury was gangbanged by the four horsemen of the Economic Apocalypse - Debt, Deleveraging, Deflation and Default, and is now reduced in her syphilitic state to giving handjobs at the side of the road for cash.

Her mother died under tragic circumstances on Valentine's Day earlier last year.

Éireann go broke

From the sycophantic and syphilitic New York Times: The Irish Economy’s Rise Was Steep, and the Fall Was Fast.

The Irish economy, pummeled by the most severe housing bust in Europe, has collapsed.

The recession started earlier and its bite has been deeper. Housing prices have fallen by as much as 50 percent. Bank shares have plummeted by more than 90 percent. Unemployment is approaching 10 percent.

The roots of Ireland’s fall date to more than 20 years ago, when a clutch of economists, politicians and civil servants put their heads together in this very pub and planted the philosophical seeds for the Irish economic miracle.

Known widely as the “Doheny & Nesbitt School of Economics,” these beery musings soon became government policy that chopped taxes in half, sharply reduced import duties and embraced foreign investment — a radical transformation that gave birth to the Celtic Tiger and perhaps the most open and vibrant economy in Europe.

But beyond the glow of this sudden efflorescence that made Ireland the fourth most-affluent country in the Organization for Economic Cooperation and Development, a housing bubble had begun to form. Low interest rates, a wave of inward immigration and a bank lending spree drove housing’s share of the economy to 14 percent, the highest in Europe, from 5 percent.

BY wide consensus here, two events have come to define — both culturally and financially — the sweep and excess of the Irish property boom. Both revolve around Sean Dunne.

The gossip around town is that Mr. Dunne, whose brazen deal-making and Donald Trump-like lifestyle epitomized the country’s euphoric boom, might be going bankrupt.

“I grew up with nothing and I know the value of money,” he adds. “The Celtic Tiger may be dead and if the banking crisis continues I could be considered insolvent. But the one thing that I have is my wife and children — that they can’t take away from me.”

Looking at the picture of his wifey, that's not quite a safe assumption, Dunne-derhead.

Brokey brokey = no pokey pokey, an dtuigeann tú?

State of the Union

(Source: CBRP.)

Who ate my wienerschnitzel?

CNN reports: Austria takes over bank hit by Madoff case.

The Austrian government has taken control of a private bank with significant exposure to the alleged fraud by Bernard Madoff.

Austria's market regulator, the FMA, installed a supervisor to take control of Bank Medici on Friday, saying the move would address the danger that the bank would not be able to pay its creditors.

Bank Medici, a private bank, announced in December that it had $2.1 billion in exposure to Madoff's investment securities through hedge funds run by the bank. Bank Medici also said its status was "solid" and that it had no liquidity problems.

If it doesn't have any "liquidity problems", why is the government intervening?

Happy Happy, Joy Joy

Stock Market Mood Music

Surplus, Surplus

The nearly-bankrupt (both morally and fiscally) New York Times reports: As Recession Deepens, So Does Milk Surplus.

The long economic boom, fueled by easy credit that allowed people to spend money they did not have, led to a huge oversupply of cars, houses and shopping malls, as recent months have made clear. Now, add one more item to the list: an oversupply of cows.

In a warehouse that his company runs here, 8 to 20 trucks pull up every day to unload milk powder. Bags of the stuff — surplus that nobody will buy, at least not at a price the dairy industry regards as acceptable — are unloaded and stacked into towering rows that nearly fill the warehouse.

Mr. Van Groningen’s company does not own the surplus milk powder, but merely stores it for the new owners: the taxpayers of the United States. To date, the government has agreed to buy about $91 million worth of milk powder.

In addition, dairy farmers are all too aware that, unlike industrial machinery, cows cannot be turned off and stored until economic conditions improve; they must be fed and cared for, at continuing expense.

But now, demand for dairy products is stalling amid a global economic slowdown and credit crisis, even as supplies have increased. The result is a glut of milk — and its assorted byproducts, like milk powder, butter and whey proteins — that has led to a precipitous drop in prices.

The price of powdered skim milk, used in infant formula, dairy products and processed foods, has fallen to roughly 80 cents a pound today from about $2.20 in mid-2007. Other dairy products have declined as well. Whole milk at grocers has not declined as rapidly as wholesale powdered milk, but it has dropped to $3.67 a gallon, down nearly 6 percent from the peak.

Logic might suggest that dairy farmers would simply sell some of their cows to a hamburger plant to cut the milk supply and raise prices. Indeed, the dairy industry has a cooperative effort under way to cull the herd.

But farmers are reluctant to do that if they expect a demand recovery, since rebuilding a herd can take years. The culling program is relatively small, and at least so far, most farmers are holding onto their cows.

And a related article about the Steel Industry, in Slump, Looks to Federal Stimulus.

The steel industry, having entered the recession in the best of health, is emerging as a leading indicator of what lies ahead. As steel production goes — and it is now in collapse — so will go the national economy.

The steel industry’s collapse closely tracks the alarming late-autumn swoon in the national economy, as the housing bust and the credit crisis converted a mild downturn into “a severe one that has much further to run,” says Nigel Gault, chief domestic economist at IHS Global Insight, offering a view increasingly shared by forecasters.

Through August, steel production was actually up slightly for the year. The decline came slowly at first, and then with a rush in November and December. By late December, output was down to 1.02 million tons a week from 2.1 million tons on Aug. 30, the American Iron and Steel Institute reported. The price of a ton of steel is also down by half since late summer.

Both of these stories are hallmarks of deflationary times. You have a glut of all possible products.

The solutions suggested are exactly as asinine as they sound. If you have a glut of a product, you don't go out and ask for subsidies to go produce more. You must cut the supply to the existing demand.

In fact, the obvious solution is to cut your supply, drop prices to where you can move the product, and align your production to what the market will bear. The first firm to do that independent of government policy will reap all of the benefits.

This is Micro-Econ 101, people!

Jump, Jump!

From the Huffington Post: Financial Crisis Suicide Numbers Mounting.

An out-of-work money manager in California loses a fortune and wipes out his family in a murder-suicide. A 90-year-old Ohio widow shoots herself in the chest as authorities arrive to evict her from the modest house she called home for 38 years.

In Massachusetts, a housewife who had hidden her family's mounting financial crisis from her husband sends a note to the mortgage company warning: "By the time you foreclose on my house, I'll be dead."

Then Carlene Balderrama shot herself to death, leaving an insurance policy and a suicide note on a table.

Across the country, authorities are becoming concerned that the nation's financial woes could turn increasingly violent, and they are urging people to get help. In some places, mental-health hot lines are jammed, counseling services are in high demand and domestic-violence shelters are full.


_ In Los Angeles last week, a former money manager fatally shot his wife, three sons and his mother-in-law before killing himself.

Karthik Rajaram, 45, left a suicide note saying he was in financial trouble and contemplated killing just himself. But he said he decided to kill his entire family because that was more honorable, police said.

Rajaram once worked for a major accounting firm and for Sony Pictures, and he had been part-owner of a financial holding company. But he had been out of work for several months, police said.

After the murder-suicide, police and mental-health officials in Los Angeles took the unusual step of urging people to seek help for themselves or loved ones if they feel overwhelmed by grim financial news. They said they were specifically afraid of the "copycat phenomenon."

"This is a perfect American family behind me that has absolutely been destroyed, apparently because of a man who just got stuck in a rabbit hole, if you will, of absolute despair," Deputy Police Chief Michel Moore said. "It is critical to step up and recognize we are in some pretty troubled times."

_ In Tennessee, a woman fatally shot herself last week as sheriff's deputies went to evict her from her foreclosed home.

Pamela Ross, 57, and her husband were fighting foreclosure on their home when sheriff's deputies in Sevierville came to serve an eviction notice. They were across the street when they heard a gunshot and found Ross dead from a wound to the chest. The case was even more tragic because the couple had recently been granted an extra 10 days to appeal.

_ In Akron, Ohio, the 90-year-old widow who shot herself on Oct. 1 is recovering. A congressman told Addie Polk's story on the House floor before lawmakers voted to approve a $700 billion financial rescue package. Mortgage finance company Fannie Mae dropped the foreclosure, forgave her mortgage and said she could remain in the home.

_ In Ocala, Fla., Roland Gore shot his wife and dog in March and then set fire to the couple's home, which had been in foreclosure, before killing himself. His case was one of several in which people killed spouses or pets, destroyed property or attacked police before taking their own lives.

It's not yet clear there is a statistical link between suicides and the financial downturn since there is generally a two-year lag in national suicide figures. But historically, suicides increase in times of economic hardship. And the current financial crisis is already being called the worst since the Great Depression.

Right, there's no connection until the t-stats say so!

Mood Music for 2009