The USA Oligarchy-Austerity-Schadenfreude Thread

[Canadian_watcher]

yeah... bacon is a good enough reason for me.
I don't have a guilty conscience when it comes to eating meat, but I do wish there were more opportunity to buy from local, small farm sources.

[crikkett]

speaking of soullessness....

Girl shoots dad with arrow after he takes away her cell

Read more: http://www.seattlepi.com/local/komo/art ... z1NfcQLqqv
TAHUYA -- A man was airlifted to the hospital after being shot in the torso with a hunting bow by his teenage daughter on Wednesday evening.
The incident unfolded at a home in the 300 block of Northeast Tee Lake Road in Tahuya in unincorporated Mason County around 8 p.m.
Mason County sheriff's spokesman William Adam said the man was shot by his 15-year-old daughter after he took away her cell phone as a disciplinary measure.
The girl refused to let her wounded father use the phone, forcing him to crawl to a neighbor's home to phone 911, Adam said.
The 35-year-old victim was airlifted to Harborview Medical Center in serious condition.
The girl ran from the home with the bow and at least 35 arrows, but was later found by a SWAT team in the woods behind her house. The team surrounded the girl, and took her into custody without incident.
After she was apprehended, the girl was found to be despondent with a serious medical issue, Adam said.
She was taken to Mary Bridge Hospital in Tacoma to be checked out, and is expected to be there a few days.
Since her father is the girl's only known family member, the girl will not be brought before any court until after being released from the hospital and medically cleared to be detained in juvenile detention.


Read more: http://www.seattlepi.com/local/komo/art ... z1NfcLj1jL

On edit:
BTW I found this on DU

Does this need its own thread?

Mason County girl shoots dad with a hunting bow, deputies say
Posted by Queenie Wong and Susan Gilmore
Update, 10:20 a.m., Thursday, May 26, 2011:

A 15-year-old Mason County girl is in custody after she allegedly shot her father with a bow and arrow. She reportedly shot him after he grounded her and took away her cellphone.

The incident happened about 8 p.m. Wed. in the Tee Lake area of Tahuya. The girl lived alone with her 35-year-old father, according to Mason County Sheriff’s Det. William Adam.

“He was doing some parental discipline. She was doing something he didn’t approve it,” Adam said. He said the man was shot with a compound bow, using an arrow with multiple razor-sharp blades. He said the girl had her own bow and was a deer hunter.

The man was shot in his torso and he was airlifted to Harborview Medical Center with life-threatening injuries, Adam said. After the man was shot in the hallway of the home, he crawled out a window, got in his car and drove 1/3 of a mile to the nearest neighbor, who called for help.

The girl was despondent when apprehended at the scene and has medical issues, Adam said. She was taken to a hospital and will be sent to the Mason County Juvenile Detention Center. She may appear in court Friday.

The girl’s mother lives out of state, Adam said.

http://seattletimes.nwsource.com/html/t ... essay.html

[Nordic]

Citigroup documents admits we're living in a Plutonomy, and seems to think it's just great.

I haven't seen this before. A friend of mine posted it on FB:

http://jdeanicite.typepad.com/files/667 ... part-1.pdf

SUMMARY
➤ The World is dividing into two blocs - the Plutonomy and the rest. The U.S.,
UK, and Canada are the key Plutonomies - economies powered by the wealthy.
Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.

➤ Equity risk premium embedded in “global imbalances” are unwarranted. In
plutonomies the rich absorb a disproportionate chunk of the economy and have
a massive impact on reported aggregate numbers like savings rates, current
account deficits, consumption levels, etc. This imbalance in inequality
expresses itself in the standard scary “ global imbalances”. We worry less.

➤ There is no “average consumer” in a Plutonomy. Consensus analyses focusing
on the “average” consumer are flawed from the start. The Plutonomy Stock
Basket outperformed MSCI AC World by 6.8% per year since 1985. Does
even better if equities beat housing. Select names: Julius Baer, Bulgari,
Richemont, Kuoni, and Toll Brothers.

..........


........ the so called “global imbalances” that worry so
many of our equity clients who may subsequently put a lower multiple on equities due to
these imbalances, is not as dangerous and hostile as one might think. Our economics
team led by Lewis Alexander researches and writes about these issues regularly and they
are the experts. But as we went about our business of finding stock ideas for our clients,
we thought it important to highlight this provocative macro thesis that emerged, and if
correct, could have major implications in terms of how equity investors assess the risk
embedded in equity markets. Sometimes kicking the tires can tell you a lot about the
car-business.

Well, here goes. Little of this note should tally with conventional thinking. Indeed,
traditional thinking is likely to have issues with most of it. We will posit that: 1) the
world is dividing into two blocs - the plutonomies, where economic growth is powered
by and largely consumed by the wealthy few, and the rest.

............

2) We project that the plutonomies (the U.S., UK, and Canada) will likely see even more
income inequality, disproportionately feeding off a further rise in the profit share in their
economies, capitalist-friendly governments, more technology-driven productivity, and
globalization.

..........

4) In a plutonomy there is no such animal as “the U.S. consumer” or “the UK
consumer”, or indeed the “Russian consumer”. There are rich consumers, few in
number, but disproportionate in the gigantic slice of income and consumption they take.
There are the rest, the “non-rich”, the multitudinous many, but only accounting for
surprisingly small bites of the national pie.

.....................


And that's just from the first couple of pages!

[stefano]

[Barack Obama] is due to meet veterans of Poland's struggle for democracy during his stay in Warsaw, though Lech Walesa, former leader of the Solidarity trade union that toppled the communist regime in 1989, said he was too busy to meet the U.S. president.

"There is no room in my schedule," Walesa said.

[eyeno]

[Barack Obama] is due to meet veterans of Poland's struggle for democracy during his stay in Warsaw, though Lech Walesa, former leader of the Solidarity trade union that toppled the communist regime in 1989, said he was too busy to meet the U.S. president.


"There is no room in my schedule," Walesa said.

Thanks. I think maybe this article is the most incisive read of the day, for me anyway.

The international community is making a $40-billion package of aid available for Arab Spring nations, French President Nicolas Sarkozy said on Friday. Half of that coming from Group of Eight countries, $10 billion from Gulf Arab states and the remainder from bilateral deals, he said.

[eyeno]

And so it begins?

http://www.activistpost.com/2011/05/terrorist-pre-crime-detector-field.html

Terrorist 'pre-crime' detector field tested in United States
Screening system aims to pinpoint passengers with malicious intentions.

Minority Report - 20th Century Fox/Dreamworks
Sharon Weinberger
Nature

Planning a sojourn in the northeastern United States? You could soon be taking part in a novel security programme that can supposedly 'sense' whether you are planning to commit a crime.

Future Attribute Screening Technology (FAST), a US Department of Homeland Security (DHS) programme designed to spot people who are intending to commit a terrorist act, has in the past few months completed its first round of field tests at an undisclosed location in the northeast, Nature has learned.

Like a lie detector, FAST measures a variety of physiological indicators, ranging from heart rate to the steadiness of a person's gaze, to judge a subject's state of mind. But there are major differences from the polygraph. FAST relies on non-contact sensors, so it can measure indicators as someone walks through a corridor at an airport, and it does not depend on active questioning of the subject.

The tactic has drawn comparisons with the science-fiction concept of 'pre-crime', popularized by the film Minority Report, in which security services can detect someone's intention to commit a crime. Unlike the system in the film, FAST does not rely on a trio of human mutants who can see the future. But the programme has attracted copious criticism from researchers who question the science behind it (see Airport security: Intent to deceive?).
From fiction to fact

So far, FAST has only been tested in the lab, so successful field tests could lend some much-needed data to support the technology. "It is encouraging to see an effort to develop a real empirical base for new technologies before any policy commitments are made," says Tom Ormerod, a psychologist in the Investigative Expertise Unit at Lancaster University, UK. Such testing, he adds, could lay the groundwork for a more rigorous randomized, controlled, double-blind study.

According to a privacy-impact statement previously released by the DHS, tests of FAST involve instructing some people passing through the system to carry out a "disruptive act". Ormerod questions whether such role-playing is representative of real terrorists, and also worries that both passengers and screeners will react differently when they know they're being tested. "Fill the place with machines that go ping, and both screeners and passengers start doing things differently."

In lab tests, the DHS has claimed accuracy rates of around 70%, but it remains unclear whether the system will perform better or worse in field trials. "The results are still being analysed, so we cannot yet comment on performance," says John Verrico, a spokesman for the DHS. "Since this is an ongoing scientific study, tests will continue throughout coming months."

ADVERTISEMENT

Some scientists question whether there really are unique signatures for 'malintent' — the agency's term for the intention to cause harm — that can be differentiated from the normal anxieties of travel. "Even having an iris scan or fingerprint read at immigration is enough to raise the heart rate of most legitimate travellers," says Ormerod.

Steven Aftergood, a senior research analyst at the Federation of American Scientists, a think-tank based in Washington DC that promotes the use of science in policy-making, is pessimistic about the FAST tests. He thinks that they will produce a large proportion of false positives, frequently tagging innocent people as potential terrorists and making the system unworkable in a busy airport. "I believe that the premise of this approach — that there is an identifiable physiological signature uniquely associated with malicious intent — is mistaken. To my knowledge, it has not been demonstrated," he says. "Without it, the whole thing seems like a charade."

As for where precisely FAST is being tested, that for now remains a closely guarded secret. The DHS says that although the first round was completed at the end of March, more testing is in the works, and the agency is concerned that letting people know where the tests are taking place could affect the outcome. "I can tell you that it is not an airport, but it is a large venue that is a suitable substitute for an operational setting," says Verrico.

So, biometric identification tied to known habits begins and becomes empirical evidence of malcontent. I have no other observation or conclusion I can make.

[Pele'sDaughter]

http://weblogs.sun-sentinel.com/busines ... por_1.html

State Farm customers report triple digit rate hikes

By Julie Patel June 2, 2011 01:02 PM

Some State Farm Florida policyholders were hit with triple digit increases in recent weeks when their policies came up for renewal.

Insurance Commissioner Kevin McCarty approved a 19 percent average statewide rate increase for the company in April, but average increases in certain parts of South Florida were as high as 64 percent. Individual policyholders' premiums can change by a higher or lower percentage than the average approved for the state and their region.

"Premium changes depend upon a number of factors such as location, risk, claims experience, coverages selected, deductibles selected, and qualifying discounts, to name a few. We encourage our policyholders to speak with their agents about the specifics of their policies," said State Farm Spokesman Michael Grimes.

Some homeowners said their agents told them State Farm is losing money because of state laws that are tough on insurers and encouraged policyholders to complain to legislators. Some agents provided cheaper quotes for state-backed Citizens Property Insurance.

Here is a sampling of premium increases for State Farm policyholders in South Florida:

A 280 percent increase to $8,524 from $2,246 for Gerald Meit, a retired pharmacist in Weston with a 22-year-old, 4-bedroom house complete with a hip roof and shutters. Meit said he has purchased insurance from State Farm for more than 50 years, with no claims. When he heard regulators approved a rate hike, he braced for an increase. But he said he was shocked when he received his renewal notice.

"We were expecting some kind of increase, but even if it doubled, that’s less than what they’re asking," he said. “It looks like they don’t want us. It looks like they’re blowing us off with this kind of increase."

His agent plans to visit the home next week to see if there is a way to help lower the premium. Meit said he was told the increase is due in part to the statewide rate hike and a reduction in the hurricane-proofing discounts he was receiving.

A 181 percent increase, to $5,537 from $1,972 the year before, for John Hutelin, a pilot who lives in a 2,100 square-foot, 4 bedroom house in Plantation. It’s about 30 years old, according to Broward County property data.

He said he has never filed a claim in the 25 years that he has been insured by State Farm and he now plans to drop his automobile policy with the company as well.

Hutelin said the insurer said the increase is partly due to an inspection the company did of his home that found the concrete walls include some wood. He said since the walls are all concrete, the company is referring to three wood gables at the ends of his home.

A 166 percent increase to $6,575 from $2,474 for Steven, a retiree in Coral Springs resident, who has not yet provided his last name. He said he spoke with his agent, who said the company is "playing catch up" after being denied rate increases in years past.

"How can State Farm justify" it? he asked McCarty in an email. "That's outrageous."

Christina Huff, from McCarty's office, replied to him in an email, saying regulators only approve rates that insurers can justify: "The Office is required to make sure that rates are not excessive, inadequate or unfairly discriminatory prior to approving the rate. Florida Statutes dictates the method by which our actuaries and analysts review rate filings."

State Farm Florida made a list released this week of the top four weakest large insurers in the state, with a “D” or “weak” rating from Weiss Ratings, which assesses the financial health of insurers. The Florida company’s premiums didn’t keep pace with claims and other expenses to the tune of $187 million in 2010, said Gavin Magor, a senior financial analyst with Weiss, which does not accept payments from the companies it rates – unlike most rating agencies. The company sent $445 million of the $980 million it collected in premiums to reinsurers, including $215 million to its parent company, Magor said.

The insurer's parent company, State Farm Mutual, made Weiss Rating's list of the top four strongest large insurers. The ratings are based on how much money the insurers have in reserves and their profit margins, risk factors, stability and other issues.

[Bruce Dazzling]

Homeland-Security Business Still Booming Ten Years Later

Published: Sunday, 29 May 2011 | 10:25 AM ET
By: Constance Gustke,
Special to CNBC.com

A decade after the 9/11 terror attacks, homeland security is still a growth business.

The niche—that includes James Bond-like tools such as infrared cameras, explosive detectors and body scanners—is expected to grow 12 percent annually through 2013, according to Morgan Keegan.

“Homeland security is reactive,” says Tim Quillen, a senior equity analyst at investment banking firm Stephens Inc. “The stocks are hedges against bad things happening.”

One example: the underwear bomber, who was thwarted in late 2009. After that a bell weather homeland security stock OSI Systems [OSIS 39.22 -0.50 (-1.26%) ] rocketed 30 percent within a month. “The stock went on a tear,” says Brian Ruttenbur, a research analyst at Morgan Keegan. Why? OSI makes X-ray and metal detectors used to scan people, baggage and cargo that it sells worldwide. During the past 12 months ending yesterday, the stock has popped from $25 to $40, driven by border and port growth.

Much has changed, since the government spent over $20 billion beefing up airport baggage screening nationwide with X-ray devices.

Airline security is a small business: about $1 billion. There’s 2,100 airport security lanes in the U.S., and 90 percent use X-ray scanners.

“The scanners are ten plus years old now,” says Ruttenbur and “going through an upgrade cycle.” Recently, the government has ordered another 500 scanners though.

Screening cargo going on aircraft and boats at ports is also spiking. Now, only a small percentage of all cargo is scanned. Security screening will grow ten percent to 15 percent annually in coming years, says Ruttenbur in a recent report. This driver will help OSI Systems pump out strong security earnings.

Tiny Niche, Big Clout

There aren’t any pure plays within homeland security though—neither stocks or ETFs. Some players like OSI Systems sell their screening devices to healthcare companies too, so their homeland security earnings are diluted.

“You have to spread the net wide and separate reality from hype," says Quillen

Both OSI Systems and Flir Systems [FLIR 34.47 -0.67 (-1.91%) ] are undervalued right now, says Quillen.

Flir Systems is a well-managed market leader in infrared cameras used to protect critical buildings, he says. This fast-growing market is slated to expand 20 percent annually, though only half of Flir Systems’ revenue come from government business. The stock rose from $29 to $36 in the past year. And Quillen has a 12-month price target of $43 on it.

OSI Systems is another favorite. In the first quarter of the year, OSI’s security group revenues grew 27 percent over last year’s.

“The stock is a long-term play," says Jonathan Richton, an analyst at Imperial Capital, citing OSI's developing cargo scanning business. Analysts peg five-year earnings growth at 20 percent. Another plus driving earnings: OSI Systems is aggressively tightening operating margins.

A third player, American Science and Engineering [ASEI 84.32 -1.02 (-1.2%) ] makes cargo and parcel search systems. But the stock is expensive right now, say analysts, since the company missed first-quarter revenue targets.

In the past year, the stock has risen from $77 to $88. Ruttenbur expects only 4-percent earnings growth this year but 10 percent to 15 percent in the next few years, as orders pick up. His 12-month price target: $94.

For investors casting a wide net, L-3 Communications [LLL 79.24 -1.10 (-1.37%) ] is a homeland security monolith. It’s also the sixth largest U.S. defense contractor.

The company makes surveillance equipment for airports and checkpoint scanners. “They’re playing a meaningful role,” says Quillen, “but security revenue is only about 5 percent.”

Its stock price has been flat over the last year.

These days, homeland security niche players are a safe bet though — even after the recent death of 9/11 mastermind Osama bin Laden.

[vanlose kid]

Monday, May 10, 2010
Rep Alan Grayson: Federal Reserve Owns Red Roof Inn Through Bailed Out Bear Stearns Commercial Mortgage Securities Trust

This is interesting, we own a hotel chain. Watch Rep. Alan Grayson explain how the Federal Reserve owns the Red Roof Inn through a bailed out Bear Stearns CMBS. I remember on 3/31/2010 Crain's Chicago reported that a Chicago (Streeterville) Red Roof Inn was hit with a foreclosure suit and the debt was part of a $455 Billion CMBS in default. I did a search and found the actual mortgage in a Bear Stearns CMBS Trust: Bear Stearns Commercial Mortgage Securities Trust, Series 2007-PWR17 (sec.gov) and Bear Stearns Commercial Mortgage Securities Trust, Series 2007-PWR18 (sec.gov). The New York Fed recently disclosed their holdings and BSCMS_07-PW17 A4, BSCMS_07-PW18 A4, BSCMS_07-PW18 A3 were on the list. Also remember in October 2009 I blogged that the Fed owned and was trying to sell the Crossroads Mall in Oklahoma for $24 million?

It's still there under REO (real estate owned) in Maiden Lane I. The Fed owns a lot of commercial real estate debt through the Bear Stearns bailout. Here is Maiden Lane I, II and III and the Grayson video below. "Rep. Alan Grayson discussed the Federal Reserve's purchase of debt from Bear Stearns, including debt from recently foreclosed Red Roof Inn's."



...

http://www.distressedvolatility.com/201 ... -owns.html

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[justdrew]

little coverage of this, but yesterday's Yuma, AZ shooting...

An elderly man killed four people and then himself in Yuma, Arizona, police said Thursday.

Carey Dyess, 73, was found dead of a self-inflicted gunshot wound. One other person was wounded in the attack, and taken to a Phoenix hospital.

Schools and the courthouse were closed in the aftermath. Officers said four people were killed in Yuma County, and one person was killed in the city of Yuma.

Divorced husband Carey Dyess Kills Five People because 'he was angry over his divorce'

A man apparently angry over a divorce case went on a shooting spree killing five people and wounding another before taking his own life.

Carey Hal Dyess, 73, from Arizona, is said to have shot an attorney related to the case and other friends and relatives this morning in and around Yuma County.

Mayor Alan Krieger said details of the incident were sketchy, but that the shooting unfolded at more than one location in and around the city, located in the southwestern corner of Arizona near the border with Mexico.
Tragic: A Yuma County Sheriffís deputy and a Boarder Patrol agent console a woman at one of the scenes of the shootings

The incident began shortly after 9am local time and continued until about 11am, when the gunman shot himself to death in a rural area outside Yuma, the mayor said.
He said City Hall and the local courthouse were shut down as a security precaution after the shooting first erupted.

A Yuma school official said three nearby elementary schools also were locked down for about two hours.

Mayor Krieger said: 'It's a tragedy. It affects the city, and obviously, that's not the kind of press we would like to have for our city. But it doesn't have anything to do with the way we are in Yuma or Arizona.'

The shooting comes just five months after six people were killed and 13 others wounded in Tucson, including Arizona Congresswoman Gabrielle Giffords.

One of the victims shot today was transported to the Phoenix Hospital in critical condition.

According to the Yuma Sun, the county's sheriff's office was called to the first scene this morning, when the body of a woman was found in a yard at Old Highway 80.

Then, around 9:21am, the Yuma Police Department responded to a shooting in the 300 block of 2nd Avenue in the county.

Two more shootings were then reported in the Wellton area, followed by a report of a self-inflicted gunshot wound near Blaisdell off Highway 95.
Yuma, Arizona
Patrol: Yuma County Sheriffís detectives investigate the shooting of six people in a series of shootings in southwest Arizona that forced officials to lock down a courthouse and area schools

Patrol: Yuma County Sheriffís detectives investigate the shooting of six people in a series of shootings in southwest Arizona that forced officials to lock down a courthouse and area schools

City Administrator Greg Wilkinson sent an email to staff saying: 'There have been some shootings in the City and County. It looks like the person has targeted certain people but please use extra caution.'

Wellton Mayor James Deermer said he still didn’t have a lot of information as of noon about the shootings and 'rumors are floating around'.

He told the Sun: 'This is a tragedy for our community ... that’s true anywhere.'

[vanlose kid]

POSTED: June 2, 10:23 AM ET | By Matt Taibbi
Goldman Tries, Fails to Sell Soul With Libya Deal


It was hard not to be amused to see this story by CNBC’s John Carney the other day with the following provocative headline: “Goldman Dodges a Bullet.”

In the story an unnamed Goldman banker told Carney that there was a widespread feeling of relief within the walls of the bank after news broke that Goldman a few years ago offered to sell Moammar Qaddafi a $3.7 billion equity stake in their company. The relief, it seems, stemmed from the fact that the deal was never struck – and therefore Goldman doesn’t have to answer charges now of having funded repression in the Middle East. From the Carney piece:

“The last thing we need right now would be headlines reading ‘Vampire Squid Profits Funding Libyan Dictator,’” one senior Goldman investment banker told NetNet.

I appreciated the shout-out there, but I also had to laugh: only a Goldman, Sachs executive would fail to see that offering to sell yourself to a ruthless anti-Semitic dictator/terror sponsor is just as bad as actually completing the sale. If anything, it’s worse. There is no modern-day Goethe or Faust with the genius to even invent an anti-hero pathetic enough to not only try to sell his soul to the Devil, but fail! But apparently, this shameful episode is what counts as a PR win for the esteemed i-banking King these days:

"Finally, we dodged a bullet," another person at Goldman told Carney.

The Libya episode is classic Goldman. They made the equity offer in the first place after blowing a giant pile of Qaddafi’s money on a complicated series of option bets, made before the 2008 crisis. In this deal they pulled the standard White-God conquistador routine, sending in a smooth-talking "rock star" salesman to dazzle the aborigines with cuckoo clocks and shiny things. From MarketWatch:

Libya was eager to join the big leagues of finance, and its investors were “awed” by an Arabic-speaking Goldman executive who urged them into an options deal that bet on the fortunes of companies including Citigroup Inc. C +0.23% , Allianz DE:ALV -1.33% and Italy’s UniCredit IT:UCG +2.08% .

The LIA, Libya’s sovereign wealth fund, was charmed by the demonstration and decided to go all-in with a $1.5 billion bet. Goldman very quickly lost them 98 percent of that money.

I never knew it was even possible to lose 98 percent of an investment that quickly. If you sent a blind, three-legged donkey into Caesar’s palace with $1.5 billion in chips, it could probably stay solvent longer than this options package Goldman sold to Qaddafi.

How could the Libyans be enticed to take such a crappy deal? See if this sounds familiar: according to the Wall Street Journal, the Libyan fund manager felt that Goldman had "misrepresented" the fantastic investment opportunity Goldman sold to them, and also made trades "without proper authorization."

But unlike the Australian and South Korean hedge funds who bought into deadly deals like Timberwolf, or the Dutch and German banks who bought into Abacus, all of whom could safely be fucked with without fear of serious reprisal, the Libyans were a threat to do more than just file quixotic lawsuits in captured American courts over the giant losses. At least, Goldman officials thought they were:

Officials at the sovereign-wealth fund accused Goldman of misrepresenting the investment deals and making trades without proper authorization, according to people familiar with the situation. In July 2008, Zarti, the fund's deputy chairman, summoned Kabbaj, Goldman's North Africa chief, to a meeting with the fund's legal and compliance staff, according to Libyan Investment Authority emails reviewed by the Journal.

One person who attended the meeting says Zarti was "like a raging bull," cursing and threatening Kabbaj and another Goldman employee. Goldman arranged for security to protect the employees until they left Libya the next day, according to people familiar with the matter.

Having managed to get their bankers out of Libya with their heads still attached to their shoulders, Goldman decided to make up for losing $1.5 billion of Qaddafi’s money by offering the international pariah a $3.7 billion equity stake that would have made him one of the largest single owners of the bank.

In con-man parlance, this is called the reload. You beat someone in a Ponzi scheme for his life’s savings, and when he shows up at your door with an axe, you get him to mortgage his house to buy a stake in the Brooklyn Bridge. After blowing $1.5 billion of Libya’s money almost instantaneously, Goldman’s solution to the problem was to immediately get Qaddafi reaching back into his pocket for a cash sum over twice the size of the original losses. It’s really hard not to admire the sheer balls of the whole deal.

Goldman apparently spent much of the summer of 2009 trying to entice Qaddafi to bite on various deals. The main proposal involved Goldman giving Qaddafi $5 billion in preferred Goldman shares in return for $3.7 billion in stock. When that fell through, they tried other proposals, including, hilariously, a deal that would have invested the Libyans in credit default swaps. When the Libyans wouldn’t bite on that either, they tried to design a deal that would have had the Libyans investing in an offshore special purpose vehicle containing what are being characterized as “high-quality bonds.” Amusingly, Goldman sweetened this pitch with what I call a "Jefferson County Special," i.e. a fat consulting fee for a fund advisor signing off on the deal:

The deal would pay Libya an annual return of 6% for 20 years, while also promising a $50m payment to be made to an outside fund adviser run by the son-in-law of the head of Libya's state-owned oil company. Officials from Goldman and the sovereign wealth fund met about the deal in June 2010, but it was never completed.

This is classic modern investment banking. You pitch some kind of deal to a city, state, or country, and it may or may not be a good deal for the actual citizens/residents whose money is at stake. But you can make it objectively a great deal for the individual officials with the power to sign off on the deal by sending a big fat check either to the politician in question or to some local slimeball consulting firm of his or her choosing. Anyway, there is some reason why we journalists are not supposed to call things like Goldman's proposed “$50m payment” bribes, but I can’t remember what it is.

Goldman’s share price actually seemed to jump a little – upward – at the Libya news, getting into the 140-142 range for much of the day. So maybe this unnamed banker in Carney’s story was right about dodging a bullet, at least as far as that day went. But as I’m typing this post, Goldman’s shares are plunging again, thanks to yet another dose of bad news: the bank received subpoenas today from a New York prosecutor, who is apparently interested in Levin report matters. Given the avalanche of bad news hitting the bank of late, it’s actually a bit of a surprise that the market still reacts at all to such stories.

One other observation about all of this, and this was pointed out to me this afternoon by a government investigator familiar with the case. In this Libya deal, we see Goldman going through a lot of effort to placate a customer who lost a billion and a half dollars. Which begs the question: why was Goldman so worried about mending fences with Qaddafi, when it seemingly did nothing for the investors who lost $2 billion in the Hudson deal, or the Australian hedge fund that got beat for $100 million in the Timberwolf deal? I've talked to a lot of people who got on the wrong end of a bad Goldman deal, and I never heard any hint of Goldman coming back with flowers and chocolates after the date rape. What makes the Libyans deserve such special attention? One wonders if you get better service from an American investment bank if the threat of beheading is behind your business deals.

More on this later. I’m also scheduled to talk about the story with Eliot Spitzer tonight on In the Arena, so please tune in. It will be interesting to hear what he has to say about the Libya business.

UPDATE: Almost died laughing when I heard about Goldman's official reaction to the news of the Manhattan subpoenas:

“We don’t comment on specific regulatory or legal issues but subpoenas are a normal part of the information request process and, of course, when we receive them we co-operate fully,” Goldman Sachs said.

So subpoenas are a "normal part of the information request process"? If that's what they consider "normal" communication, how do they shake hands in the Goldman offices -- by beating each other with baseball bats? Instead of greeting cards, do they send each other hydrogen bombs on Christmas and Easter? For pure comic relief, these folks really can't be topped.

http://www.rollingstone.com/politics/bl ... l-20110602

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[Bruce Dazzling]

Video at the link.

Tables Turn: Deputies and movers show up at bank to seize property for homeowner
Story Created: Jun 03, 2011 at 3:48 PM America/Chicago

COLLIER COUNTY, Fla. - A bank foreclosure story you've got to see to believe. A Collier County couple turns the tables on Bank of America, the bank that tried to foreclose on their home. Now, the family is foreclosing on the bank! Even bringing trucks and deputies ready to seize property.

The foreclosure nightmare started when Warren and Maureen Nyerges paid cash for a home owned by Bank of American in the Golden Gate Estates. They never had a mortgage whatsoever. But, the bank fouled it up and wound up issuing a foreclosure through their attorney.

The couple took their case to court and after a year and a half nightmare the foreclosure was dropped. A Collier County judge said Bank of America has to pay the couple's $2,534 legal fees for the error. After more than five months the bank still hadn't paid up. So, the homeowners' attorney did just what the bank would do to get their money, legally seize their assets.

"I instructed the deputy to go in and take desks, computers, copiers, filing cabinets, including cash in the drawers," Attorney Todd Allen told WINK News.

Outside the Bank of America on Davis Boulevard, several deputies stood by with movers ready to start hauling out the bank's office supplies and furniture.

Inside, the homeowners' attorney was locked out of the bank manager's office by deputies while the bank manger tried to figure out what to do.

Allen says the manager was visibly shaken, "Having two Sheriff's deputies sitting across your desk, and a lawyer standing behind them, demanding whatever assets are in the bank can be intimidating. But, so is having your home foreclosed on when it wasn't right."

After about an hour the bank finally cut a check to satisfy the debt, and no furniture was taken. A representative for Bank of America issued a statement saying they are sorry for the delay in issuing funds. They claim the original request went to an outside attorney who is no longer in business.

As for Allen, he calls this a symptom of a larger problem he sees often in the courts, where banks don't perform their due diligence on foreclosure cases. "As a foreclosure defense attorney this is sweet justice."

[Nordic]

Thanks, Bruce. I dove into this thread this morning to post that same story. It's the best "feel good" story I've seen in a while!

Too bad this kind of thing isn't rampant.

[Nordic]

http://cryptogon.com/?p=22738

More Americans Think Economy Will Never Recover

June 4th, 2011
Recover to what? Happy motoring on Chinese credit?

Via: CNBC:

Americans are growing increasingly doubtful about direction of the US economy, according to the latest survey from business-advisory firm AlixPartners.
In fact, an increasing number, some 61 percent, say they don’t expect to return to their respective pre-recession lifestyles until the spring of 2014, if ever.
What’s worse, a full 10 percent said they expect they will never return to pre-recession spending.
That’s a more pessimistic view than last year, when those surveyed expected that they could be back to pre-recession spending levels by the middle of 2013.
“Americans continue to push their expectations for return to a pre-recession ‘normal’ further and further into the future—close enough for comfort, but far enough away to seem realistic,” said Fred Crawford, CEO of AlixPartners. “But as that happens, more and more it seems normal is actually where we are right now.”

Source link: http://www.cnbc.com/id/43268037

[Allegro]

.
Not for the lulz of it, but in good faith I've posted the following Sandow blog post and one clarifying comment that followed. If orchestras, better yet, classical music was always on RI's mind, Greg Sandow's blog posts would likely be in a circle of many music critics' writings at RI. But that's not what we're about.

Believe it or not, the grand genre of classical music is still part of the U.S. economy, and those manipulators and promoters within the global Oligarchy-Austerity-Schadenfreude may not care too much wrt disappointments and mourning of many classically trained and practicing performing artists at age 30 and beyond.

(Actually, if you wish, scroll to username Tom to read his comments about economics that produced early 20th century orchestras, and his notions wrt their probable futures.)

Greg Sandow on the future of classical music

The cost squeeze – expenses
— May 3, 2011

As I noted before, the orchestra cost squeeze is truly a squeeze. Or, in other words, it’s not a flat phenomenon, a simple matter of income declining, because ticket sales and donations are falling off. No, it’s got another dimension: expenses are rising. And the falling income/rising expense squeeze gets worse over time.

Here’s the rising expenses part of the story.

Expenses rise, first of all, for all of us -- businesses, nonprofits, individuals. Inflation. Rising gas prices. Heating costs. We all know the drill.

And then, over time, there are particular things for which orchestras have been spending more -- marketing and development (the fancy word for fundraising, though there’s more involved: for instance, urging people to leave an orchestra money in their wills).

The increase in these costs has been going on for a long time, because before the 1970s, orchestras spent hardly anything for either of these things. Ticket sales were a much larger percentage of income, and when extra money was needed, patrons were on hand to donate it, apparently without needing to be searched for, or asked. I don’t mean to say that finding money always was easy, but it was a lot easier than it is now. That’s why orchestras, back then, didn’t have much in the way of fundraising budgets.

Same for marketing. In the late ’60s and early ’70s, the biggest orchestras sold all their tickets. 100%. Or at least that’s what consultants from McKinsey noted, after studying orchestra finances.

Late in the ’60s, a financial crisis hit, because the orchestras expanded to 52-week seasons, and also paid their musicians not just for more weeks, but at a higher rate. In the wake of that came the marketing and development departments. Orchestras had more seats to sell, and more money to raise.

The cost disease

But now we get to the killer part of the long-term rise in expenses -- the Cost Dsease, also known as Baumol’s Dilemma, after William J. Baumol, the economist who first suggested what I’m about to summarize.

The principle -- generally accepted by economists -- is simple enough. Suppose you’re a company that manufactures things (or, these days, contracts to have them manufactured). As time goes on, the manufacturing process gets more efficient. Productivity rises. So you spend less money to make more widgets.

This happens more or less through the entire economy. So we all (very generally speaking) get richer. (Obviously, I’m leaving out such factors as glaring income inequality, which normally I care a lot about.) Because we’re richer, we can have things we didn’t have before. Computers. iPhones. More sophisticated cars. More varied clothes and food. We take these things for granted. They’re part of our lives. We expect to be paid enough so we can buy them. Which, if we work for a company that shows increased productivity, isn’t hard for our employers to do.

But some big players in our economy get left out of this. These are institutions (very typically nonprofits) that don’t show productivity gains. Orchestras, for instance. It takes just as many musicians to play a symphony now as it did 50 years ago. Or hospitals. Or universities.

Orchestras, in fact, are less productive than they were, because (see above) they need larger staffs, for marketing and development. And so orchestras fall behind the rest of the economy. Their costs keep rising, just everybody else’s do. Just like General Electric, or Ralph Lauren, they have to pay higher salaries than they used to, so their musicians -- and the people on their staff -- can buy computers, and nicely varied food.

And the orchestras themselves need computers for their offices. But there’s no way they can fund their rising expenses with greater productivity. So their costs keep rising, faster than their income. This would happen even if ticket sales and donations still were strong!

So as time goes on, even when their finances seem healthy, orchestras still are forced to scramble for money. As one sign of this, the percentage of their income that comes from ticket sales has been falling for quite a long time. Which means the percentage of their income that they have to go out and find has been rising, leading to higher development costs over time, which means they have to raise still more cash, which means...

I don’t want to get melodramatic about this, but the Cost Disease is real, and makes orchestra financing troublesome, even without the scary new squeezes we’ve been seeing in the past few years.

I’ve explained the Cost Disease before, but maybe this elucidation is clearer than the others.

< comment begin >

By Tom on May 6, 2011 3:54 PM
(Of those found, I corrected a few spelling errors and miscellaneous typos. And highlighted some ideas.)

I remember reading about the Baumol Dilemma during my masters program in arts administration. There are a couple of issues with Baumol & Bowens’ theories:

1. The fundamental issue of productivity has existed since the late 1700’s, when orchestral concerts first became accessible to a general, ticket buying public. Yet in spite of this, the number of orchestras grew throughout the late industrial revolution and in the atomic age.

2. The lack-of-increasing-productivity model is incomplete, as it does not address the effects of market theories on supply and demand.

I would argue that the number of symphony orchestras grew from the late 1700’s until recently, because demand was increasing as well, a byproduct of increased average personal wealth stemming from productivity increases. More people were wealthy enough to demand and pay for receiving access to the luxury good that is symphonic music. Anyone marginally familiar with economic theory will know that if demand exceeds supply, prices for the good in demand will rise. This negates Baumol’s Disease in a demand-driven environment.

Gold is a fairly useless metal, with practical applications mainly in tinting, electronics and chemical production. Only 10% of what is produced annually today is used for those purposes, with 90% going towards human vanity in the form of jewelry, and human folly, in the form of investment. Yet its price spikes and bottoms drastically, as we have seen in the last 40 years. It has an almost wholly demand-driven value, since it is practically useless, insofar as supply far exceeds industrial demand.

Like gold, symphony orchestras - analyzing their inherent value in brutal market terms, which few people seem able to do - have a very low functional value, but can have a high perceived value based on societal vanity and civic investment.

Let us say that classical symphonic music has a demonstrable positive effect on the human mental state, and on ancillary businesses, such as restaurants, taxi services, babysitting services and the like. This might be roughly equivalent to the real usefulness of gold, i.e., 10% of its total annual production. The rest is civic vanity and investment. It is often demonstrated by quotes from patrons and politicians in the form of “for a city of our size, it is a matter of pride to have a world-class orchestra” or “we’ve been attending for 40 years and love this orchestra and maestro so-and-so”. Are these arguments valid and do they represent value? [If] gold’s really worth around [$1500] an ounce, and does it make a person better-looking if they wear it as opposed to if they did not?

It would seem that orchestras are not too dissimilar to gold, though of course their market cycles have been much longer hitherto. The other branches of the entertainment industry are much closer in its ebbs and flows of fashion to the price-cycles of gold, but that is because they are much more in touch with market mechanics, insofar as they [branches of the entertainment industry] are a perceived good by a much larger segment of the general population than orchestras, which, as market research has shown, only attract approx. 4% of the total human market at best.

The real reason, I believe, for the orchestral crisis of the 1990s until today has been a bubble created by the Rockefeller cultural initiatives of the early 1960s. Not Baumol’s disease. With the Rockefeller cultural initiatives, market conditions not unlike the housing bubble of today, were created. Now the bubble is exploding, and orchestras are crashing.

Before 1960, the US had a much smaller number of orchestras than today. With the advent of the NEA and increased attention from funding sources, local government, corporate and foundation, the number of orchestras grew, as did the salaries of musicians, and (nota bene, though that’s a separate discussion) the cost of maestros and soloists. In the 60s and for a few decades forward, this was perhaps justifiable from a market perspective. Electronic reproduction quality was far lower than the actual live performance sound experience, and a relatively well-educated population with a connection to established national-romantic cultural roots were willing not only to buy tickets, but also donate individually, to attend their local orchestra. Soon every mid-size city in the U.S. had its own professional orchestra, and every major city suburban/state region of the U.S. had their regional orchestras.

This favorable environment started eroding sometime in the 1980s, concurrently with the advent of the CD, the decline in elementary education quality in the U.S., and various demographic shifts.

The then-named ASOL [American Symphony Orchestra League; now League of American Orchestras] handled the Rockefeller-inspired growth about as well as Alan Greenspan handled the national economy by holding interest rates too low for too long. [The] ASOL advocated for more emotional appeals and increased funding for too long. Instead, both parties may have done better to realize, that not every American actually could afford a house, nor should they be on a stock market-driven pension plan, just like not every city or region in the U.S. could or should have its own symphony orchestra. So foundation and corporate funds were squandered to prop up marginally effective orchestras, instead of focusing on the demonstrably efficient and technologically progressive ones. However, as the League of American Orchestras is in no way a regulatory body, it can’t be blamed for playing its advocacy role. But the League could have brought more economic sense into the debate rather than focusing on best-practice lectures, audience-building and fundraising workshops. Cost-cutting workshops were never very popular with boards, managers and - especially - musicians.

Therefore, the situation today is unsurprising not because of Bowen’s “disease” but because of supply and demand. There are simply too many orchestras and too few audiences around. Bowen’s Disease offers no solution to the productivity issue. However, orchestras defined as luxury goods, have their future defined less by the level of production than by the laws of supply and demand.

There will be a radical culling in the number of orchestras in the U.S., which will probably bring their number down to levels last seen around 1900, when they were truly civic-driven (in our day also recording-driven) cultural institutions. People will likely have to travel to a large city to hear a live symphony orchestra, and it’ll be difficult and expensive to obtain tickets. Their rarity and vanity appeal, as it once was in 19th century Europe, will then allow those surviving orchestras to pay their musicians productivity-driven wages, despite Bowen’s model. People will always want to have the amount of gold they are wearing beheld by others in the foyer of a symphony hall during intermission.

In a way, we should be less worried about orchestras today, since economic theory provides a reasonably accurate prediction of their future. The question is, rather, what is going to happen to the music departments of colleges and universities and their graduates in the U.S., which today are producing classically trained musicians at a rate which could be likened to building thousands of million dollar mansions in downtown Detroit every year now and far into the future.

And where is the perception of reality among already employed musicians and their unions? They need to institute their own paradigm shift, or they, too, shall soon be eating cake.

< comment end >