bittersweet

Its quite a thing to get used to the cold. It is liberating and awakening, on the other hand, it is bitter and merciless.

Moments feel like an eternity as the wind streaks across your face and leaves it feeling alive and dead at the same time, and only when you touch it do you notice that in fact it is stiff and frozen in place. Your hands come out of the warm pockets to write a text message and before you are two words in, you notice that you do not feel how hard you have pressed the button and there is a sense of numbness you keep going, because in some perverse way that numbness feels more alive then anything else. The feeling of not feeling allows you to know that you are real, that you feel. Only when we lose something do we manage to realize how essential it is to our being, to who we are. The cold manages to make me feel more alive then the sun ever could, which is perverse for the sun gives me life, however the cold makes me realize I am alive. There is also an unspoken freedom in it being freezing and you not caring, unzipping the jacket, removing the beanie, spreading your arms and just letting go, letting the cold wash over you and only using your soul to warm your body. Everyone should try this, it is an amazing feeling. Respecting the adversary.

Other times, the cold is lashing at you with such ferocity that it makes you wish you were never alive to feel its misery. It chill's your bones to the point of where you are not sure you are or if you wish to be. It breeds a feeling of isolation from your fellow warriors, as everyone is huddled in bundles appearing as a furry balls from a distance. Getting up to walk to the bakery half awake with that morning breath still in your mouth, despite your best tooth brushing effort, when you know that a warm bed is still an option, is the cruelest moment of the day. The idea, that here you are still in dreamland trying to recall what it was your mind was so fixated on a mere 10 minutes ago as you step outside and, it hits you like a punch to the face, except a punch lasts a moment, the cold is there to stay, stinging you. So you brave it, try to embrace it and thus overcome it, but your mind is not in the same place in the morning as it is in the evening, and you struggle with the beast. Knowing you will prevail, but wondering why is the fight so bitter everyday, why is there a need for it. Where is the acceptance and accord that is reached in the evening in the morning. War.

I make a truce every evening with the cold, we embrace, confess our love for one another and leave the other at that moment. I go into my warm apartment, get under the covers and bask in the warmth. The cold moves on, readying for another fight. When it is time to leave the apartment in the morning, I forget last night, the cold does too, and we are at war once again. Perhaps the peace is reached because we know that we are done with each other for the day. And in recognition of the fight, respect for the adversary causes the truce.War. Respect.

Wishlist

Pearl Jam
"wishlist"

"I wish I was a neutron bomb, for once I could go off
I wish I was a sacrifice but somehow still lived on
I wish I was a sentimental ornament you hung on
The christmas tree, I wish I was the star that went on top
I wish I was the evidence, I wish I was the grounds
For 50 million hands upraised and open toward the sky

I wish I was a sailor with someone who waited for me
I wish I was as fortunate, as fortunate as me
I wish I was a messenger and all the news was good
I wish I was the full moon shining off a camaros hood

I wish I was an alien at home behind the sun
I wish I was the souvenir you kept your house key on
I wish I was the pedal brake that you depended on
I wish I was the verb to trust and never let you down

I wish I was a radio song, the one that you turned up
I wish...
I wish..."

This has been in my head all day today and yesterday!

Capitalism is dead, Long live socialism

The following is taken from Economist's View

November 24, 2008
The Citigroup Bailout

It's bailout time. Let's start with Paul Kedrosky:

Good Bank, Bad Bank, and F---ed Bank: Apparently Citibank and the U.S. government (i.e., we taxpayers) have reached a deal whereby we will backstop something like $300-billion in screwed assets on Citi's balance sheet. ... Here is the gist:

* Citi will carve out $300-billion in troubled assets, which will remain on its balance sheet
o The first $37-$40-billion in losses on those assets will go to Citi
o The next $5-billion in losses will hit Treasury
o The next $10-billion in losses will go to the FDIC
o Any more losses will go to the Fed
* There will be no management changes at Citi, because, you know, they are all fine and upstanding people who have done nothing wrong
* There will be some compensation limitations, but those have not yet been made clear

To be clear, this is not a "bad bank" model. Assets are not, apparently, being taken off the Citi balance sheet and put into another entity walled off from the Citi biological host. Instead, they are being left on the Citi balance sheet, but tagged and bagged for eventual disposal via taxpayers. ...

I'll have more when there is more, and I know the equity futures markets like it -- it's admittedly less terrifying that letting Citi fail -- but so far I'm not impressed. ...

Yves Smith:

WSJ: US Agrees to Bail Out Citi (Updated): ...Note key element of the deal is that the Federal government will guarantee $300 billion of Citi assets, a much bigger number than had been leaked earlier, with a rather convoluted loss-sharing arrangement, but the bottom line is that Citi is at risk for at most $40 billion. Citi also gets a $20 billion equity injection, on slightly more onerous terms than the initial TARP investments, but still more favorable than Warren Buffett's investment in Goldman. Oh, and it appears there will be NO management changes.

I do not see how GM can be denied a rescue now (not that that outcome is really in doubt, merely how much pain will be inflicted on management and the UAW). ...

Update 12:50 AM: Bloomberg's story puts the bad asset program slightly higher, at $306 billion. ...

Calculated Risk has the Joint Statement by Treasury, Federal Reserve, and the FDIC on Citigroup, while James Kwak says the bailout is "Weak, Arbitrary, Incomprehensible." I think he has it right:

Citigroup Bailout: Weak, Arbitrary, Incomprehensible: According to the Wall Street Journal, the deal is done. Here are the terms. In short: (a) Citi gets another $27 billion on the same terms as the first $25 billion, except that the interest rate is now 8% instead of 5%, and there is a cap on dividends of $0.01 per share per quarter; and (b) the government (Treasury, FDIC, Fed) agrees to absorb 90% of losses above $29 billion on a $306 billion slice of Citi’s assets, made up of residential and commercial mortgage-backed securities. (If triggered, some of that guarantee will be provided as a loan from the Fed.) There is also a warrant to buy up to $2.7 billion worth of common stock (I presume) at a staggeringly silly price of $10.61 per share (Citi closed at $3.77 on Friday).

The government (should have) had two goals for this bailout. First, since everyone assumes Citi is too big to fail, the bailout had to be big enough that it would settle the matter once and for all. Second, it had to define a standard set of terms that other banks could rely on and, more importantly, the market could rely on being there for other banks. This plan fails on both counts.

The arithmetic on this deal doesn’t seem to work for me (feel free to help me out). Citi has over $2 trillion in assets and several hundred billions of dollars in off-balance sheet liabilities. $27 billion is a drop in the bucket. Friedman Billings Ramsey last week estimated that Citi needed $160 billion in new capital. (I’m not sure I agree with the exact number, but that’s the ballpark.) Yes, there is a guarantee on $306 billion in assets (which will not get triggered until that $27 billion is wiped out), but that leaves another $2 trillion in other assets, many of which are not looking particularly healthy. If I’m an investor, I’m thinking that Citi is going to have to come back again for more money.

In addition, the plan is arbitrary and cannot possibly set an expectation for future deals. In particular, by saying that the government will back some of Citi’s assets but not others, it doesn’t even establish a principle that can be followed in future bailouts. In effect, the message to the market was and has been: “We will protect some (unnamed) large banks from failing, but we won’t tell you how and we’ll decide at the last minute.)” As long as that’s the message, investors will continue to worry about all U.S. banks.

The third goal should have been getting a good deal for the U.S. taxpayer, but instead Citi got the same generous terms as the original recapitalization. 8% is still less than the 10% Buffett got from Goldman; a cap on dividends is a nice touch but shouldn’t affect the value of equity any. By refusing to ask for convertible shares, the government achieved its goal of not diluting shareholders and limiting its influence over the bank. And an exercise price of $10.61 for the warrants? It is justified as the average closing price for the preceding 20 days, but basically that amounts to substituting what people really would like to believe the stock is worth for what it really is worth ($3.77).

How does this kind of thing happen? A weekend is really just not that much time to work out a deal. Maybe next time Treasury and the Fed should have a plan before going into the weekend?

What, and ruin a perfect record? Robert Reich:

Citigroup Scores: If you had any doubt at all about the primacy of Wall Street over Main Street; the utter lack of transparency behind the biggest government giveaway in history to financial executives, and their shareholders, directors, and creditors; and the intimate connections the lie between Administrations -- both Republican and Democratic -- and the heavyweights on Wall Street, your doubts should be laid to rest. Today it was decided the government will guarantee more than $300 billion of troubled mortgages and other assets of Citigroup under a federal plan to stabilize the lender after its stock fell 60 percent last week. The company will also will get a $20 billion cash infusion from the Treasury Department, adding to the $25 billion the bank received last month under the Troubled Asset Relief Program.

This is not a particularly good deal for American taxpayers, but it is a marvelous deal for Citi. In return for all the cash and guarantees they are giving away, taxpayers will get only $27 billion of preferred shares paying an 8 percent dividend. No other strings are attached. The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well. The American public, including the media, have not the slightest clue what just happened.

Meanwhile, more than a million workers in the automobile industry, along with six million mortgagees, and a millions of Americans who depend on small businesses and retailers for paychecks, are getting nothing at all.

As I noted the other day, the difference in urgency between saving wall street and saving main street is apparent.

John Jansen says somebody will pay for this:

Reaction to the Bailout: Tokyo is closed so there is no US Treasury trading this evening. We will have to wait for Europe to arrive to get a reaction.

Stocks are higher. That also seems ludicrous. I do not care what they call this but Citibank is effectively acknowledging that they did not have the resources to survive alone without government assistance. I did not use the words bankrupt or insolvent.

I think that when participants think about this soberly they will be very disturbed and I am saddened to say that the markets will line up one of the remaining survivors for a pre holiday turkey shoot. It has been the history of this rolling crisis since August 2007 that the worst outcome ensues. The market will seek another prey and relentlessly pursue it.

Update: Paul Krugman:

A bailout was necessary — but this bailout is an outrage: a lousy deal for the taxpayers, no accountability for management, and just to make things perfect, quite possibly inadequate, so that Citi will be back for more.

Amazing how much damage the lame ducks can do in the time remaining.

Update: More from Arnold Kling

For all of the Depression Mania, there is a lot of the U.S. economy that does not have to shrink. Manufacturing is pretty lean to begin with. Housing construction is already much lower than it has been in years. Unlike the 1930's, we have some very big sectors (health care, education, other government employment) that are unlikely to develop massive layoffs.

The one sector that definitely needs to contract is the financial sector. Maintaining Citi as a zombie bank is not really constructive. I would feel better if it were carved up, with the viable pieces sold to other firms and the remainder wound down by government. In my view, getting the financial sector down to the right size ought to be done sooner, rather than later.

From my perspective, the whole TARP/bailout concept is misconceived. The priority should not be saving firms. The priority should be pruning the industry. Get rid of the weak firms, and make good on deposit insurance. Then let the remaining firms provide the lending that the economy needs.

Update: Felix Salmon says the bailout is underwhelming.

Update: John Hempton:

The consensus is that the Citigroup bailout was bad...I am going to differ here. The bailout was well designed...
except
1). The Government should have taken a much larger fee - at least 20 percent ownership of Citigroup - and arguably more. Shareholders should be punished.
2). The attachment point of the excess of loss policy is too high. If the attachment point had been 80 billion Citigroup would survive. There was no need for a 40 billion dollar attachment point.
The problem with the bailout was not the design - it was the amount extracted from Citigroup shareholders. The government took too much risk for too little reward.
I am surprised that the shareholders were not effectively wiped out as per Fannie, Freddie, AIG.
Not displeased - but somewhere I wish the government would get a happy medium somewhere - rather than one rule Citigroup and one rule for Fannie.

Update: Andrew Samwick:

The technical term for this is a joke.

Citigroup has plenty of assets. It has just written too many claims on those assets. Those holding those claims need to face the reality that their claims are worth less than they were promised and adjust to that reality. That means either liquidating the firm, selling off the assets to the highest bidders, or becoming the new equity holders of the firm. The FDIC can get involved as needed to manage its contingent liabilities to insured depositors.

If the government is to get involved beyond that, it should be senior debt to the restructured entity, not preferred equity (i.e. junior to the most junior debt) to the existing entity.

Update: Barry Ritholtz:

Un-fricking-believable.

The US is guaranteeing $306 billion on bad investments (So much for Capitalism without failure). For Citi, its a great deal — but its a terrible one for taxpayers.

The dividend payment has been restricted to one cent per quarter for 3 years. Can someone explain why even a penny is allowed?

Where is the “Protection” for the taxpayers? Where are the clawbacks? How about going after the idiots that bought a third of a trillion dollars worth of junk, and then got paid large on it? Where is the sense of outrage and justice?

At what point do taxpayers demand that the people responsible for creating this mess must pay their pound of flesh?

Update: Brad DeLong:

It is unclear to me why they aren't just buying common stock. As it is, they're endangering their own reputations to an extraordinary degree...

My oh my, THAT IS A CONSESUS. Kids, go and thank your lame ducks in Washington for this. You are getting warrants for stock at $10 when it is worth $3 now. HA! That is the same level as buying a $5 bill for $15 dollars. Oh and all the management stays in place, despite it being them that got Citi into this mess. Oh and do not forget this is on top of the $700 billion already invested, plus the money used to sell Bear Sterns to JP Morgan, bail out AIG so they can have corporate retreats at luxury SPA's.

They have been able to do this, because the average senator, congressman, and media pundit has zero clue as to what the hell is going on. The people running the show are former Wall St. Execs that in a few months will be right back on those boards getting stock options for much better prices then the govt. for all their hard work in screwing your generation over.

So if anyone reading this has a shred of hope for their future, write a letter to your congressman, senator, governor, and object to Hank Paulson and his buddies fattening themselves at our expense. Now you all know why every kid in Business school dreams of working in Banking, because one day, for not to much work you can screw the world financial system and get the govt. to not only give you unlimited sums of money without any accountability but not even demand that you leave your job as a precondition. THAT IS JOB SECURITY WE CAN BELIEVE IN.

Obama, you have not taken office yet, and already you are a puppet.

YES WE CAN, screw the taxpayer, YES WE CAN

Can I top my shit again?

That is the question. Can you push yourself farther and harder then last time, and how do you do it? Now it is not my point that it is impossible to do so, but rather are you really at your limit when you think you are, and what is to say you cannot go past even that. I was thinking about all the records being broken in sports for example (tangent alert):

Michael Phelps has broken his own records for fun, and before that Ian Thorpe was breaking them and it seemed impossible that anyone could go faster, but they do, they always do. It is not as if Thorpe slacked off on the last few meters of a race and thus did not improve his times. He always improved his times, and then now, a few years later Phelps is doing the same thing. Except he is making Thorpe’s times seem pedestrian. I have no doubt that Phelps is a magnificent swimmer, I do not believe it is his suit or anything else that makes him faster than Thorpe, it is just the knowledge that someone went 1:09:49 and that it sure as hell is possible to get to 1:09:00 and lower. Really it is all a matter of believing.

How do you push yourself in non sports aspects to be better, something that is not necessarily quantified as a time for a specific race? More importantly why do you do so? Personal satisfaction, a sense of pride and honor, or just wanting to see what you are truly capable of doing? When do you know that you have reached that maximum and point which you will never be able to equal, and how do you deal with the implications that you will never scale those heights?



I am really interested in reading Malcolm Gladwell’s new book “Outliers” his basic premise is that you need at least 10,000 hours of training in something before you can become truly professional at it, and that IQ alone does not determine a whole lot. In an interesting interview with Stephen Colbert he revealed that probably the biggest reason Bill Gates believes he has become such a successful computer developer/writer etc is that when he was 13 his school bought a computer terminal and he was given a chance to use it.

Watch it below

The Colbert ReportMon - Thurs 11:30pm / 10:30c

Malcolm Gladwell

Ron Paul Interview
Bob Barr Interview

Green Screen
Bill O'Reilly Interview

Be vewy, vewy quiet: I'm hunting wabbits!

one of the best cartoon moments ever. you gotta love bugs and daffy