Archive for March, 2009

MOFT: Episode 12 (T.J. Oshie)

Just a few weeks ago, I fell in love with singer Ingrid Michaelson while watching her perform an amazing concert.

After 35 years of living, I had my first celebrity crush.

Well apparently, celebrity crushes come in bunches because I already have another one … and this time, it’s for a man, baby.

I love you, T.J.

I love you, T.J.

That’s right – I now find myself totally jonesing for St. Louis Blues hockey player T.J. Oshie. And I’m not afraid to admit it. This is an enlightened society, right? A movie called ‘I Love You, Man’ is the nation’s number one comedy, after all.

Now I know by merely mentioning hockey, I probably just lost a lot of my regular readers, but if for no other reason than to see a man without any hint of irony or embarrassment express his intense affection for another man,  please stay with me a bit longer so I can explain what’s so amazing about this 22-year-old rookie from the University of North Dakota.

Oshie is without a doubt a very solid technical hockey player. He’s a speedy, agile skater who’s got mad stick skills which he uses often to make defenders look silly. For a player his age, he’s also got an amazing, almost uncanny ability to read the ice and know where to go with the puck. He plays strong on defense and is versatile enough to be used on both the Blues’ power play and penalty kill special team units.

But the real reason Oshie is so special – and why he has become My One Favorite Thing of the week – has nothing to do with his physical talents but is all about the way he plays the game, the size of the kid’s heart.

Oshie’s not a big dude, at least in terms of NHL players, coming in at an official (and from my eyes, generously measured) 6 feet 0 inches and 194 pounds. But he plays like an absolute lion, going 110% every shift, throwing his body around without any regard for his physical well-being.

Every game, Oshie skates with intensity, aggression, and most importantly, infectious joy, and his impact is having a dramatic effect on the entire team as the Blues are on one of the most exciting late-season runs in recent memory.

Dwelling at the bottom of the conference just a few weeks ago, the team is now battling hard to nail down one of the final playoff spots with two weeks left in the season. In January, I predicted that with a core bunch of talented young players (David Backes, David Perron, Andy Mcdonald, Patrick Berglund, Brad Boyes, Roman Polak, Eric Johnson to name a few),  the Blues would soon be a force to be reckoned with, winning the franchise’s first Stanley Cup within five years.

But watching Oshie makes me think that timetable could be moved up considerably. Just look what Oshie has done for the Blues this week alone. Last Thursday night, after sitting out a morning practice skate with some sort of bug, Oshie scored two points with an assist and a highlight-reel goal (shown here) to help the Blues beat the Vancouver Canucks 4-2.

Then in a key back-to-back weekend series with the Columbus Blue Jackets, Oshie showed what a stud he truly is. On Saturday night, after serving a stint in the penalty box, Oshie returned to the action and laid a huge, clean hit on Blue Jackets star Rick Nash, causing a bit of an on-ice ruckus since marquee players don’t usually get hit like that.

The Blues ended up winning that game in an overtime shootout, and it was quite clear that the Blue Jackets wanted some vengeance during the next match, to be played in Columbus in less than 18 hours. But instead, Oshie just doubled down on his ultra-coolness by scoring the first goal of the Sunday game, adding an assist, and most awesomely, doing the following when Rick Nash tried to exact retaliation …

The Blues won Sunday’s game 5-2, moving for now into sole possession of the eighth and final playoff spot.

Yeah, so I now got me a man-crush for T.J. Oshie. That’s OK. I’m cool with it. And it”s not like I’m fawning all over Oshie’s long wavy locks of hair or his baby face and the way his cheeks get all red and pinch-able when he exerts himself.

OK, maybe I should stop now. But T.J., I love you, man. Truly…

Government Debt: The Final Bubble

Could this be the beginning of the end for our markets’ last great bubble?

An auction yesterday of $34 billion in 5-year U.S. government bonds didn’t go over so well, fetching prices well under what analysts were expecting.


Oh I know, it may not seem like that big of a deal. The debt still got sold, unlike an unsuccessful auction for 40-year bonds in the UK. The fact that our auction resulted in yields (which move in the opposite direction of the price of bonds) of 1.849% versus the expected 1.801% seems like rather unimportant, inside-baseball type of stuff.

And if it’s just one bad auction, then it may not be important (Edit: Demand for an auction of $40 billion in two-year U.S. notes Tuesday was quite strong). But if this weak demand is a signal of things to come, then we are in for a world of hurt.

In the past ten years, we have had a dot-com bubble, a housing bubble, a credit bubble and an oil bubble, but I have contended they will all pale in comparison to the government debt bubble we are now experiencing.

Think about it: The U.S. government, despite owing $10 trillion in debt, despite incurring an additional $1.3 trillion deficit in 2008 (a number which will certainly be crushed this year and likely for years to come if the Obama plan even gets partly realized), has been up until now able to sell almost as much of the debt as it wishes to at extremely low interest rates.

The Pollyannas will say that there’s a good reason for the low cost of our debt, and why that situation won’t change anytime soon. The big concern right now is deflation, not inflation. Other countries have at least as many problems as we do, and too much savings to boot. They need to put their money somewhere, and the U.S. markets are still the world’s best, safest place to invest money. They own too much of our debt to start selling now – it would only lead to mutually assured destruction.

“This time it’s different.” To me, there are no four more dangerous words. It defies the laws of economics and of logic to expect that a nation awash in debt with miles and miles of higher and higher deficits on the horizon will be able to lend more money at virtually zero interest for an extended period of time.

The only question is when do the floodgates open? We’ve heard rumblings of complaints – notably, on the record and not anonymous – from Chinese officials about our country’s economic situation and increasingly high levels of debt. We’ve seen budget deficit estimates from the CBO which far exceed the optimistic ones put together by the Obama team. And now we had a disappointing auction.

Of course, to a certain extent, debasing our currency is what the government wants. If we could control the pace of the move, some inflation would be a good thing since we’re so heavily in debt (as the value of the dollar falls, that means debtors owe less in ‘real’ terms). But it is highly likely that the transition would come too fast and too quick for our economy and our policies to adjust without experiencing significant dislocations and subsequent pain.

I can almost guarantee you that if government debt is a bubble and it does pop, you won’t see our foreign lenders gently exiting the market. It will be a stampede.

And what will be the implications of such a scenario? Believe it or not, they are likely far worse than anything we have seen so far. Interest rates will soar, as will inflation. Savers will be crushed. Investment will grind to a halt. An already weak economy on its knees would get weaker. We will be forced to renegotiate our obligations with foreign lenders, most notably the Chinese.

The end result could be no less than the end of U.S. hegemony.

MOFT: Episode 11 (McDonald’s Filet-O-Fish commercial)

Every Tuesday night after my weekly basketball game, I pick up some Mickey D’s for me and Filet O Fish cartonMs. Deadman (or Deadwoman, if you prefer) to eat at home. It’s a classy tradition in the Deadman household, one that we both totally look forward to, with the main source of our enjoyment being the Filet-O-Fish sandwich that always makes up the entree portion of our meals.

Snicker if you must, but we are just huge fans of the Filet-O-Fish, so you can imagine my intense glee when I found out that McDonald’s recently launched a promotion for the sandwich – the pricing apparently varies depending on the location, but two Filet-O-Fish sandwiches for $3 is the going rate at the establishment I frequent (compared to the regular price of $3+ for 1 sandwich).

That steal of a deal would have been normally enough to make the Filet-O-Fish My One Favorite Thing of the week, but whoa, wait just one second … because you see, in order to advertise this particular promotion, McDonald’s created this friggin’ awesome commercial that has this fish on a wall singing a catchy little theme song. It’s a good thing it’s catchy, too, because my best estimate is that the ad airs on average about two million times every day.

Just in case you haven’t seen it, for your viewing enjoyment, here’s the original commercial:

Oh, how Ms. Deadman and I love this commercial. Every time it comes on, we can’t help but join in the singing, and we even started doing our own little dance (well, basically, just a bunch of funky head moves). So we thought we’d demonstrate our appreciation of this marketing masterpiece by crafting our own little homage video and – because we have no shame – sharing it with all of you. (As you can tell from the outtake version below, this was a much more difficult task than I had first imagined).

So congratulations to Mickey D’s, to that little square of processed fish goodness, and of course to whatever creative, daring agency is responsible for this particular commercial – You are the winners of this week’s prestigious My One Favorite Thing award.

And here’s the final, (mostly) error-free version:

The dagbuzz for 3/23/09: The Geithner Bank Stability Plan

Details of the Geithner bank stability plan came out today, and Wall Street for one loved it. And why not,  for the plan basically allows financial institutions to take the worse of the toxic assets rotting away on their balance sheets and pawn off the vast majority of the risks of nonpayment onto the U.S. government (and ultimately the U.S. taxpayer).

I will give credit to Geithner for creativity in crafting the plan given our limited options. Without the use of private money and leverage, we would never be able to afford absorbing all the problematic assets without jeopardizing the health of the U.S. balance sheet and sending our foreign investors fleeing for the exits. And even if we could afford it, Congress would never step up with the money now that the public’s appetite for these Wall Street bailouts has totally disappeared, so Geithner cleverly bypassed that particular concern by giving extraordinary powers to agencies like the Federal Reserve and the FDIC.

It is quite apparent from reading the fact sheet the U.S. Treasury released today regarding the plan (which I encourage everyone to read since it actually provides a concise, rather easy-to-understand summary) that Geithner’s core assumption is that current market prices for these toxic assets are not reflective of their underlying value.

If Geithner is right, and prices of these assets are artificially low, then his plan could very well work. If he’s wrong and, as many experts believe asset prices fall further, then we are throwing good money after bad, and the leverage we are employing will cause even more damage.

Geithner says new plan is best option

Eliot Spitzer: A thoughtful voice of reason (alas, without any power)

In a recent interview with CNN,  former New York Governor Eliot Spitzer gave detailed, thoughtful, reasoned insights into a whole host of recent topics related to our financial crisis, including AIG bonuses, Obama’s performance, the media’s impact, regulation, etc.

I recommend the 20-minute Fareed Zakaria interview in its entirety, but if you only have limited time, Spitzer offers a concise explanation into the cause of our current economic situation for a few minutes starting at about the 10:45 mark (I have attached that portion of the video below.

No matter what you think of his personality (I always thought he seemed like an arrogant, hypocritical jerk) or the personal indiscretions that caused his ultimate demise (to me, it should have been a matter between him and his family and THAT’S ALL), Spitzer unquestionably took a harder, more probing look at Wall Street and its practices than anybody else who was in a position of power during that time. If we had had more Spitzers running around, then perhaps we would have addressed our problems earlier and avoided some of the pain we are experiencing.

Private-public partnership proposal poses plenty of problems

Oh goody. Looks like we’re about to hear the details of Geithner’s long-awaited financial stability plan, which has as one of its key components a public-private investment pool designed to help rid our system of the toxic assets rotting away on bank balance sheets.

Apparently, the Treasury will hire four or five private investment managers to run a fund that will purchase the assets. The government will then match whatever monies the private firms manage to raise and invest.

Sounds simple enough on the surface, but is it just me, or do bad things generally happen when government and the private sector get into bed together?

What often ends up occurring is one of two things:

1) The private companies – because they get all sorts of government breaks and incentives, including in many cases the assumption of losses should really big disaster strike – end up making decisions that do not properly assess risks vs. rewards, resulting in ultimate failure, whereupon the government must become more fully involved anyway. It’s exactly the kind of privatizing profits, socializing losses phenomenon we’ve seen with the current crisis. And it’s the taxpayer who gets screwed.

2) OR, public policy concerns get in the way of maximizing profits, and the government feels like it must step in to protect the interests of the American populace. In this case, the private enterprises get screwed, and are either forced to alter their investment strategy in inefficient ways or watch as their investments or ‘outsized’ gains get confiscated in one manner or another.

We saw both 1 and 2 when it came to the Fannie Mae and Freddie Mac disasters, and watching the AIG fiasco unravel is like watching the same story over and over again.

Though your ideology may affect the way you ultimately view the AIG situation – either management knows the company is too big too fail so they are not spending the taxpayers resources wisely, or the government is being forced by public outrage to get involved in company decisions that would be better left to management – we should clearly have done one of two things: Let the company fail and allow the private markets to work its destructive magic (and risk systemic collapse as its unpaid obligations filter through) or fully take the company over and end this charade that AIG is still a private entity. Anything would likely be better than this half-assed, want-it-both-ways solution we currently are trying.

In most cases, public-private partnerships are just clever ways to try and remove large obligations off the balance sheet of the American government (but merely postpone the costs), and justified under the guise that private industry can do things cheaper and more effectively.

I’m sure there are instances where public-private partnerships have been successful (if you know of any, please let me know in the comment section), but when the goals of the two entities are ultimately so different – one wants to maximize profit, the other wants to address some sort of nonprofit-based public policy goal – it’s no surprise the end result often ends up being a disaster.

Look, I know I’m doing the very thing I’ve been complaining about: Criticizing the new administration without giving its agenda or policies a chance (hell, in this case, I’m criticizing without even seeing the plan!).

Obama & Co. inherited this giant, sticky, complicated financial mess and are trying to be creative about fixing it without making our government go broke. There are no easy answers, and I frankly don’t know what the alternatives are. But the idea that we’re employing the same basic strategy that helped get us into this crisis strikes me as very unwise, to say the least.

The Congress AIG Bonus Bill: Bravo! (Seriously…)

Great. Now there’s a backlash to the backlash to the AIG bonuses, and everyone is scolding Congress for acting so rashly in crafting a bill designed to recover 90% of the bonuses in taxes.

Conservatives are complaining the bill is unconstitutional and unproductive. In his Obama interview, Jay Leno said he’s frightened about its implications, and’s own Genghis is mocking the effort.

Gimme a break.

Don’t get me wrong. I have plenty of problems with this bill.

I question the constitutionality of the law.

I think targeting bonuses alone is unwise and insufficient. Companies will just get around the law by increasing base salaries, and bonuses in any case are a reasonable compensation incentive, as long as they’re tightly tied to performance at the individual AND corporate level.

I agree that some talented people may be poached by companies not encumbered by the law and that this would put the very institutions we’re trying to rescue even further behind the eight ball.

I worry that banks that aren’t healthy may try to return the TARP money as soon as possible, undermining the main purpose of the program in the first place – keeping the banks well capitalized and the credit flowing.

However, I think all of these potential issues aren’t nearly as concerning as the critics would have you believe.

I’m no lawyer or Constitutional expert, but I do believe the bill of attainder issue has been at least somewhat addressed by broadening the law to include bonuses paid by any bank receiving a certain amount of TARP money. At a minimum, the answer doesn’t appear clear-cut and deciding questions of legislative constitutionality is one of the reasons why we have the court system anyway.

While I’d rather have Congress devise a broader, much more considerate compensation bill, I’m not going to cry that banks which are receiving significant sums of taxpayer money in order to stay solvent are severely limited in their ability to pay out bonuses to people already making a very good living (the bill only targets households with income greater than $250,000). When these banks are healthy and making a profit again, they can return the money and institute whatever compensation policies they want.

In terms of top talent leaving banks targeted by the bill, I think this concern has been wildly exaggerated. The financial industry has been decimated; unemployment in the sector is very high and even some very talented capable individuals are out of work and available should any talent be poached. Besides, you gotta find it laughable that we are worried about these ‘best and the brightest’, since it was in large part these very same folks with their fancy financial alchemy that created the monster which finally broke our system. Perhaps a thorough management cleansing at some of these companies would ultimately be helpful.

I also largely dismiss concerns regarding the unintended consequences of incentivizing banks to return the TARP money too quickly. If banks are healthy, we want them to return the TARP money as soon as possible. If banks are not healthy, and still attempt to return the TARP money, the government can stop them. Government regulation requires a certain amount of capitalization, and the stress tests will hopefully further separate the healthy institutions from the sick ones.

In short, I am glad Congress is moving in haste on this issue, even if in practical terms the AIG bonuses are chicken feed and any legislation addressing them will do very little in terms of getting us out of our current mess.

Would it have been so much better had we used force of law to stop AIG from giving out the bonuses n the first place? Absolutely, and if Geithner or others did not act forcefully enough to make that happen, I hope they are taken to task for that failure.

Do I hope our legislators take the time to craft a meaningful, defensible bill that minimizes any negative unintended consequences? Of course. Now that the first tranche of bonuses have already been paid out, and it will be up to the government to get the money back, it only makes sense to do this right.

But symbolism matters, and if we plan on continuing this practice of doling out hundreds of billions of dollars to companies in need, we have to show that this kind of behavior won’t be tolerated. It’s our money, and we have a right to say how it is used.

If in the process, we begin talking about how our culture of excess and misaligned compensation policies led to an unhealthy focus on short-term profit and an imbalance in dangerous risk-taking, then all the better.

March 2009
« Feb   Apr »

Enter your email address to follow this blog and receive notifications of new posts by email.


Get every new post delivered to your Inbox.