I'll Wait

My dad sent this to me over email.

I have no idea of its veracity, but if it's true, this is awesome stuff:

The conversation below was overheard on the VHF Guard (emergency) frequency 121.5 MHz while flying from Europe to Dubai:

Iranian Air Defense Radar: 'Unknown aircraft you are in Iranian airspace. Identify yourself.'

Aircraft: 'This is a United States aircraft. I am in Iraqi airspace.'

Air Defense Radar: 'You are in Iranian airspace. If you do not depart our airspace we will launch interceptor aircraft!'

Aircraft: 'This is unknown aircraft United States Marine Corps FA-18. Send 'em up, I'll wait!'

Air Defense Radar: (no response)

Cliff Lee and the Formula for Great Pitching

One of my passions in life is baseball. I starting playing baseball when I started walking and stopped when my career ended at Vanderbilt.

I am now content to be the pitching coach for a local amateur baseball program here in Nashville.

That all being said, you can bet I am watching every pitch of the World Series.

I am not a Phillies fan and am not rooting for the Phillies in any way, but in Game 1 the Phillies' Cliff Lee did give one of the better pitching performances I have seen in a long, long time.

This morning I read through the NY Times and discovered that Cliff Lee was giving away the secrets to being a great pitcher:

He spun curveballs, cutters, changeups and fastballs to all parts of the strike zone. He grabbed the ball and fired, charged off the mound after innings, and repeated until the last out.

“You’ve got to be unpredictable,” Lee said. “You’ve got to show them stuff they haven’t seen before. Mix speeds, mix locations, and don’t get into patterns, because that offense is pretty potent. If they get a clue on what you’re trying to do and you actually do it, they’re going to make you pay.”

“Not nervous at all,” he said, before pausing and adding: “It’s been a long time since I’ve been nervous playing this game. It’s what I’ve been doing my whole life. I put all the work in. You do everything you need to do to prepare, and I try not to leave anything to chance. So what’s the point in being nervous? I’ve already done the work. It’s game time. Time to go out there and have fun and execute and let your skills take over.”

“He was getting that low strike called, so when we saw that low pitch, we started offering at it,” Damon said. “If it was a curveball, we looked silly with the check swings or whatnot, and if it was a fastball, it seemed like we were taking it. He was able to establish that part of the plate in the zone, and he went with it.”

"I'll pat myself on the back when it's over hopefully, but until then I'm going to keep grinding and do everything I do each day to prepare for my next outing and leave it at that," Lee said.

SCARY STUFF FOR HALLOWEEN!

The scariest thing you will see this Halloween:

1,990 pages of government bureaucrats telling us the where, when, why, and how much of health insurance.

Miracle Boy

I am not a hockey fan in any way, shape, or form. That being said, the movie Miracle, the true story of the 1984 U.S. Olympic Hockey Team's victory over the vaunted Soviet Union, is in my top ten of all time.

If you have seen the movie, the video below will make your day. Classic stuff here!

Thought of the Day

This morning, my dad sent me the Thought of the Day from Sydney Willams with Monness, Crespi, Hardt & Co., Inc.

Take thirty seconds and read it below:

Thought of the Day

October 29, 2009

I repeat myself – a privilege of age – but I continue to be astounded that, following the worst financial crisis in seventy years, the new Administration came in with guns blazing… to focus on healthcare and cap-and-trade. Granted, a stimulus package was passed early in President Obama’s term, but only a small percent of the funds have thus far been spent. To leave unregulated a derivative market, the notional value of which is more than thirty times the size of the U. S. economy (and five times the world’s GDP) and to provide banks billions in aid without a concurrent requirement to reduce leverage and shut down off balance sheet funds, is beyond comprehension!

Last evening Tom Keene and Tom Pruitt of Bloomberg interviewed Niall Ferguson and Ken Rogoff, both Harvard professors. This morning I listened to a few snippets of their conversation. They are in agreement that to conclude that the crisis is over is a mistake. Crises such as we experienced a year ago tend to go on for some time. There is little question that last fall we approached the edge of the precipice, peered over, and were yanked to safety. But, to prevent such an event from happening again should be the principal focus of the Administration. Exchanges are needed on which to trade derivatives. Sunlight must be allowed to shine into the dark corners of trading firms. Leverage at banks needs to be reduced. If banks are too big to fail, they are too big.

Professor Ferguson pointed out that at the epicenter of the crisis were Fannie Mae and Freddie Mac, government sponsored enterprises (GSEs) overseen by Congress, “the worse qualified people in the country” according to Professor Ferguson. Having the Chris Dodd’s and the Barney Frank’s write banking legislation is akin to letting the unrepentant fox, responsible for the death of so many chickens, devise a security system for a new coop.

A focus on financial regulation was hijacked, in my opinion, by members of the Administration like Rahm Emanuel – a chief of staff who increasingly resembles H. R. “Bob” Haldeman who once described himself as Nixon’s “son of a bitch” – and his statement that one should never let a crisis go to waste – that this would be a great time to alter the face of American democracy.

The health bill, meandering through Congress, looks to be coming to some sort of a conclusion – likely a mish-mash, understood by few, yet affecting all. That may free up time to focus on financial regulation, but it comes after banks were provided free money, allowing them to invest in risk-free Treasuries, while not requiring the moneys be used to fund the thousands of small businesses that start up every day – the life blood of job growth.

It is hard to have confidence in an Administration, which seems to have its priorities so misplaced.

Whoever Smelt It, Dealt It

I am going to be very interested to see what Mr. Gore and his fellow "climate change" fanatics propose to do about this latest new from a United Nations report:

Livestock are responsible for 18 per cent of the greenhouse gases that cause global warming, more than cars, planes and all other forms of transport put together.

Livestock also produces more than 100 other polluting gases, including more than two-thirds of the world's emissions of ammonia, one of the main causes of acid rain.

Is it time to put a stop to these pesky Chik-fil-A ads with those polluting livestock encouraging people to "Eat Mor Chikin"?

Maybe Mr. Gore can make a movie about it as well. And maybe this time, the British High Court will not rule in a lawsuit that his film "is scientifically flawed and has nine significant exaggerations and factual errors" like they did for An Inconvenient Truth.

The WellPoint Reality

WellPoint, the nation's leading health benefits company, recently published a 238 page analysis of the ObamaCare. The results aren't exactly what President Obama wanted to see:

......what distinguishes the Wellpoint study is its detailed rigor. Take Ohio, where a young, healthy 25-year-old living in Columbus can purchase insurance from WellPoint today for about $52 per month in the individual market. WellPoint's actuaries calculate the bill will rise to $79 because Democrats are going to require it to issue policies to anyone who applies, even if they've waited until they're sick to buy insurance. Then they'll also require the company to charge everyone nearly the same rate, bringing the premium to $134. Add in an extra $17, since Democrats will require higher benefit levels, and a share of the new health industry taxes ($6), and monthly premiums have risen to $157, a 199% boost.

A family of four with average health in those same cities would all face cost increases of 122% buying insurance on the individual market. And it's important to understand that these are merely the new costs created by ObamaCare—not including the natural increases in medical costs over time from new therapies and the like.

Democrats have been selling health care as one huge free lunch in which everyone gets better insurance while paying less. But the policy facts simply don't add up, and Democrats are attacking WellPoint because they don't want anyone to understand what their health-care schemes will mean in practice. Democrats know that if the public is given the facts and the time to consider them, Americans might demand that Democrats stop pushing the country off this cliff and start all over.

Obscene Profits?

Let's consider some recent comments made by top Democrats and top liberal organizations about "evil" health insurance companies:

"I'm very pleased that (Democratic leaders) will be talking, too, about the immoral profits being made by the insurance industry and how those profits have increased in the Bush years." House Speaker Nancy Pelosi, D-Calif., who also welcomed the attention being drawn to insurers'"obscene profits."

_"Keeping the status quo may be what the insurance industry wants their premiums have more than doubled in the last decade and their profits have skyrocketed." Maryland Rep. Chris Van Hollen, member of the Democratic leadership.

_"Health insurance companies are willing to let the bodies pile up as long as their profits are safe." A MoveOn.org ad.

Now let's consider a few of the facts about the "immoral profits" of the health insurance industry:

Health insurers posted a 2.2 percent profit margin last year, placing them 35th on the Fortune 500 list of top industries. As is typical, other health sectors did much better - drugs and medical products and services were both in the top 10.

The railroads brought in a 12.6 percent profit margin. Leading the list: network and other communications equipment, at 20.4 percent.

HealthSpring, the best performer in the health insurance industry, posted 5.4 percent. That's a less profitable margin than was achieved by the makers of Tupperware, Clorox bleach and Molson and Coors beers.

The star among the health insurance companies did, however, nose out Jack in the Box restaurants, which only achieved a 4 percent margin.

Mervyn King on Too Big To Fail

Mervyn King, Governor of the Bank of England, recently gave a speech in Edinburgh on the state of the financial sector.

Mr. King gives some spot on analysis of how we got ourselves into this mess, and offers some recommendations for we can get out of it:

Why were banks willing to take risks that proved so damaging both to themselves and the rest of the economy? One of the key reasons –mentioned by market participants in conversations before the crisis hit – is that the incentives to manage risk and to increase leverage were distorted by the implicit support or guarantee provided by government to creditors of banks that were seen as “too important to fail”. Such banks could raise funding more cheaply and expand faster than other institutions. They had less incentive than others to guard against tail risk. Banks and their creditors knew that if they were sufficiently important to the economy or the rest of the financial system, and things went wrong, the government would always stand behind them. And they were right.

....It is hard to see how the existence of institutions that are “too important to fail” is consistent with their being in the private sector. Encouraging banks to take risks that result in large dividend and remuneration payouts when things go well, and losses for taxpayers when they don’t, distorts the allocation of resources and management of risk.

That is what economists mean by “moral hazard”. The massive support extended to the banking sector around the world, while necessary to avert economic disaster, has created possibly the biggest moral hazard in history. The “too important to fail” problem is too important to ignore.

....Separation of activities does not resolve all misaligned incentives. Where private sector entities outside of the utility banking sector engage in a high degree of maturity transformation on a scale that could have consequences for the rest of the economy, the government would not want to stand aside when such an entity fails. That is the heart of the matter. Maturity transformation reduces the cost of finance to a wide range of risky activities, at least some of which are beneficial, but the implicit government guarantee means that the true cost of that maturity mismatch does not, as it should, fall on those who receive the benefits. The aim of policy should be to minimise or eliminate that subsidy. Separation of activities helps not hinders that objective, not least because it is the mixture of activities that reduces the robustness of the system. Although there are no simple answers, it is in our collective interest to reduce the dependence of so many households and businesses on so few institutions that engage in so many risky activities. The case for a serious review of how the banking industry is structured and regulated is strong.

Beer, Baseball, and The World's Oldest Profession

I just read this from Don Luskin's blog, and I just had to share it:

Sometime later this year, we taxpayers may again receive an Economic Stimulus Payment. The Obama Administration is very excited about this new program. Let me try to explain to you how it works using a simple Q and A format:

Q. What is an Economic Stimulus payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. Only a smidgen.

Q. What is the purpose of this payment?
A.... That you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn't that stimulating the economy of China?
A. Shut up.

Below are some helpful hints on how to best help the US economy by spending your stimulus check wisely:

1) If you spend the stimulus money at Wal-Mart, the money will go to China.
2) If you spend it on gasoline, your money will go to the Arabs.
3) f you buy a computer, it will go to India.
4) If you buy fruit and vegetables, it will go to Mexico , Honduras and Guatemala.
5) If you buy a car, it will go to Japan.
6) If you purchase useless stuff, it will go to Taiwan.
7) If you pay off your credit cards or buy stock, it will go to management bonuses and they will hide it offshore.

Instead, keep the money in America by:
1) Spending it at yard sales, or
2) Going to ball games, or
3) Spending it on hookers, or
4) Beer or
5) Tattoos.

These are the only American businesses still operating in the US. So, the best suggestion is go to a ball game and drink beer with a tattooed hooker that you met at a yard sale.

Joke of the Day

From Drayton Bird (insert any of the current political leadership in D.C. for Mr. Brown and Mr. Darling below):

An old priest lay dying in a London hospital. For years he had faithfully served the people of the nation's capital.

He motioned for his nurse to come near.

"Yes, Father?" said the nurse.

"I would really like to see Gordon Brown and Alistair Darling MP before I die", whispered the priest.

"I'll see what I can do, Father", replied the nurse.

The nurse sent the request to The Houses of Parliament and waited for a response.

Soon the word arrived; Gordon Brown and Alistair Darling would be delighted to visit the priest.

As they went to the hospital, Brown said, "I don't know why the old priest wants to see us, but it will help our images - might even get me re-elected. Darling agreed.

When they arrived at the priest's room, the priest took Brown's hand in his right hand and Darling's hand in his left.

There was silence and a look of serenity on the old priest's face.

Finally Gordon Brown spoke. "Father, of all the people you could have chosen, why did you choose us to be with you as you near the end?"

The old priest slowly replied, "I have always tried to pattern my life after our Lord and Saviour, Jesus Christ."

"Amen", said Brown. "Amen", said Darling.

The old priest continued, "Jesus died between two lying thieves. I wish to do the same."

Who Pays? You Pay

From a recent USA Today article:

Starting next year, Bank of America will charge a small number of customers an annual fee, ranging from $29 to $99. The bank has characterized the fee as experimental. But card holders who have never carried a balance or paid late fees could be among those affected.

...Citigroup, meanwhile, has started charging annual fees to card holders who don't put more than a specific amount on their cards, typically $2,400 a year. Other banks are charging inactivity fees if customers don't use their credit cards during a specific period of time. You heard that right: You could be spanked for staying out of debt.

These fees are the credit card industry's response to credit card legislation that will, among other things, restrict credit card issuers' ability to raise interest rates on existing balances. Credit card issuers are looking for ways to raise income before the new rules take effect in February. During the first quarter, 27% of credit card offers included annual fees, up from 18% a year earlier, according to Synovate Mail Monitor, a credit card direct-mail tracking service.

This is such a glaring example of who ultimately pays when the government tries to "fix" the problem.

Liquor Before Beer......

David Einhorn is one of those people who is not afraid to say what he thinks.

We often put a premium on this quality in people, but I have found the quality is only redeeming when the person who says what he thinks thinks well. Lucky for us, David Einhorn's mind appears to be working really, really well.

In a recent speech to the Value Investing Congress, Einhorn uses a classic lesson learned in college to analyze our current financial mess:

Like teenagers with their parents away, financial institutions threw a wild party that eventually tore-up the neighborhood. With their charge arrested and put in jail to detoxify, the supervisors were faced with a decision: Do we let the party goers learn a tough lesson or do we bail them out? Different parents with different philosophies might come to different decisions on this point. As you know our regulators went the bail-out route.

But then the question becomes, once you bail them out, what do you do to discipline the misbehavior? Our authorities have taken the response that kids will be kids. “What? You drank beer and then vodka. Are you kidding? Didn’t I teach you, beer before liquor, never sicker, liquor before beer, in the clear! Now, get back out there and have a good time.” And for the last few months we have seen the beginning of another party, which plays nicely toward government preferences for short-term favorable news-flow while satisfying the banking special interest. It has not done much to repair the damage to the neighborhood.

Einhorn also has some very biting remarks about the United State's current fiscal woes:

Over the next decade the welfare states will come to face severe demographic problems. Baby Boomers have driven the U.S. economy since they were born. It is nocoincidence that we experienced an economic boom between 1980 and 2000, as the Boomers reached their peak productive years. The Boomers are now reaching retirement. The Social Security and Medicare commitments to them are astronomical.

When the government calculates its debt and deficit it does so on a cash basis. This means that deficit accounting does not take into account the cost of future promises until the money goes out the door. According to shadowstats.com, if the federal government counted the cost of its future promises, the 2008 deficit was over $5 trillion and total obligations are over $60 trillion. And that was before the crisis.

Over the last couple of years we have adopted a policy of private profits and socialized risks. We are transferring many private obligations onto the national ledger. Although our leaders ought to make some serious choices, they appear too trapped in short-termism and special interests to make them. Taking no action is an action.

In the nearer-term the deficit on a cash basis is about $1.6 trillion or 11% of GDP. President Obama forecasts $1.4 trillion next year, and with an optimistic economic outlook, $9 trillion over the next decade. The American Enterprise Institute for Public Policy Research recently published a study that indicated that “by all relevant debt indicators, the U.S. fiscal scenario will soon approximate the economic scenario for countries on the verge of a sovereign debt default.”

Finance and Econ 101

From a new study in the National Bureau of Economic Research:

[F]ewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification. Financial literacy is strongly related to sociodemographic characteristics and family financial sophistication. Specifically, a college-educated male whose parents had stocks and retirement savings is about 50 percentage points more likely to know about risk diversification than a female with less than a high school education whose parents were not wealthy.

So, 2 out of 3 young adults don't possess a BASIC KNOWLEDGE of interest rates, inflation, and risk diversification. When I think back to my high school (private school) and college (Vanderbilt) education, I can't say this really surprises me.

I can't recall taking a single course in finance or economics in high school, and I got through Vanderbilt taking only one economics course. Shame on me for not taking more courses in finance and economics in college and shame on our educators for not making me.

Mark Steyn - Read Him NOW!

If you are not reading Mark Steyn, stop what you are doing and START!

From his latest piece:

The Obama project is not difficult to understand. It’s been accomplished in many other parts of the western world: If you expand the dependent class and the government class, you can build a permanent governing coalition, and stick the beleaguered band in the middle with the tab. In early 2008, in response to one of my fin de civilisation jeremiads, a reader wrote to tell me to lighten up: “You need to relax. We’re rich enough to afford to be stupid.” Here we are, just over a year later: We’re no longer as rich, but we’re being considerably more stupid.

.....At a certain point, why bother? As fast as you climb the ladder, you’ll be taxed and regulated down the chute back to the bottom rung. You’ll be frantically peddling the treadmill seven days a week so that the statist succubus squatting on your head can sluice the fruits of your labors to Barney Frank and the new “green jobs” czar and whichever less hooker-friendly “community organizer” racket picks up the slack from Acorn, as well as to untold millions of bureaucrats micro-regulating you till your pips squeak while they enjoy vacations and benefits you’ll never get. Who needs it? If you have to work, work for the government: You can’t be fired and you can retire in your early 50s. But running your own business is for chumps.

A Monk on the State of the Market

Via John Mauldin via John Hussman:

A novice monk approaches his teacher and asks, "Is this a bull market or a bear market?"

The teacher replies, "If it is a warm day, and I say that it is winter, will you still wear your heaviest coat?"

The Daily Court Martial

I am 100 pages into Max Hastings' new book Finest Years: Churchill as Warlord 1940-1945.

At the bottom of page 87, I came across something Churchill told his private secretary Jack Colville:

"I try myself by court martial to see if I have done anything effective during the day. I don't mean just pawing the ground---anyone can go through the motions---but something really effective."

I don't really know why, but this quote really hit me like a ton of bricks. I believe its effect had something to do with my fear of the verdict of a court martial on far too many of my days.

I am going to post this on my wall at work tomorrow morning to remind myself of the importance of doing more than just pawing the ground each and every day.

OUCH!

From an L.A. Times article:

Highridge paid New York developer and landlord Tishman Speyer Properties $31 million for 3 MacArthur Place, an 11-story building completed in 1991 in the master-planned MacArthur Place development. Tishman Speyer paid $83 million for the building near the top of the real estate peak in 2007.

This article clearly demonstrates the real estate principle that you make or lose money when you buy a property not when you sell it.

Ponzi Finance

I just finished reading Hoisington Investment Management Company's latest Quarterly Report.

This is required reading, and I will quote extensively from the report below:

The Federal Reserve reported that as of June 30, 2009 total U.S. debt was $52.8 trillion. Total U.S. debt includes government, corporate and consumer debt. Importantly, however, it does not include a few trillion in "off balance sheet" financing, contingent unfunded pension plans for corporate and state and local governments, or unfunded liabilities of the U.S. government for such items as Medicare, Social Security and other programs. Currently GDP stands at $14.2 trillion, so there is approximately $3.73 in debt for every dollar of output in the United States, a level unprecedented in our history. Normally, debt levels as a percent of GDP would be uninteresting and immaterial; however, the current level of debt is unique in two ways. First, the asset side of the balance sheet purchased by the debt is falling in price. Second, the money that was borrowed to purchase those assets was often fraudulently expended. Neither the borrower nor the lender really expected the debt to be serviced. Rather, each party expected the asset price to rise extinguishing the debt.

This type of financial arrangement was correctly analyzed by the famous American economist Hyman Minsky in his paper, "Financial Instability Hypothesis", in which he described three phases of debt financing. The first is "hedge finance", where the lender expects a return on both principal and interest. The second is "speculative finance" where the lender expects to get interest on the loan but perhaps not the principal. The third case, where the lender expects neither the principal nor interest to be returned, is referred to as "ponzi finance". This was typified in the last business cycle by loans issued without documentation, no down payment home loans, extremely low cap rates on commercial real estate, and the high leverage borrowing ratio of private equity funds. Even ponzi finance works as long as asset prices are rising. But once the bubble is pricked, the debtor is left with declining asset values that preclude the rollover of their obligations.

........The federal government's promise to extricate the U.S. economy from this recession involves more spending (increasing public debt) and more subsidies for consumers, such as car rebates and home buying incentives (more private debt). In other words, more debt is supposed to solve the problem of over-indebtedness. The truth is that this policy merely indentures its citizens further without providing any income for repayment of debt......This means there is no long term income benefit from stimulus programs. According to the latest academic research, the most recent $800 billion stimulus plan will boost economic activity in the short run, but will surely depress economic activity over time. The government problem is complicated by the fact that the tax multiplier is 3, meaning that a 1% change in taxes will change GDP by about 3% over time. More recent research (Barro & Redlick, September 2009, "NBER Working Paper 15369") suggests that a 1% cut in the marginal tax rate would raise GDP in the ensuing year by 0.6%. With the deficit rising due to a zero spending multiplier, the tendency will be to try to raise taxes to pay for this higher level of expenditures, which will further depress aggregate spending and output.

A Polack Nails It!

Political scientist Zbigniew Lewicki, a professor at Warsaw University in Poland, nailed it in a WSJ article about President Obama winning the Noble Peace Prize:

“It’s as if the Nobel Prize in literature went to someone who published a book of poetry - a very interesting one, but just a debut,” he said. “For the first time the prize was given to someone who has plans, but no achievements. This is a purely political decision that could also be called a perverse verdict.”

So, why does Poland care whether or not President Obama won the Nobel Peace Prize? They care because the prize is supposed to actually mean something, like it did when Poland's own Lech Walesa won the prize in 1983.

The article really ends with this stinging indictment:

When Lech Walesa received the honor in 1983, he had been an anticommunist dissident for more than a decade, kept in custody by the communist regime in 1981 and 1982, fired from his job, with his name banned by communist censors.

It was given to him in the darkest period of Poland’s 20th century history, at the height of the Cold War that could at any time transform into a very hot and nuclear conflict.

In 1983, the prize went to someone who was a global symbol of anticommunism with an impressive record, a complicated present and an uncertain future in a country oppressed by the Soviet tyrant.

And now? Poland feels the prize goes to a big question mark.

More on Ardi the "Missing Link"

Some more here on Ardi:

Casey Luskin at the Discovery Institute explains. Ardi was discovered in the early 1990s and has undergone significant reconstructive surgery to the pelvis, which was crushed when found. Science magazine itself reported this in 2002. Now that's significant because it's the pelvis that is the primary clue to how a creature moves. In other words, the headline about Ardi's signficance is an interpretation based on massive reconstruction of a pelvis that was in tiny, little pieces.

Science Magazine itself reports doubt about the interpretation that was blared in the headlines.

However, several researchers aren’t so sure about these inferences. Some are skeptical that the crushed pelvis really shows the anatomical details needed to demonstrate bipedality. The pelvis is “suggestive” of bipedality but not conclusive, says paleoanthropologist Carol Ward of the University of Missouri, Columbia.

We already knew of upright walking / tree-climbing, small-brained hominids—that’s what Lucy, an australopithecine, was. We already knew that there were australopithecine fossils dating back to before 4 million years, and this fossil is only a little bit older. So what does this fossil teach us? Assuming all the reconstructions of Ardi's crushed bones are objective and accurate, this fossil teaches us at least one very important thing: prevailing evolutionary explanations about how upright walking supposedly evolved in humans, confidently taught in countless college-level anthropology classes, were basically wrong.

David Cameron finally stepping up to the mic

Leader of the British Conservative Party David Cameron delivered a dynamite speech entitled "Putting Britain Back on Her Feet."

I had high hopes for Cameron when he became leader of the Brits' Conservative wing, but to be perfectly honest, I have been extremely disappointed with his leadership.

I hope this speech gets Cameron back on track:

Why is our society broken? Because government got too big, did too much and undermined responsibility.

....Why are our politics broken? Because government got too big, promised too much and pretended it had all the answers.

....But this idea that for every problem there’s a government solution for every issue an initiative, for every situation a czar....

....Do you know the worst thing about their big government? It’s not the cost, though that’s bad enough. It is the steady erosion of responsibility.

The American Nones

I thought this was an amazingly interesting, powerful, and challenging read.

I have been talking with several friends recently about how the modern welfare state and the expansion of our federal government is really an indictment of the Church.

From the post by Anthony Bradley:

Soviet communism adopted Karl Marx’s teaching that religion was the “opiate of the masses” and launched a campaign of bloody religious persecution. Marx was misguided about the role of religion but years later many communists became aware that turning people away from religious life increases dependence on government to address life’s problems.

......The American Religious Identification Survey, published by Trinity College in Hartford, Conn., reports that we should expect one in five Americans to identify themselves as having no religious commitments by 2030. The study, titled “American Nones: The Profile of the No Religion Population,” reports that Americans professing no religion, or Nones, have become more mainstream and similar to the general public in marital status, education, racial and ethnic makeup and income. The Nones have increased from 8.1 percent of the U.S. adult population in 1990 to 15 percent in 2008.

According to the study, 22 percent of American 18 to 29-year-olds now self-identify as Nones. For those promoting dependency on government to handle the challenges of everyday life, as well as those who wish to take advantage of a growing market for morally bankrupt products and services, the news of declining religious life is welcome.

The most significant difference between the religious and non-religious populations is gender. Whereas 19 percent of American men are Nones only 12 percent of American women are. The gender ratio among Nones is 60 males for every 40 females.

The marketplace and society in general will both reap the consequences of high numbers of male Nones........With consciences formed by utility, pragmatism, and sensuality, instead of virtue, we should expect to find a culture with even more women subjected to the dehumanization of strip clubs, more misogynistic rap music, more adultery and divorce, more broken sexuality, more fatherlessness, more corruption in government and business, more individualism, and more loneliness.

Historically, religious communities in the United States addressed the needs of local communities in way that were clearly outside the scope of government. For example, as David G. Dalin writes in “The Jewish War on Poverty,” between the 1820s and the Civil War, Jews laid the foundation for many charitable institutions outside the synagogue including a network of orphanages, fraternal lodges, hospitals, retirement homes, settlement houses, free-loan associations, and vocational training schools. These were also normative activities for both Protestant and Catholic religious communities on even a larger scale in communities all over America before Franklin Roosevelt’s New Deal.

........The real “opiate of the masses,” it would seem, is not religion but the lack of it.

Community Reinvestment Act Debacle

How good does this sound on paper: "Everyone has the right to own a home."

The above idea of every American having the "right" to own a home was the driving force behind President Jimmy Carter's Community Reinvestment Act. The same idea was the driving force behind President Bill Clinton's beefing up of Carter's Community Reinvestment Act.

In recent testimony for a U.S. House of Representative Financial Services Committee hearing, Edward Pinto, affordable housing expert and former Chief Credit Officer for Fannie Mae, details the danger of pie-in-the-sky ideology. Some excerpts below:

I’d like to remind you of Ms. Cincotta’s (known as the "Mother of the Community Reinvestment Act) repeated warnings to this and other congressional committees. She spent 30 years:

“[f]ighting abuse, fraud, and neglect of the FHA program that has destroyed too many neighborhoods and too many families’ dreams of home ownership….” Statement by Gale Cincotta before the Subcommittee on Housing and Community Opportunity, April 1, 1998

She repeatedly warned Congress that poor lending practices led the FHA program to have:

“a national default rate 3 to four times the conventional market, and in many urban neighborhoods it routinely exceeds 10 times.”

FHA’s annual percentage of new foreclosure starts has steadily increased over the last 60 years, from 0.06% in 1951 to 2.36% in 1998 to an estimated 4.4% in 2009.

I give you this background because if Gale were here today, she would tell you that the federal bureaucrats have done it again, but this time on a much more massive scale. Because of CRA and Fannie and Freddie’s (the GSEs”) affordable housing goals, “American Nightmare of Foreclosure” has spread to virtually every congressional district of these United States.

There exists a proxy for national CRA performance since approximately 50% of CRA originations since the mid-1990s were acquired by Fannie Mae and Freddie (the GSEs) to help them meet HUD-mandated affordable housing (AH) goals. CRA created the supply and the GSEs created the demand2. We do know both the quantity and performance of the GSEs’ loans that were AH goals rich. There were two types of AH loans that have special bearing on CRA lending – loans with LTVs above 90% (effectively 95% -100%) and loans to borrowers with impaired credit (generally represented by borrowers with FICOs below 660).

Over the period 1997-2007 the GSEs acquired a total of $2.2 trillion in credit impaired loans and private securities backed by credit impaired loans. Again the GSEs were leader in this regard;

Largely as a result of high LTV and credit impaired loans, over the period 1993 to 2008 the GSEs acquired over $2.8 trillion in incremental AH loans over the percentage level achieved in 1992;

As a result of the combined CRA and AH volume explosion that started in 1993, the nation’s homeownership rate, after being level for over 30 years, began to grow rapidly from 1994 when it was at 64.2%, to 68% by 2001, and peaking at 69.2% in 2004;

The GSEs’ delinquency rate on their $1.5 trillion in high risk loans, 85% of which are goals rich AH loans, is 15.5%. at 6.30.09 This is about 6.5 times the 2.4% delinquency rate on the GSEs’ traditionally underwritten loans.

Platitudes are not sufficient. I have presented a prima facia case that CRA is toxic lending which leads to unsustainable loans which leads to an unacceptable level of foreclosures.

CRE Update

This WSJ article on raising vacancies and shrinking lease rates for office space really hit home for me.

I am seeing the trend described in this article on both the landlord rep side (not fun telling a landlord that they really need to take a deal that includes 6 months of free rent and a 10% reduction in the asking lease rate) and the tenant rep side (loads of fun telling a tenant you got them 6 months of free rent and a 10% reduction in the asking lease rate).

From the article:

Rent for office space is falling at the fastest pace in more than a decade as vacancies create a glut and landlords slash prices to attract tenants.

Declining rents and rising vacancies in the office sector signal more woes for the commercial-real-estate market, which already faces a lack of credit and plummeting property values. With landlords more likely to default, financial institutions, which hold trillions of dollars in commercial-real-estate debt also face more pain. "It means more losses for the banks, because they will have to write off more bad debt," said Victor Calanog, director of research for Reis.

In Boston, intellectual-property law firm Fish & Richardson PC recently signed a lease for 124,000 square feet of space in a new development under construction on the South Boston waterfront, paying about $48 a foot with about $85 a foot in tenant improvements from the landlord, according to a person familiar with the deal -- compared with the roughly $55 a foot the firm is paying now to landlord Equity Office.

In its attempt to persuade the tenant to stay, Equity Office, which is owned by private-equity firm The Blackstone Group, initially offered the firm $84.50 a foot in December 2007, but dropped the price over time to stay competitive and sent wine and champagne gift baskets to all of the firm's 45 principals, according to Tim French, Fish & Richardson's Boston managing principal.

"We were like the belle of the ball," said Mr. French.