< meta name="DC.Date.Valid.End" content="20050825"> Amendment Nine: August 2005

Tuesday, August 30, 2005

Apropos

Federalist's post below on the Iraq war (The Moose) and the ensuing discussion, here is a pertinent article on why David Brooks should be (and from what I hear, is) the laughing stock of intellectuals and learned professionals throughout the land. It is also, much more importantly, an article about tactics in Vietnam and how to win a war. Via John Robb's Weblog.

Sunday, August 28, 2005

Don't Cry for Me Argentina

Ever wonder how China got such a good credit score so fast? More here.

Thursday, August 25, 2005

The Moose

Delivered a good post today. "Win or get out" was his stance. Sorta reminded me of something I read somewhere else once! Still though, despite the elevation of discourse, we're left with a certain truth which everyone I know agrees on:
The truth is that America will withdraw if the situation does not improve in the next year and a half. The patience of the American people is not endless and the politics would dictate a withdrawal if there is not progress.
Right. We're bailing. Everyone knows it. I'd say 18 months is a bit long, I'd give it 9-12 (Fourth of July at the latest). Let's just accept that. We're leaving, and the mess that currently exists over there will be a full-out shitstorm after we leave. Believe it.

Now the question becomes, how do we leave? Or better, can we still win? My guess is, even a small improvement for a period of weeks would extend our departure date by a couple of months. For every week of success, tack on an additional month or month and a half of patience from the "American people" (you know, "us"!). You may not accept that. But I think things are fickle enough right now where just a few weeks of solid good news would be so welcomed that the press would practically orgasm on their way to file the report. Let's say its so for argument's sake.

Now, can we win? The Moose rightly parallels the situation to the Kosovo conflict. Yet I think he focuses on the wrong issue. As he points out, in Kosovo, many Republicans were so blinded by their hatred for Clinton that they failed to do the right thing, and decided to play short-term politics rather than long-range defense. And to be sure, there are many on the left who are committing that very same sin now. But politics is, afterall, politics.

The singular difference between here and Kosovo is the definition of success. In Kosovo it was simple, stop Milosevic. Once that was accomplished, the situation began to improve. Here though, we stopped Hussein, and ever since then things have all gone straight to holy hell. In other words, we find ourselves today in a situation where the definition of success is quite unclear. Stop the insurgents is far too vague a goal. So is make Iraq safe for freedom. What is the simple goal we are trying to accomplish in Iraq?

I fear the answer to that question has changed over time, and continues to change. But if Democrats would like to take advantage of the Iraq debacle, they need to have a two or three word answer to that question. Right now, all I hear is a lot of puff (from Sen. Biden's 8/14/05 MTP interview:
a secure nation within its borders that's basically a representative government where everybody thinks they've got a piece of the action that is federated in part where there is more autonomy given to the regions than ordinarily would be assumed in a united democracy, and the institutions in place where there is enough ability for that government, whatever is elected, to secure the physical safety of its people and not be a threat to its neighbors.) (does that seem a little abstract to you?)
and a lot of "i dunno". That isn't a strategy for success; neither at the ballot box, nor on the field of battle.

Sunday, August 21, 2005

Welcome the Vulture's Corner

Due to popular demand, fellow Amendment Nine blogger Mitya K has launched a blog focused exclusively on distressed securities: The Vulture's Corner. Have a look, say hello, and recommend to a friend!

Friday, August 19, 2005

The War Against Terror

Over the last year, I've heard two fairly well educated, fairly level headed fund managers say the following:
Our war against terror is their war against oil.
I've also been visiting John Robb's site as he chronicles this. Today's latest puts me over the edge (he gives you the choice quote here). Assuming I can count myself in the class of those well educated and level headed fund managers, I will be the third such person to say this:
Our war against terror is their war against oil.
Figuratively and literally. Federalist, I believe, is right, America is unprepared to fight a war which is essentially a war to protect a commodity. Of course, I just started re-reading a little Gibbon, so perhaps I'm predisposed at the moment.

Wednesday, August 17, 2005

Congratulations to FedFarmer

and his family on the birth of their new baby boy. Three strikes, you're out!

Loud Applause

Walter Kirn is filling in at AndrewSullivan.com right now. His posts are the best I've ever read on a blog before, not kidding. I hope when his turn is up, he'll take a page from Sully's book and start up his own WalterKirn.com.

Anyway, both posts so far are great, and I highly recommend them to you. I'd like to comment on the "Ideas Please" post, or the 8/15 entry if you prefer. It hits on something I've been feeling for quite some time. We're caught in an epic tragedy right now. Grasping more and more tightly at "our way of life" and symbols of permanence like the Bill of Rights, vowing to not let the terrorists destroy either. As Kirn notes, this is a bit like watching Lear... though I can only pray the insanity has not yet set in.

But he does hit at the solution, a time-honored one at that. Don't stay the course, change, evolve, and grow. That has always been America's secret. We can change, we can grow. Whether we do it quickly enough may be an existential question, but that it needs to be done seems manifest.

I'm going to take this a slightly different direction now. Instead of focusing on Terror, the Bill of Rights, and our current situation in Iraq, or as Kirn puts it: fighting the Gulf War over again, this time with feeling, I'm going to focus on the problem I see with many activist liberal bloggers. Indeed, I'm going to focus on the Democratic party, and perhaps see how it reflects the general tenor of the country as Kirn sees it.

Liberal activist bloggers... they call themselves progressives. And they constantly beat the drum of the "progressive blogosphere" and its wondrous "dialogue." Yet, when you get right down to it, most of the "Democrats from the Democratic Wing of the Democratic Party", or "Reform Democrats", are nothing more than nostalgic throwbacks.

They want the party to be pure true blue. Click here for a perfect example of the purification ritual, or the change without growth solution. Chris Bowers has this to say to those who don't necessarily support full gay marital rights: "Fuck them."

Sure is passionate, but it isn't growth, it isn't change, it is just shutting off dialogue and running back to symbols, running back to slogans, being "more Democratic" than those others, all the while reinacting every tragedy ever written. The ideas of how to run the party offered by liberal activists bloggers like Mr. Bowers are merely old, standby 60s era activist laundry lists with a sprinkle of Clinton-era boominomics. All of it slickly packaged in a cellophane wrapper, inherited from a busted dotcom bubbly dream. Were it only so easy friends.

I wish complex problems could be solved by simple solutions. I wish we could just put on our throwback jerseys and be the party in power again. I wish the country could simply be "more" American and by wearing suits on Fridays once more, beat back the terrorist menance. But we can't. Nothing is that simple. It takes hard work, dedication, and gritty determination. But more importantly, it takes the courage to change. Show me a "reform Democrat" with that type of courage, show me a country brave enough to change things on a dime. You do that, and you'll see victory for both sides of the coin.

Monday, August 15, 2005

Weekend Observations

I was in Annapolis, MD over the weekend. It was hot, muggy, and swimming with bourbon (who knew bourbon cools you down?). I noticed that Annapolis has changed quite a bit since I was last there. The Naval Academy though, has not changed at all. In other words, the town is growing up and the USNA matters less than it ever did before. I couldn't help but recall that rumor I heard back in the early Clinton years. Apparently there were several Congressmen and Senators interested in closing down West Point and Annapolis with a consolidation program at the USAF Academy. Colorado Springs would become, under the rumored plan, the one service Academy where graduates would funnel into their service of choice on an as needed basis. Multi-disciplinary warfare was the buzzword. In today's world, I think that rumor might have some more legs.

Also, I visited a regular commenter on this site. He showed me the specs on some recent mezz deals that fell through. I had already heard that in the buyout market private equity was pricing so aggressively and so cheaply that deal flow to mezz funds was slowing up. But what I was showed were some pretty startling numbers. The capital being offered was dirt cheap, but the deal went to one particularly infamous PE group who priced it as a virtual giveaway. We both guess that over the next few years as the deals sour (which at those prices, they've got to) PE groups will be set up for some hard times. This gives a little weight to the doomsday scenario of a chain reaction reorganization in the PE world. Could be fun!

Friday, August 12, 2005

Cindy Sheehan

You've heard about her. NYT did a spread. I haven't blogged about this because I felt like her story really doesn't deserve a filter, and to be honest, I'm not really that interested in it. Take it or leave it. But whether you like her, don't like her, or just don't care, I hope everyone can agree that this sort of smearing and slimeballing is not only over the top, it's just not what civil people say. It is disgusting and hateful. You just don't go around saying stuff like this:
a left wing media whore in the form of a grieving mother
about someone who has lost her son in a war. You just don't do it! Somebody needs to tell "Erick" that in this situation, his mamma's advice is well taken: "if you don't have anything nice to say, keep your trap shut sonny."

Shia Coalition

John Robb says we're f***ed. I agree. With a Shia fragmentation, there appears to be little chance of avoiding civil war. As the SCIRI spokesman put it:
What have we got from the central government but death?

Raleigh, NC

No one ever told me this, but there are a lot of hippies in Raleigh, NC. The odd thing is, the hippies seem to be the ones with the money. Go figure.

Wednesday, August 10, 2005

"Did I Say That?"

Proving they have a sense of humor, Southern Appeal, a blog I actually visit from time to time (the gaudy picture of Lee notwithstanding), has this post on Ave Maria Law School. If you're like me, you might find the post a bit ironic. But at least they made it clear Ave Maria has an authentic Catholic identity. Whoa! That sounds official! And thank the good Lord... no, make that Mary herself, that they separated themselves from those inauthentic Catholic identities. I hate those cheap imitation identities.

Tuesday, August 09, 2005

An Important Debate

What's the most humid place on earth? A fight broke out over this here in NC late last night. I remain convinced that Pope AFB and the surrounding Fort Bragg area, but especially Pope, must be the most humid place in the history of mankind. One cannot walk two feet there in the summer without needing a towel. Its a combination of things, but most significantly, its just hot as all hell and there are no trees anywhere, and the soil is like sand, and instead of a lake to cool you, you get a runway sizzling at over 120 F, just to keep it nice and warm (like a giant oven, making Pope a hot summertime kitchen). The counter proposal was the subway in NYC when its REALLY, REALLY HOT in the city. I agree, when its toasty outside, the subway is disgustingly humid. All the AC run off from the buildings above seems to end up collecting down there. And combined with the sweet stench of dog piss, and warm blowing air from the rush of the trains, there really are few things more unpleasant, but its not as hot and humid as Pope AFB, no way. Anyone else got a contender? Keep it to the US, obviously India has us all beat.

Monday, August 08, 2005

Delphi

and GM bonds are keeping me pretty busy today, as I'm sure several of you are also quite busy with this. I will try to respond to everyone and keep this discussion going later tomorrow. Thanks for the emails, and keep the comments going!

Sunday, August 07, 2005

Housing Market: Lenders and Buyers

Later in the week, we'll focus on the Al-Qaeda topic I posted below. For now though, let's keep going on the economy track. A lot of the conversation ended up over email instead of the comments section, but thats alright with me. Bankers keeping their cards close should tell us all something.

One section of the economy is always of keen importance, especially now since it has been the one steadily growing area of the economy for almost a decade: the housing market. Bubble talk is always big, and financial news outlets typically overdo it. No one though can deny that the housing prices have been appreciating to levels making even the most iron stomachs a little queezy, as the crest towards a downhill ride starts to swell under us. My mortgage broker keeps talking about "1989 all over again" as he guzzles a bottle of Maalox. And even the beige book points out that residential real estate "showed a few signs of cooling in some districts." Feel that? That's the wave pitching up and down.

Here's my assessment for what its worth. Mortgage lenders, not homeowners, stand the most to lose over whatever bubble popping we may be in store for. First of all, the widespread use of ARMs which everyone fears will create a cascading of rate resets is over-generalized. Most ARMs for the last 4-5 years have been hybrid loans, utilizing longer fixed periods and balancing rate increases. The results is a rate reset cycle of 3-5 years, instead of the 12 months everyone fears. This means the risk of rising rates is not rising rates per se, but cooled financing demand and the loss of fees associated with that. Banks with big, fat books will need to go on a diet and shed some of that fat as the lucrative fees which have been driving their business will dry up.

Secondly, home price deceleration will only chill the wealth effect, but its not as if that wealth will disappear (remember Mitya's third law, wealth is neither created nor destroyed, just moved around). If home price appreciation slows to say, 2-4%, where would you put your money? Probably in a savings account. It makes no sense any longer to keep paying as much of a mortgage payment as possible, and instead to increase your savings. Banks haven't had a big savings push in a long time, Americans are saving record low amounts (0% according to the last report); so to substitute the fees from mortgage origination with retail banking fees, some serious catch up work is required.

Thirdly, something like 15% of residential closings over the last year have been for investment purposes. That is a lot investment property. These double, triple mortgagers are the ones at risk, and it only reinforces point two above. Though people flipping properties may lose a little wealth, those aren't most people by any stretch. Coincidentally, investment properties are big money makers for banks who make moneyon all ends of the deal, stopping the flow of these will definitely cause some belt tightening.

So, while it is pretty clear to me that the housing market bubble pop is here (convincingly, turnover or existing home sales compared to housing stock is at 5%), the effect of a pullback in house appreciation rates will primarily pain the lending class ... at least for the next three years (now how's that for calculating economic cycles to the incumbent's advantage!)

Saturday, August 06, 2005

Mother of all Wars

Found a link to an article describing this from a commenter on J. Robb's site. Why don't they just go ahead and say what "it" is, it isn't "sort of a mother of all wars." "It" is WW-III, and "it" has been going on for at least the last 10-15 yrs. And "it" is, the first world v. the third. And finally, this mother of all wars, is unlikely to ever end, unless of course humankind ends. "It" is the ultimate have versus have nots. Ins versus outs. Victory only means a changing of sides.

More on this from John Robb here. When will American politicians start talking about "it"?

Friday, August 05, 2005

Don't Take the Bait - It Hurts!

Begging the professor's pardon here, I'd like to interrupt Mitya's twin posts and comment on something that appeared to have resolved itself, but yet again it shrinks out into the sunlight.

Armando appears to be up to his old tricks again. Since one of our bloggers has had a bit of a reconciliation with dear Armando, I'll give him the benefit of the doubt. Unfortunately though, regardless of whether Armando meant to or not, he and other "bloggin' dems" picked the wrong path. Instead of committing the time and energy to let the Roberts nomination evolve a little, weigh the issues, and plot the best attack, they decided to be lazy, pounce on any negative, and sing the filibuster chorus at the drop of a hat. The result is 1) a missed golden opportunity and 2) a worse post-nomination situation for gay Americans.

As everyone now knows, while at Hogan, Roberts did some pro bono on the Romer case. According to the lead attorney for the plaintiffs, he was "terrifically helpful" in prepping for the case. This fact was not disclosed in the Judiciary Committee questionnaire. Making it all the more obvious the gaming going on here. The goal was to innoculate Roberts. And once the the innoculation occurred, to band-aid it over.

But thats not what Armando thought on 8/3 when he started the filibuster waltz. Citing an '81 memo where Roberts "approvingly quoted" from J. Black's dissent in Griswold. Armando ended his post with the invitation to tango:
Roberts, unless he expressly states that he will not overturn Griswold and Roe, must be filibustered. There is no other way.
Of course, Roberts is never going to expressly state anything about how he will or will not rule, and Armando knows that. His message is clear. "These quotes prove Roberts isn't fit for the job." In other words, Armando took the bait: hook, line and sinker.

Here's what could have happened if no rush to judgment. First, the Roberts issue would not have been discussed, thereby preserving its shelf life for future debate. Second, when the truth comes out, as it did yesterday, that Roberts helped out on the Romer issue. Democrats could come in and praise him, congratulate him. Seriously, it would have been wonderful.

We could have spent the entire judiciary hearing talking about fags and queers and how great it was for Roberts to help them out. How thrilled we are that Roberts clearly is prepared to recognize gays and give them the equality of respect they deserve. Shit, you could even have a gay gospel choir (if there is such a thing) come in and sing Hosannas! Gay rights groups could have given him rainbow flags and pink triangle appreciation awards. And the leaders of the gay rights movement could have held press conferences endorsing Mr. Roberts as "our nominee". Senior Democratic Senators could say before their vote: "you know, I was gonna filibuster Mr. Roberts cause I expected he'd be as extremist as the President made him out to be. But I can tell now he's a sensible man, so I'm not gonna filibuster, he's walked the walk and proven he'll respect the rights of others as a member of the Court." The press would be fixated on Roberts as the "pro-gay justice." And specials stories on CNN would appear wondering aloud about "Bush's pro-gay legacy." In other words, everyone would have done what we are all now doing, re-evaluating Roberts on the basis of his actions, not his words.

All this could have been said and done (and still can be by Dem Senators, but not by Armando). And the result would be devastating for the Republicans. A further wedge would be driven between the christian right and their many conservative, gay, well-heeled allies. More importantly though, Roberts would be effectively "cloaked". For at least the beginning of his expectedly long-tenure on the court, Roberts would find it impossible or at least, quite difficult, to play the part the radical right had envisioned. And in the end, for people who really will be affected by a Roberts on the Court, that is a far better situation than can be expected from stirring up the pot with the futile filibuster game. Which begs the question, is Armando more concerned about stirring things up, or helping people out?

Thursday, August 04, 2005

On the One Hand

The economy appears to me to be poised for sustained growth over the next three quarters. Good latent corporate demand, low inventory overhang (if any), and lots of talent on the cheap. Inflation is heating up, but not significantly impacting profits. Oil prices, the main source of inflationary pressure, are poised for a small albeit significant correction as the long-lead times begin to wane and more production comes online. From that point of view, things look pretty good. So let's start there, how good do things look to you?

Back from the Highlands

It has been a very long absence for me from the blog, the states, and the daily grind. I kept working all the while, and have some interesting news along the vulture front which I'll pass along soon enough. I spoke with Sharpshanks yesterday, he is being drilled with work right now and won't be posting until the fall. Thank you Federalist and others for keeping the site up and running.

I'd like to post on two topics over the next few days, and generate some good discussion as my own opinions are not as settled on these two issues as in other realms.

Topic One: The short-term (6-9 month) economic outlook.

Topic Two: The long-term evolutionary outlook for Al-Qaeda and global terror.

Teasers for each topic on the way, as for now, just saying hello!

Wednesday, August 03, 2005

1.3m pounds; 2.3m dollars

That's how much Shell makes every hour. Mitya posted on the PIS in Iraq, I think he might have forgotten to point out this one. The Iraq war was supposed to make oil less expensive, instead the inverse has occurred. As we spend more and more money trying to secure the country, oil just gets more and more expensive. The real PIS though is the exit strategy. Damned if we do, damned if we don't.

Tuesday, August 02, 2005

Forgot to Mention

In another sign that Krispy-Kreme may be able to turn it around, low-carb diet kings Atkins Nurtitionals, Inc. filed 11 last week. DIP loan by UBS, and looks like a pre-pack. The CRO blames it on Kraft, Unilever, & General Mills. The big joke in the papers though is the asset valuation of $301m.

Monday, August 01, 2005

Child Labor and the Liberal Intelligentsia

Matthew Igelesias, against his usual habit of constructive contributions and intelligent insights, has laid an egg so rotten we all may choke on its fumes. Josh Marshall, horribile dictu, seems to approve the stench. Now to be fair, both are talking mostly about the argument that sweatshops in the third world--as bad as they are--still offer a step up from misery to poverty. That's an issue in its own right, arguable perhaps on the "if not cake then at least crumbs" principle. But both writers at least refer to child labor in the same general category, even if they don't explicitly approve it. Josh allows as how sweatshops might not be OK, though, if perpetuated by violence. But in any case we're left with an implicit, look the other way, endorsement or at least toleration of child labor as some kind of alternative to misery. O tempora, O mores-- the perfidy of liberals trying to polish their tarnished economist credentials.

That it should be necessary to point out that child labor is violence, that it destroys health, maims, and kills--that this should need saying is all the evidence we needed for the utter corruption and disgrace of our nation's public discourse.

C'mon, guys, say it isn't so. I can't wait to apologize for misuderstanding you.