On my first jet flight, I could have had a US Army .45 automatic in a shoulder holster and a bottle of whiskey in my sport coat. The seats all had ashtrays and anyone could light up after takeoff.
Times have changed. They confiscated my shaving cream so I'm dry-shaving...I tried to get everything out of my pockets, but my shorts had so many pockets that I overlooked my cell phone....wallet, keys, change, sneakers, watch and glasses all in the bags or in trays.......then I beep ...I take off my belt and hold up my pants with one hand in my stocking feet...I beep again before I discover the cell phone...It's embarassing to be one of the idiots holding up the parade...
If they would just let us carry out .45s automatics on board again the terrorists wouldn't have a prayer...BLAM! Die sucker!...Maybe we should issue birdshot loads to prevent cabin depressurization...
the picture? A nice idea for a Halloween display...
Meanwhile...I watched a Chris Rock two hour special last night...he says George Bush has done such a bad job that it is currently impossible to elect another white man as President...A black man...a white wonan...a giraffe....anything but another white man... He says Bush is the worst President ever...not just the worst American President...the worst PTA President...the worst baseball league President...the worst of all Presidents...
Tonight Governor Palin is heading for Senator McCain's ranch in Sedona...I'd like to be a fly on the wall...McCain has painted himself into a corner by objecting to Obama's idea of cross-border raids into Pakistan...Senator McCain...soft on terorism...what will Palin say on Thursday?
This morning we get a Skype call from Venice, Italy. One of my more sceptical readers wants to know if my latest posts about Congressmen Pepper and Gibbons are completely true...my answer is yes...truth is always much stranger than fiction...
Gasoline lines and gas shortages are back again....the rumors of shortages send panicked motorists to top off tanks and fill containers....sure enough we're out of gas again...the big trucks are stalled on the interstate...next week the grocery stores begin running out of milk, bread and fave beans....Atlanta, Knoxville, Raleigh and Asheville are all out of gas....people are stuck at home...they're even thinking about cancelling the weekend college football game in Albany...
The sub prime mess was bad enough....now the negative amortization mortgages are resetting....this will be much worse....The way these work is that you agree to an interest rate of 7 or 8 % and pay only 2% for the first five years or so, adding the balance to the debt....then after a period of time you get a letter from the bank saying your monthly payments have tripled....this on a California house that probably declined in value 30%....plus you financed with a 2nd mortgage....good grief....so your mortgages are 200% of the home values and you can't afford to pay them....even college football is at risk.
All of our big investment banks have gone down....our biggest insurer, AIG, needed an $85 billion gift from the government to remain afloat even on a temporary basis....too many insurance policies issued on sub prime collateralized debt mortgage obligations...The big commercial banks are dropping like flies....depositors are making "runs on the bank" and placing the proceeds in short-term US Treasury Securities that pay zero percent (or less).
I look at my own house (sold two years ago) and do an internal rate of return calculation.....it went up in value 7% a year for the first 22 years and then 26% a year for the last five because of a bubble induced by artificially low interest rates and lunatic mortgage lending practices....ten trillion in bad paper....
I have seen the future...an economic death spiral for the world....I'm investing in canned goods and peanut butter...heading for Puerto Rico in the morning....I'll buy some dark rum Sunday morning...and hope American Airlines has enough fuel to get me back...Marx was right....unregulated capitalism will always implode....
We walk into the Capitol in Washington sometime in the 90s and see Congressman Sam Gibbons. Mrs. Phred is delighted and calls out his name. He spends 15 minutes with us giving us a tour of the Capitol building. I tell him that I read about him parachuting into France with two cans of cold Schlitz beer in his gas mask bag. He tells me that President Clinton sends him a six-pack every year on D-day
"On June 6, 1944, Capt. Gibbons, 501st Parachute Infantry Regiment, 101st Airborne Division, arrived by parachute near Carentan, France on the Cotentin Peninsula. Gibbons served in the European campaign to the end of the war and then returned to his home in Florida.On D-day, June 6, 1944 (He wrote "I was there" which has been translated into French) He was recently awarded the French Medal of Valor. On June 13, 1944, the main German forces counterattacked south of Carentan, in a battle between German tanks and the American paratroopers lasting all day, 6 am to 10 pm, the paratroopers gave ground, defending in depth, and bent but did not break before restoring the pre-dawn line of defense. Of the 600 paratroopers that began that day fewer than 400 soldiers remained. Gibbons could count a dozen burning tanks."
Sam self-destructed to some extent, calling the "new republicans" Nazis during a hearing. He was a cool guy...my Uncle Bruce was in his outfit...the 101st Airborne... We've been to places in Normandy where they have the 101st insignia on stained glass chuch windows.
"Sam Gibbons has had a few verbal showdowns with the newly elected Republican congress in the mid 1990s. During a taped Ways and Means Committee hearing, Gibbons stormed off to the microphones explaining how the American children were being railroaded and given no time to speak. He compared the new Republicans to dictators and shouted that he had "to fight you guys 50 years ago," referring to Nazi Germany in World War II."
Sam retired in 1997...he was a good legislator. It's a real shame that his extrreme televised frustration with partisan politics was the last thing we remember him by.
The Mayans had a ceremony for it. Every 52 years they would forgive debts and burn possessions to ensure the return of the sun and let the good times roll again.
Then there was Nicholai Kontradieff. Nicholai worked as a Soviet central planner in the 1930s. By plotting worldwide price levels and economic activity over a 200 year period, he became convinced that there was a long wave of capitalist economic activity and that things collapsed every 50 to 70 years in a kind of nuclear winter lasting about 15 years.
The chart below shows debt in America climbing to 340 percent of gross national product at the beginning of the great recession.
Kontradieff believed that this periodic collapse, accompanied by deflation, called the Kontradieff Wave, was caused by an unsustainable increase in debt levels. The Soviets threw him in prison, where he died. Part of his theory was that the Winter of the wave paved the way for capitalist economic renewal. This did not sit well with Marxist theory or Uncle Joe Stalin.
The debt crisis, credit crisis and economic crisis were merely the opening acts in the approaching end of the long wave. The big crisis will be the currency crisis. This will begin to unravel in the next few years as basic commodities like food inflate and creditor Nations begin to realize that they are holding huge amounts of dollars, euros and British pounds that won't buy much of anything of value and all head for the exits at once. The music will stop and there won't be any chairs.
It's time to invest in guns, seeds, gardening tools and dirigible stamps. It was swell while it lasted. I thought 1974 was the wave, but now I know that the mother-of-all Kontradieff waves is about to hit the beach....How's that for mixed metaphors?
A butterfly flaps its wings in western Africa. The disturbance grows into hurricane Katrina and destroys New`Orleans.
In 1968, as I listen to a Chinese high-frequency English language propaganda program while flying over the South China Sea, I'm unaware that David X. Li is growing up in rural China. It is hard to imagine that Li's thoughts will ultimately cause the greatest international financial collapse in the history of the world.
Li grows up and becomes a Wall Street "quant". He invents something called a "Gaussian Copola" which was universally used (or misused) as a tool to quantify the risk of default of mortgages, CDOs, Credit Default Swaps and other exotic securities.
It's hard to believe that the thoughts and theories of one little guy from China could be responsible for all this, but it seems to be true.
On second thought, I am familiar with tendency of managers to misinterpret the work of brighter subordinates. In 1972, I did a multiple regression analysis on the relationship between total ticket revenue from college football games and a collection of independent variables.
The factor that had the highest correlation to total game revenue was the quality of the opposing team. The Execs that read my study immediately scheduled a number of high quality teams for the following school year. They neglected to consider the cost of guarantees to high quality teams. While my formula revenue projections were on target, the net result was an unmitigated financial disaster as expenses far outstripped revenue. That was the last year the University fielded a team.
Destroying a college football program is small potatoes compared to destroying a world economy...A little butterfly named David X. Li flapped his mental wings and blew it all away.
I'm drinking more than my fair share of dark rum.
I go down to the local liquor store and treat myself to a bottle of dark Bacardi select...I eyeball the Bacardi 151... but that way lies madness...
Flashback to 1964...I have a roommate, Ted, who is a blond good-looking fraternity guy from Palm Beach...He tells me about "pig parties". That is where you compete to find the least attractive possible date and then delight in their embarrassment when they realize that they have all been invited to a party for ugly women. He actually seems a little guilty relating this to me...maybe there was hope for him?
My deviant non-empathetic roommate produces a bottle of Bacardi 151. I end up with a traffic ticket for driving my Harley-Davidson Sportster at 110 MPH in a 30 MPH zone at 2 AM in front of the Tallahassee police station. Only a year earlier Jim Morrison, my former almost roommate, was charged for stealing an umbrella from a police car. The judge gives me a break after seeing my military ID, but he chews me out good...but at least I didn't get caught stealing a stupid umbrella...
Outside the hotel room tonight, they are blasting away with Puerto Rican tunes...one of the songs is about "muchos saxophones"....I sit in an Audit Committee meeting with 12 staff and volunteers...it's embarrassing to be the only non-bilingual person in the room...they all speak English for my benefit...If I come back, I will be fluent in Spanish...
My pay grade is GS0...I'm just a volunteer.
So what about that credit freeze? One problem is collateralized debt obligations (CDOs). These are bundles of securitized sub-prime mortgages. They were rated AAA by the rating organization when issued primarily because of "insurance" against defaults...more about that later.
The banks are using models to value these CDO assets which reflect home price declines in metropolitan areas. For example. the San Francisco Metropolitan Area (SFMACDOs). This would result in valuing CDOs at near market value. For example, many banks are carrying CDOs worth 15% on the dollar at 75% or more.
I don't think $700 Billion is going to do much to correct the "exuberant excesses" of the last seven years. It's a ten trillion dollar issue...but wait...what about credit default swaps?...and what happened to the Investment Banks?
A Credit Default Swap is like an insurance policy against CDO defaults. Warren Buffet called these instruments of financial mass destruction five years ago. The Investment Banks collected big fees on these policies for years but never set aside payment reserves or anticipated any defaults on mortgages. So when the housing market went south two years ago, eventually "hedge fund" managers panicked and withdrew assets from the investment banks leading to the collapse of Bear Sterns, Merrill Lynch, AIG Insurance, Lehman Brothers and others...what's a "hedge fund"? Please...Don't even ask.
While "sub prime" mortgages, borrower fraud, speculative greed and low interest rates created a huge housing and mortgage bubble, a bigger problem now looms...negative amortization or "pay option" mortgages. These have brought down Washington Mutual and Wachovia, two of the biggest US Commercial banks. How's this for a deal...sign an 8% mortgage but pay only 2% until your mortgage balance reaches 125% of the original loan...then you get a letter that your payments have doubled or tripled. You owe maybe twice as much as your home is worth after a 30% decline in value...to walk or not to walk...that is the question...
Meanwhile, inter-bank lending virtually dried up because banks realize that mortgage assets of other banks are significantly overvalued or impossible to evaluate based on current valuation models. Depositors are making panicked (but somewhat justified) withdrawals from banks where they have more on deposit than the $100,000 FDIC insurance limit. The $44 billion in the FDIC fund won't go all that far in the current climate.
I've evaluated the finances of my own credit union. Here is some scary stuff on their provision for bad debts:
2005 $12,000,000
2006 $12,000,000
2007 $60,000,000
2008 $150,000,000
So what about suspension of the "mark to market" method of accounting for mortgage assets that just got signed into law as part of the bailout package? Now banks don't have to write down assets to what they fetch in similar sales...how helpful..
Tampa, Florida As the race for president heats up, and I get more e-mails from Obama asking me to register my neighbors, I pause to remember and honor Claude Pepper as the essense of participatory democracy. He was born in 1900 and died in office in 1989. He served in the US Senate from 1936 to 1950 and was defeated by George Smathers who leveled the following charges against Pepper in his "redneck" campaign speech:
"Are you aware that Claude Pepper is known all over Washington as a shameless extrovert? Not only that, but this man is reliably reported to practice nepotism with his sister-in-law, and he has a sister who was once a thespian in wicked New York. Worst of all, it is an established fact that Mr. Pepper, before his marriage, habitually practiced celibacy."
Claude went on, after his Senate defeat in 1950, to become a Congressman from Miami, where he served until his death on May 30, 1989.
When I got back from Vietnam in 1968, my nerves were raw. I read in the Miami Herald that a woman from Thailand who had married a GI was being deported because her husband had been killed in Vietnam and she was not a citizen. I wrote a letter to Claude Pepper expressing my displeasure and a week or so later he passed a law in the House of Represenative and Senate making the spouses of GIs killed in combat automatic citizens. It was signed into law by President Lyndon B. Johnson
Mrs Phred and I were very impressed with his prompt response to my request. We felt we owed him something so we both went to his campaign headquarters in Miami and made a lot of telephone calls working for his relection...
He was a new dealer and a big Stalin supporter in the 1940s. That cost him his Senate seat in 1950. He was a champion of liberal causes and of the elderly. He graduated from Harvard Law school...
So They've got two aging shuttles lined up on the pad. The next launch is scheduled for October 10 at 12:43 AM...I may take the old Ford van and a cooler and sleep on the Banana River to be there for the launch.
They will be upgrading the Hubble telescope by a factor of 10 to 70...They have already looked back 13 billion years and concluded that the universe is expanding and that the rate of expansion is accelerating for reasons that we can't begin to understand.
Horatio: O day and night, but this is wondrous strange!
Hamlet: And therefore as a stranger give it welcome. There are more things in heaven and earth, Horatio, Than are dreamt of in your philosophy
Mrs. Phred finds me staring at the ceiling and asks if there is a problem. I tell her that my heros (Neil Armstrong, John Glenn, Chuck Yeager, Scott Crossfield and other giants) are all dead or over 80. I tell her that the shuttle crew were having their diapers changed when I was flying missions...
Mrs Phred is immediately thoughtful ...she starts in about how life goes by in an eye blink...I realize that you should never ever scream "WE'RE ALL GOING TO DIE!" to the women and children...or compare human lifespans to geologic time...
I tell her that there will be a tunnel and a bright light at the end and all her friends and relatives will gather to welcome her...she likes that so I suggest that she might consider being a Muslim and claim her 72 nubile young male virgins at the end...
Anyway...it's crappy that the real deal guys are either very old or dead...
Tampa, Florida I make my annual visit to see my Doctor. She's pleased with my weight, low cholesterol level and blood pressure...we don't discuss smoking or digital rectal exams anymore. When I tell her that I hope to see her again next year we agree more sincerely every time. I've cleared up the water in Mom's pool by shocking it with five gallons of chlorine. My little sister and her husband, Jay, come over for the party. I bar-b-que steaks. It's nice to see Mom smile. She especially laughs about my hat, which is popular in the pool today. This is my little sister. I ask Jay if he has any residual effects from the AK-47 wounds. He says he still has some numbness in his arm and right hand. My regular barber gives me a $1 senior citizen discount on my haircut so I bump his regular tip $1. I do some googling about Puerto Rico diving for the trip next week. There's a guy down there who's looking for a dive buddy. I don't e-mail him...finding your dive buddies online my not be the best way...For example, here's a birthday greeting quote from an online friend...what a character he must be...I'll have to look him up in England next May for dinner at the Joogleberry...with a name like Joogleberry its got to be good...
" It takes every drop of energy just to run my brain Took a long time to learn that it's just a waiting game Some people call it depression, I call it a song Don't worry 'bout me, I'm not going to be around all that long "
I go out to play tennis with Mrs. Phred this morning and tie it up 5-5.....This is going to be my day, I think...I revolve saying 5-5....5-5...savoring the moment....the 8 AM Florida heat and humidity leaves me dripping with sweat...Mrs. Phred seems cool as a cucumber...
She takes the next game 6-5 and I start dreaming of a tie-break....We go back on forth...ad-in, deuce, ad-out, deuce...Finally she puts me away 7-5....I dream of future victories....I've never won five games before...we've been playing 20 years...this is my best...it augurs well...
Tomorrow, I hit what is considered official retirement age of 65...what to do?
We look at newer, bigger recreational vehicles....no, maybe not...Maybe the Federal Reserve has an opening for a shrewd chairman who has actually studied macroeconomics.
We saw " Burn after Reading" last night...another dark comedy by the Coen Brothers...funny to laugh out loud when people are being sequentially killed, but the Coen Brothers have a talent....then to St. Pete Beach for rum-runners and coconut shrimp on the "million dollar" pier ....a strong tropical wind off the water and a typical Florida light show of frequent nighttime lightning strikes in a big cumulus nimbus line off the dark gulf....I was just reading about this Englishman who was paralyzed by a lightning strike in WW1 on the right side, then 20 years later in Canada he was paralyzed on the left side by another strike, then just as he was learning to walk another bolt got him on both sides, then he died and another strike spit his tombstone...what are the odds?
Interstate 275 has been upgraded here with overhead LED signs and we get a warning twenty miles ahead on the way home that a crash has blocked all three lanes at Kennedy Avenue...how nice...we divert...I make another contribution to Obama's campaign this morning...
Tampa, Florida I notice that the days are growing shorter. After the strokes, the cute blond Jewish neurologist asks me some key questions to judge my loss of cognitive ability. I count backwards from 100 by sevens for her. No problem. "What season is it?", she asks. Momentarily stumped, I offer Spring as a tentative answer. "Was it hot when you came in?", she wonders. "It's always hot in July in Florida", I tell her. It's still hot in mid-September. Now I practice answering the question of seasons. You won't catch me again. I believe that the season changes on the solstice and equinox. Soon it will be Fall... I think. The sun will sink below the Equator. I have faith that it will return if we make the proper blood sacrifices in the dead of Winter.
Two of my college students, Steve and Mike, go to dinner with us at Frenchy's on Clearwater beach. They bring along Argie and Jill, wives and old friends and two of Steve and Jill's lovely children. The restaurant overlooks the Gulf and sits on a wide white sand beach. We sit on the patio and watch the incomparable Florida sunset.. The live band is a Johnny Cash sound-alike...
Because you're mine, I walk the line
We stoke up on she-crab soup and pina coladas...on the way back to the car we practice lowering our voices and singing...
I shot a man in Reno, just to watch him die
It's always wonderful to reconnect with old friends.
The park offers swimming in a cool lake. It's heavily wooded. I've been doing some painting for my daughter-in-law and generally trying to be useful. The little ones camp with us in the Park in relays. Grandchild number five found my kneepads and likes to wear one as a helmet.
Tropical Storm Hannah swept though last night. We had a great roaring fire in the rain and toasted marshmellows (can you see raindrops and toasted marshmellows descending from the heavens?). We swam in the rain and watched the storm bands sweep though. The girls (numbers two and three) appointed me as the monster so I ran them down and dragged them shrieking by the heels to deep water.
We looked at nearby Chapel Hill. It's a big University with an abundance of the older homes that we both like. Maybe we'll look there for a stick home someday (People who live in RVs call homes without wheels "stick homes"). We'll head back to Tampa tomorrow at about 4am. It's been five months plus since we left on this trip. The BBC wants me to write about my travels and provide pictures. I'm negotiating for complete creative control with Rich Blayden, the BBC Post Senior Editor. I'm also holding out for Waldorf salads.
The little ones dropped my laptop on the floor last night as Hannah stormed about. They seem to get super-energetic when fed massive amounts of hot dogs, ice cream, marshmellows, chocolate and Graham crackers. The strange thing is, it started working again after being dead for several weeks.
By noon the skies had cleared....Maybe I'll slip up here in my old white Ford Van and do some more painting in October or November.
We could be in Tampa tomorrow, but I'd like to stop at Ginnie Springs and dive the caves and float down the Santa Fe river. Hurricane Ike should arrive about the same time we do. It's a nice one (Cat IV).
