October 11th, 2009
Continuing the theme of over reliance on technology, owners of the T-Mobile Sidekick smart cell phone got a rude lesson this week. The Sidekick stores its data “safely” in a huge storage system loosely termed “the cloud” – meaning some huge mass of data storage on the internet out there “somewhere” storing your data, but you don’t need to trouble yourself with the details. You’re safe. (think Gmail’s “2GB of storage for every user” for another example of storing data in “the cloud”)
As those of you with large disks have learned, the more stuff you have, the harder and less practical it is to back it all up – especially if you are backing it up to another computer over the internet. The remote backup/recovery services you hear advertised can take as much as a month to complete the first backup of your computer if you have a lot of stuff, even on a good DSL connection. A typical 156kb upstream ADSL connection can transfer about 1 GB of data per day.
So the cloud must be failsafe on its own. Disk must be in RAID arrays that cannot fail and lose data. The idea of ever backing up the entire cloud to one central place is not practical, especially if the data has to be up 24/7 for constant updating. Portions of the cloud must back up each other, and some centrally run control system keeps track of what data is where and what other part of the cloud is its backup.
So the early rumors are the Sidekick server(s) were given a software upgrade, and the upgrade failed and wiped out every server. The result was a catastrophic loss of all data with basically no hope of recovering any of it. There is no backup, because it isn’t possible or practical to do it.
[I wonder if the data was encrypted with 128 bit encryption, and they lost the key 
]
Posted in Technology Politics | 1 Comment »
October 8th, 2009
Story
I’m really coming to the conclusion that Geithner is an idiot, not just a misguided globalist who wants the IMF to run the world.
While he and the Federal Reserve’s Bernanke are holding interest rates as close to zero as is possible, Geithner now says he wants Americans to save more. Why would people save more money to earn 1% interest? or lock in for a longer term when most people expect inflation to come back at some point?
At the same time we are being told to save money, the government is urging us to buy stuff we can’t afford (new cars, houses, appliances) to stimulate the economy. The government itself is spending money like a drunken Pelosi, and is considering a second stimulus package.
None of this makes any sense.
Posted in Politics, Timothy Geithner Watch | 1 Comment »
October 8th, 2009
Accuride makes parts and accessories for commercial trucks. Due to the recession and environmental law changes, demand for new trucks is very low at the moment. The company is basically surrendering itself to the Private Equity firms and lenders to whom it owes money via chapter 11 bankruptcy..
Posted in Bankruptcy Watch, Financial Collapse | No Comments »
October 8th, 2009
One of the criticisms of the economic crisis in 2008 was the claim that the credit rating agencies were asleep at the switch, and didn’t warn investors in CMOs (Collateralized Mortgage Obligations – think Freddie Mac and Fannie Mae) that the mortgage portfolios were getting more and more risky.
The issue on the table is how do you find a balance that protects rating agencies so they aren’t intimidated by the threat of lawsuits for publishing negative information, but not protect them so thoroughly that they are immune from the consequences when they fail to report bad news.
Last month, a group called Audit Integrity, which is an industry research firm that focuses on risky or fraudulent business practices, published a list of “the 20 companies most likely to end up in bankruptcy”. Hertz was one of the 20, and is now suing Audit Integrity and encouraging the other 19 companies to do the same.
(One of the 20 has already been removed, but that was due to a data problem from the company that supplies the data that goes into their risk model)
Story
Posted in Uncategorized | No Comments »
October 7th, 2009
Who would be suggesting that Indian Rupee is a better investment than the US Dollar?
Bloomberg Report
Our friends at Goldman Sachs, of course.
Posted in Uncategorized | No Comments »
October 7th, 2009
After 4 years, Delphi (the parts maker for GM) is out of bankruptcy.
Before you get a thrill running up your leg, basically the deal is that GM is taking back its domestic parts plants (which were spun off from GM around 20 years ago), and the non-US plants are being given to the debtholders for what Delphi owed them (about $3 Billion)
During GM’s spiral downward, they had plowed about $12.5 billion into Delphi to try to keep it alive – without Delphi parts, there are no GM cars.
So our Government Motors car company lurches forward. What will be very interesting is the next time the UAW’s contract is up and the “workers” end up negotiating with their own union leadership “management” – with the U.S. taxpayers footing the bills for the next time GM fails.
Posted in Bankruptcy Watch, Financial Collapse | No Comments »
October 6th, 2009
Canwest Global Communication – Canada’s largest Newspaper and private TV company has filed for bankruptcy. Their most well known asset is the National Post newspaper.
Posted in Bankruptcy Watch, Financial Collapse | No Comments »
October 5th, 2009
Glenn Beck alluded several times to the games being played by the Fed and the US Treasury, and he had a guest on who explained it away as “Oh, that’s a repo agreement – those are done all the time”.
I’ve heard of Repos before, but not really understood them. A Repo agreement is a two step transaction – the seller owns a bond (or other financial instrument) and agrees to sell the bond to a buyer, but with an additional requirement that the seller will buy back the bond at a future time at a fixed price. The only credit risk is if the seller is unable to buy back the bond in the future and the value of the bond has dropped, then the buyer has to resell the bond and eats any loss.
So how does this work in practice? Let’s say you’re a primary dealer for the New York Federal Reserve Bank (a securities firm that trades in US Treasuries and has a special relationship with the Fed).
Here is a scenario – the primary dealer currently has $1 billion in cash on account at the Federal Reserve.
The US Treasury holds an auction and sells $1 billion in Treasury bonds to our Security Dealer (let’s say it is Goldman Sachs, for example). GS transfers $1 billion to the US Treasury and gets $1 Billion in bonds. The US Treasury now has $1 billion more on account with the Fed (until they spend it).
GS now takes the $1 billion in bonds and enters into a Repo agreement with the NY Fed. It agrees to sell the $1 billion in bonds to the NY Fed, and agrees to buy them back at a later date. The NY Fed now adds $1 billion in bonds to its stockpile of Repo agreements, and puts the $1 billion back into GS’s Federal Reserve account. There is of course interest being paid and collected, and that’s accounted for in the pricing of the Repo agreeement.
So at the end of the transaction, the US Treasury has an extra Billion in debt and cash to spend, the Federal Reserve has temporary ownership of $1 billion in US Treasury debt, and GS is back pretty much to where they started, other than they probably make a nice profit on the deal – but the Fed didn’t actually buy any securities directly from the US Treasury.
It’s magic!
Here is the Fed’s explanation of Open Market Operations and how they use Repos and Reverse Repos to control the money supply. The writeup mentions that Repos are usually done for only a day at a time. How much money and debt is sloshing back and forth each night between the Fed and the Primary Dealers?
The Fed puts that information online weekly:
http://www.newyorkfed.org/markets/soma/sysopen_accholdings.html
about $1.6 trillion dollars….
Posted in Financial Collapse, Politics, Timothy Geithner Watch | No Comments »
October 4th, 2009
Michael Moore asking people walking in and out of the Stock Markets “What is a derivative” is as pointless as an atheist asking a minister “What is predestination?”. If you don’t have a foundation in the topic, the problem with explaining a concept is not that the person being asked doesn’t understand it – it’s that the person asking the question lacks the ability to understand their answer or is asking the question just to be argumentative – so it is pretty pointless to try to respond. Michael Moore just barely made it out of high school – he quickly dropped out of University of Michigan (Flint), which is little more than a community college.
Derivative: a contract whose value is based on the performance of an underlying financial asset, index, or other investment.
Source: Dictionary of Finance and Investment Terms, 5th Edition
John Downes & Jordon Elliot Goodman, published by Barron’s Educational Services (1998)
It has 716 pages of terms and examples if he really wanted to learn anything. I’m sure the 2009 edition probably has a few more pages.
Posted in Politics | No Comments »
October 3rd, 2009
Michael Moore’s movie Capitalism: A Love Story opened in wide distribution this weekend.
I was working in Flint Michigan (as a contract worker for EDS) at the time Mr Moore was filming Roger & Me, and I have a very different perspective than him. The city of Flint didn’t die because GM didn’t care about Flint – Flint died because the city of Flint became a corrupt bloated cesspool dominated by the labor unions and the Democratic party. They imposed a city income tax and became very anti-business – figuring GM and parts suppliers had no alternative but to keep building cars in the city, and the city could tax its workers and GM forever without consequences and give themselves huge pension packages.
The first thing that happened was businesses fled the city. What Roger & Me didn’t show was that just over the city line (in Flint Township to the west and Burton to the East), there were prospering shopping centers, new housing construction and a prosperous middle class.
The second problem was that Flint decided to choose its mayor based on the color of his skin, not the content of his character. Shortly after I moved there, I was stunned to turn on the nightly news on TV and hear the police chief say… “Well, basically there is nothing I can do about the crime. It’s being caused by drugs and poverty, and that I can’t solve – the Federal Government needs to fix that by creating new programs”.
So prostitution and drug dealing went on right out in the open all day long with the police looking the other way. In its good times, Flint was the model of a racially diverse community – many blacks from the South moved to Michigan in the “Great Northern Migration” and filled the ranks of the people working in the factory. Black and white worked and lived side by side with mutual respect with no racial tension. The Mott Foundation supported the school system to help the immigrants from the South be prepared to participate as true equals.
Without any effective political opposition to the Democratic party rule, the city lost its tax base and filled up with non-working parasites. The middle class moved out. More stores closed. GM became a larger and larger portion of the city’s revenue – they tried to get the city to lower the property tax valuation on its inefficient obsolete factories (they were designed for the old days when you had a discrete “chassis” and a body – which is no longer how cars are designed or made). When the city said no, GM tore down the Fisher Body plant (the focus of Roger & Me). With just an empty field left, the city could no longer justify the taxes it was extorting. In 1992, Flint and Gennessee County were ordered by the State Tax Tribunal to pay GM back $35 million after a 9 year long battle. Buick City would last another 15 years or so but is now just another big empty field. Background info
So while I look forward to seeing more people understanding the Goldman Sachs / Paulson / Geithner connection, I don’t expect the film to be at all balanced or objective in its politics.
Posted in Financial Collapse, Uncategorized | 1 Comment »