True Grit

“The wicked flee when no one pursueth.”

“The gunfight is in the head not in the hands.”

I have thought of writing this post through the usual prism of politics, but then decided against it. The story is an apolitical narrative about, well, balls.

As a society we love to wallow in feel-good, soul-searching, navel gazing movies that it was about time for a Coen brothers-administered shot of some reality-based western drama.

You know how much I love to explore American history.  Turns out I’m not the only pampered Manhattan resident with the secret Wild West fascination. Coen brothers, whose Big Lebowski is listed among my favorites, seem to share the same fetish (No Country for Old Men and now True Grit). True Grit delivers. Wild West justice was on full display with lovingly nuanced approach that the brothers crafted, unexpectedly noir free. It’s a simple, straightforward story of grit, balls that are in the head, not between the legs. The scene of the little girl fording the river must be a tutorial for all in an era of indecision. Moments like this are with us every day, nothing is different but physical surroundings. What matters is your mental ability, whether you a frail 14-year old girl or a hardened Marshall (unparalleled Jeff Bridges). Jeff Bridges can work magic – he was a natural as a troubled country singer in last year’s Crazy Heart and seems like he brought the same traits on the set of True Grit. Including the whiskey bottle and Southern drawl. He nonchalantly captures this western spirit in both movies. Just as Coen brothers capture the essence of bravery.

The young actress who played the girl, Hailee Steinfeld is also 14 years old, but I’d say is just as mature and fearless as her character requires.

With my plebeian tastes, and despite a few high brow existential movies on my favorites list (One Flew Over the Cuckoo’s Nest) I was always a secret fan of simple good guys vs. bad guys narratives. I like Star Wars and Lord of the Rings trilogy. I admit – westerns are my occasional guilty pleasure. But not all westerns. I don’t think I’ve seen any John Wayne movies. I don’t watch westerns for the story that is usually very straightforward, but for the characters and the clichés, like a stranger riding into town, a full-screen shot of a gunfighter’s nervous hand milliseconds away from drawing a gun, a mandatory drunk flying through the swinging saloon doors, a smart and imposing villain, a protagonist with a rocky past. The Quick and The Dead for example has all that and the superb cast (Gene Hackman as perfect villain, very young but very talented Leo, Russell Crowe as a reformed priest)

I guess what makes a good western is the main character who’s fallible: A drunk (True Grit), a bank robber (Butch Cassidy and the Sundance Kid), a cold blooded maniac (No Country for Old Men), The Good, The Bad, The Ugly. We can be certain those characters don’t lead healthy lives that’s why we love them. Compare those characters with, say, Walker Texas Ranger where sterilized and vice-free Chuck Norris manifests his black and white societal aspirations.

I was disappointed this movie wasn’t nominated for the Golden Globes. I guess it’s a bad sign for the Oscars. They got one for No Country and Jeff Bridges got one for Crazy Heart. Somebody must have decided they already got enough.

My birthday party (offtopic)

The denouement of my birthday party the other day may have changed the cruel fate of two nice black guys.

The final chapter of the party took place in Soho House and consisted of 3 Russian girls and one nice Jewish guy at different stages of highness and drunkenness. I wasn’t as elevated as the rest, unfortunately, because I was anticipating, for several weeks now, the dreaded “peeing in the cup” procedure. Nonetheless our festive mood was hard to spoil and we made ourselves comfortable on the couch in the lounge area and ordered drinks. It was well past midnight and the place was getting empty. As such, the remaining parties, especially on neighboring couches were joining each other in the chit-chat. Two artsy-type black guys were sitting next to us, paying interest to our loud drunken chatter about things that should be best kept private. Natasha was explaining to Nathan what types of men she likes, heavy on detail. At this point all of us were speaking in mixed languages, waving arms, giggling at self-made crude jokes that seemed witty at the time and thinking that we were being discreet. The two black guys decided to make a move. “Are you Russian?” – one of them asked. I must say that that day we all looked like prime PETA targets, including all 3 of us wearing giant fur hats, which, given the setting, made us look not just Russian but cartoonish. “We’re going to Russia in a few weeks”. “We’re taking a train through Siberia” – added the other proudly. Natasha, high as a kite, and spotting the new audience turned around and began chatting with the guys. They looked happy and content.

A few minutes later I turned around to check on the situation on the neighboring couch and I must tell you, I saw the real life interpretation of Munch’s “Scream”. The two black guys looked as white as a sheet. Their jaws were agape, their eyes frozen in horror. At this point Natasha was standing and, using heavy gesticulation to drive the point home, in vivid details, in heavy accented English was describing to them how they are going to be raped on the Moskva – Vladivostok train. She wasn’t joking, she looked very concerned. “Two black guys, on a train for a week, in the middle of nowhere, are you out of your fucking mind?  You will be sitting in the compartment with some smelly drunken hicks eating fried chicken in a foil drinking vodka for breakfast and smoking 24/7 with no way out. For weeks! And that’s if you’re lucky. That is if the bandits don’t rob you and kick you out from the train in some deep Siberian forest and where they’ll find your thawed corpses in the spring, if at all. Sovsem ohueli? And, you know, black guys like yourself – you can become popular there, and not just with girls! And then they’ll never find you.” The more she talked the more she got into a groove and the more morbid her audience’s faces became.

Although the picture was a feast for the eyes, we had to stop the torture. The two guys just came here to have a drink, relax after a hard day’s work, chat, have a good time but inadvertently got themselves into some reality check. We said quick “Nice to meet you, have fun in Russia” to the guys, paid the bill and dragged Natasha to the elevator, where we bursted with laughter.

Somewhere the next day two black guys were cancelling their plane tickets to Moscow.

How to love Led Zeppelin

Do you love Led Zeppelin the way I love them?
I’ll teach you how to do it. Yes, you, Justin Bieber fans. And I’ll do it without even mentioning the you-know-what song.

Everything has been written and said about Led Zeppelin. I will not say anything new to the hard core fans of LZ that they don’t already know. The purpose of this article is to create a sort of an introduction or “reeducation LZ boot camp” for the young crowd that grew up listening to sanitized crap-pop of the late 2000s.

History changed its course the moment Jimmy Page tore into the first chords of “Good Times Bad Times” and Robert Plant declared with youthful certainty that “he was told what it means to be a man” and John Bonham (Bonzo) challenged Gods to a drum duel. The year was 1969.

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A couple of Buffett’s quotes

Chasing my previous post. These quotes are from the 1980s but even more relevant today.

On a hypothetical shipwrecked 25 brokers stranded on an uninhabited island:
Faced with developing an economy that would maximize their consumption and pleasure, would they, I wonder, assign 20 of their number to produce food, clothing, shelter, etc., while setting five to endlessly trading options on the future output of the 20?

And another one:
We have “professional” investors, those who manage many billions, to thank for most of this turmoil. Instead of focusing on what businesses will do in the years ahead, many prestigious money managers now focus on what they expect other money managers to do in the days ahead.

Jedi Master has spoken

Many of you know my stance on taxes – I don’t think that progressive taxation is the end of the world. But when one of the richest men on the planet says that he and the ones like him are not taxed enough there must be something to it. Buffett Tells ABC Rich People Should Pay Higher Taxes Or as Fox News would conclude – a hidden socialist agenda.
I read a book about Buffett recently. His genius is simplicity. The way he succeeds is he gets the same information as everyone else – from annual reports – but he knows what information is important. He just knows how to ask the right questions. All of those Efficient Markets Theory apologists that question his record are a bunch of Ph.Ds that claim to know the future by looking at the charts of past events. There are still a bunch of those being employed by big banks to this day as market technicians. But in essence, they are no better than astrologists.
Despite having grown up in a very conservative family (his father was a member of the John Birch Society) he nonetheless learned to think for himself and has become known for his support of progressive causes throughout his career. But he does not let any sort of ideology guide him. All that matters is economic sense and right now that means to lower taxes on middle class and raise them on the top 1%. That also means that without Uncle Sam coming to rescue in 2008-2009 there would be no Ford, GM and Citi anymore and millions more would be unemployed. Pretty Good for Government Work

Of course, our fiscal conservatives love to point out, in horror, to France and Germany with their constant strikes that paralyze railroads and airports, etc. implying that this is what we’re going to turn to if we raise taxes on the rich, but, frankly, it’s like comparing apples and oranges: the unions in this country are so neutered that the only thing they can do these days is give concessions to the employers. Unions Yield on Wage Scales to Preserve Jobs Trust me the strike in this country would be suicidal for workers and unions. Employers would just move operations elsewhere. The diminished union influence is, in my opinion, one of the primary reasons why middle class is disappearing here. The top 1% controls about 23% of the wealth in this country. And the rest are living paycheck to paycheck while voting Republican and fearing Socialism.

Obama keeps tax cuts for the rich

First of all let me congratulate those destitute 1% of the population who were scraping by paycheck to paycheck and who can now breathe a sigh of relief. I heard so many frightening stories about how the 3% increase of their tax rate will slow the economic recovery. Now these 3% will sure trickle down to the rest of the population. But enough sarcasm – I’m really happy for them. Maybe now they will finally stop complaining that Obama administration treats them unfairly. From my previous posts you probably know that the abundance of complaints and general thinness of skin (real or assumed) on Wall Street (who else is in the top tax bracket?) is my favorite topic. The amount of wimps in the top bracket is breathtaking. Makes you wonder how is it that they made it to the top?

I think it all comes down to the fact that being viewed as a victim has become fashionable in this country. It’s a foolproof PR strategy. Moreover, it’s convenient – you get to blame a third party (Obama, government, stiff regulations, communists, etc.) for all of your misfortunes.
Obama, unfortunately, got himself in the position where he’s damned if he does and damned if he doesn’t. One part of the country thinks that he’s in bed with Wall Street, the other part of the country is convinced that he’s out to destroy capitalism, and media doesn’t bother to notice the controversy. For their own convenience certain news sources can criticize Obama for having too many Goldman guys in his administration (alluding, of course, that he’s conniving against the working man) and in the same breath accuse him of socialistic tendencies. I fault Obama for not fighting back hard enough against this nonsense. He’s in dire need of some pit bulls and a Fox-like echo chamber with talking heads. If there’s one thing I admire about the Republicans is that they are masters at propaganda. Their mantra that repetition makes it true really works: death panels, Obama’s Kenyan birth, middle class tax increases – all of it stuck.

Now that Obama kept Bush’s tax cuts do you think that he’s going to be thanked by the business community? Fat chance! Investors Show Obama No Respect in Global Poll as Profits Surge As I described above it’s convenient to always be pissed off about something. Investors made money this year, profits surged – but they’re still not happy. If they are not pissed off at Obama they really have no one else. They need him as a human receptacle of all kinds of misdirected anger. Especially now that the Congress is Republican.

To Obama I say – may the force be with you!

Elections 2010

Well, I don’t know about you but I’m quite pleased with the outcome of the elections. First, Harry Reid held on to his seat. It’s not that I particularly like him, but think of the possible alternative the “2nd amendment remedies” Sharron Angle.
Second is that Democrats lost with much smaller margins than the polls showed. The Rasmussen polls consistently had Dem Senate candidates in Pennsylvania and Illinois behind by 5-6% margin but they lost by a razor thin margin. This makes me question whether Rasmussen polls are biased against Democrats. In other words, I didn’t really see a tsunami. I saw a lot of independent voters expressing their displeasure by smallest of margins and knowing their fickle nature I don’t see why they wouldn’t change their mind and vote the other way 2 years from now.

My predictions about the elections and the markets that I made on July 19th were quite right.
some-predictions-for-the-near-and-not-so-near-future
The market rallied about 10% since then.

Now, show us how it’s done, guys!

Tea Partiers and the Constitution

Tea Parties have a strange love-hate relationship with the Constitution.

I think they have some sort of their own version of the Constitution, just like Conservatives have their own idealized version of the 1950s or Reagan or like any of us have our own idealized memories of childhood. Sober analysis would conclude that it’s not like times were better, but perhaps it was just that we were younger.

So I downloaded the full text of the Constitution in an attempt to see where do they get their talking points. To begin, I searched for the word “religion” in the text, given the recent demand by Tea Party darling Christine O’Donnell, delivered with an air of knowing superiority during her debate, to know where in the Constitution there’s a separation of church and state. The word “religion” did come up once in the text. In the context of “No religious test shall ever be required as a qualification to any Office or Public Trust under the United States”. Further, in the First Amendment, is the following: “Congress shall make no law respecting the establishment of religion”. I have to give her that – she really did believe that there’s a mention of God or Jesus in the Constitution, because she looked like a child who just found out that there’s no Santa Claus. When her opponent quoted the First amendment it was like an unpleasant revelation to her. I hope that the first thing she did after the debate is to go and check the text to see it with her own eyes.

Many Tea Parties, without fully knowing what the Constitution actually contains, nonetheless like to throw weighty words around, especially when asked a practical question, for example how to balance the budget. You will be hearing words like “tyranny”, “Founding Fathers”, “Constitution”, “God-given rights” without actually getting an answer to your question. In fact many conservatives like to mock liberals for deriving their rights from the Government. Liberals, those spineless fucks, you see, take the rights mercifully granted to them by the omnipotent Government while the steel-balled conservatives themselves insist that all rights are God-given. They conveniently forget that the enforcement of God-given rights is still the job of the dreadful Government. Rights have to be protected and even though I would love to carry a gun around all the time in case I need to dispute, say, a claim from my insurer, I hire a Government to do that for me. Sure, they mostly suck, they tax you, they grow corrupt with time, but the alternative is a do-it-yourself Wild West. Don’t get me wrong, I, of all people, would succeed in a kill-or-be-killed setting like this, but the point is why not hire somebody else to do the enforcement job for you, while you can engage in, say, some money making or world saving? Besides, every 2 or 4 years you have a recourse against the Government in form of election. It’s amusing to hear all those yells of “tyranny” and calls to “violent rebellion” from middle-aged middle class nearing retirement who, for way too long, had a boot of Socialism planted firmly on their necks! But no more! Down with Socialism!

Funny, how I always digress in my writings. I do like to rant though, if you haven’t noticed.

So anyway, a Tea Party rally would not be a Tea Party rally without some dude in a tricorner hat waving the copy of the Constitution. But now I wonder whether they just like the original document or all of those amendments that came afterwards. If they just like the original then they would have to admit that they would repeal the subsequent amendments, like giving women the right to vote or abolishing slavery or granting citizenship to persons who are born here. Some brave and honest tea parties, like Rand Paul, would repeal the 14th amendment, for example. At least he’s honest and I give him kudos for that. I only wish that he went all the way – calling for repeal of all of the amendments, instead of picking and choosing only the ones he likes. That’s where I have a problem with the tea partiers supposed love of the Constitution. They love it but they want it changed. They imagine things to be in the Constitution that are not actually there. They choose to ignore some inconvenient articles. This problem can be solved if they just write their own Tea Party version of the Constitution. Just to give you a few highlights: Abolish federal income tax (Sharon Angle); Establish the presence of Christian God in state affairs (Christine O’Donnell, Sarah Palin); Abolish Department of Education and a right to citizenship for those born here (Rand Paul). And wave this document instead – that will keep you honest.

After watching that Christine O’Donnell video I thought that it would be funny if it wasn’t so sad. No matter how civil a society we’re bound to have citizens who have no idea what the Constitution is all about and have their own fantasies about what’s in it. But to have a public official who runs for office not to have a clue about one of the most important cornerstones of the current law, the establishment clause, is sad and even scary. It does not necessarily show her stupidity, although she’s pretty ignorant, unable to name even Roe v Wade – the mandatory pet peeve of any self-respecting conservative – as an example of Supreme Court decision she disagrees with (not because she agrees with it, but because she doesn’t know what the fuck that is!), it shows her inability to think. If she truly believed that government does not guarantee the separation of church and state, then what particular church does the government have in mind? And just to be on the safe side – to check with herself to make sure that she belongs to that particular brand of religion. Because, you know, she a Catholic after all, and Catholics used to be, shall we say, frowned upon, in the good ol’ days.

The Foreclosure Situation

Given the recent development on the foreclosure front here’s my 2 cents and a possible solution.
How can a trust with tens of thousands of individual loans in it dispute each one of those defaulted loans one by one in court? This isn’t going to happen. And it’s not because it’s too long and too costly – there are ways around that, but because trusts can’t prove that they own those mortgages, they don’t have the paperwork needed. To go forward with foreclosure en masse would mean some abrogation of the sacred contract. Also, if the house has several liens on it, as happens in most cases, the potential buyer, who’s hunting for a cheap foreclosed home can’t be 100% sure what exactly he’s buying. It can turn out that he’s going to be second in line, after the primary mortgage holder claims to own the property as these two unfortunate guys found out. I mean what reliable source or a database do you check to know what it is that you’re buying with a foreclosed home? I think foreclosure has a risk of becoming a four-letter word.

What it can mean is foreclosure market will be dead for a long time, because bargain hunters will be spooked by the legal uncertainty. In reality it would look like the whole country will be plagued by haunted houses that no one can sell, buy, move into, bulldoze to the ground and not even touch with a ten foot pole. Wouldn’t that signal that the new construction will be hot again? People have to live somewhere. Just a speculation on my part.

That’s just one of many problems. The other one is sloppy record keeping.

Even before the mortgage meltdown, the servicing industry “was plagued with problems,” such as servicers charging unauthorized or excessive fees and making false or unsubstantiated statements about how much borrowers owed, says David Vladeck, head of the bureau of consumer protection at the Federal Trade Commission, which has brought several recent cases against servicers.

WSJ Article

I read a few articles in the past few days and to my horror I found out that no one is really insured from being foreclosed upon in this unceremonious manner, even if you’re current on your mortgage! That is because most of those small lenders that originated your loans are non-existent right now, those loans are long gone from their balance sheets into the trust without proper documentation being transferred into the hands of a new owner or lost altogether. In this case how do you prove that you paid all your mortgage bills on time? You have your records, sure, but they have theirs! Prove that your records are correct! These robo-signers are a sort of indiscriminate roulette that can pull your own mortgage out of some system purely by mistake and make you in default. “Because it says so on the computer screen” – you will be hearing when, puzzled, you call your mortgage servicer trying to clear the little misunderstanding. You will be speaking with some clueless person who will be immune to your logic and calls to reason, because I suspect they all are being trained to not understand questions for which there are no standard answers from the manual. What recourse do you really have in situation like this other than going to court?

The solution. With such clusterfuck in the foreclosure process and a high unemployment rate the solution begs for itself. Just like in early 2000s a bunch of no name lending companies popped up here and there I can see a huge market for foreclosure specialists. The business model would look like this: A small company gets a list of the prospective foreclosures from the trust or from the sponsoring bank and hires high-school drop outs for $10 an hour to phone the properties on the list. If somebody still lives there and pays mortgage or at least is working out a payment plan – those get dropped from the FC process. If no one answers the phone, the bank is given the green light to proceed with the FC. I mean this is a rough idea, perhaps those employees have to do visits to the property and follow some guidelines, etc. but you get the idea. Then they send the updated list back to the bank, which, in turn, proceeds with the wholesale robo-signed foreclosures. It’s a sort of quid pro quo: if banks want to speed up the process and bypass the paperwork requirement they have to pay to make sure that no current homeowners end up on the list. Isn’t that a reasonable requirement? This way we kill many birds with one stone: the FC proceeds at a reasonable speed (not as fast as it is right now, but not as slow as it would under the judicial review); a bunch of unemployed people get jobs (and maybe, as a positive side effect, even pay their own mortgages); politicians can move on something else, like fighting socialism – everybody’s happy. I think even Republicans can support something like this – after all it’s good for business.

ABS East 2010. Time of disconnect.

The annual securitization industry conference has just concluded in Miami. I attended it mostly due to gracious gesture of my former colleague who got me a free pass at the very last moment. Since I’ve been out of industry for a year I had to get current on recent developments. My second reason for going was anthropological, of course. I wanted to get a general feel of the market participants.
I will get very specific with terms during my observations, but I will make the best effort to explain terms to the uninitiated. This is not, after all, a financial blog.

But first things first. The biggest topic of discussion and concern at the conference was government and legislative actions. After attending a few panels and listening to speakers from different camps I came to sad conclusion that Wall Street, Government and regulatory and legislative bodies are a beast with more than two hands and naturally neither hand knows what the other is doing. First, let me describe the participants. Each panel consisted of specialists in that particular area of expertise. If it was a regulatory panel – there were people from some government agencies, FDIC, OCC, etc. If it was a research panel – it had a bunch of analysts on it, and if it was a traders’ panel – you guessed it! Normally, at this sort of conferences, I would just skip the lectures all together and hang out by the pool or at the bar with salespeople, but this time I wanted to make full use of the conference pass acquired through the kindness of others. I had to go listen to the panelists in order to refresh my memory on things and get the feel on the state of current affairs. So the uncertainty about legislative maneuvers was on everybody’s minds. Because this is not a specialty industry publication and it’s not even a market blog I will not delve into the specifics about deals and bonds performance. (Those who are interested to know about trade ideas can ask me specifically, but being in a generous mood I put a few at the end of the post). I will try to make it into a 3d party observation from 10,000 foot view.

“It’s not the product, it’s the macro.”

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