Links 12/15/08

Why Climbers Die On Mount Everest Science Daily

For feds to bail out Cerberus is the ‘epitome of ignorance’ TCPalm (hat tip reader Steve). I confess to being remiss in not addressing the “And why are we bailing out Cerberus, pray tell?” question. In part that is because I have not watched the Chrysler saga closely enough to make detailed commentary. But based on what I know of another deal of theirs, the acquisition of Mead-WestVaco paper mills (now called NewPage) I would bet they have been too clever by half. NewPage has been plagued by penny wise, pound foolish cost-cutting.

Asset Management Holiday Sale: 60% Off AllAboutAlpha

Detroit Bailout: No News is Bad News Felix Salmon. I couldn’t agree more with the headline (and the post is good too).

Madoff Said to Use Unregistered Side-Unit for Clients Bloomberg. This may partly explain my question of how could Madoff have been running this operation so long and not have it registered? Um, he somehow didn’t. That means he was breaking the law all along, it appears, not just in substance (Ponzi scheme) but even in form. But I cannot believe that so many wealthy people failed to ask for copies of his filings. Don’t the rich have sensible people advising them? Apparently not.

Sovereign loss funds … Brad Setser

OPEC Races to Get Ahead of Declining Oil Demand Wall Street Journal. This article is uncharacteristically downbeat.

Asia faces a tough 2009 as output decreases Michael Pettis, Financial Times

Left and Right, United in Disdain for Detroit and Its Workers William Kristol, New York Times. Mirable dictu….

Fed Watch: What If the Analogy is Wrong? Tim Duy, Economist’s Watch. At least one respectable economist is also worried about the consensus economic prescription.

Antidote du jour:

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  1. a

    Twofer from Bloomberg:

    “Treasury Benefits From ‘Paranoia’ as Rates Decline” which Alice Rivlin punctuates with, “We can’t press our luck…Eventually we’ve got to show the world that we are fiscally responsible.”

    “Dollar Staggers as U.S. Unleashes Cash Flood, Deficit”

  2. Anonymous

    “In my view, policymakers tend to see the current account deficit as almost an unimportant residual, something that just falls out of the global economy, but tells you little about the economy itself. I tend to view it as representing a fundamental imbalance. I believed that as part of the adjustment of the past year, a combination of import compression and export expansion would eliminate the imbalance, and that the appropriate role of policy was to facilitate and cushion that imbalance.”

    Sensible trade management should have begun ten years ago. Now it will be so much more painful. The US has no other choice, really, but to impose import quotas. Along with the return to sensible tax policy, increasing treasury rates to encourage domestic savings, stripping agricultural subsidies, and repudiation of CDS. All the rest has been a miserable failure and will continue that way.

    Actions by the mercantilist nations of Germany, China, and Japan are making it clear that the situation has become every man for himself.

  3. John Rosevear

    I’m no fan of Cerberus, but if anything they’ve reversed a lot of stupid cuts at Chrysler and started things moving in the right direction. It’s not widely understood that Chrysler was pretty thoroughly gutted by Daimler, who — starting moments after the acquisition — made off with their cash reserves, laid off huge numbers of engineers (including much of the the vaunted Jeep development team, many of whom were hired by Toyota and put to work creating the current Tundra), canceled and trimmed in-progress vehicle programs in inane ways, and left them at the time of the divorce with almost no product pipeline and a fleet consisting mostly of half-baked, underfunded, lowest-common-denominator products. I mean, go drive a Sebring sometime… it’s awful, worse in almost every respect than the cars Chrysler was building in 1998. Where are their small cars? Gone — the Neon’s successor and a promising smaller car were canceled, the cobbled-up Caliber imposed instead as part of an mad Stuttgart-imposed revisioning of the Dodge brand.

    Along those lines, rumors persist that the Dodge Charger (one of Chrysler’s very few good vehicles, and one of their very few bright spots in recent years) was never supposed to exist at all — the gorgeous design that was shown in 1999 was vetoed by the Germans — but was put together at the last minute from a defunct Mitsubishi program at the insistence of the dealers, who did not agree with Daimler’s insane all-wagons-and-trucks vision for Dodge and thought they needed a real sedan (instead of the Magnum) to replace the Intrepid. I could go on and on and on, but the gist is this: Daimler was awful, and Cerberus — whatever games they are playing at the larger level — has by and large made things a whole lot better.

  4. Anonymous

    “The ascendant environmentalists disdain (to say the least) the internal combustion engine and everyone associated with it. Most of today’s limousine liberals are embarrassed by their political alliance with the workers who built those limousines.”
    William Kristol in “Left and Right, United in Disdain for Detroit and Its Workers” It should be emphasized that the vanguard of the progressive movement is not only anti-capitalist it is anti-developement period. The goal is substantial reductions in population and GDP. This is one reason not to expect much out of the new administration.

  5. ruetheday

    Re: Cerberus – Lou Dobbs had some interesting comments on this over the weekend. In addition to the fact that we’d be bailing out a private equity firm with piles of cash they could use instead, he also pointed out that, as a private company, they have none of the mandate reporting/transparency requirements of a public company, so tracking the funds would be impossible. Unfortunately, he ended by stating that bailing out GM but not Chrysler would be politically infeasible, so we’re stuck.

  6. Peripheral Visionary

    The real root of the problem with the auto bailout is that it is the cost of retiree benefits, not the current cost of labor, that is crushing the Big Three. But retiree benefits are a third rail of politics, and so Republicans and Democrats have made the extremely unfortunate decision to go after the current management and the UAW, both of whom are only marginally culpable for the current mess.

    Given that the stone around the auto industry’s neck is the burden of retirement benefits (and massive crushing debt), I really don’t see any way out other than bankruptcy filing. Government assumption of retirement benefits is tempting, but it would set a terrible precedent, as every industry in America would be lining up asking for Federal takeover of their too-generous pension systems.

  7. Anonymous

    Cerberus is both Chrysler and GM. Based in their investments, and when they made them, they deserve nothing.

    They are half of GMAC, probably the only reason that anyone is even considering giving them bank holding company status. They are very deep in lobby, from the looks of it, not so deep in financial acuity.

    I want to be a bank, a lot of my assets are 0% loans……

  8. doc holiday

    Although cats are not usually considered a delicacy by humans, studies have linked the consumption of cats by cows as being a primary nutritional source for multi-vitamins. Cat sausage has become a highly sought after item at many New York Delicatessens who have struggled to keep up with demand…

    I know, boring…

  9. Anonymous

    @Anonymous 7:53 AM: “It should be emphasized that the vanguard of the progressive movement is not only anti-capitalist it is anti-developement[sic] period. The goal is substantial reductions in population and GDP.”

    Your idea of the “progressive” movement is seriously uneducated. It’s like conflating libertarians and Christian conservatives as having the same vanguard.

  10. Merry-will-go-round

    More magnificent business punditry cited in today:

    ‘”…said Bernard Baumohl, chief economist for the Economic Outlook Group. “Ultimately, housing is the epicenter that’s holding back the banks and the economy from growing.”‘

    When your economy is signficantly dependent upon increasing housing debt to produce GDP “growth,” you should realize there are much deeper problems in your economy than housing market fluctuations.

  11. MarinusWA

    I do love the Madoff story. Charles Ponzi would be proud.

    Just goes to show: Good investors invest in value, bad investors invest in returns.

  12. Anonymous

    Federal Reserve sets stage for Weimar-style Hyperinflation

    by F. William Engdahl

    Global Research, December 15, 2008

    The Federal Reserve has bluntly refused a request by a major US financial news service to disclose the recipients of more than $2 trillion of emergency loans from US taxpayers and to reveal the assets the central bank is accepting as collateral. Their lawyers resorted to the bizarre argument that they did so to protect 'trade secrets.' Is the secret that the US financial system is de facto bankrupt? The latest Fed move is further indication of the degree of panic and lack of clear strategy within the highest ranks of the US financial institutions. Unprecedented Federal Reserve expansion of the Monetary Base in recent weeks sets the stage for a future Weimar-style hyperinflation perhaps before 2010.

  13. Erik

    great work as always.

    thought you might like a bit of humor – sort of.

    “Is Ben Bernanke Charles Ponzi’s Lovechild”


  14. Anonymous

    Your photo reminded me of a photo I took of a cat that had been socialized with a flock of chickens.
    Point Reys Peninsula around 1994.

  15. macndub

    Another boring topic: apparently, the Canadian nuclear reactor that produces radioactive isotopes for medical use is on the fritz, again. This has led to cabinet-level resignations over the past year, I believe. There’s an analogy here with the constant drive toward supply chain efficiency at the expense of flexibility.

    Globe and Mail

  16. Juan

    Well doc, cats may not have been a delicacy but on the recollections of a former mining co. associate they can be trimmed to appear as rabbit and during the Great Depression in central FL even sold for enough to help offset a diet of swamp cabbage and gopher tortoise.


    Cerberus should never get a penny of that money. What a joke. It’s actually just a bandaid until Obama gets in.

  18. Anonymous

    According to Harvard Law Professor Elizabeth Warren, the credit card companies are misleading consumers and making up their own rules. “These guys have figured out the best way to compete is to put a smiley face in your commercials, a low introductory rate, and hire a team of MBAs to lay traps in the fine print,” Warren tells FRONTLINE.

    Read the full article for a good laugh.

    Full article,


  19. Anonymous

    I saw a graph about 6 month ago showing the peak sales for the last 4 to 5 years and the triggering of the ARM loan interest rate increases. It showed the peaks getting bigger, all the way into 09. Worst to come?

    Back that with credit card defaults and double the fun.


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