Links 2/3/09

Norfolk tigers fascinated by snow BBC. A nice video clip.

Iran launches first home-made satellite Reuters

Obama’s Ethics Reform Promise Faces Early Test New York Times. And is found wanting.

Fitch Downgrades California’s $5B RANs to ‘F2’ MarketWatch (hat tip reader Ed)

Goldman Says Buy Puts Because U.S. Stocks May Resume Retreat Investor Village (hat tip reader Dwight). I’d tend to dismiss this as somehow talking their book were it not also for this: Put / Call Ratio: Top, Not Bottom in Equities Ben Bitroff.

Angels Flee From Tech Start-Ups New York Times. While interesting, and sadly predictable, this article makes it sound as if angels are an important source of funding for startups, when far and away, the biggest are savings, friends and family, and credit cards. All those are drying up too.

Budget Surplus? Tax Cut! Budget Deficit? Tax Cut! High Energy Prices? Tax Cut! Deep Recession? More Tax Cuts! Menzie Chinn, Econbrowser.

Bank insolvency: tips & tricks Steve Waldnan

S&P forecasts 200 defaults Financial Times

Beyond the age of leverage: new banks must arise Niall Ferguson. I like the first half of his suggestion, but would prefer a more surgical mortgage remedy.

It wasn’t just the market … Brad Setser

Antidote du jour (hat tip reader Nivethan):

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  1. Carrick

    Niall Ferguson’s documentary “The Ascent of Money” can been viewed on PBS’ website right now (its primarily about the current crisis — crafted from his soon to be released broader-scope doc on the world’s financial history)

    His other big documentary “The War of the World” was pretty good too.. explained the development of conflict in the 20th century and basically says the 3rd World War was all the proxy wars in Latin Amer, SE Asia, Afghanistan, etc. That’s on YouTube, Google Video, etc.

  2. M.G.

    Definetly new banks must arise as I wrote already in October 2008! Renegotiation of mortgages should be a “normal activity” and in some European banking markets is done without problems. This remedy could be taken over by the “good banks” after the file is carefully examined for appropriate bank’s risk management.

  3. fresno dan

    from Setser “It turns out that state backed companies weren’t borrowing as private sector entities — or at least no one who was lending them money thought so. They were able to borrow so much largely because of their state backing. And now, given Dubai, Inc’s cash flow troubles, Dubai, Inc may soon morph into Abu Dhabi, Inc.”

    Hmmmm…who does that remind me of…some country setting up private, semi-quasi-not backed by the full faith and credit-but yeah, backed by the full faith and credit… of the sovreign … uh, Francis – no thats not it. O yeah, Fannie!

    Dubai collapses within a year.

  4. Anonymous

    "China often had to spend 15% or so of its GDP buying foreign assets — to avoid currency appreciation didn’t affect overall levels of output or employment in the US, but it certainly affected the composition of output and employment. More money was allocated to home construction (for a time) and less to investment in the production of goods for export than otherwise would have been the case. "

    Brad Setser discusses the 10000 foot view of the state run "trade" agendas in the export surplus countries in determining the composition of output and employment in the US. Such distortions would be less likely without a willing host like the Bush and Clinton administrations.

    Like the S&L crisis for Reagan/Bush, the housing bubble provided cover for the damage lopsided trade policies were doing to the American economy. A huge jobs program, courtesy of American middle class wealth.

    The MBS fraud was not an accident, it was part of the strategy of creating the debt bubble. For the time being, the US has narrowly averted an internal coup by our own elected government. Watching what is left of the Republican klan, they are still operative at a certain level. O'bama would be wise to take his cue from the American people and cleanse the government of these traitors.

  5. Anonymous

    Love that Commodity Bull Market website- Guy states ” I’m Trying to take 2000 dollars and make a million out of it ” My featured article today Gold man Sachs Predicts oil to rebound in late 2009…My prediction is all traders will be exterminated by late 2009.

  6. ruetheday

    Dimon slamming Obama for his bonus criticism.

    This is almost as bad as Pandit playing down nationalization fears the other day, saying he was certain the regulators were committed to “free market principles”.

    These guys have some cajones, taking bailout dollars while thumbing their noses at the government, the regulators, the president, and the taxpayers. Obama needs to step up and dole out some pain, quickly.

  7. Brian

    Angels may be small relative to the other sources you cited, but the good ones bring a lot more than money to the table. If they have some experience they are likely to also be more reliable sources of future funds if all doesn’t go well in the early days of a venture. Finally, in some cases they can be an important source of validation for institutional venture funding sources. They are a key ingredient in the secret sauce of US capitalism well beyond the funds they bring to the market.

  8. Anonymous

    Put this nationalization issue into greater perspective (Obama):

    The market cap of Avon at $9 billion is almost double the market caps of Ford and GM combined …. dah!

  9. Anonymous

    I’m a pretty regular angel investor, been involved in 10-20 deals over the past 36 months.

    I don’t think it’s correct to cast it as an “either or” proposition, when it comes to angel versus family/friend funding. (Nor is it correct to look at VC and angel funding in the same way.)

    It’s more accurate to just see all of these investors as falling on different places in the timeline. Family/friends/credit cards are critical for that first $250k-$500k, when you’re nothing but a fantasy. Angels are a great place to go when you need $500k-$1.5m to go from prototype to something approaching product. And of course VCs should be on the road-map when you need to raise more to scale your business even more. (And if you need more than $20m, you start to look at private equity + + mezzanine + strategic investors.)

    Some businesses can of course leap-frog past any one of the above steps. But this still remains the general path taken by hundreds of startups every year.

    All of the players in the food chain have different appetites for risk, and different expectations for potential reward. And having any one of us drop out of the cycle is actually very disruptive to the entire process.

  10. Anonymous

    Perhaps not a model for the banks, but the CR Union industry is adopting a different strategy. I do volunteer audit work for one local CU & was told about this today:
    The National Credit Union Administration Board today approved a series of actions designed to enhance and support a corporate credit union system facing unprecedented strains on liquidity and capital due to extraordinary market disruptions and the current economic climate. Corporate credit unions provide investment and liquidity services to consumer-owned natural person credit unions.
    Which I take to mean that the Corporates have taken some heavy losses on MBS investments and (I suspect) found ways to avoid disclosing them? Our CU has either NCUA or an outside firm auditing every 3 – 6 months. Not sure about the big guys.
    So NCUA is loaning the troubled Corporates some $$ (no FED bailout, thanks very much) and if they cannot afford the new insurance premium (NCUSIF), they will be shut down.
    As a recent commenter put it, bankrupt them or they will bankrupt us.

  11. Anonymous

    By the way, this is an interesting observation:,0,2662833.story

    Automakers reported dismal January results today, as U.S. sales for the month fell below those in China for the first time, according to industry estimates.

    Final January numbers aren’t due until later today, but according to calculations from General Motors Corp, Chinese consumers bought about 790,000 vehicles in the month, compared with just under 680,000 sold to customers in the U.S. A year earlier, sales here totaled 1 million cars and light trucks.

  12. aaron

    To add onto the well-informed comment on angel investing above, statistics about entrepreneurs in general often fail to distinguish between someone opening a roofing business vs. a high-tech enterprise.
    In this case, angels are often important to high-tech enterprises, although some firms skip straight to the venture capital stage. At the moment, startups are in crisis because there is no viable exit strategy–there are no IPOs and fewer acquisitions. As a result, we’ve been seeing a massive startup “die-off”.

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