Archive for October, 2010

 

Thanksgiving Comes First

Wednesday, October 27th, 2010

This post is to throw my two cents behind Suldog’s “Thanksgiving Comes First” campaign. Bear with me as I attack this subject from a somewhat different angle.

About 15 years ago I took a trip to Indonesia to visit a friend of mine from college who was living there at the time. It was summer, and my first evening there, at around 5pm, I was shocked to find that the sun had fully set. My friend reminded me that we were basically situated on the equator, and that there were no seasons there. Sure, there’s a rainy “season”, but the length of the day never changes, and the temperature doesn’t vary widely.

We, on the other hand, are not an equatorial people. Our daylight changes with the seasons, and the temperature with it. And for most of us living here, we can trace our ancestry back to parts of the world which also have seasons. Our ancestors marked the passage of time with holidays to celebrate that we all survived yet another year. In the fall there would be harvest celebrations, in the winter celebrations to mark the return of longer days, in the spring a celebration to mark the return of life to the land, and in the summer a celebration of the longest days of the year.

Though today most of us are not subsistence farmers, we still celebrate these holidays. Not because they mark another remarkable year surviving off the land, but because they connect us with the world around us, with our ancestors, and with our childhood. Suldog really hits home when he writes [emphasis mine]:

When I was a kid, Christmas was magical. The lights were colorful and amazing, making the night a warm, bright, wonderful place to be, even if it was 20 degrees outside and the snow was up to your waist. If you’re old enough, you’ll recall that Christmas carols gave you the same sorts of butterflies in your stomach that would be associated with love at a later time in your life. Cities and towns put up decorations on the main streets, with the larger municipalities erecting lovely Christmas trees in central spots.

That feeling of butterflies is a connection with the world around you, and your place in that world. It is a sense that the world is full of wonderful things, and joy that you have the privilege to be a part of it.

Conversely, celebrating these holidays inappropriately defecates all over the celebration. When someone tries to peddle the holiday before its time, they turn the joy into a chore. They become as welcome as a third wheel on a date, spoiling the magic, wrecking the sensation.

Now I understand why some stores want to carry holiday inventory in advance of the holiday. In part there is the desire to make more money by extending the season, but they also aim to eliminate holiday inventory leftovers after the holiday. So they wind up selling early, and cleaning out early. But in the process they wind up celebrating the wrong holiday in the wrong season. At best, it’s jarring to witness, at worst it kills the holiday mood.

Home Depot is the worst offender of this in my book, and not just with regards to Christmas. For instance, try buying paper yard waste bags at Home depot in November. Can’t be done. Or snow shovels and driveway salt in February. Forget it. In their zeal to eliminate end of season inventory, they have literally shifted each season back by almost a full quarter year. It really needs to stop.

As a consequence of their zeal to sell early and clean out their inventory early, I have seen retailers sell:

  • Christmas stuff in October
  • Halloween stuff starting in July
  • 4th of July stuff starting in April
  • Easter stuff starting in February
  • Valentine stuff starting in December

It needs to stop.

So to do my part, I pledge right here and now that I won’t do any holiday shopping at stores that violate seasonality. Specifically, Christmas decorations going up before veterans day (and really, they should only go up Thanksgiving week). And I hope that you will too.

I may be doing more on this front to save Christmas from idiot retailers. If you want to help, let me know too.

 
 

Foreclosure Crisis

Tuesday, October 19th, 2010

I hate to toot my own horn, but here’s what I wrote on this matter back in August of 2009:

Unwind The Mortgage Backed Securities

So the mortgage backed securities are toxic, and have been valued at near zero in many cases, precisely because nobody knows what is in any one bundle of securities. It would seem axiomatic then, to unwind these securities and find out exactly what is in each one. Doing this will have a number of positive effects:

  • Homes can be foreclosed upon more readily: This one is simple. If you can see that there are non-performing loans in your portfolio, and there are real, valuable properties backing those homes, then you have a real motivation to get those homes foreclosed upon and resold so as to get a cash return on the non-performing loan. Today, too many homes are languishing unsold or unattended to because the mortgage owner is unclear that he owns the property. Unwinding the MBS takes care of this problem.
  • Performing loans can be identified and valued properly: This is the flipside of the point above. performing loans are likely undervalued in today’s environment, and identifying them within the bundled security will allow them to be properly valued.
  • Fraudulent securities can be discovered and removed from the system: There is a fair amount of evidence that many holders of mortgage backed Securities were naked short sold them, i.e. they were sold securities that has no loans or mortgages backing them up. This is fraudulent, and those lonas need to be identified and removed from the system, and the parties who issued those loans need to be prosecuted. I’ll have much more to say on this topic in the financial regulation portion of the Grand Plan.

The commonality here is that the bundling of mortgages into Mortgage Backed Securities has hindered proper price discovery, and caused something of a panic in the marketplace. When prices cannot be discovered, people bail, and that is exactly what has happened here. The sooner prices can be discovered, the better off everybody will be.

Once prices are discovered, home owners should be given an opportunity to refinance their homes at the lower principle by buying back their mortgage on the open market. Particularly if the Fed is the current holder of the mortgage. Doing this will enable people to get themselves out from under water, and will recapitalize the banking system. it should be a win win for everybody involved.

So apparently, we now have a situation where not only have the banks been selling mortgages with no property behind them into mortgage backed securities, but we have a system for tracking which mortgage belongs in which security which has no clear legal title to foreclose on those mortgages which actually do have properties backing them. (link via Joan)

I think the solution here is mass mortgage default. Yes, it will cause some major financial institutions to collapse, but they deserved to collapse two years ago, and staving it off only generates moral hazard and leaves our economy in its current zombie state. Better to let people take their homes outright, default on their debts, and recapitalize the economy that way. Doing this will cause a national reset in property values, which is the first prerequisite to getting the economy back on track. Once we’ve done that, maybe we can retire Fannie and Freddie and set up something more akin to what they have in Denmark.

 
 

Tangled?!? What a Disgrace…

Thursday, October 14th, 2010

So I blogged back in 2008 about how Disney was coming out with a Rapunzel movie, and that the art looked breathtaking. So I saw an advertisement for this movie last night, and , well, I just don’t know what to say. The art, while a little different, still looks amazing. But the story…

The name has been changed to “Tangled“, and the movie looks to be total camp. According to Wikipedia, the director for the movie was changed mid-way through to the guy behind the movie Bolt.

Great.

I might still go to see it, because the art does look unbelievable. But I may wretch over the story. I wonder what the reviews will be like.

Here is the concept picture that so moved me previously, though you should click through all the concept art because it’s so good (especially this, this, this and this). The original concept art is beautiful and, well, serious. The final art doesn’t look bad either (see here and click around), but you can see how they took a decided turn towards the pointlessly goofy. In any event, both galleries are worth looking at. Query whether the movie will be as well.

 
 

New York Times Doesn’t Understand Tax Basics

Wednesday, October 6th, 2010

Saw this expose on the failure of the Chicago Tribune linked in a number of places. Caught this gem in the middle [emphasis mine]:

Mr. Zell’s first innovation was the deal itself. He used debt in combination with an employee stock ownership plan, called an ESOP, to buy the company, while contributing only $315 million of his own money. Under the plan, the company’s discretionary matching contributions to the 401(k) retirement plan for nonunionized Tribune employees were diverted into an ownership stake. The structure of the deal allowed the Tribune to become an S corporation, which pays no federal taxes, making taxpayers essentially silent partners in the deal.

So unbelievably wrong. In the event that you don’t know, an S corporation turns the company into a pass-through entity, whereby the shareholders report the income or loss of the company on their personal tax returns as personal income, and pay taxes according to personal income tax code and rates. Being n S corp or a C corp does not enable one to evade paying income taxes. At best it enables one to stop paying double taxes, once on the corporate level and again as a capital gain distribution. That is why its so often used by small businesses, and also why so-called taxes on the “rich” just amount to extra taxes on small businesses.

You’d think that the New York Times would put an article like this in front of a business editor who might understand these differences before publishing. Jeez.