Sunday, April 26, 2009

More Gloom & Doom


Above is a graph of Mortgage-Backed Securities' loan delinquency rate. As you can see, the delinquency rate increases dramatically near the end of 2008, and the current rate is likely even higher. The interesting thing about this chart is not the numbers- it's what they represent. These are Mortgage-Backed Securities for commercial loans. These are for loans that were made on commerical real estate, like shopping malls, business offices, etc.

The graph doesn't include data for 2009, but we do know that the largest commercial real estate bankruptcy in U.S. history occurred 2 weeks ago. General Growth Properties filed for bankruptcy. They own hundreds of shopping malls across the United States. You have almost certainly shopped in a mall that they own. To see a list of their properties, go here and search their directory.

So, how big is this crisis? The graph below represents the amount of money tied up in Commercial Mortgage Backed Securities, and the dates at which these loans mature.



Since 10 years is the standard maturation for these loans, many of them won't mature until 2017, but that's if the commercial tenants don't walk away and close their businesses first. This is why General Growth Properties had to file for bankruptcy- the tenants in their shopping malls have started closing their doors (and not paying their rent.) There is over $1 trillion tied up in Commerical Mortgage Backed Securities. Now we begin to see why the banks who received federal bailouts haven't been making loans to consumers as expected- they're stuck with the bill for these commercial real estate loans as well, among other things.

The Flu.


Above is a graph from the CDC showing when the deaths occurred in Great Britain during the 1918 flu pandemic. The deaths occurred mostly in the months of October - December, and then again from February to March. Maybe most interesting is the 'small' spike in cases during the previous summer: in July of 1918, the first deaths occurred, and then the disease remained dormant until the next winter.

Next, think about the following statistics: According to the CDC, during the 1918 pandemic, an estimated 50 million people died. Approximately 500 million people were infected. So even during the pandemic of 1918, 90% of the people who got the flu survived.

So even 90 years ago, 90% of the infected people survived infection. Our medical treatments are significantly better today, even though they're far from ideal. Currently, the fatality rate from the oubreak in Mexico is estimated between 5 and 10 percent, but almost zero in the United States.

The graph seems to indicate that even if the current outbreak subsides, it may likely return later in the fall and winter months, but hopefully our fatality rate will be far lower due to better standards of treatment.

Southwest Airlines

Here's some good news.



Also, a lucky part of this swine flu outbreak is that it's already almost May. In 1918, the first cases in the U.S. appeared in early March. But more virulent cases showed up in Europe the following August. There's an article here about whether influenza spreads more quickly during the winter due to low humidity levels in the air.

Saturday, April 25, 2009








stores where you can find Purell



From www.cdc.gov:
What can I do to protect myself from getting sick?
There is no vaccine available right now to protect against swine flu. There are everyday actions that can help prevent the spread of germs that cause respiratory illnesses like influenza. Take these everyday steps to protect your health:

•Cover your nose and mouth with a tissue when you cough or sneeze. Throw the tissue in the trash after you use it.
•Wash your hands often with soap and water, especially after you cough or sneeze. Alcohol-based hand cleaners are
also effective.
•Try to avoid close contact with sick people.
•If you get sick with influenza, CDC recommends that you stay home from work or school and limit contact with others to keep from infecting them. Avoid touching your eyes, nose or mouth. Germs spread
this way.

Friday, April 24, 2009

Whistling past the graveyard...

On 4/21, I posted some links to a blogger who pretty much seemed like a conspiracy theorist whose credibility was questionable, but he had gotten some things right before the news media caught up with him recently, and this story was too serious to ignore if he's proven correct again.

Today the Federal Reserve released the Stress Test assumptions- in other words, the rules/statistics that have been plugged in to the test, to measure the banks' ability to withstand further degradation of the economy.

These numbers are exactly the same numbers that the blogger cited in the report he obtained last week. This doesn't mean that 16 of the biggest 19 banks in America will be declared insolvent when the report is released on May 4, but so far, the blogger has been too accurate to just be making this up...

We're all screwed.


Don't worry, there's no video on this post.

Tuesday, April 21, 2009

Stress Test: Insolvent Banks?

On April 19, a blogger claimed to have a copy of the U.S. Treasury's 'Stress Tests' of 19 large banks, and apparently this report said that 16 of the 19 are insolvent.

Then, the same blogger claimed to have received a telephone call from the Securities & Exchange Department about the report.

On April 20, the Treasury Department issued a statement saying that the results of the 'Stress Tests' hadnt been received yet.

But on April 10, the Treasury Department warned the banks not to release the results of the 'Stress Tests' before the end of the earnings season, when banks report their quarterly earnings/profits/losses.

Today, just after the stock market closed, the Associated Press claimed to have received an advance report of the Treasury's 'Stress Test' results.

Combine that with this explanation of the accounting irregularities reported by the banks this earnings season, and you can see how the banks' stock prices could be artificially inflated by accounting gimmicks. This is significant because the stock market's rally during the past 4 weeks has been fueled by the large banks reporting unexpected quarterly 'profits'.

Cold Fusion

Here's a 60 Minutes story on cold fusion. It's a good story.


Watch CBS Videos Online

Monday, April 20, 2009

Torture and the U.S. Intelligence Failure

This is from an e-mail from Stratfor. I usually don't agree so much with George Friedman, but he really puts this issue in the proper perspective.


Stratfor
---------------------------



TORTURE AND THE U.S. INTELLIGENCE FAILURE

By George Friedman

The Obama administration published a series of memoranda on torture issued under the Bush administration. The memoranda, most of which dated from the period after 9/11, authorized measures including depriving prisoners of solid food, having them stand shackled and in uncomfortable positions, leaving them in cold cells with inadequate clothing, slapping their heads and/or abdomens, and telling them that their families might be harmed if they didn't cooperate with their interrogators.

On the scale of human cruelty, these actions do not rise anywhere near the top. At the same time, anyone who thinks that being placed without food in a freezing cell subject to random mild beatings -- all while being told that your family might be joining you -- isn't agonizing clearly lacks imagination. The treatment of detainees could have been worse. It was terrible nonetheless.

Torture and the Intelligence Gap

But torture is meant to be terrible, and we must judge the torturer in the context of his own desperation. In the wake of 9/11, anyone who wasn't terrified was not in touch with reality. We know several people who now are quite blasé about 9/11. Unfortunately for them, we knew them in the months after, and they were not nearly as composed then as they are now.

Sept. 11 was terrifying for one main reason: We had little idea about al Qaeda's capabilities. It was a very reasonable assumption that other al Qaeda cells were operating in the United States and that any day might bring follow-on attacks. (Especially given the group's reputation for one-two attacks.) We still remember our first flight after 9/11, looking at our fellow passengers, planning what we would do if one of them moved. Every time a passenger visited the lavatory, one could see the tensions soar.

And while Sept. 11 was frightening enough, there were ample fears that al Qaeda had secured a "suitcase bomb" and that a nuclear attack on a major U.S. city could come at any moment. For individuals, such an attack was simply another possibility. We remember staying at a hotel in Washington close to the White House and realizing that we were at ground zero -- and imagining what the next moment might be like. For the government, however, the problem was having scraps of intelligence indicating that al Qaeda might have a nuclear weapon, but not having any way of telling whether those scraps had any value. The president and vice president accordingly were continually kept at different locations, and not for any frivolous reason.

This lack of intelligence led directly to the most extreme fears, which in turn led to extreme measures. Washington simply did not know very much about al Qaeda and its capabilities and intentions in the United States. A lack of knowledge forces people to think of worst-case scenarios. In the absence of intelligence to the contrary after 9/11, the only reasonable assumption was that al Qaeda was planning more -- and perhaps worse -- attacks.

Collecting intelligence rapidly became the highest national priority. Given the genuine and reasonable fears, no action in pursuit of intelligence was out of the question, so long as it promised quick answers. This led to the authorization of torture, among other things. Torture offered a rapid means to accumulate intelligence, or at least -- given the time lag on other means -- it was something that had to be tried.

Torture and the Moral Question

And this raises the moral question. The United States is a moral project: its Declaration of Independence and Constitution state that. The president takes an oath to preserve, protect and defend the Constitution from all enemies foreign and domestic. The Constitution does not speak to the question of torture of non-citizens, but it implies an abhorrence of rights violations (at least for citizens). But the Declaration of Independence contains the phrase, "a decent respect for the opinions of mankind." This indicates that world opinion matters.

At the same time, the president is sworn to protect the Constitution. In practical terms, this means protecting the physical security of the United States "against all enemies, foreign and domestic." Protecting the principles of the declaration and the Constitution are meaningless without regime preservation and defending the nation.

While this all makes for an interesting seminar in political philosophy, presidents -- and others who have taken the same oath -- do not have the luxury of the contemplative life. They must act on their oaths, and inaction is an action. Former U.S. President George W. Bush knew that he did not know the threat, and that in order to carry out his oath, he needed very rapidly to find out the threat. He could not know that torture would work, but he clearly did not feel that he had the right to avoid it.

Consider this example. Assume you knew that a certain individual knew the location of a nuclear device planted in an American city. The device would kill hundreds of thousands of Americans, but he individual refused to divulge the information. Would anyone who had sworn the oath have the right not to torture the individual? Torture might or might not work, but either way, would it be moral to protect the individual's rights while allowing hundreds of thousands to die? It would seem that in this case, torture is a moral imperative; the rights of the one with the information cannot transcend the life of a city.

Torture in the Real World

But here is the problem: You would not find yourself in this situation. Knowing a bomb had been planted, knowing who knew that the bomb had been planted, and needing only to apply torture to extract this information is not how the real world works. Post-9/11, the United States knew much less about the extent of the threat from al Qaeda. This hypothetical sort of torture was not the issue.

Discrete information was not needed, but situational awareness. The United States did not know what it needed to know, it did not know who was of value and who wasn't, and it did not know how much time it had. Torture thus was not a precise solution to a specific problem: It became an intelligence-gathering technique. The nature of the problem the United States faced forced it into indiscriminate intelligence gathering. When you don't know what you need to know, you cast a wide net. And when torture is included in the mix, it is cast wide as well. In such a case, you know you will be following many false leads -- and when you carry torture with you, you will be torturing people with little to tell you. Moreover, torture applied by anyone other than well-trained, experienced personnel (who are in exceptionally short supply) will only compound these problems, and make the practice less productive.

Defenders of torture frequently seem to believe that the person in custody is known to have valuable information, and that this information must be forced out of him. His possession of the information is proof of his guilt. The problem is that unless you have excellent intelligence to begin with, you will become engaged in developing baseline intelligence, and the person you are torturing may well know nothing at all. Torture thus becomes not only a waste of time and a violation of decency, it actually undermines good intelligence. After a while, scooping up suspects in a dragnet and trying to extract intelligence becomes a substitute for competent intelligence techniques -- and can potentially blind the intelligence service. This is especially true as people will tell you what they think you want to hear to make torture stop.

Critics of torture, on the other hand, seem to assume the torture was brutality for the sake of brutality instead of a desperate attempt to get some clarity on what might well have been a catastrophic outcome. The critics also cannot know the extent to which the use of torture actually prevented follow-on attacks. They assume that to the extent that torture was useful, it was not essential; that there were other ways to find out what was needed. In the long run, they might have been correct. But neither they, nor anyone else, had the right to assume in late 2001 that there was a long run. One of the things that wasn't known was how much time there was.

The U.S. Intelligence Failure

The endless argument over torture, the posturing of both critics and defenders, misses the crucial point. The United States turned to torture because it has experienced a massive intelligence failure reaching back a decade. The U.S. intelligence community simply failed to gather sufficient information on al Qaeda's intentions, capability, organization and personnel. The use of torture was not part of a competent intelligence effort, but a response to a massive intelligence failure.

That failure was rooted in a range of miscalculations over time. There was the public belief that the end of the Cold War meant the United States didn't need a major intelligence effort, a point made by the late Sen. Daniel Moynihan. There were the intelligence people who regarded Afghanistan as old news. There was the Torricelli amendment that made recruiting people with ties to terrorist groups illegal without special approval. There were the Middle East experts who could not understand that al Qaeda was fundamentally different from anything seen before. The list of the guilty is endless, and ultimately includes the American people, who always seem to believe that the view of the world as a dangerous place is something made up by contractors and bureaucrats.

Bush was handed an impossible situation on Sept. 11, after just nine months in office. The country demanded protection, and given the intelligence shambles he inherited, he reacted about as well or badly as anyone else might have in the situation. He used the tools he had, and hoped they were good enough.

The problem with torture -- as with other exceptional measures -- is that it is useful, at best, in extraordinary situations. The problem with all such techniques in the hands of bureaucracies is that the extraordinary in due course becomes the routine, and torture as a desperate stopgap measure becomes a routine part of the intelligence interrogator's tool kit.

At a certain point, the emergency was over. U.S. intelligence had focused itself and had developed an increasingly coherent picture of al Qaeda, with the aid of allied Muslim intelligence agencies, and was able to start taking a toll on al Qaeda. The war had become routinized, and extraordinary measures were no longer essential. But the routinization of the extraordinary is the built-in danger of bureaucracy, and what began as a response to unprecedented dangers became part of the process. Bush had an opportunity to move beyond the emergency. He didn't.

If you know that an individual is loaded with information, torture can be a useful tool. But if you have so much intelligence that you already know enough to identify the individual is loaded with information, then you have come pretty close to winning the intelligence war. That's not when you use torture. That's when you simply point out to the prisoner that, "for you the war is over." You lay out all you already know and how much you know about him. That is as demoralizing as freezing in a cell -- and helps your interrogators keep their balance.

U.S. President Barack Obama has handled this issue in the style to which we have become accustomed, and which is as practical a solution as possible. He has published the memos authorizing torture to make this entirely a Bush administration problem while refusing to prosecute anyone associated with torture, keeping the issue from becoming overly divisive. Good politics perhaps, but not something that deals with the fundamental question.

The fundamental question remains unanswered, and may remain unanswered. When a president takes an oath to "preserve, protect and defend the Constitution of the United States," what are the limits on his obligation? We take the oath for granted. But it should be considered carefully by anyone entering this debate, particularly for presidents.



This report may be forwarded or republished on your website with attribution to www.stratfor.com.

Copyright 2009 Stratfor.

Saturday, April 18, 2009

You Know It's Getting Bad When...

...Harvard economics professors argue that the solution to our current problem is inflation.

Greg Mankiw is not a crackpot. He's a Harvard economics professor, an advisor to previous White House administrations, and the author of two of my economics textbooks. He says that inflation may be necessary to bring us out of our economic situation. And he's not just saying it- he's writing it in an op-ed in the Sunday New York Times. Which basically says that he thinks it's got a real chance of happening at some point in the future, and he wants his name associated with the idea.

The main reason that aggregate demand hasn't been stimulated by current U.S. monetary policy is because banks who received 'bailouts' from the government are not lending to borrowers. So the Federal Reserve's decision to lower interest rates to nearly zero has been rendered ineffective due to the banks, who are hoarding cash.

Inflation would give these banks an effective incentive to lend money to borrowers. Inflation would also stimulate demand. Another benefit is that inflation would lower the value, in real terms, of our national debt.

If you read the article in the link above, and then read this story about the national debt and your tax bill, you'll start to see how desperate even presidential advisors are becoming.

Inflation isn't the best way out of our economic problems. But politically, it is the easiest way, especially domestically. China recognizes this, and that's why they're making contingency plans with other nations like Argentina, to establish international trade without using U.S. dollars. China is the largest holder of U.S. Treasury securities, so the value of our dollar is very important to them. Inflation would reduce the value of our currency. It may be the easiest political way out of our current economic troubles, but China would likely have strong objections, and who knows what their retaliation would be. Maybe this, or this.

Keep in mind, if the current administration and the Federal Reserve choose to endorse inflation as part of their monetary policy, it is nearly a certainty that they will never admit to it. They will publicly proclaim their commitment to a "strong dollar policy" and they will claim to be "fighting inflation," while only hoping to keep its level from getting out of control. If you hear them issuing denials, you'll have reason to suspect it. You'll never hear them admit it, but you'll know it when you see it at the grocery store.

Thursday, April 16, 2009

Scary stuff

The number of homeowners facing foreclosure surged in March as lenders lifted temporary moratoriums and resumed legal actions against delinquent mortgage payers.



General Growth Properties Inc, the second-largest U.S. mall owner, declared bankruptcy on Thursday in the biggest real estate failure in U.S. history.

But none of those properties are near you, right? Go here and click "Search" without typing anything.

If you're still not nervous, here's a picture of an entirely abandoned neighborhood in Detroit.

Osama bin Laden: Alive?



Hamid Mir is a Pakistani journalist who does a lot of international interviews & conferences, mainly because he was banned from Pakistan by General Pervez Musharraf in 2007. So take this for what it's worth, because there's obviously a long story behind him, let alone what he says.

Saturday, April 11, 2009

How Bacteria Communicate


As you watch this, think about how important it is to take all of your prescribed antibiotics the next time you have an infection or an illness.

Wednesday, April 8, 2009

FT.com / Comment / Opinion - Ten principles for a Black Swan-proof world

FT.com / Comment / Opinion - Ten principles for a Black Swan-proof world
The author here gives a good list of lessons to be learned from the economic crisis. I'm not a huge fan of his book (i'm not sure it introduces anything new) but you can see him talk about the main idea of his book below.

Dogsitting



Keep in mind, they often run faster than this, but this gives you an idea...

Thursday, April 2, 2009

Captain at the Dog Park


Captain needed a bath anyway, and it was pretty nice out today, so he was in luck. He actually ran around quite a bit, which is unusual. He must be glad to see warmer weather. This clip was taken just before he swam in the creek, and he smelled so bad afterwards you could almost see the stink coming off of him.

Wednesday, April 1, 2009

National Ignition Facility



This is a video from the National Ignition Facility, which houses a group of 192 lasers, all focused on a single point inside a spherical target chamber. It will recreate temperatures found inside stars and nuclear explosions. If we're lucky, it will prove the possibility of nuclear fusion as a virtually limitless source of energy.

The facility has been under construction for 12 years, and was finished yesterday.

Mmmm




(in case you can't wait to get to the store)