How We Got Ourselves into This Mess

I thought it was just the capital markets mourning the death of my father. In today’s Wall Street Journal, Mr. Greenspan argues there was more to the story:

On Aug. 9, 2007, and the days immediately following, financial markets in much of the world seized up. Virtually overnight the seemingly insatiable desire for financial risk came to an abrupt halt as the price of risk unexpectedly surged. Interest rates on a wide range of asset classes, especially interbank lending, asset-backed commercial paper and junk bonds, rose sharply relative to riskless U.S. Treasury securities. Over the past five years, risk had become increasingly underpriced as market euphoria, fostered by an unprecedented global growth rate, gained cumulative traction.

The crisis was thus an accident waiting to happen. If it had not been triggered by the mispricing of securitized subprime mortgages, it would have been produced by eruptions in some other market. As I have noted elsewhere, history has not dealt kindly with protracted periods of low risk premiums.

The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when the economic ruin of the Soviet Bloc was exposed with the fall of the Berlin Wall. Following these world-shaking events, market capitalism quietly, but rapidly, displaced much of the discredited central planning that was so prevalent in the Third World.*

It appears retirement has turned the master of opaque into the master of the obvious:

The current credit crisis will come to an end when the overhang of inventories of newly built homes is largely liquidated, and home price deflation comes to an end. That will stabilize the now-uncertain value of the home equity that acts as a buffer for all home mortgages, but most importantly for those held as collateral for residential mortgage-backed securities. Very large losses will, no doubt, be taken as a consequence of the crisis. But after a period of protracted adjustment, the U.S. economy, and the world economy more generally, will be able to get back to business.

* He does admit, later in the editorial, that free money following the dot-com crash may have had something to do with this mess.

Bring Back the LaTroy Hawkins Fan Club

Welcome back to the American League, LaTroy Hawkins!

The Spoils of Private Equity

Ever wonder how the Gordon Gecko’s of the current decade are faring? Director Robert Greenwald’s new film, “The War on Greed, Starring the Homes of Henry Kravis,” provides of glimpse of just how well the sultans of leverage have done this decade. New York Times reporter Andrew Ross Sorkin describes the vignette as a “tongue-in-cheek story — think ‘Lifestyles of the Rich and Famous’ meets ‘Roger & Me’ — detailing Mr. Kravis’s homes and lifestyle, juxtaposed against the homes and incomes of working families.

Love Canal, Times Beach, and St. Louis Park

Sometimes, opening your mail can be as treacherous as the backstreets of Minneapolis after a snowfall.

Dear Resident, We regret to inform you that known carcinogens may be seeping into your home. Rest assured, there is no need to panic. With love, Your friends at the EPA

Rating the Charities

Trying to figure out what charities to support with your holiday / year-end philanthropy? Charity Navigator uses information reported by charities on Form 990s to rates hundred of American non-profits on organizational efficiency and capacity, among other things.

Here are a few of Gopher Girl’s favorite charities and how they rated (out of 4 stars):

• Initiative Foundation: 4 Stars
• Pancreatic Cancer Action Network: 4 Stars
• Amherst College: 4 Stars
• American Refugee Committee: 3 Stars
• Minnesota Public Radio: 3 Stars
• Lance Armstrong Foundation: 3 Stars
• The Nature Conservancy: 3 Stars
• Girl Scouts (National): 3 Stars
• Carleton College: 3 Stars
• American Cancer Society: 2 Stars
• Minnesota Historical Society: 2 Stars
• Public Radio International: 2 Stars
• Rails to Trails Conservancy: 2 Stars
• League of American Bicyclists: 1 Star
• Emergency Foodshelf Network: 1 Star

Note: The standards they apply to food shelves seem particularly rigorous. Also, there are a lot of reasons that a charity may rank 1 or 2 stars, not just excessive fundraising expenses. For example, charities that report a decline in revenues are penalized. However, to me this may signal that (provided it’s a worthwhile organization) they have a greater need (See Morehouse College.)

Crawford County Iowa Bans RAGBRAI

This is just wrong on so many levels:

RAGBRAI has been banned from rolling through Crawford County.Stinging from a $350,000 settlement paid to the widow of a RAGBRAI rider who died in Crawford County, the board of supervisors on Tuesday passed a resolution that prohibits the bicycle ride or "any event of like kind and nature."Crawford County officials say their roads are not designed for bicycle travel, so they are too risky for use by participants in the Register's Annual Great Bicycle Ride Across Iowa.

How bad is the housing market?

More grim news about the U.S. housing market today.

• Home prices slumped 4.5% in the third quarter from a year earlier, matching the second quarter’s record decline. And if that doesn’t make you want to deleverage the real estate exposure in your portfolio, consider this: The S&P/Case-Shiller National Home Price Index also fell 1.7 in the third quarter alone, marking the largest quarterly decline in the index's 21-year history.

• That certainly doesn’t sound good, but the news that made me want to run for the hills came from a report released today by the U.S. Conference of Mayors and the Council for the New American City. The study, prepared by forecasting firm Global Insight Inc., predicts that the value of U.S. homes will fall by $1.2 trillion, and that "at least" 1.4 million homeowners will lose their properties to foreclosure in 2008.

Meanwhile, back in Greenspanland things look pretty rosy. According to press reports, former Federal Reserve Chairman Alan Greenspan said that he had "no particular regrets" and that the faltering U.S. housing market is not a result of his policies.

"The housing bubble is a not a reflection of what we did, as it is a global phenomenon," Mr. Greenspan told an audience in Oslo last week.

Right, free money had nothing to do with this asset bubble. Do I look as credulus as Larry King? Earlier this month, Joseph Stiglitz, a Nobel Prize-winning economist, said Nov. 16 that there is a 50% probability that the U.S. will tumble into a recession after the ``mess'' left by Mr. Greenspan. Defending his record in a statement the same day, Mr. Greenspan said that the criticisms were "inaccurate or incomplete." On the housing front, Mr. Greenspan said that investors are realizing that the drop in U.S. house prices has yet to abate after the ``shocker'' of the subprime mortgage market slump. ``Markets are becoming aware of the fact that the decline in house prices is not stopping,'' said Mr. Greenspan. ``The sub-prime was a shocker because no one expected it. It was the weakest link in the international financial sector.''

Twins Fan Thanksgiving Reflections

Hunter's gone. No shocker there, but the timing is certainly poignant. We will certainly miss Torii, who is not only a local favorite but probably the most charismatic player in the league. As Kurt Streeter writes in the LA Times,

"If you haven't been paying attention to Torii Hunter, then you've been missing out. He is everything a baseball player should be, particularly in an era when the game needs to sell itself to a younger generation looking for more sizzle."

Or to quote a glowing PR piece from major league baseball, "There is no question but that Torii Hunter, the new center fielder of the Los Angeles Angels, is a very special player." As I try to get the cranberry stains out of my holiday best, let me enumerate the ways in which I am thankful that Torii Hunter once donned a Twins uniform:

• He gave Twins fans a reason to come to the Metrodome in the dark seasons of 1998-2000
• He gave Twins fans a reason to believe in the comeback seasons of 2001-2004
• He behaved with class when he was sent to AAA in 2000
• He hit 9 Grand Slams as a Twins
• His awesome defensive play bolstered awesome pitching
• He won 7 Golden Gloves
• He rejected the White Sox's offer!

Stop the Treeicide!

I think this is supposed to be some sort of a feel good, human interest story but instead I just find it kind of depressing.

A tree standing more than seven stories tall and 27 feet wide is being donated and heading today to St. Paul's Rice Park as the park's second annual Christmas tree.

Bear Stearns 'Tokin' CEO

Those of you who are fortunate enough not to know what a CDO, CDO squared, or CDO cubed is may have missed the hilarious Wall Street Journal front page story that inventoried the transgressions of Bear Stearns beleaguered and beloved CEO, Jimmy Cayne. Weekday afternoons playing golf instead of managing risk. Ditching crisis management meetings for bridge tournaments. YAWN. Sounds like usual senior executive self-indulgence. But wait, what's this? In addition to being an avid golfer and bridge player, he was an avid dope smoker? (Thew NewsCorp influence on the Journal is already shining through.) For more on this developing story, check out this irreverent satirical editorial allegedly penned by Stephen Schwarzman (CEO of Blackstone, the private equity giant).

Global Incident Map

There's lots of bad stuff going on, and if you don't believe me, check out A Global Display of Terrorism And Other Suspicious Events.

How Blue Is Minnesota?

According to this article in The Hill, the Democrats think they have a legitimate shot at winning all 8 congressional seats in Minnesota in the 2008 election.

Minnesota Nice

A MarketWatch study of best metro centers for business ranks Minneapolis #1. Of course, MarketWatch has just figured out something Gopher Girl has always known.

"Minneapolis-St. Paul is where it's at when it comes to business, much more so than any other of the nation's major urban areas. The Twin Cities ranked at the top of a MarketWatch study on the nation's best metro centers for business, winning by a wide margin."

We'll Shop Our Way Out of This Mess!

This cannot be susainable:

Sept. 25 (Bloomberg) -- Consumer confidence fell more than forecast in September to the lowest level in almost two years, as declining home values, a deteriorating labor market and tougher borrowing standards took a toll on Americans' spirits. The Conference Board's index of confidence dropped to 99.8 from a revised 105.6 in August and workers were less optimistic about job prospects, the New York-based group said today. The report raises concern that the prolonged housing recession and tougher credit standards will put a brake on consumer spending, which accounts for more than two-thirds of the economy.

Minnesota State Bird?

Another reason to hate (and fear) mosquitoes:

Almost 270 people in Italy's province of Ravenna may have been infected with chikungunya, a virus that causes fever, rash and joint pain, since it arrived with a tourist three months ago. The outbreak was caused by the same viral strain that sickened about 235,000 people on Reunion island in the Indian Ocean last year, says an Italian virologist investigating the episode.

Now Italy is threatened by a contagious illness that may also spread elsewhere in Europe and North America the same way it got to Ravenna -- through an infected traveler. There were 2.1 billion airplane passengers last year, driving the spread of new diseases that are emerging at ``an unprecedented rate,'' the World Health Organization said last month.

A run on the bank in England

The Wall Street Journal describes a literal run on the bank today in England:

"Early Friday, Northern Rock customers queued outside at least one branch to withdraw their savings after the mortgage lender was forced to tap the Bank of England for emergency funds. Some savers had been concerned weeks ago about the possible fallout from the subprime lending crisis on the U.K. lender. In Kingston, England, a line began to form more than an hour before the Castle Street branch opened as concerns about the institution's liquidity unnerved savers. A staff meeting appeared to be taking place before doors were unlocked. Around 9:00 local time, the line outside contained about 30 people, but swelled to more than 70 within half an hour. Almost all were over 50 years old and retired. All planned to withdraw their cash."

European Central Bank Steps in as Lender of Last Resort….Again

As reported by Financial Times:

The European Central Bank on Wednesday loaned commercial banks €75bn ($104bn) for three months, a sign that institutions in the money market remain wary of lending to each other for periods of more than a week.

The Frankfurt-based central bank said 140 banks had applied for €139bn in central bank deposits, agreeing to pay an average interest rate of 4.52 per cent as compared with current interbank prices of 4.75 per cent.

The size of the refinancing operation shows how worried commercial banks remain that the crisis in the US mortgage market could yet render fellow institutions in the money market unable to repay loans.

It chimes with remarks by US Treasury secretary Henry Paulson that, even as short-term lending normalises, the crisis of confidence in the credit markets could last longer than any recent financial crises.

Category 5 Stink Bomb of Bad Mortgages

Dear Readers, I thought you might enjoy this cheery news, as reported in the Financial Times:

“Washington Mutual, the largest US savings and loan company, said on Monday it was increasing its reserves for loan losses to as much as $2.2bn because of a “near-perfect storm” in the mortgage markets.”

So much for a super-cycle.

So much for real estate markets being "local"

The news on the housing market just keeps getting worse. According to the New York Times, the median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950.

A new Health Food?

This Runner's World article confirms what Gopher Girl learned long ago: Peanut butter is the perfect food. "Peanut butter-yes, that sticky companion to jelly on all those sandwiches your mom made-just might be the best runner's food on the planet."

Mortgage Lender Implode-O-Meter

This website is devoted to tracking the mortgage finance meltdown. Is this guy nothing more than a tool of the shorts? He might be, but it's still a good read with lots of good information.

The New Tycoons

This thought-provoking NY Times article exposes the 21st century robber barrons: “…[S]tarting in the late 1970s, as the constraints receded, new tycoons gradually emerged, and now their concentrated wealth has made the early years of the 21st century truly another Gilded Age. Only twice before over the last century has 5 percent of the national income gone to families in the upper one-one-hundredth of a percent of the income distribution — currently, the almost 15,000 families with incomes of $9.5 million or more a year, according to an analysis of tax returns by the economists Emmanuel Saez at the University of California, Berkeley and Thomas Piketty at the Paris School of Economics. Such concentration at the very top occurred in 1915 and 1916, as the Gilded Age was ending, and again briefly in the late 1920s, before the stock market crash. Now it is back…”

No One Likes a Neglected Blog...

And for that, I apologize. The good news is that Pat Neshek's nomination for the AL All-Star team motivated me to get off the couch and on to the computer. Click here to vote, and vote, and vote, and vote...for Pat.

Email Overload

Apparently, Gopher Girl is not the only person for whom a clogged electronic inbox has become a bane. According to the Washington Post, a blogger and venture capitalist’s last month in declaring email bankruptcy could be the start of a new trend: “The supposed convenience of electronic mail, like so many other innovations of technology, has become too much for some people. Swamped by an unmanageable number of messages -- the volume of e-mail traffic has nearly doubled in the past two years, according to research firm DYS Analytics -- and plagued by annoying spam and viruses, some users are saying "Enough!" Those declaring bankruptcy are swearing off e-mail entirely or, more commonly, deleting all old messages and starting fresh.”

China + Private Equity

A few of my favorite things (NOT.) According to the Wall Street Journal, the Chinese government has decided to enter the private equity bubble, which it is largely responsible for creating. "The key thing to take away from the Chinese government's plan to take a $3 billion stake in private-equity firm Blackstone Group: If you're paying for the fuel, you might as well get some of the heat. China's huge trade surplus with the U.S. and other countries has given it plenty of cash -- and a problem figuring out what to do with it. Because China lets its currency, the yuan, fluctuate only in a narrow band against a basket of foreign currencies, it can't easily convert all the money it makes overseas into yuan; to do so would send the yuan higher. So China has been sticking its money into overseas assets... The 10-year Treasury note yields just 4.79%, less than the rate of 5.25% that the Federal Reserve has set on overnight bank loans. Mortgage-backed securities and agencies don't yield much more. A key factor behind those low yields has been that Chinese demand has kept prices propped up. (Prices and yields move in opposite directions.) Those low yields are part of what has driven demand for riskier investments such as junk bonds, emerging-market debt and, yes, private-equity firms. That's driven up prices and driven down yields on these securities, making it cheaper for private-equity firms to borrow and invest."

More on China

The news about tainted imported goods from China just keeps getting scarier and scarier.

SEIU on Private Equity

SEIU (Service Employees International Union) issued a cautionary and sobering report on private equity this week. "The private equity buyout industry, armed with more than a half-trillion dollars of capital, is today engineering financial deals that together are larger than the annual budgets of most of the world’s countries. This financial juggernaut is generating hefty returns to its investors, extraordinary riches for its executives, and newly relevant questions about the impact of its business practices on American workers, businesses, communities, and the nation. "

Canary in the Coal Mine

Gopher Girl isn't normally predisposed to isolationism, but the lack of basic safety standards and inspections on food imported from China is terrifying.

More on the Private Equity Bubble

When private equity firms like the Blackstone Group start marking plans to “go public”, it’s a sure sign we’re at the top of that market. Even the firms themselves acknowledge it, as this memo penned by Bill Conway, one of the founders of private equity juggernaut the Carlyle Group, demonstrates.

The Housing Bubble - Act 1

Like all speculative bubbles, fraud appears have been a bigger part of the housing boom than any casual observer imagined. The Washington Post reports on that sham mortgages appear to have been an epidemic in recent year, particularly in the high-end market. One frightening statistic cited: Mortgage fraud is up 10-fold since 2000. “Many experts have concluded that the nation's real estate boom of recent years was fueled in part by weakened lending standards that sparked excessive demand and drove up prices. Now, some are worried that the looser standards may have permitted a boom of another kind -- a big expansion of mortgage fraud… As more of these cases come to light around the nation, the question is: How much did an epidemic of fraud contribute to the frenzied housing market of recent years?”

USA: A Banana Republic?

The New York Times reports this morning that the “income gap” in the United States continues to grow. According to a study of IRS data conducted by Emmanuel Saez of the University of California, Berkeley and Thomas Piketty of the Paris School of Economics, the top 10% of Americans now enjoy a greater share of the nation’s wealth than at any time since the eve of the Great Depression: “The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.”

Intervals or Tempo Runs?

When it comes to improving your race times, quality (intensity) beats quantity.

Trying to do too much

This New York Times article warns of the productivity pitfalls of multitasking: "Several research reports, both recently published and not yet published, provide evidence of the limits of multitasking. The findings, according to neuroscientists, psychologists and management professors, suggest that many people would be wise to curb their multitasking behavior when working in an office, studying or driving a car."

No Deal for Morneau

Contract negotiations between the Twins and 2006 MVP Justin Morneau are off for now. Gopher Girl’s hope was that the first baseman and management would reach a deal similar to Joe Mauer’s that would have kept Mourneau in a multiyear deal. Now it’s wait and see.

The Great Wall of China

Check your favorite website to see if it is censored in China.

I'm BACK!

Gopher Girl has been on vacation, and so much happened while she was away. For example, Runner's World took a cue from the LBOs and announced that it was acquiring the Running Times.

Subprime Loans, Toil and Trouble

In the last two years many skeptics began warning that the red-hot housing market and adjustable-rate loans would blend into a toxic brew. Last year, subprime loans totaled $600 billion, or about 20 percent of all mortgages, up from $120 billion and 5 percent in 2001, according to Inside Mortgage Finance. More than half of subprime loans have adjustable rates.

Snow flakes everywhere!

Just how much snow is out there? Check out this snow cover map of the North Central States.

Where is the Icebox of the Nation?

Fraser, Colorado is trying to steal International Falls claim to be the Icebox of the Nation.

The Ultimate Highway Map

The Eisenhower Interstate System, simplified.

He's Good Enough, He's Smart Enough

And doggonit, people like him! It's official: Al Franken is running for Senate.

When Exercise is Bad for You

The Times reports on a study published in the European Heart Journal. According to the Times, super-fit athletes who train hard for triathlons and marathons can develop a life-threatening condition called ventricular arrhythmia. As is usually the case with these "endurance exercise is bad for you" reports, the condition is very rare.

2007 Tour of Lakes

Time to register for one of the funnest recreational bike tours in Minnesota. The 2007 Tour of Lakes heads east to Garrison and the territory around beautiful Mille Lacs lake. The Paul Bunyan Cyclists do a fanastic job at hosting this annual event. The one downside to the TOL: you will gain weight. Too much good food. Even the 70-mile route will not be calorie-neutral. Tour of Lakes

Brokers Are Not Your Friends

And in case you forget it, read this New York Times article about the SEC's latest investigation of insider trading:

"The Securities and Exchange Commission has begun a broad examination into whether Wall Street bank employees are leaking information about big trades to favored clients, like hedge funds, in an effort to curry favor with those clients, executives at Wall Street banks said. The inquiry, these people said, seems aimed at determining how pervasive insider trading, or the illegal use of market-moving nonpublic information, may be on Wall Street. Knowledge about a large trade, like the sale of a big block of stock by the mutual fund giant Fidelity, would tell a trader which way the stock would move. Concerns about insider trading have escalated as mergers and buyouts have boomed and the use of complex derivatives has soared. Studies of various markets — including those for stocks and credit default swaps — have pointed to an unusual amount of trading ahead of announcements for deals."

The speech accent archive

This archive of speech clips allows you to track different accents by speaker and native language.

Free Speech under Attack

On Tuesday, one of America's great independent bookstores canceled a planned reading by the editor of a book on abortion rights, after receiving threatening e-mails and telephone calls. Krista Jacobs was scheduled to read at Prairie Lights Bookstore in a forum to be broadcast on public radio's "Live from Prairie Lights".

The Wages of Whiteness

Think we live in a color blind society? Think again. This short article published by a Vanderbilt University Law School explores the variation in the experience of "race" among African Americans according to skin tone. In "Skin Tone Effects among African Americans: Perceptions and Reality," (American Economic Review Papers and Proceedings 96(2), May 2006, 251-255) Dr. Joni Hersch finds evidence that lighter skinned African Americans have more access to education and other badges of American success. http://law.vanderbilt.edu/faculty/faculty-personal-sites/joni-hersch/joni--hersch/download.aspx?id=896

Need to Race!

I am going through race withdrawal. I haven't run a race since December's Reindeer Run http://www.reindeerrun.com/website/ and given the casual (and cold) atmosphere that one hardly counts. I need a new challenge and I can't wait until spring. What's a northern girl to do?

Republican Arrogance

The usually diplomatic Tom Friedman shows his angry side in this NY Times column. "George Bush, Dick Cheney and Don Rumsfeld think you're stupid. Yes, they do.They think they can take a mangled quip about President Bush and Iraq by John Kerry -- a man who is not even running for office but who, unlike Mr. Bush and Mr. Cheney, never ran away from combat service -- and get you to vote against all Democrats in this election." I missed this column when it originally ran back in November, but it is still available on the web via Bruce Springsteen's website: http://www.brucespringsteen.net/news/index.html

Twins Fest!

In another sure sign that spring is nearing the northern plains, single game tickets for 2007 Twins home games go on sale this Friday at 5:30 P.M. See the Twins 2007 schedule online at: http://minnesota.twins.mlb.com/NASApp/mlb/schedule/index.jsp?c_id=min&m=4&y=2007#terrace_suite?partnerId=2006hp_tixcomponent_min_tab2&affiliateID=2006hp_tixcomponent_min_tab2

Torturing the Data until it Confesses

This Macleans article looks at journalists' abuse of statistics (from a north of the border perspective, of course.) "As Homer Simpson said when asked to explain the 900% rise in 'heavy sack beatings' since his vigilante group began patrolling the streets of Springfield, 'People can come up with statistics to prove anything. Forty percent of all people know that.'" http://www.macleans.ca/topstories/national/article.jsp?article=2007_1_18_1169163033

Nkorho Pan, South Africa Webcam

Check out this webcam at Sabi Sands Private Game Reserve in South Africa. It's like going on a safari while staying in your living room! http://www.wavelit.com/popup/playerAfricam.asp#

American Accents

Take this short quiz to find out what brand of American accent you have. Not surprisingly, Gopher Girl has a "North Central" accent. "North Central" is what professional linguists call the Minnesota accent. If you saw 'Fargo' you probably didn't think the characters sounded very out of the ordinary. Outsiders probably mistake you for a Canadian a lot." http://www.gotoquiz.com/what_american_accent_do_you_have

A sleep-deprived nation

According to a study published in this month's Journal of Occupational and Environmental Medicine, nearly 40 percent of U.S. workers experience fatigue, costing U.S. employers billions of dollars in costs from lost productivity. http://www.acoem.org/news.aspx?id=2530

Wanna Buy a Condo?

“Nationally, condominium sales have fallen further than those of single-family properties, 13.6 percent from November 2005 to the same month in 2006; free-standing homes showed a 10.7 percent decline in the same period. Inventories have risen 38.1 percent for condos and 29.6 percent for individual homes, according to the National Association of Realtors.” http://www.nytimes.com/2007/01/16/realestate/16rentals.html

Drunk Postal Carriers Gone Wild

Only in Wisconsin: http://www.startribune.com/462/story/927473.html

God's Undertaker

The New Yorker reviews a new biography of Thomas Hardy: http://www.newyorker.com/critics/books/articles/070115crbo_books

Mark Dayton

Sometimes, I think there's a DFL conspiracy to ensure that there's a Republican in the Minnesota Governor's mansion: http://www.startribune.com/587/story/912703.html

Sidney Ponson???

Oh man, if this is the best the Twins can do to replace Radke and Lariano, it's going to be a L-O-N-G summer (and not in a good way): http://www.startribune.com/509/story/913177.html

What candidates do your neighbors support?

One of the creepiest sites on the internet: http://www.campaignmoney.com/