If anyone has Dan Root's contact info, I'd like to get in touch with him while I'm out here in Seattle. I believe thekeep's address has been dead for a while.

The republican right-wingers are really getting desperate

Just check this out. I didn't get it--Kelli did. I suspect they might have seen my name on the Obama donation list.


I think now might be the time to start mobilizing for a real replacement for the current Republican party.

As most of you know, I am fiscally conservative (but pragmatic) and socially liberal. History has already begun turning away from intolerance. It will not be quick, but it looks like it's coming.

Obama and The Middle East


First off, on the general policy shift of actually talking to people--kudos, that's wonderful, etc. We'll see how it goes, but it can hardly be worse than the previous strategy.

I do have a bit of an issue with one rhetorical flourish here, though.

Obama said the U.S. had made mistakes in the past but ''that the same respect and partnership that America had with the Muslim world as recently as 20 or 30 years ago, there's no reason why we can't restore that.''

Let's see. That math works out to 1979-1989. That would be the time of Contra, the time of the Iranian Hostages, the time of the Arab-manipulated oil scare, etc. Admittedly, it got somewhat better at the end of that range. Originally I thought we were talking about 1970-1980, which would have been bleaker, but I'm behind the times. Going with "relatively recently" would have been safer.

(Aside: 20 years ago. Next year that will be 1990. Yikes.)

There was a relatively small window of better times, and it was never all that great. I wouldn't have tried that rhetoric, especially since most Muslims are hyper-historically aware, compared to an average American.

One other thing, look at the difference of quality in the questions in the actual interview, here: http://www.huffingtonpost.com/2009/01/26/obama-al-arabiya-intervie_n_161127.html

PAT Sucks.

I forgot how freaking bad the busses are when the students come back.

Goddamnit, PAT, it's hardly a mystery. The class schedules are published. Maybe you want to make changes in your own schedule? I'm just saying.

I'd biked most of the time, but I am too much of a wimp to do so in the snow and such. And my rear rim got bent again, so it's not like I could just take it out during the nicer days. (I suspect the cold helped generate that issue).

Followup Article(s)

I'll be editing this message with additional articles in the future, but this first one is extremely important to read now.


Today, there are many municipal bonds that were originally sold to expire 10-15 years from now. But projects finished early and the issuers wanted to pay them off. However, the bonds often have a minimum time before they can be called. So, issuers simply buy US Treasuries and put them into the bond, to be used when the bond can be called. Now, for all intents and purposes this is a US government bond which has the added value of being tax-free. I had a friend, John Woolway, send me some of the bid and ask prices for these type of bonds. One is paying two times what a normal US Treasury would pay. Another is paying 291% of a normal US Treasury. And it is tax-free! Why would anyone sell what is essentially a US treasury bond for a discount? Because they are being forced to sell, and no one is buying! The credit markets are frozen.

Why The Bailout Is Important (Probably)

One of the common claims is that no one is going to starve if the bailout doesn't happen. That's probably true, but picture the following situation.

The grocery chain that owns all the stores in your area was expanding rapidly in the last couple years, and went into large amounts of secured debt (i.e. mortgages) to do it. They used this money to build new stores, warehouses, shipping depots, etc. They even have a line of credit for covering cash flow needs for purchasing inventory before they can sell it.

Now, we have the current situation. Their real estate values have to be marked down, even though they have no intention of ever selling the properties at a profit. They are now in a negative equity situation on paper. This violates the debt covenants on their rotating line of credit. They can no longer purchase anything until they have hard cash.

Stores in most areas do not have much of a cushion in terms of their inventory supply--usually nor more than a week, and often less for perishables. While the run off in some of their inventory happens to build up enough cash to make purchases, people see the shelves emptying and panic. People hoard whatever they can, leaving lots of others with no food reserves.

Now, you might say, this solves the problem. They should have enough liquid money now, especially if they stop making some of their debt payments temporarily. But you've got some period of time where people are out of luck.

Now, what if this happens to some segment of their middlemen or end chain suppliers instead? What if the lenders for these lines of credit go bankrupt themselves? What if people simply start pulling lines of credit because of fear?

This possible chain of events are what people are talking about in the "Seizing up of the credit markets". In this country (and in large portions of the rest of the world), we have built up a system where almost everyone borrows for almost everything...from end customers all the way up the value chain. When this system breaks, the results are so unpredictable that no one really has any clue of what would happen--so the potential for a worst case scenerio needs to be the one which is considered.

Now, people probably wouldn't starve. They'd just have to live on rice or some other staples for a few months. Most people would probably not loose their jobs--but a large portion would, and this feeds back into the earlier problems. You have entered a positive feedback loop, and it's impossible to predict just how bad things could get.

Bailout Articles Roundup

I'm skipping some of the early commentary here, and concentrating on why the bailout is a good idea, probably necessary, and will end up not costing the government anything--in fact it should make money over the long term.

As reference, the text of the orginal draft of the bailout plan:

This draft is obviously inadequate in detail. Lots of people have made the points for needing oversight, etc, so I won't rehash those. We also seem to be nearing an acceptable compromise which includes these needed revisions (from popejeremy http://thehill.com/leading-the-news/paulson-senate-dems-reach-tentative-bailout-deal-2008-09-24.html )

Bush's speech transcript:

(Overstock CEO Comments on President Bush's Speech Outlining Bailout Plan)

Not what you might expect. These are important revisions in how we handle short sales which need to happen, as well as support that the government shouldn't pay prices which are too high for these SIVs (Structured Investment Vehicles).

(Bill Gross - How Main Street Will Profit)

This (and the follow up interview below) are hands down the best information I've seen anyone write on why this could work out quite well, why it's necessary, and why it's not really a windfall for Wall Street - they will be paying for their mistakes, because they cannot play out their hand.

(Follow up TV Interview on CNBC)

Another good article along these lines from Andy Kessler in the Wall Street Journal (got out of the .COM bubble when it started looking completely insane.)

Warren Buffett Articles


Transcript on CNBC inteview about Goldman Sachs investment. Lots of commentary on the fed Bailout--indicates some of the same ideas as Gross has but less elaborate).


The above article makes the claim that Buffett's deal with Goldman Sachs is not an investment, it's an endorcement deal.

While there is certainly an element of that (which is why it makes financial sense for Goldman), these kinds of preferred share investments are quite common. How is Buffett handing over 5B in cash NOT an investment? Sure, he gets a nice premium, and there is no equity risk--but in terms of risk, while he would get his principal back before shareholders in the event of a bankruptcy, he would be subordinate to all normal debt holders.

The Warrants are important and have value, but not actually part of the current investment, they are the outline of how future monies could be invested. Warren could by up to 5B worth of shares (at a $115 value). Warren has used this sort of structure before. So, claiming it not an investment is just hyperbole.