Monthly Archives: December 2008

New, Improved and The Same

There is a constant in this world that the only constant is change.  I can’t deny that, as I’ve changed jobs.  Still a geek, still fixing other peoples’ network woes when their desires exceed their abilities and still working with the technology that is beyond the leading edge. 

For those of us who live out there, we call it the Bleeding Edge as occasionally the technology turns around the cuts you a spare orifice just for giggles.  Invariably there is no documentation, no troubleshooting guidelines and very few people to call on to help you when the technology goes off into its’ own dark corner and behaves badly.  That’s the nature of what I do for a living.

When a few of us get together we swap war stories and show off our fresh scars then the talk turns to testing.  Testing, be it software, technology, or even simple things like, water, food, or sharpened sticks, is a critical step in developing something.   Testing helps keep crap products off the shelves, but so many manufacturers consider testing to be a needless expense that gets in the way of a good press release and a snappy PowerPoint presentation.

Which explains why there are so few really good products out there.  Invention of a whole new "thing" is difficult.  As an intellectual exercise, think about what we consider ‘new’ inventions in the last five generations.

The microprocessor?  Nope, it’s just miniaturization of tube and switch technology, gone solid-state and excruciatingly small.  You can make a computer out of tubes, switches and wires:  The original ENIAC was precisely that and it took a whole room of gear to add two numbers together.  Your computer is a direct descendant of ENIAC, except it is very small, and blindingly fast, but still relies on switches as logic gates. 

Programming is a direct descendant of Babbage’s Difference Engine.  The mental manipulations of Lady Ada Lovelace created the symbology for the very first programs for a mechanical calculation machine that only existed in Charles Babbage’s head.

Television?  Not at all.  TV is simply a method to show moving pictures to a lot of people at once, a refinement of Marconi for transmission combined with the moving picture.  Moving pictures go back to Eadweard Muybridge and his zoopraxiscope.

Supersonic Jets?  An evolution of daVinci, Bleiriot and the Wright Brothers original work.  DaVinci even postulated a rudimentary turbine, which is the heart of a jet engine.  There were significant changes during WWII, as wars tend to accelerate innovation, but it all goes back to the originators.

Pharma?  For thousands of years the village shaman or apothecary knew that a tea of foxglove would help those with ‘weak hearts’.  Foxglove contains digitalis:  The inventor of ‘medicines’ is lost unto time.  We’ve refined it and gone all scientific.

Genetically Modified Organisms?  Not by a long shot.  We’ve been cross-breeding plants, animals and humans for several thousand generations.  The Macintosh Apple does not actually exist in nature:  It is a hybrid, a cross-breed like the Labrador Retriever, or a green eyed Persian cat:  GMO’s are just more precise about things. 

Nuclear power?  Sort of.  Nuclear power is, at its essence, using fission to make heat to boil water to make steam which spins a turbine attached to a generator to make electricity.  Weaponizing nuclear energy is nothing more than an evolution of black powder; a very small quantity of something that goes high-order quickly creating a Very Big Bang. 

Electricity we knew about as far back as the Baghdad Battery, which was a primitive wet cell.  Westinghouse, Tesla, Edison and the rest improved and commercialized electricity.

X-Rays go back to the Curies, Roentgen and the original discovery of pitchblende as some kind of weird dang stuff that nobody really understood.  X-Rays needed film to prove their existence, which was Nicephore Niepce’s area of expertise, reproducing a drawing onto a pewter plate coated with bitumen of Judea, circa 1765.

Cars?  Gottlieb Daimler and the gasoline engine, but that was the size and fuel: Watt and others created a locomotion device using steam, but the use of a piston, pressure differentials and mechanical linkages to do work goes back so far that nobody can put a tag on it.  Archimedes perhaps?

Which, in summation, means there really haven’t been any amazing inventions in the past several hundred years.  We’ve refined things, polished the apple to a glossy shine and even found unique ways to utterly destroy ourselves, but we haven’t invented anything truly ‘new’ for a long time.

The point of this posting is that we don’t test things anymore.  Nobody takes a few days to look over a ‘new’ invention and see if it is as wise and good as the PowerPoint says it is.  Usually the first draft isn’t.

I have a new mobile phone now.  A nice one, from an international, well-known company in Waterloo, Ontario.  There is a problem with it.  The keys are just that tiny little bit of a millimetre too small to be used effectively by humans with normal sized fingers.  I have fingers that might even be considered small for a male of the species, so it isn’t as if I am trying to punch the keys with the blunt end of a sausage.

Someone, somewhere in the chain of design and testing didn’t hand off a prototype to another person to see if it really does work, as intended, by a wide range of folks with normal sized fingers.

Which is a damn shame, as I really want to like this technology.  Now, I merely accept it as vaguely useful. 

Senate Appointments from Steve

Up here our Prime Minister, Stephen "Steve" Harper, has gone off his meds again, probably in distress over President Jo Jo The Idiot Boy leaving office shortly:  Steve won’t have any friends to play with during recess at the G-8.

It would seem that Stephen woke up from a week of high-manic behaviour and decided to appoint 18 folks to the Senate.  (See the American Note at the end for an explanation)  The list reads like a list of political payoffs, as expected and a few choices that can only described as inside jokes or the make-good on an April Fool’s Day bet that went wrong.

The top three appointments that are catching the fancy of the press are:  Mike Duffy of CTV, Pam Wallin, ex-CTV/CBC and one-time Consul-General for Canada and Nancy Greene Raine, Olympic Gold Medal winner in 1968.

Duffy is best described as a one-time political pit-bull who has been asking the occasional pointed question of politicians in Ottawa since 1971 when he worked for CFRA on the Hill beat.  Duffy is the second or third best known export of Prince Edward Island:  The other two notable exports include Lucy Maud Montgomery and a stripper named Sparkle Gallant who did an act with lawn darts. I digress.

Pamela Wallin is the sole well-known export of Wadena Saskatchewan.  (I admit to having breakfast with her in the cafeteria at CJOH-TV, as the Canada AM Ottawa studios were part of the station, Studio B, if I recall.  For that matter, I’ve had breakfast with Jean Chretien too.  Same table, same cafeteria, same trivial conversations at 0600 waiting to get to work)  Pam is a journalist of repute and is also a charter member of BroadsCanada.  I wish I was making this up, but I’m not. 

Nancy Greene Raine’s claim to fame is a Gold Medal in the 1968 Olympics in Grenoble and many World Cup Skiing events.  She’s originally from Ottawa, believe it or not and was one of the initial developers of Whistler-Blackcomb in BC.  I think "Canadian Icon" applies properly and nicely to Nancy Greene Raine.

The other fifteen Senate appointees?  Nobodies, unless you count Leo Housakos, who was the Director of Via Rail Canada and supervised the most barely adequate inter-city train service on Earth.  Lawyers and fartcatchers would sum up the rest. 

They’ve all been appointed by a Prime Minister who is dedicated to a Equal, Elected and Effective Senate.  Since the House is prorogued and Steve can’t do anything there without bringing down his government, at least he’s doing something to keep busy.

(American Note:  Our Senate of 105 seats is appointed.  Technically they are a Chamber of Sober Second Thought regarding any laws passed by the House of Commons.  This is a holdover from British parliamentary tradition, in that commoners could not advise the monarch:  Only the House of Lords/Senate could give advice to the Crown to provide Royal Assent to the laws passed by the House of Commons.  In the Olde Days, Senators were appointed for Life and were rarely Sober, or Thoughtful. 

The Canadian Senate is like the Puerto Rican Pineapples float in the Rose Bowl Parade:  You look at it, you’re astonished by it and wonder how it works, but it doesn’t actually matter in the grand scheme of life.)

Border? What Border?

This is a repost of something back in October 2007 called "Flight Rules Change". I’m reposting it for a reason:  The calendar is about to flop over to 2009 and the rules are coming into effect later in 09.  Amount of debate and outrage?  None.

Here’s the setup:  You live in the US and you want to fly to Frankfurt, Germany.

In order to fly to Frankfurt, the airline takes your information, including your passport data, SSN, date of birth, address, phone numbers, contact numbers, credit card information and itinerary.  Then it compares your data to a list of known Bad Guys, the No-Fly List. 

Other data is obtained, including your flight history over the past years, seat selection, meal selection, previous duty-free purchases and all the frequent flyer data the airline has on you, which usually includes domestic flights, hotel stays, car rentals and so on.  This wad of data is sent to Germany, who looks the data over and decides if you are OK to come to their country. 

This, of course, happens after you buy the ticket and before you show up at the airport.  The day of the flight to Frankfurt, you show up, with your bags, four hours before your flight. 

The airline counter person says that you have been chosen as a selectee.  They don’t tell you why.  Why is because your name, Jeremiah Dingobaby, is close to Jim M. Dingleby, who is a known Bad Guy.  Germany isn’t too keen on letting a known Bad Guy into their country and the airline isn’t keen on flying a known Bad Guy. 

You get poked, prodded and squeezed like a melon by the TSA.  The TSA and airline says you are now OK to fly.  Germany grudgingly goes along, but is now scouring your data with a jaundiced eye.  Expect to get the melon treatment at Frankfurt from the German Customs. 

After all, you visited Columbus Ohio last February and Columbus is a known hotbed of anti-German sentiment, as well as Chicago, Charlotte and Cincinnati, all places you went to in the last five years, according to your Frequent Flyer account.  Any city that starts with the letter C is not looked upon favourably by the German Customs, even if it is domestic business travel, in the US, by a US citizen and has nothing to do with Germany whatsoever.    

If some of the data about you is wrong, misguided, opinionated, or not about you at all, your recourse is to sit down and shut up.  If you don’t like it and complain, then there’s always more room on the No-Fly lists in Germany and the US.

That’s more or less how the system works today.  There’s no problem with Germany not wanting Known Bad Guys in their country: They’re a sovereign country and they can decide whom they choose to admit. 

If the rules are nobody left-handed can come in, then so be it.  The airline is acting sensibly by checking for left-handed passengers before the Frankfurt flight leaves, after all, the rules at the destination apply.  The US airline has to go along, in order to land at Frankfurt.

The change that is currently under discussion is this:  The US owned aircraft, with US citizens as passengers, going to Frankfurt, Germany, has to fly over Canada to get there.  Canada has a 200-mile border limit, like most countries, so taking a flight that starts in Boston, Cleveland, Buffalo, Detroit or Seattle, is technically within Canadian airspace.  Chicago and Minneapolis are close.  

Canada is now demanding that the full wad of data from the US sources must be given to the Canadian government and security folks before the aircraft leaves.  The Canadians are going to scour the data and apply their rules.  They don’t want anyone with the potential of being a Bad Guy, in their airspace and conceptually at least, ‘in’ their country. 

Never mind that they’re talking about US citizens, on a US flight, that has nothing to do with Canada, has no intention of landing in Canada and has nothing whatsoever to do with Canadian immigration, Customs, security or laws.  The Canadians demand the data and the implied threat is that the airline will not be allowed to overfly Canada to get to Frankfurt. 

This will add several hours to the flight, as the aircraft will have to fly due East to get over the Atlantic ocean, then go North to get to the International airways. 

Now, as a US Citizen, on a US flight, how do you feel about Canada having the full panoply of data on you?  Do you trust Canada to treat the data securely and not accumulate more and more data on you?  Will Canada use the data for its declared purpose, keeping Bad Guys out, or are they just fishing for data on US Citizens on US flights because they can? 

I’d be grumpy about it, after all, who the hell died and made them Grace Kelly?  When did Canada become the arbiter of who is allowed to fly or not fly, if the flight doesn’t land there?

Now, reverse the situation, exactly 180 degrees.  The US Department of Homeland Paranoia and the TSA are proposing a change to overfly rules.

Any flight that enters US airspace must submit all passenger information to the TSA in advance.  The TSA and Homeland Paranoia will determine the suitability of any passengers to overfly US airspace, regardless of the destination of the flight.  That’s the real change.  I made up the Canadian stuff. 

Therefore any flight in Canada, going to Mexico, or the Caribbean is subject to US rules, as the aircraft has to fly over the US.  Any Canadian flight going to Tokyo will most likely fly over Alaska, which is US airspace and the US rules will apply.  Same with flights from the Pacific, most take the polar route, over Alaska, therefore the US rules would apply. 

Even if the flight is only landing in Canada, Mexico, or the Dominican Republic, from India, Korea or Japan, the US rules would apply.  Doesn’t matter if Korea Air or JAL has vetted all the passengers with Canadian, Mexican or Dominican Republic entry rules, as they should, the US rules also apply.  If the US don’t like the passengers on that flight, the airline is potentially denied overflight rights.

Who died and made the TSA and Homeland Paranoia, Grace Kelly?  When did the US become the sole arbiter of who is allowed to fly, or not fly, if the flight doesn’t land there? 

Technically, many of Canada’s major airports are within the 200 mile international boundary with the US.  Does that mean all our domestic flights are going to be subject to US security rules?  Our standards have been higher and more thorough for more than twenty years, since the Air India bombing, so we have to lower our standards? 

What happens with all that data about Canadian citizens on a Canadian aircraft, flying from one Canadian destination to another on a purely domestic flight?  Why does the TSA need the credit card, frequent flyer, name and address data of a Canadian not going to the US? 

Who says the TSA is responsible enough to even look at, let alone literate enough to read that level of data collection?

The US would never put up with that kind of crap from anyone else, so why are the trying it on the rest of the world?  Because they think they can get away with it is why.  The TSA and Homeland Paranoia want as much data as they can get on anyone, anywhere, regardless of where they live, work or go.  All of this under the guise of "Security".  Naturally, if you’re not for it, then you’re an Enemy and an Evildoer of the Axis of Evildoers Evil Axis.

My proposed rule in return?  If the TSA and Homeland Paranoia change the rule, which they can, arbitrarily at their whim, then the Canadian and Mexican governments immediately impose the same rules in return, using the internationally agreed upon 200 mile limit boundaries. 

In the interests of our sovereign "security", we’ll want US flights to be subject to our rules, in the event they might have to land in Canada or Mexico. 

Check your personal GPS.  I did, and found the proposed TSA rule at the coordinates of "WTF?" and "Bite Me!" at an elevation of "Kiss my pink, puckered, rear orifice!"

Auto Bailout Goes Ahead

Finally President Jo Jo The Idiot Boy got Hank Paulson to unscrew the TARP wallet to the tune of $17.4 Billion in loans to GM and Chrysler.  Not a gift, but loans that the two have to pay back, unlike the Bailout The Base payday for Wall Street, which is a straight-up cash grab for anyone Hank knows. 

Meanwhile, in Canada, our Provincial and Federal governments are warming up the photocopier for the Canadian side of the Auto Bailout Game.  Proportionally we should be running off about $1.7 Billion extra in Canadian Tire money for the Big Three up here, but the number being tossed around is closer to $3 Billion from the Ontario government and the Feds.

This morning, Chrysler and to a lesser extent, GM announced the are shutting down all their plants in North America until approximately the end of January, give or take.  It isn’t a particularly nice Christmas gift for the workers, but at least it isn’t an indefinite layoff notice.  Christmas will be very modest in a lot of towns this year as the suppliers also feel the ripple of the plant shutdowns. 

Now the hard work begins.  GM and Chrysler have to regroove their entire business model in order to survive.  The problem is that it takes nearly two years for any auto manufacturer to bring a new product into production, even in a mad-panic full-court-press of design, engineering marketing and sales. 

Therefore the regrooving simply cannot take place on the product side to see any immediate results:  It has to happen on the management side, which will not happen.  The workers, the ones who actually assemble the components are going to take what could best be described as as a back alley beat-down, on both sides of the border. 

Expect the UAW and the CAW to be painted as greedy left-leaning, near-Communist unions, intent on stealing from the taxpayers and hamstringing the poor, innocent auto makers from trying to fix their businesses. 

When you hear those kind of sound bites, take a moment and consider this:  The CAW and the UAW don’t design the cars and trucks that the Big(ish) Three have foisted off on the buying public for the last 20 years. 

The unions don’t set the reliability or quality standards of the products.  The unions don’t control the predatory pricing.  The unions don’t have a say in how car financing is set up.  The unions don’t decide that you can’t get airbags unless you buy the deluxe version.  The unions don’t offshore components and jobs to the third-world where environmental controls are None, or Less than None. 

Accountants decide how well, or how badly, a vehicle is made, as accountants are the ones that say it will take 11 seconds to hang a door assembly, not the 40 seconds it actually takes.  Management makes the decisions on options, quality, financing, equipment, colours and the rest of it.  The CAW and the UAW are the people who take the decisions and delusions made by the the people who have the private jets and try to make a car or truck out of it. 

Now, who is going to pay the most for this bailout?  It isn’t the guys with the private jets, or the accountants.  It’s going to be the person on the assembly line who is gong to take the biggest hit:  Oshawa, Brantford, St. Thomas, Oakville and Windsor are all going to hurt.  At least it won’t hurt as much as it could have.


Madoff's Ponzi Scheme

As an indicator of just how greedy the rich are, Bernard Madoff’s Ponzi scheme seems to be the high water mark.  If you’re not familiar with the story, here’s the short form.  Bernard Madoff, a Wall Streeter, was the creator of a investment company that promised big (as in double-digit) returns for investors.  The whole thing was a scam.  As new investors were brought in, that money was used to pay off the earlier investors whose investments were coming due. 

Madoff’s Ponzi, now called the largest fraud in US history, is rippling through Wall Streeters, banks, investment houses and international financial services like a greed wave of global proportion.  $50 Billion is the number being bruited about.  Or, more than double what the Auto Industry wants as a bridge loan. 

Unfortunately, it isn’t just greed heads who are getting burned.  Some charities, having listened to their financial advisors who were buddies of Bernie Madoff, have also been scorched:  The Jewish Community Foundation of Los Angeles, the Korean Teachers Pension Fund, the New York Yeshiva University, and even the town of Fairfield, Connecticut. have taken a beating along with banks and insurance companies worldwide.

Which is indicative of what happens when people ignore some essential economic truths.  If the rest of the market is offering payback in the realm of 4%, then someone offering an 11% payback either knows something the other 6.5 billion people on the planet don’t know, or they’re getting these paydays by selling heroin to kindergarten children with your investment. 

As the first probability (knowing something absolutely no one else knows) is very unlikely, the second probability comes to the fore.  Not to say that Madoff was selling smack to kids; he wasn’t.  He was merely taking money from newer investors and shovelling it at the earlier investors.

It is unfortunate that humans are so gullible, but we are.  Magicians know that we can be fooled.  Vegas is proof that humans can rationalize all sorts of madness in the name of "beating" the house.  The same holds true with various governmental and charitable lotteries.  The sports pages of your local fishwrap/newspaper contain hundreds of ads for ways to ‘beat’ the system along with odds and spreads as part of the editorial content.  Not that anyone would actually wager on the outcome of a sporting event, would they? 

There are other ways we express our gullibility, especially online.  The Nigerian 419 Scam has a very long history going back to the Spanish Prisoner scam of the 1900’s.  The setup is more or less the same:  Person of Importance being held in jail, with access to a whack of money.  If only you, as the mark, send a few thousand dollars for bribes, the prisoner will richly reward you when he/she gets out, the will is probated and the box is unlocked.  Of course, everything must be kept, shall we say, hush-hush. 

There are stories that during the Inquisition, the Spanish Prisoner scam was first run, using personal couriers to deliver the scam to nobility in far off lands.  Just leave the money with my trusted personal manservant, the guy who brought you the sealed letter and he will make sure the money is distributed according to our wishes.

Which speaks to what might be a truth of the Human:  We want a free payday, we want the payday to be mammoth and we don’t want to share it.  It has to be just for us, as we’re special and unique and only we can truly see the wisdom and greatness of this plan.  Madoff either knew this truth, or suspected it and stole $50 Billion. 

Note to Planet:  If it looks too good to be true, it is too good to be true. 

There are no bank inspectors, deposed dictators, magic pills that give your car 100 miles per gallon, or special dispensations on the laws of physics that allow you to break free from the Man.  Sorry.


The Real Economy

On a business trip to St. Louis a couple of weeks ago, I got a chance to look at a different economy from the one I’m normally exposed to here in Toronto.  Flying in to somewhere different gives you a sense of perspective that you can test with some simple economic truths.

The light industrial area I was in was at the corner of "For Rent" and "For Lease".  Almost every second building had some kind of appeal from a realtor:  "Your Business Name Here!" was a common pitch.  This tells me that a lot of small businesses have disappeared, taking with them, the jobs that are always attached to a small and medium-sized businesses.

Downtown, office space is readily available.  Whole floors of buildings are open and ready for a business to move in with cubicles, work pods and grey coloured boardroom-ettes.

At the hotel on one night, there was an event for a local Christmas Charity.  I was going out and had to swim through the crowd, eventually making my way outside to wait for a friend.  In the valet parking, fleets of luxury cars and SUV’s.  No modest Toyotas were to be seen, unless one counts a surfeit of Lexi.  Benzes, Escalade’s, and high-end BMW’s would roll up to the valets without a word being exchanged:  The occupants would dash into the hotel.

The Base was in full attendance, women with flat foreheads, air kissing each other, lest they displace makeup or disturb the Botox-induced visages.  The men were attired almost universally in evening dress, without a callused palm to be seen among the well-tanned and manicured hands:  Some of the wristwatches cost what the servers made in a year of hard work and a lot of overtime.

Looking in the local newspaper, there are no jobs in the help wanted section, unless you count multi-level marketing scams, temporary envelope stuffing gigs and day-labour as a career path.  Perhaps more telling was the half-page of bankruptcy auctions.  You could buy the whole production line of an injection molder, electronics assembler or engineering and prototyping concern at auction from the liquidator for cents on the dollar.

Gone with those companies are the jobs.  Middle-class, solid, respectable jobs that pay reasonable to very good wages and provided benefits like health care and dental care for the employees.

There is critical data point:  America and to an extent, Canada, are becoming economically stratified societies.  There are Poor folks and there are Rich folks and there are very few left in between. 

Those that are in the middle-class are one twisted-ankle health-care bill, or plant slowdown from being out of money and flat broke.  The reasons for this stratification can be laid at the door of The Base, the upper-class wealthy who make their money by shuffling paper around.  The Base has the ear of the politicians and a hand on or near the power levers, so things like tax laws are jiggered for their benefit.

For instance, in the bitter bitching regarding the auto industry bailout, several Republican senators put the blame on the UAW as the sole reason the Big Three are in DC looking for a slice of Hank Paulson’s TARP pie.  Facts, those pesky little reality pearls that get in the way of a good sound bite, would show that the UAW (and the CAW up here) have, over the past ten to fifteen years, have partnered with the auto industry by rolling back wages, taking benefit cuts and even running retraining for their laid off members at their own expense.

Those are not the actions of a ‘greedy’ union workforce.  The unions have made real sacrifices to keep at least some of their jobs.  It’s The Base trying to squeeze and blame everyone but themselves. 

I’m overlooking the international trade barriers that are viciously one-sided in the auto industry.  You can’t import North American made cars into Japan or Korea without doubling the price, as Japan and Korea have very effective tariffs and duty structures that protect their auto industry and the jobs associated with it. 

If you could actually import North American cars into Japan or Korea, there still is no market, as the products themselves are crap.  If memory serves, the UAW doesn’t get involved in the design or marketing of the products.  That would be the responsibility of…wait for it…GM, Ford and Chrysler executives. 

It is so much more convenient to blame a union/the middle-class than to look at the ineptitude of your golf buddy who couldn’t manage a good bowel movement, let alone design a product that real humans would buy with a straight face.

Historically, we only need to look back a few thousand years to see what happens when you have a two-strata society.  Rome went into the toilet.  Greece went into the toilet.  Their societies had approximately two strata:  Slaves, who didn’t actually exist as anything but chattel and the Wealthy, who made the laws.  In both examples there was a merchant-class, but taxes and laws made it very difficult to stay in business without resorting to every possible trick, dodge, finagle and illicit market going. 

Eventually, like a Ponzi scheme, it all falls down when that tiny little sliver of the upper-class, consumed by greed beyond the dreams of avarice, cannot get, find, or steal enough money to keep the show going.  I have no idea why but the names of Ken Lay, Conrad Black and Bernie Ebbers keep coming to mind. 

A $50 Billion dollar Ponzi is unravelling right now.  It was a hedge fund, oddly enough and the perp, Bernard Madoff has admitted he took the wealthy, banks, investment dealers and a raft of Wall Streeters to the cleaners.  Madoff has said he’s broke and now a lot of banks are trying to pillow their involvement in the scheme, as the banks bought Madoff’s sales line.  There is much soiling of the undergarments in the financial sector as revelations come out.  (Not to worry though, the soiled undergarments will be hand-laundered and gently pressed by our hired girl from Guatemala that we pay almost $4.00 a hour for a 100 hour work week.) 

Again, historically, what happens when a two-strata society collapses?  The Dark Ages comes to mind.  So does Germany in the 1920’s to 1933 when bread cost 13 million marks a loaf.  Somalia is a contemporary example of a country that fully imploded with all the systems that describe a society, flat-lined, torn up and sold for scrap.

The dangerous part is what happens a few years down the road in a disintegrating two-class society.  It is not unknown for the poor to rise up and take what they need to survive.  France, during the Revolution.  Britain, in the days of Cromwell.  Russia at the beginning of the 20th century.  These are all examples, historically, of what happens when the poor can’t afford to eat:  They attack the rich.

This is not to say that it will happen, only that it can happen.  Rio De Janeiro or Mexico City come to hand as examples at the smaller end
of the spectrum.  The rich do not go outside, unless armed, as it is not uncommon for organized kidnappers to grab those perceived as wealthy and hold them for ransom. 
The gated and patrolled communities of the US Southeast are only a few steps removed, representing a rapidly building fortress mentality of the rich.

Which leaves us where?  On a slippery, high, windy ledge is where.

On the Overpass

This morning the Canadian Military released the names of three more of our soldiers who were killed in Afghanistan on Saturday.

Some of the American readers will be astounded that the Canadian military are in the area, but don’t be.  Our folks keep a low profile in Afghanistan in keeping with our national character.  We’ve been in country since 2005 more or less, not counting some work done by the Dwyer Hill gang a few years earlier looking for a tall guy carrying a kidney machine from cave to cave.

As our fallen are repatriated, the flight lands at Canadian Forces Base (CFB) Trenton, about two hours east of Toronto.  The repatriation containers are loaded onto hearses.  The hearses, under police escort, drive to Toronto, to the Provincial Coroner’s office.  The route takes the 401 Highway, (a US equivalent to any major interstate) then into downtown Toronto on an overcrowded six-lane artery called the Don Valley Parkway.  Along the route, there are signs letting your know that this is the Highway of Heroes. 

Almost spontaneously, as the fallen are driven into the city, the side of the highway and the overpasses are lined with regular folks.  There are flags and banners unfurled to honour the fallen.  Police, fire and ambulance services seem to appear regularly.  There are young people and older people:  Ex-soldiers: Families, Men, Women and Children.

As the cortege approaches each overpass, the crowd falls silent.  Some salute, some come to attention, others bow their head in contemplation or prayer.  The cortege whistles past at highway speeds.  There is a moment of silence, then the participants very quietly go back to their vehicles and walk away.  Not many words are exchanged amongst the participants.

Nothing is formally organized.  There is no protocol, no speeches, or even precedence, for these gatherings.  They happen when they need to happen and disperse afterwards.

In talking with some of the people on the overpasses, there are two common answer to the question "Why are you here?":  "Because they were Over There." and "They deserve to know we’re thinking of them and respect what they’re trying to do."

The heartening part is that there is no discussion of the politics, or the morality of Canadian soldiers fighting in Afghanistan.  Those discussions are set aside, as they should.  The focus is on expressing respect and support towards those who serve and have made the greatest sacrifice that can be made.

Sometime next week, probably on Tuesday or Wednesday, there will be groups on the overpasses again.  They will be honouring Cpl. Thomas James Hamilton, Pvt. John Michael Roy Curwin and Pvt. Justin Peter Jones.

That’s the reason why a section of the 401 and most of the Don Valley Parkway is called the Highway of Heroes.


Connect the Economic Dots Part IV

The first three parts of Connect the Economic Dots laid out the perfect storm of an unregulated financial industry eating itself, much like the snake who has swallowed its own tail, as consumer debt spiked, at the same time the oil industry decided to give themselves a pay day.

Here’s a factoid from Sharon Astyk’s blog:  McDonald’s Restaurants are now the second largest merchant vendor on credit cards.  People are buying their Big Mac on credit, as they don’t have the actual cash to buy lunch.  The amount of credit card debt has grown more in the past 10 weeks than in the past 10 months combined.

To complicate matters even more, the US credit-card industry may pull back more than $2 Trillion dollars in credit card debt over the next year and a half.  The reason the banks want to pull in their exposure?  Too many credit card holders are tanking and the bankruptcy courts are writing off the credit card debt.  This is risky to a bank, as it means they don’t get paid.

Now a review:  The financial industry caused about three-fifths of this mess.  They get a bailout.  The oil industry spiked prices for no good reason and saw consumers park their cars.  Expect the oil industry to ask for government money, as demand for their product is dramatically down.  Consumers, who are the actual engine of the economy, get flogged by the financial industry for their part in the mess. 

So far, most of the people who are actually responsible have skated away without losing their houses. It is incumbent to name them: 

#1:  The US Federal Reserve Chairman, Ben Bernanke.  His department is the one that modified the rules for debt to equity ratios for Wall Street.  His department permitted highly leveraged debt financing at the corporate level.

#2:  US Treasury Secretary, Hank Paulson.  His department controls the financial taps and is at least on paper, in charge of regulation of the financial industry.

#3:  Securities and Exchange Commission head, Christopher Cox.  This is the regulator for Wall Street, more or less.

On paper, these are the three lads who are, under the direction of the government, supposed to keep tabs on the economy, making sure it works well and fairly so that consumers have confidence in the whole system. 

You can be assured that Cox, Paulson and Bernanke do not make $5.15/hour, the US Federal minimum wage. 

You can also be assured that the only way these three lads got theirs job is they are buddies of the President.  That would be President Jo Jo The Idiot Boy, George W. Bush. 


Connect the Economic Dots Part III

With the previous two posts, you can see how things lined up to create potential for our economic disaster.  Now, we can add two other data points:  Oil prices going straight up and the incredible hubris of the investment community.

Oil prices first.  There is a limited amount of oil on the planet controlled by what is essentially an oligarchy that does whatever the hell they want to.  In the past two years the price of gasoline, the final product of the oil companies, has more than doubled then fallen by roughly the same amount.  Over the summer of 2008 gasoline hit $1.42 a litre in Mississauga from a low of $.71/l in the spring.  Diesel fuel, Jet-A and bunker oil did more or less the same thing. 

You saw it yourself where you live and if you think back to the spring, most businesses that rely on fuel to conduct their operations added a "Fuel Surcharge".  The airlines did it a year or two earlier, as fuel costs for Jet-A makes up about 60 percent of the cost of your ticket.  Air carriers are very sensitive to fuel prices:  To the point that almost all the major air carriers worldwide buy options on fuel to keep their prices as stable as possible. 

Who do they buy options from?  Wall Street of course, the same place where the airline stocks live.  Would Wall Streeters swap stories about how well, or how poorly airlines were hedging fuel prices?  Please don’t make me laugh; my lips are chapped.  Of course they did and that added to the guidance, whispered street numbers and the other data-flotsam of Wall Street.

But back to oil prices.  At some time over the early spring of this year people clued into how much they were actually paying for gas for their vehicles.  It was going from a cost of being a car owner, to a significant portion of their weekly earnings.  There was no good reason why oil prices spiked.  There was no Katrina-like shortage of oil or gas from a natural disaster.  There was no mammoth refinery shutdowns or global labour strife that closed down ships and pipelines. 

The reason oil prices spiked was oil company greed, nothing more.  Pardon me, it was the "free market at work" and prices reflected what the market would bear. 

It turns out that at that precise moment, consumers went "WTF?  I’m spending $100 to fill my SUV, twice a week?  $800 a month on gas?  That’s half my mortgage payment!"  The SUV got parked and a For Sale sign was put on it. 

People looking to buy a new vehicle were no longer looking at SUV’s or pickup trucks.  They couldn’t afford the gas.  Small cars are now the desired norm, but the Big Three don’t make small cars that the sane will buy.  The Big Three make gas pigs big enough to blot out the sun.  Don’t expect to be let out of your lease, unless you die, as that is where the Big Three make their money.

Meanwhile back at the ranch, the Masters of the Universe hubris of the Wall Street Captains took a turn for the worse.  All those Asset Backed Commercial Paper loans started to look like a Very Bad Idea.  It would seem that Standard and Poor’s ratings were, at best, fanciful.  Forclosures were up.  Not just a little bit, but significantly. 

It would seem that homeowners couldn’t actually make their payments, what with jobs being sent to China, or rationalized out of existence, gas prices spiking, food prices spiking (because the food travels by truck) and the cost of living in general was increasing. 

Unfortunately, wages never did seem to increase, as paying more for employees is a ‘cost’ that Wall Street does not recognize as part of a well-run organization.  "If only that company would rationalize their supply chain, then we could recommend their stock, but…"  Companies responded in the only way that Wall Street would accept:  They cut staff, cut costs and cut services as fast as Wall Street demanded, usually to the point of the company going all but out of business.

There was our Perfect Storm.  Fuel prices spiking for no good reason.  Wall Street demanding instant gratification from any investment.  Asset Backed Commercial Paper mortgage loans going into the toilet at a record rate.  Three greed-based economic situations, all more or less stage managed by a bi-polar Wall Street who wanted to get a slice of both ends of the transaction. 

Where was the SEC?  They are the overall regulator of the investment industry are they not?  As best as can be determined, the SEC is viewed as a fluffy white kitty by Wall Street.  The SEC has all the regulatory authority and legislative spine of bacon flavoured aerosol cheese:  Looks fine, in a cheesy way, smells bad, tastes worse and shouldn’t actually be consumed by sentient beings.

The US Treasury?  Considering that the head of the Treasury is a long time Wall Street insider, this is like the money in the bank vault being guarded by an armed robber.  Who appointed him?  The Decider who Decides the Deciding about Deciding.  The same guy who told the SEC to back off and let the free market Decide things as that is the American Way.

Then one morning Wall Street woke up and discovered a hard financial truth:  In order for a mortgage loan to be worth anything, there has to be someone who pays down the mortgage every 30 days.  Problem:  The ‘little people’ on the furthest end of the economic transaction were being laid off, because Wall Street demanded instantaneous financial performance by the companies Wall Street invested in. 

This is like curing migraines by amputating the patient’s head.  It does ‘cure’ the migraines, in that there are no symptoms reported by the patient.  The patient can’t report symptoms, as the patient is missing their head and is quite dead.

The most egregious part of the whole economic perfect storm is that Wall Street is the author of their own demise.  At the same time Wall Street is getting a multi-billion dollar bailout for being stupid enough to believe in Wall Street.  Nobody in the positions of authority have been fired.  Nobody in the transaction chain have had their bonuses cancelled, or been forced to refund any fees they’ve grabbed in the heat of selling shit to flies.  Wall Street is actually rewarding themselves for their own greed, mismanagement and general stupidity. 

Worst of all, the US Treasury department, using now-scarce taxpayer money, has written Wall Street an essentially blank cheque to bail themselves out of the mess they created for themselves by being greed heads and playing with things they refused to understand. 

Now if this strikes you as almost identical to the Big Three auto industry, you would be right, with one exception:  The Auto Industry does not have Hank Paulson on the speed dial.  Wall Street is getting rescued with your tax dollars.

But wait, there’s more! 


Connect the Economic Dots Part II

We have set the stage for the economic meltdown, if one thinks back two to four years, or reads the previous post, Connecting the Dots Part I. 

Anyone could get mortgage financing, as long as they could fog a mirror.  Credit was extended to anyone and almost anything that would come in the door of the mortgage company, banks, car dealer, furniture store and so on.

The mortgage side was the worst of it.  Companies like Countrywide would package up their mortgage loans as "Asset-Backed Commercial Paper" and sell them to Wall Street.  Wall Street looked to Standard and Poor’s and the other rating agencies for a measure of the worth of the loans.  S&P said "Hell, there’s houses backing the loans up, so they’re good."

Now this makes a little sense, but only a little.  Everything depended on house prices going up dramatically.  All indicators at the time made it look that way, as the builders couldn’t get enough workers while banks and mortgage lenders were writing billions of dollars worth of deals every month.  It must be a solid investment?

Investment houses, like Lehman, Smith Barney, Goldman and the rest looked at the AAA rating and said why not?  AIG, who insured the purchases, looked at the AAA rating too and agreed to back the deal, just in case prices took a little wobble. 

The Securities and Exchange Commission, in 2004, took off all the controls over debt to equity ratios for banks and investment houses.  As long as you had the cullions, you could run as much debt as you wanted.

Meanwhile, down on Wall Street, the fund managers looked through whatever colour of glasses were popular that day.  Stories abounded about colleagues who made millions in a couple of hours betting against Wall Street, then suddenly selling everything and buying something different.

Remember E-Trade, or all the infomercials on hedging and options trading?  You too could be a Wall Street Winner, if only you bought and sold on a hourly basis, reading the runes with our specialized knowledge. 

There was a time, not that long ago, when you would actually meet people who said their profession was "I work from home, I’m a day trader"  These particular folks were the ones who prospered from the misfortunes of others, swapping options on FCOJ (Frozen Concentrated Orange Juice) by watching the Weather Channel and seeing that the temperature in Ocala this afternoon was a bit too low for the crop, so the price in six months will go down, as the quality won’t be as good, but we’ll bet that others will guess too low and we’ll make millions when the price stays up a bit.  I wish I was making that run-on sentence up, but I heard that statement, almost word for word, from a day trader I used to know. 

These were the kind of people who made money on Home Depot, Lowe’s and Weyerhauser stocks when Hurricane Katrina hit New Orleans.  The complete destruction of a major city, means a demand for lumber to rebuild, therefore; buy!  We’ll overlook the deaths, destruction and malfeasance ("Brownie, you’re doing a helluva job") at a high level, as long as we can make a buck.

That describes the problems of options and derivatives, at least in technical terms, but doesn’t quite get the economic weirdness across.  The closest Wall Street analogy is betting on sports at a high (and very fast) level.   

Wall Street is nothing more than betting a player in a basketball game would, or wouldn’t make a free throw. This we can understand, even if we’ve never owned a stock in our lives.

The derivative would be; would the ball bounce left or right? 

The derivative’s derivative is;  would the bounce be outside the key, or inside the key. 

The hedge would be that the bounce outside the key from a missed free throw would be caught by a player whose last name ended in a vowel. 

The derivative hedge would be that a spectator wearing a blue t-shirt would catch the ball and his last name would end in a consonant. 

There were even some who would bet against the Instant Replay, despite what they saw in the real world five seconds earlier. 

Most of it was fuelled by technically illegal inside trader knowledge, whispered numbers and tipsters who ‘knew’ something would happen.  There are more investing tip sheets and research companies than one could imagine.  Emailed hot picks and dead dogs are swapped hourly, with the buy and sell orders flying out within seconds, often automated sell or buy limit orders not even done by humans. 

Subscribe to Morningstar, or any of the other "stock research companies" and see what happens.  It’s the same game as The Racing Form tip sheet:  This horse did well on muddy tracks but can’t win on dry turf and today’s jockey only wins on horses with three names. 

At least with Morningstar, you don’t get these tips from a guy named Perry who wears a green check-print sports jacket and a genuine full-Winnipeg of white shoes and a white belt holding up polyester pants of a colour not seen in nature.  The quality of the information (innuendo and a light sprinkling of public facts) is the same, but the fashions are different. 

Investing became a hour-by-hour, then minute-by-minute game. In the Olde Days of 2001, mutual funds invested in companies for three months or longer.  There were reports of real humans who would invest in General Motors and hold on to the stock for a couple of years, knowing that over time the stock would go up nicely.  Not wild 25% swings, but a calm, pleasant, 5% to 10% increase in value without much fuss, or nervous scanning of the stock prices.

The downside to buying, then holding an investment for a period of time, meant you were a ‘non-performing’ investor, to the brokerage:  You didn’t generate much commission for the house as you weren’t in the frenzy of buying several times a day.  Remember, every buy or sell means you, as an investor, pay money to the broker for the pleasure of their assistance, even if the investment is a dead dog that is starting to smell. 

As a non-performing investor, you don’t get access to the special, platinum edition, ‘really, really good’ copy of The Racing Form.  Sorry, I meant investment research.  As a non-performing investor, your broker, who is compensated only on the amount of commission he or she brings in from you buying and selling often, considers you dead. 

The broker’s boss is compensated on a percentage of what his people bring in, therefore the broker’s boss considers you less than dead. 

The corporate management gets their bonus if they make certain financial targets, so you, as a non-performing investor, do not actuall
y exist in their Universe.

Into this multiplicity of moving parts and minute by minute madness, falls Asset Backed Commercial Paper, with a AAA rating.  The bettors had a new toy that they didn’t quite understand but sure seemed like fun and was backed by real estate, so how bad could it be?