Wednesday, August 29, 2007

RIP Hilly Kristal

So, Hilly Kristal passed away yesterday. He outlasted his former business, legendary punk venue CBGBs by less than a year. I can't help but think that trying to keep it going was a big factor in his demise, although 75 is a pretty good innings, especially by the standards of punk rock survivors.

Kristal led a series of increasingly desperate rearguard actions against the club's eviction from its building. It was at one of these, a benefit featuring the Willowz and Ted Leo, that I first experienced the venue. Indeed it was just this morning that I was listening to the Willowz and reflecting that it was only during these last-gasp performances that he regained his knack for booking exciting bands.

I've hated on the venue before, and it would be grossly uncharitable for me to rehash these arguments at this moment. Still, it's worth reflecting again on the sentimentality and love that the venue, indeed the whole late seventies punk scene in New York engendered.

I don't quite know why this is, since by the time I moved to the city its music cognoscenti had become remarkably indifferent to the loss of music venues. I suspect that CBGBs, and punk music in general, exploited a time when cultural bottlenecks in the city were the most pronounced that they ever had been.

This isn't quite true, since CBGB was not the only game in town. Max Kansas City, now occupied by my office's nearest deli, was another stallwart. But Kristal seemed to take more risks, which suggests that finding shitey venues to play unpolished music was much harder then than it is now.

In a city where bands had an ever-expanding suite of options, it became harder for CBGBs to maintain a grip on the most exciting ones. Which meant that it became more of a home for fringe genres (hardcore, metal). Still, and I need to stress this right now, it made it possible for the US to hold its head high in underground music again, and that's worth almost anything.

[UPDATE: the Voice is reprinting Lenny Kaye's elegy for CBGB. It's reasonably close to my own sentiments, although I offer that not as recommendation. The article is just very good.]

Monday, August 27, 2007

A House Is Not A Hotel

I've been closing a real estate transaction. Be back soon.

Friday, August 17, 2007

A Potent Stew Of Pedantry And Boogie Rock

It's been a bit of a quiet day. I couldn't find much to talk about, with the possible exception of a really stupid definition of a "best efforts" financing commitment in the C section of the Wall Street Journal. It comes in the context of an article about how big banks are rethinking their commitment to the business of financing films.

Some already announced deals, meanwhile, have been grappling with challenges in the syndication markets. When banks started doing these deals a few years ago, they would usually agree to a "best efforts" deal with the studios, meaning they would only commit to a deal if they could underwrite it to reduce their risk.

But more recently, banks have committed to deals before underwriting them. Now, with several banks struggling to syndicate new deals at acceptable prices, some are reverting back to "best efforts" deals.

Urgh. I imagine this doesn't make much sense to you, either, since most English-speakers would translate "underwrite" as "commit to fund". I think the best way of describing "best efforts" is "banks agree to provide as much funding to film producers as banks can raise from third parties". I have no idea how you underwrite something to reduce your risk. They probably meant to say "syndicate", but that word has different connotations in the media.

Anyway, that was all very tedious. To cleanse your soul, may I suggest you watch AC~DC, fronted by Bon Scott in a dress, tear through "Baby Please Don't Go". Comes close to the majesty of the Nuge's version

Thursday, August 16, 2007

Tantrums At Credit Suisse

I was going to give the blogging game a bit of a rest today, maybe catch up on my work, work on buying an apartment, improve the intern, that kind of thing.

And then along comes an outburst of such monumental stupidity and chutzpah I feel obliged to reply with a umbrage-laden, humourless and insulting outburst in return. Yes, I've finally taken a banker's comment personally.

Via the inordinately informative Alphaville, the free-bones FT with lower levels of ponderousness, comes the following ludicrous outburst from one Jonathan Blau, the co-head of the leveraged finance strategy and portfolio products group at Credit Suisse. Mr Blau is discussing the fact that current credit markets are experiencing huge levels of volatility, that mediocre credits (those with average levels of risk) cannot raise debt, and that really good ones are paying historically high levels of interest on new debt issues:

I would argue that this remains an idiosyncratic event. And it’s being amplified by the financial press because the financial press talks to a banker, talk to a trader. The trader says to himself, ‘I’ve lost all the money I made this year; I’m having…a bad day; my bonus is impaired’ and he tells the financial reporter it’s the end of the world.

The financial reporter of course prints that because he wants to make a big splash with his editors so that he can move on to some other job that he’d much rather have, say working on the political desk.

There are a few possible explanations for this outburst. The most obvious is that during previous encounters with the press, the hacks in question were unable to conceal their contempt for him. Blau may have confused a personalised dislike with a more generalised dislike for covering the world of finance. It could be, on the other hand, that the reporters relegated to writing about "leveraged finance strategy" are truly bored and dispirited with their work.

What's most amusing about this is that it was only today that I realised that Credit Suisse HAD a leveraged finance strategy (yes, I'm misconstruing his title for comedic effect). I'd always sort of assumed that CS' leveraged strategy was finding the stupidest, greediest, or most desperate clients and pitching them leveraged loans and high-yield bonds at eye-watering rates of interest.

In fact, I've never encountered an investment bank with such an unconcealed lack of respect for their clients. In fact it was almost impressive how often they were willing to say "hey what else were they going to do?" to reporters. I'd love, you'd know I'd love, to give you some juicy examples, some of which you might be able to follow up on by joining the dots from bankruptcy filings. But they'd be much too close to the day job.

Still, I'm sure some of you can remember the "Burning Bed", when the attempts of First Boston (which Credit Suisse subsequently acquired) to gouge the Ohio Mattress company ended with it owning the unfortunate maker of Sealy Posturpedic.

Then of course we have the swashbuckling tale of Credit Suisse Financial Products, its derivatives arm, which has since been disbanded. While one financial title was indeed fulsome in its praise for the operation, the UK's Financial Services Authority and Japanese regulators were less so.

And who could forget the time Credit Suisse lent a struggling Houston utility money at 12.5% and upwards? (Actually, in its defence, saintly heartland investor Warren Buffett wanted in on that deal, too).

What we have here is a picture of a smart guy apparently wigging out at the behaviour of the small number of people that believe him any more. Now it's true that Credit Suisse, like Deutsche Bank, is a legacy Wall Street investment bank that succumbed to the charms of a graceless European owner through its own fecklessness, but such churlishness should be beneath such a group of very rich men.

It is true that there is a huge degree of financial illiteracy amongst some business journalists. Indeed, I've poked them with my pedant stick on a couple of occasions. But by and large the financial media is slightly better compensated, slightly smarter, and a lot weirder than their counterparts covering politics or what have you. Bloomberg's big contribution to the media has been to recognise this, for good or ill.

I suspect the good folks at Alphaville know all this already (except maybe the gouging Texan utilities bit) and are just too kind to rub it in his face. But really, if there was a canon or poor excuses for a debt capital markets business going up the tube, this is definitely top five. Because, seriously, none of us have enough money to buy his toxic leveraged loans, even if we were qualified investors.

On a lighter note, happy birthday Elvis, the Republic of India, and the compact disc. Actually all three are on consecutive days, but I could not come up with a better way of plugging
Alex Von Tunzelmann's mighty Indian Summer, which, unlike Credit Suisse, IS actually Big In Houston.

Wednesday, August 15, 2007

Poor's Show

Wow three posts in one day. It's like 2004 all over again. Telling example, here, of how ill-equipped mainstream business writers have been to write about debt markets. Gretchen Morgenson and Jenny Anderson's article on the commercial paper market kept referring to Standard & Poor's, the rating agency as "The S.&P", as one would refer to the stock index, the S&P500. S&P alone will do just fine. With luck they'll fix it before the print issue.


I just popped out to Chipotle a minute ago, and stumbled upon a sedately-moving demonstration by pedicab drivers rattling down Broadway. They seemed to be protesting another bout of authoritarianism from the powers-that-be in New York. At least one sign referenced mayor Bloomberg, but from what little I could google, their beef is with a cap on their numbers that was passed by the City council above Bloomberg's veto.

Most likely, though, Bloomberg sees them the same way I see them; as the equivalent of mimes - a reasonably attractive and faux-bohemian addition to the streets, and a useful means of amusing tourists, but in no way to be tolerated in overwhelming numbers. I don't hate the pedicabs anywhere near as much as I do 70% of cyclists (100% of those that use Prospect Park), but I do think they're the wrong size and the wrong speed to be cluttering up the streets of New York. The city's already a delicate balance between pedestrians/mass transit users and cars, and bicycles and pedicabs tend to disrupt this balance.

Bicycles, though, are single-user, relatively small and maneuverable vehicles, while pedicabs are not. moreover, they're a solution to a problem, that of pedestrians temporarily wishing to move at the speed of traffic, that taxis already solved without creating this slow-moving tween of a vehicle type. I'm not the biggest fan of taxis, either, and do feel that they should take the lead in making fuel efficiency gains, but they're moving at about the same speed as the other vehicles, and tend to keep the traffic flowing nicely.

You might think this approach is somewhat reactionary, particularly on the day that the city scored $354 million for a congestion pricing scheme from the Federal government. But the two are linked. Congestion pricing will only work if traffic can move freely around the city and the city's buses are able to take up the strain of additional commuters. While I've seen depressingly little evidence that the City is even thinking about how buses fit into congestion pricing, I'm sure that the limited environmental benefits of pedicabs go nowhere towards outweighing the disruptions to the city's streets they cause.

That goes double for party bikes

Whose Guitar Is It Anyway?

Sorry, this is the same Pitchfork that we know and love and trust with arcane musical knowledge? Why then did it breathlessly lead yesterday with the news that the Wu-Tang were going to cover "While My Guitar Gently Weeps", as if this was the most unnatural pairing since Arthur Miller and Marilyn Monroe?

I mean, I'm just a white-boy Scandinavian rock fan, but even I recall that Ghostface got there three years ago, and, um, Pitchfork lamented its exclusion from his album. Probably a good opportunity for a wee little tune, and to remind you of the scene of Withnail's return to London.

Ghostface Killah - "My Guitar"
Buy "Pretty Toney" here. But, since, "My Guitar" never made it on there, and we do know how much the remaining Beatles and the heirs of the dead ones like to get real paid, better buy the "White Album" just to be safe. Actually, wait. why not just buy "Withnail & I" on DVD, and that way George Harrison's heirs get paid directly? Sorted

Monday, August 13, 2007

Bridges, Squares

The current distress in credit markets in the US and elsewhere has been reasonably kind to Mrs. Cutesome, although she is likely very soon to go from being a cute leveraged finance expert to a cute workouts and restructurings expert. Me? Not so much. The market's been busy, and there's an outside chance that we could get armageddon for all borrowers rather this flight to quality that everyone keeps going on about (What is quality? Whatever said banker happens to have on his books. Heh)

But what we're still missing, amidst the discussion of how home loans work, is some decent discussion of how corporate finance works. So we know that jumbling dodgy home loans together and selling them on to investors can lead to these investors holding dodgy securities. We know that this has made investors in other kinds of debt more nervous.

But we don't know how this will play out. More importantly, mainstream media knowledge of the workings of leveraged finance is pretty slim. Reporters can write a story pretty easily about how buyers can't get debt and they can suggest that debt will be more expensive. Those with advanced ninja private equity skills might suggest that covenant lite loans will become more covenant heavy.

At this point we start wading off into crazy-land. Sometimes covenant-lite means not monitoring debt-cashflow measures, the sort of oversight most frequently mentioned in discussions of covenants, but it also covers a host of other restrictions, including those on asset disposals and the ability of buyers to extract cash from their purchases.

The other measure is more simple - how much money is the buyer putting down? This is one area where discussions of mortgages and leveraged buy-outs proceed on similar tracks. If a buyer puts more equity into the deal, and since if a deal goes bad, this equity gets repaid after banks recover their money, deals with a higher proportion of equity tend to be less risky for banks. they tend to mean lower returns for borrowers, but then this is the same for a mortgage.

So now, we've established the difference between equity and debt, we'd hope that the difference between an equity bridge loan and a debt bridge loan is clear. It's not unfortunately, since writers tend to conflate the two. The huge majority of hung loans, or pier loans, on banks' balance sheets are meant to be repaid with longer-term debt. It's not as if private equity funds are short of capital, and while they may ask for their banks to tide them over with an equity bridge until the deal's close, they're usually good for the repayment - indeed some loans will come with a call on the cash in the fund.

I wouldn't call them risk-free, though, or particularly good business for the backs, since they're essentially unsecured "corporate" lending to the funds at low margins. Which was what Jamie Dimon, the CEO of JPMorgan, was talking about in the speech quoted in this Businessweek article:

The banks readily concede that bridge loans represent some of their biggest fiscal risks. Among those leading the jeers: Jamie Dimon, chief executive officer of JPMorgan Chase, one of the banks that delved deeply into such financing. "I think equity bridges are a terrible idea," Dimon said in a late July conference call with analysts. "I think they're bad. I think they're a bad financial policy. I don't think they're good for the banks. I don't think they're good for the private equity guys. So I hope they go the way of the dinosaur because they're basically a one-sided put on our balance sheet."

The article follows by explaining what equity bridges are, and uses the same perfectly reasonable analogy to borrowing for a down payment that I might. But I keep getting the feeling that the author is not aware that there are two types of bridges, and that since the banks won't tell him what types of exposure they have, he's still none the wiser. But debt and equity bridges have very different types of risk, and I could be wrong when I say that private equity funds are good for them.

But I'm absolutely certain that these bridge loans are not the ones clogging up banks' balance sheets. Its debt debt, bridges to a long-term financing that can no longer be assembled. It's a horrible drag on their earnings, but not toxic waste.

Friday, August 10, 2007

How Not To Sell Out

This fight does not quite live up my chosen metaphor of a cage match between General Pinochet and Pol Pot, but it's curious nonetheless. Johnson & Johnson has decided to sue the American Red Cross for infringing its trademark - the red cross.

This seems on the face of it a rather callous thing to do, asking the guys that clear up after floods to disgorge money to a private corporation, a listed corporation, as the Red Cross is quick to highlight in its press release on the matter. For good measure, the Red Cross describes the suit as "obscene", its CEO begs that “the courts and Congress will not allow Johnson & Johnson to bully the American Red Cross.”

The American Red Cross CEO, since may this year, is Mark Everson, and you can find a very illuminating interview with him at Charity Navigator titled "I Am Well Suited for the Job". The guy that runs the site knows his onions, is pretty critical, and obviously has the ears of a couple of big donors, because Everson does not try and fluff him.

Unfortunately we don't get much in the way of discussion of the two big issues, beyond Hurricane katrina, that marred the tenure of his predecessors. The first was the Red Cross policy of withholding its dues from the international Federation of Red Crosses over the issue of whether to recognise an Israeli affiliate. This led to the hugely expensive Red crystal symbol emerging for use in non-Muslim or Christian countries.

It wasn't so much the cause I was bothered about, since the Americans had a fair amount of right on their side, so much as the manner. Here we have a $600,000 grand a year guy issuing diktats to his fellow agencies, all the time working on commercial projects that run completely at cross-purposes to what its sister agencies are trying to do.

I can't though, lay the Johnson & Johnson issue at the door of current, or even recent management. This goes back to a deal struck over a hundred years ago, and lumped the American Red Cross with commercial obligations before its counterparts overseas had even thought through the consequences, much less adopted their later hard line.

Still, for the American Red Cross to complain about such commercial conflicts, when its been slapping its logo on everything from cold remedies to radios is the height of chutzpah. Time for them to get back to first principles.

Alright, got to hustle to Shea now, to see if I can finally catch a Mets victory. Daft Punk last night was good.

RIP Tony Wilson. I reckon Miguel will be out with a far more apt tribute soon. I'd just like to point you to a clip from 24 hour Party people. I reckon Tony wilson actually has his chat with god prepared. He was also really bad at turning a fast buck, god bless 'im

Tuesday, August 07, 2007

Ballistic Bush vs Lincoln

We've heard a fair amount recently about how obsessed President George W Bush is with history, sometimes in consuming it, sometimes in exploiting it, sometimes in punting accountability to it. You can't find this discussed in various forums, including David Greenburg's column at slate, which suggests that Bush has a Hegelian, or determinist, or what I was encouraged in high school to call "whig", view of history.

Greenburg is not quite describing Bush's view as a belief in history operating inevitably towards fuller human progress, noting quite sensibly that bush can also be capable of some very backward-sounding leaps of faith. He rather peculiarly decides to describe the differences between the various determinist schools as differences in the weight they ascribe to individual actions in the sweep of history.

The above, though, only really serves to illuminate the degree to which Bush's megalomania informs his policy decisions, and I'm inclined to say he's not THAT full of his own grandeur. No recovering alcoholic with Barbara Bush for a mother, I'll venture, could.

It might give the reader an idea of how the president misuses history, although the late David Halberstam demonstrated with his last column that he does not exploit it with any consistency at all. No it resembles more several managers in my current organisation, always in thrall to the last thing they read (or heard, in the case of the surprisingly bountiful illiterates on our payroll).

Still, I'd like to take the chance to highlight one area where I think Bush is being personally led in a very destructive direction by a book. The book is Jay Winik's April 1865, a description of the waning weeks of the American Civil War. It's a very easy read, and while Winik's somewhat florid style is not entirely to my taste it gave me a very good insight into a period of which I have read much too little.

Now David Ignatius suggested in April 2001 that Bush bone up on the book because of the excellent descriptions that it offered of reconciliation following the Civil War. This wasn't a bad idea, since it offers many examples of formerly sworn enemies sitting down together and forging common bond.

Thing is, Bush did not, according to the author, get round to reading it till after 9-11. Assuming he's a slow reader with a short attention span, he'll have been focusing more on the steadfastness that General Grant demonstrated in the war's closing battles and the quantities of men he threw into them rather than any of that conciliatory nonsense.

The final months of the Civil War featured unpopular leaders urging a desperate people on towards a hard fought victory. I'd be gobsmacked if Bush hadn't flattered himself to make the comparison. I think most of you could pick some holes in the analogy without resorting to Wikipedia, but it says a lot for the president's mindset that he hasn't examined them himself.

Right, talking of crude political rhetoric, I'm off to buy flip-flops.

Monday, August 06, 2007

Cramer Erupts

Here's your multimedia for the day. Former Bear Stearns economistGoldman Sachs trader and current CNBC celebrity goes absolutely nuts about the fact that the current state of credit markets is going to put his friends out of jobs. Asks for a rate cut (this is actually very sensible advice, because I am currently trying to take out a mortgage.

The wig-out has been remixed to the tune of "Right Here Right Now" by Fat Boy Slim, although the author, for reasons best known to himself, has chosen to identify it as a Crystal Method tune. Nowhere in the voluminous comments on the post has anyone caught this.

I can't help but think that the sages of subprime need to get out a bit more. It's also telling that none of them seem to have a problem with deeplinking, that big no-no of the mp3blogging world. (HT Mr. Salmon)

[UPDATE: You smug git, Gari. Corrected elsewhere]

Friday, August 03, 2007

Odds Sods And Mods

1) Excellent news. In my new office I'm sat three feet from an HP 4250 Laserjet Printer, now with added cancer-causing hotness.

2) I'm quite fond of the whimsical statues at the 8th Avenue and 14th Street A/C/E subway stop. I can't yet claim they helped me get through cancer, though.

3) Ah, the endless train of amusement that is Macquarie Bank, the Australian bank that buys things, particularly bits of infrastructure, and then alternates between borrowing against them like crazy and shuffling themm between the funds it manages.

The above article, which is not the only one in its genre I've read, suggests that the bank's approach might be heading for disaster, on the back of trouble in fund whose investment focus, investing in high-yield debt, is not even a related discipline. We hear also from it that decreased supplies of equity and debt may make it hard for the bank to keep making so much money.

Here's my only contribution to the debate. No one, and I mean no one, produces ideas for things to buy as well as Macquarie. It doesn't mean they'll make as much money at what they do, especially if their returns do not benefit from cheap debt. But they'll keep making more than their peers.

Right, I'm off to watch Transformers. Have a good weekend.

Thursday, August 02, 2007

Get Real Unpaid

You'd think I'd learn from the fate of the Intel ad. Still, head over here to watch a Comedy Central correspondent characterise the subprime lending crisis as African-Americans' economic warfare against The Man. Surprised he didn't mention the fate of Amp'd mobile too.

Rise of the Meatheads

Today's schedule is not as rotten as any of last week's, but it does not stop inspiration from being thin on the ground. In circumstances like this, I think I'm going to have to look for a new job. But to keep you all entertained, may I direct you to the following link, a long, erudite discussion of the Judgement Night soundtrack over at our Sugarzine chums.

Wednesday, August 01, 2007


So Rupert Murdoch has finally won control of the Wall Street Journal, that occasional dumpster for right-wing oppo research and diligent follower-up on yesterday's market announcements. I'm not too bothered either way about it, as earlier comments might suggest.

What I've found immensely amusing during this entire affair is that the Journal's writers, as well as several normally highly capitalist commentators, have suggested that the not hugely dynamic family owners of the Journal keep control of Dow Jones as a public service. The idea being that such important market oversight cannot be entrusted to the salty Australian who owns the New York Post.

This is lazy and patronising garbage. A private company owes the market at large so such favours. There is an entire army of money managers, analysts and regulators to keep an eye on corporate America, not to mention a horde of financial journalists of varying degrees of sobriety that don't work for the Journal, even if they secretly wished they did.

But, as Jack Shafer, a writer I normally love, puts it:

Today's Wall Street Journal moves financial markets with its news accounts because readers believe—rightly—that the paper serves no master but the reader.

I've observed the effect as well. You can talk about a financing in an industry, with a banker that has worked in it for several years, and any reference to it in the Journal will colour his entire commentary. A weak anecdote, to be sure, but there's something about the Wall Street Journal that feeds the American desire for a comforting source of certainty and authority.

The idea that a business news consumer should subject him- or herself to the cacophony of voices toiling below the level of the journal leaves many readers cold. I'd hasten to suggest that anyone who does take that view probably shouldn't be playing around with other people's money, though. For the casual reader, there are a wealth of other options, many of them quite reasonable, not the least of which is Bloomberg News.

The only other interesting angle is whether Rupert Murdoch instinctively understands newspapers or not. Shafer says no, Felix Salmon says yes. I think what we can say is that he is very bad at broadly-based pay rises for journalists - he only pays highly for the most notorious ones. Which the Journal doesn't have any of, outside the Op-Ed page. Heh.