tag:blogger.com,1999:blog-73589072024-03-12T22:01:11.726-04:00Gumby FreshRock. Pig. BlogGringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.comBlogger831125tag:blogger.com,1999:blog-7358907.post-91684910301398912472012-04-09T18:52:00.000-04:002012-04-10T03:48:19.649-04:00The Right Kind of HowlerSo, inspired by the <a href="http://banananutrament.blogspot.com/">return of the Mig</a> and his, er, fresh new venture called <a href="http://www.gripper.com/">Gripper</a>, I've decided to eject a post that's been bouncing around my cranium a few months now.<br />
<br />
Despite, or perhaps because of, not living in a city any more, I spend a large portion of my otherwise inert disposable income on new vinyl records. Middle aged physical media fetishists are, after all, the record industry's Last Marks. And given I'm too old to be getting drunk in the many and varied central business districts I still visit on the course of my travels, I now tend to spend any spare hours visiting random record shops.<br />
<br />
The cash outlay is about the same, and since I'm visiting these locations using public transport rather than taxis I usually just about end up ahead. Unless I'm really bored and in Asia and visit the electronics bazaars instead. <a href="http://www.funan.com.sg/malls/website/index.aspx">Singapore's Funan mall</a> has the world's slowest pizza hut, <a href="http://www.lonelyplanet.com/china/hong-kong/sights/market/apliu-street-market">Hong Kong's Apliu</a> has a dedicated valve amplifier stretch, and <a href="http://www.pantipplaza.com/">Bongkok's Pantip Plaza</a> is brutally hard to get to using the elevated metro. All of these electronics temples are easier on the wallet, and probably, whatever <a href="http://en.wikipedia.org/wiki/Mike_Daisey">Mike Daisey</a> has said, easier on the conscience, than sex tourism.<br />
<br />
Should you require death metal vinyl in Singapore, may I recommend <a href="http://www.metaltravelguide.com/asia-middle-east/singapore/singapore/hells-labyrinth">Hell's Labyrinth</a>, and should you be in need of sludge metal in Berlin, may I recommend <a href="http://bisaufsmesser.com/">Bis Aufs Messer</a> (though BAM loses points for not, apparently, knowing where to get a coffee anywhere in Friedrichshain).<br />
<br />
But my favourite random record shop experience so far has been at <a href="http://www.vinylgrove.com/">Vinyl Grove</a> in the Hague. I'd been on a business trip across the Netherlands that would have been described as epic if only the Netherlands was a bit larger. As things stood, and thanks to some rather lax planning, I'd been zigzagging across the country by train rather than clustering meetings by town. I was, truth be told, knackered. Before heading over to the Denneweg for a moderately expensive, and moderately satisfying, dinner, I stopped by Vinyl Grove for a browse.<br />
<br />
The owner was awesomely fun to chat to, though somewhat sceptical when I urged to him to play <a href="http://www.metalsucks.net/2010/06/02/thous-summit-a-gorgeous-horrible-world-awaits-you/">Thou's "Summit"</a>, while casual visitors browsed his shelves. He even gave me a beer, which therefore meant I was obliged to buy some of his stuff. I bought two albums released on Small stone records, mostly because the owner distributes the label in Europe. <a href="http://www.smallstone.com/albuminfo.php?album=112">Lo Pan's "Salvador"</a> is just a little too sleek for my tastes, but <a href="http://www.smallstone.com/store/index.php?main_page=product_info&cPath=1&products_id=139">Acid King's "Early Years"</a> is just magnificent.<br />
<br />
The last purchase that evening was an impulse buy. Based mostly on the cover, and with the store owner's admonishment for me to not let it put me off at first, I bought <a href="http://www.amazon.com/This-Howlin-Wolfs-New-Album/dp/B004OA3W0W">This Is Howlin’ Wolf’s New Album</a>. And it's this album I'd like to talk about today, because it's deeply misunderstood. The main reason it's misunderstood is that Howlin' Wolf disowned it. Not definitively, in the sense that he refused the royalty cheques (not that it sold massively, mind), or even refused any meretricious follow-ups (I'm looking at you, <a href="http://en.wikipedia.org/wiki/The_London_Howlin%27_Wolf_Sessions">The London Sessions</a>).<br />
<br />
The album's backstory and frontstory are both rather fraught and complicated, and clouded by the racial politics surrounding the popularisation of the blues. Chess Records Scion Marshall Chess had a small hit with Muddy Waters' "Electric Mud" album, and decided to record an album with a similarly "psychedelic" slant with Howlin' Wolf. "Psychedelic" is one of the least helpful terms in all of music, as you'd expect from a genre that in its earliest iterations consisted of amped up blues rock. Having not listed to "Electric Mud" I can't speak for its degree of psychedelicity, but I've finally decided that "This Is…" is not a psychedelic album.<br />
<br />
This is important, because you then need to approach the politics of the album differently. It would be easy to say that Marshall Chess foisted a bunch of white kid-friendly longhairs on Howlin' Wolf, and told him to put up while they wanked all over his musical legacy. There's a problem with this version of events even if you do ignore the psychedelic tag. As Wolf subsequently pointed out, and what made the record's sub-headline "He Didn't Like His Electric Guitar At First Either" particularly unfair, Wolf had been pretty comfortable with the use of electric guitars, though he did apparently tell a session guitarist on the album, Pete Cosey: "Why don't you take them wah-wahs and all that other shit and go throw it off in the lake — on your way to the barber shop?"<br />
<br />
No, if you want to make an album a prime example of white entertainment executives desecrating black culture in search of record sales, you'll need to look elsewhere. Maybe "London Sessions". In fact, be horribly mean to it anyway, on principle. But "This Is…" is best understood as a funk album. I say this partly because Cosey ended up being central to Miles Davis' equally-maligned funk albums, and <a href="http://www.headheritage.co.uk/unsung/albumofthemonth/miles-davis-on-the-one">Julian Cope</a> will explain why these albums are also very important. But I say it mostly because much of the album is VERY fruggable. Go on, play it next to James Brown's "The Payback" and see what I mean.<br />
<br />
Marshall Chess did two things to make sure that his version of events of the run in with Wolf ended up being part of posterity. The first was to become <a href="http://www.imdb.com/title/tt1042877/fullcredits#cast">executive music producer</a> of the semi-fictionalised story of Chess, Cadillac Records, which doesn't cover <i>l'affaire "This Is…"</i>, but does make sure that Howlin' Wolf is portrayed as a whip-smart commercially-minded auteur, in other words not the sort of guy, even in comparatively advanced years, to be anyone's stooge. The second was to bring together some rappers to record some blues covers. Chuck D's on record as saying he's a big fan. In this light, the real story of "This Is…" is not white-black artistic conflict but conflict between two different generations of black music.<br />
<br />
The theory isn't perfect. The album has plenty of heavy metal fans. Soundgarden covered "Smokestack Lightning" as it appears on "This Is…", not that <a href="http://www.allmusic.com/album/ultramega-ok-r18512">Allmusic worked this out</a> (Allmusic doesn't get this on a couple of levels. It rates "This Is…" <a href="http://www.allmusic.com/album/this-is-howlin-wolfs-new-album-r2145781">very poorly</a>, without venturing any reasons). I don't think any simplistic analysis of the cast of the record, or even of Wolf's intentions, would help prove this theory of mine. I'm not even sure I should even be discussing the record in terms of race (call this <a href="http://en.wikipedia.org/wiki/John_Derbyshire">post-Derbyshire</a> caution.<br />
<br />
The final problem with trying to reclaim "This Is…" is that the history of the blues has ended up in the hands of rich old white men. These cultural gate-keepers are as easily embarrassed by accusations of a lack of authenticity as the artists that exploited the blues. The sound of the album is close enough to the pop music that blues purists reject to make it very easy to throw the record under the bus.<br />
<br />
The problem, then, is with the context, not the record. So here's why I like it: It annoys so many people that I'm prepared to overlook the fact is also seems to have annoyed its creator.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com3tag:blogger.com,1999:blog-7358907.post-2096470275464613592010-10-16T09:05:00.006-04:002011-04-05T11:03:54.164-04:00M180 BoogieIt's been a little over a year since I last updated this blog, and the only activity that anyone would have noticed has been the occasional <a href="http://gumbyfresh.blogspot.com/2007/10/not-within-my-ambit.html">squeal from the bottom of the Ambit Energy pyramid</a>. There have been a few reasons for this. The Atlantic Yards saga moved into phase about which I could not ethically comment, and then beyond that I had much less to contribute anyway. I stand in awe that <a href="http://www.observer.com/2010/daily-transom/brooklyns-angry-man-norman-oder-plans-keep-fight">Mr. Oder</a> is still on fire. <br /><br />Once I acquired offspring I stopped going out much, and the few gigs I went to could be reviewed just as economically on twitter. Under my real name. Despite the fact at least four or five very fun bars and restaurants opened up near me, I didn't really have the enthusiasm to review any of them (For what it's worth, here's my take on <a href="http://www.forninopizza.com/">Fornino</a> Park Slope: "Please end your quixotic grilled pizza crusade. La Villa can't be paying you that much to eschew tasty Neapolitan crusts.")<br /><br />In any case. I've moved. To <a href="http://en.wikipedia.org/wiki/Scunthorpe">hereabouts</a>. And will have to stop being accustomed to instant, plentiful stimulation. Books will be read. Records will be savoured, just as soon as the next consignment from <a href="http://www.allthatisheavy">All That Is Heavy</a> arrives. This is an area that doesn't do renewal, or gentrification, or any real estate greed at all really. If you would like to build an arena there, I'm sure you could find the space pretty easily, and you wouldn't excite much resentment, so long as you left the mighty <a href="http://www.scunthorpe-united.co.uk/page/Welcome">Iron</a> be.<br /><br />It might make a good subject for a blog, though I will probably need to settle a lot longer before I put pixel to screen. I'd sound a little too condescending or wistful for now. Or alternatively, I could set up a pirate radio station - blasting the latest rock sounds I'd picked up on the East Coast to the hungry natives. "<a href="http://www.imdb.com/title/tt0100436/">It's been done</a>", you say? There's the internet, you say? Don't you have automobiles, washing machines, modems and other symbols of a sick society to procure? True. All true.<br /><br />Anyhow, <a href="http://www.gothamist.com">Gothamist</a> is gone from my RSS feed. At some point <a href="http://www.nolandgrab.org">No Land Grab</a> will be too. I'll be left with a grab bag of doom metal and finance feeds, and my perspective on life will be the poorer for it. Or I'll get heavily into animal-raising or furniture restoration.<br /><br />A few weeks before I left I went on a lone bar crawl of the five boroughs. Before you criticise me for embarking on what was essentially a day-long, transit-heavy schlep with fairly minimal boozing beyond that contractually required to visit an open-air drinking establishment in each borough, you need to realise that it was a day-long, transit-heavy schlep with fairly minimal boozing beyond that contractually required to visit an open-air drinking establishment in each borough. I don't think I have any friends that like to spend three hours on the Lexington line, or an hour on the G train replacement bus.<br /><br />But the bars weren't really the point. The idea was to get a half-decent cross section of the New York I was leaving behind. I don't think I really went through it like <a href="http://en.wikipedia.org/wiki/Rock_(confectionery)">rock</a>. I always erred on the side of the picturesque. From the walk through Pelham Bay Park from the 6 train to the <a href="http://maps.google.com/maps/place?cid=13663913548954506038&q=Reef+Restaurant&cd=1&ei=OrC5TJPDEdmQjAeZhZHsCA&sig2=xahE25XhXVRC-jxcMsahjw&dtab=2&sll=40.675194,-73.983046&sspn=0.006295,0.006295&ie=UTF8&ll=40.839394,-73.784373&spn=0,0&z=18&iwloc=lyrftr:m,13663913548954506038,40.837678,-73.782914">Reef Fish Bar</a> on City Island, through to the cheeky pint at Stone Street's <a href="http://www.ulyssesfolkhouse.com/">Ulysses</a> on Manhattan, then via the Staten Island Ferry to the World-flattening <a href="http://killmeyers.com/">Killmeyers</a>, I took my fill of the view from sundry buses, subways and ferries.<br /><br />From there it was pretty much all downhill. The <a href="http://wickedmonk.com/">nearest bar</a> I could find to the S79 bus stop was so bad I decided that I would have to tack on another Brooklyn bar to the end of my trip, and the R train and G train were tantrumming so badly I took a good couple of hours to make it to the Bohemian-Beer-Garden-goes-Disney called <a href="http://www.studiosquarenyc.com/">Studio Square</a>. I finished at Mission Dolores, one of those places I'd have called a local four years ago, but it didn't feel right. Too many youngsters.<br /><br />When it comes down to it, there's only ever been one bar I felt truly comfortable walking into on my own, or somewhat inebriated, or both, and that was <a href="http://freddysbar.com/">Freddy's</a> (The link has automatic sound. But Freddy's can do what the hell it likes, K?). When I started work on this post late last year (gives you an idea of where blogging stands in my list of priorities right now), Freddy's did not exist in any form. <br /><br />Since then, not only has it opened up in a new location in Sunset Park/South Slope/Greenwood Heights, but I've been back to New York and had a chance to visit. And it's wonderful. Even at 3am in the morning and not that busy. It was nice to hear the staff talk about how they were going to bed down in the community, and grapple with what to do when there's not a built-in fan-base of starry-eyed hipsters nearby. All of these issues are important, and it's not often that a bar's management has to sit down and think about its role in quite such an abstract fashion. In any case, I wish them well.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-36201335420478732282010-02-16T16:27:00.003-05:002010-02-17T10:39:45.057-05:00New York Times Plays Nuclear Gotcha. BadlyTime to reacquaint myself with the mysteries of blogging, and there's no better way to do that than by jumping down the throat of the New York Times, which just <a href="http://www.google.com/hostednews/ap/article/ALeqM5gBBbBioMGGC5ImGcSFeWaL0R7R6AD9DTGEF80">lost a finance writer under unpleasant circumstances</a> (Email me, guys, my rewrite skillz are unstoppable. And untraceable).<br /><br />Behold, the New York Times, on the new <a href="http://www.nytimes.com/2010/02/17/business/energy-environment/17nukes.html">nuclear loan guarantees</a>. Southern Company, the utility that Boss Hog from the Dukes of Hazzard would be if he was a utility (<a href="http://www.gregpalast.com/enron-not-the-only-bad-apple/">See Greg Palast here</a>), has received a guarantee for $3.4 billion in financing for two new nuclear units. For some reason, the Times has managed to inflate that figure to $8.3 billion, maybe by including both potential interest and principal payments, even though Southern is <a href="http://www.southerncompany.com/nuclearenergy/presskit/docs/GTF_DOE_loan_guarantee_final_D_v2.pdf">quite clear</a> (pdf) on the number.<br /><br />But the reporter's most conspicuous boo-boo is right here:<br /><br /><i>The new aid for the nuclear power industry serves many of the Obama administration’s objectives, helping broaden support for its energy policy proposals, which face obstacles in Congress; helping control emissions of greenhouse gases; and to some extent bolstering employment and domestic energy production.<br /><br />Mr. Obama said, “Make no mistake: whether it is nuclear energy, or solar or wind energy, if we fail to invest in these technologies today, we’ll be importing them tomorrow.”<br /><br />But these reactors were designed by Westinghouse, a subsidiary of Toshiba, and many major components will be fabricated abroad. And nuclear power is of limited use in offsetting oil imports.</i><br /><br />This is, to say the least, rather unfair. I've been very critical in the past of politicians conflating the debate about how the US generates its electricity with that about where it gets it oil from, since so little of the US generating fleet runs on oil. But Obama didn't say that. Obama, notes the reporter, wants to bolster domestic energy production, without specifying what kind of energy production it wants to bolster. He then notes that Obama says "if we fail to invest in these technologies today, we’ll be <b>importing</b> them tomorrow.<br /><br />Our reporter took one look at the word "import" and thought he would like to take the president down a peg. He notes, correctly, though huffily, that "nuclear power is of limited use in offsetting oil imports," though he could have said the same about any source of fuel for generating capacity. But Obama was talking about importing technologies, not hydrocarbons. I'm not one for squealing about moments of laisse majeste (as I never tired of saying yesterday, I wasn't allowed to vote for the bugger), but this is weak fuel for a hail of peanuts.<br /><br />UPDATE: The article has been revised with the gotcha nonsense removed. Fortunately, the reporter has added a new bit of nonsense for me to pounce upon. This time, he's positing the notion that "banks", by which one assumes he means commercial lenders, will be funding the loans guaranteed by the Federal government. WRONG! Lending money to a project with the full faith and credit of the federal government is just not profitable. One can simply buy government debt to earn pretty much the same return with fewer headaches. Soooo, as again the Southern press release makes clear, the actual money for the loan will come from the government-owned Federal Financing Bank. Since the government is taking on the credit risk, it might as well front the cash itself.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com2tag:blogger.com,1999:blog-7358907.post-74366349225188587952009-09-17T22:47:00.002-04:002009-09-17T22:50:13.395-04:00You *Genius* OneximThe country whose corporate finance market gave us the <a href="http://www.timesonline.co.uk/tol/news/world/europe/article4272585.ece">Aluminium Wars</a> vomits forth a hunk of ill-informed conjecture on the Nets stadium financing so wacked-out I just have to say "bravo"! I'm almost envious.<br /><br />Via <a href="http://www.nolandgrab.org/archives/2009/09/nbarussias_rich.html">nolandgrab</a>, we hear that, like some low-rent London estate agent, the Atlantic Yards stadium finance coterie is hoping that mentioning a wealthy Russian in the same sentence will make their stinky Pimlico maisonette of a stadium financing look more appealing.<br /><br /><a href="http://en.wikipedia.org/wiki/Mikhail_Prokhorov">Mikhail Prokhorov</a>, a nickel magnate, is apparently interested in a Nets bailout, though his recently-founded <a href="http://www.onexim.info/">Onexim Group</a>, whose website lists no financial information, and whose press release page is dominated by news of legal actions. I note, as nolandgrab notes, that his name often seems to be waved around near flailing sports franchises, and why the man wouldn't buy an equally crap team with a better balance sheet is beyond me.<br /><br />I'm not even going to even start speculating about how this fantasy wormed its way into the cranium of Reuters' ace Moscow reporting duo. One can read, in this profile of the estimable finance blogger <a href="http://www.thebigmoney.com/articles/impressions/2009/09/16/spawning-salmon">Felix Salmon</a>, that Reuters, since its acquisition by Thomson, has regained some of its mojo of late. <br /><br />Could be so, and its capital markets coverage has been much more prominent on the web the last few months. Its municipal finance coverage, however, has suffered from Thomson's disposal of the Bond Buyer some months before the Reuters purchase. <br /><br />When one reads the following it's fairly apparent that there's no-one inside the Reuters brain trust to talk to any more about municipal finance:<br /><br /><i>Prokhorov is considering issuing a bond worth $700 million through Onexim to help fund the project, one source close to the deal said. The source said the bond must be issued before the end of 2009 so it is exempt from government taxes, adding: "This is a pure business story. The value potential of the club and arena are very high."</i><br /><br />That said, any reporter that will allow the gibberish that is that final quote to make it into their story may have more immediate parts of their reporting toolbox in need of an upgrade.<br /><br />But back to the first sentence. "Through" is the wrong preposition, pure and simple. The bonds would be issued through the <a href="http://gumbyfresh.blogspot.com/2009/08/i-am-god-of-capitalism-and-i-give-you.html">Brooklyn Area Local Development Corporation</a> as part of the hastily-approved corporate welfare package put together by the city and state for Atlantic Yards. The bonds can't be tax-exempt if they're issued by Onexim. I thought briefly that Onexim might borrow the money on a taxable basis and lend it on to the project, but that isn't what the article suggests in the sentence after.<br /><br />So let's assume the Reuters guys aren't too hot at verbs or prepositions. Could they mean that Prokhorov is <i>buying</i> the bonds through Onexim? It would mean that Prokorov might decline to demand a prepayment penalty on the bonds, although I doubt that he would be able to avail himself of <a href="http://www.bloomberg.com/apps/news?pid=20601087&sid=acgEIvkTqbj4">most municipal bond interest breaks</a>, since he's not presumably paying much in the way of US tax. <br /><br />He is far from the most suitable buyer for a tax-exempt bond, unless the arena bonds are Build America Bonds, where the tax subsidies are paid direct to the issuer, but I don't <i>think</i> they are. <br /><br />They could have been told that Onexim is considering guaranteeing the bonds, by putting up a performance bond, in exchange for a substantial stake in the Nets or arena company, though I have no idea whether Onexim has the resources to make a $700 million contingent commitment like that, and whether the ratings agencies would believe them. <br /><br />Still there must be a reason why someone close to Onexim or Ratner is babbling about bonds when no-one asked them to. I hope you will agree with me now when I say the Reuters reporters don't sound like capital markets vets. What we're hearing, via an elaborate and far from lucid chain of whispers, is that the bond financing is looking as hairy as the Net's team finances. This should be far from reassuring to Ratner's pals at the ESDC.<br /><br />"Odd", Eric, ain't the half of it.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-59020503721656009532009-09-10T16:01:00.002-04:002009-09-10T16:22:18.281-04:00The Ratner Hat SyndromeJust got back from a trip to Canada. So it's taken me a little while catch up with the Atlantic Yards hullaballoo. Saw the renderings in the <a href="http://www.nytimes.com/2009/09/10/arts/design/10yards.html?_r=1&ref=arts">Times</a> on the way home.<br /><br />I must say the first thing the new arena put me in mind of was the funny helmets the rebels used in the third Star Wars movie. Which makes the new arena mid-80s futuristic, I guess. It also looks a little more low-slung, which is in general a good thing. If the man managed to put it up nearby without throwing people out of their homes and gorging on public subsidies I might even learn to love it.<br /><br />Two small details intrigued me. The first is that Ratner's moving the team offices out of the arena, which sounds like a pretty desperate stab at cost-cutting, and may well reduce the attractiveness of the arena to another buyer. I'm sure Ratner has lots of Brooklyn office space standing by idle right now, but am not sure that whatever mug he manages to dump the team on will be similarly, um, blessed.<br /><br />The second is that Ratner has decided that the new arena will include retail space. This is interesting, because, again, and this can be confirmed fairly quickly by a quick stroll through his two ugly malls, Ratner's not hurting for vacant retail spaces in that part of the world right now. Is Ratner, or his bankers, or the agencies, so worried about the revenue that the arena will produce, that he's trying to juice it with some retail rentals?<br /><br />Alongside the release of the new rendering, Ratner also granted Eliot Brown, the only professional journalist spending much time writing about the arena financing, an update on that end of things. There's not much new in here, more a sort of confirmation of some of the proposals that Ratner's been floating around the last few weeks and months.<br /><br />He confirms that he does have a $200 million equity gap, but seems to indicate he's looking for outside providers to take equity in the project company, rather than pay Ratner for a stake in the Nets, which Ratner would then contribute to the project as equity. This could be smart, since there are a couple of private equity and real estate investors that might like a direct stake in an asset like this. <br /><br />They'll only do it, though, I imagine, if the Nets sign a long and expensive lease on the arena, which would doom his chances of trying to sell the team for a while. Of course, Ratner says that FCE could meet this $200 million from its own resources, but I think a commitment that large would put its return on capital so far in the toilet it might as well go back to building strip malls in Cleveland.<br /><br />Then there's this issue of issuing the bonds to finance the stadium and then holding them in escrow until the litigation can be resolved. Ratner has told Brown that he can do this. I'm still not sure how that will work. I'm fairly certain the tax consequences for investors of being made whole (paid back early) on these bonds would be horrible. But it might be possible, and FCE, in one final throw of the dice, might be able to put up the premium to prepay the bonds itself. Certainly it would be easier to find that kind of money than $200 million in equity.<br /><br />But the process is likely to be hideously complex. Go look at <a href="http://www.munibondadvisor.com/refunding.htm">this page</a> to get an idea of how difficult refinancing municipal bond debt is. Yeah, I'm copping out a little bit here, but I had a rather large lunch, and municipal finance terminology is not my strong suit. Let's just say we're getting a clearer idea of what route Ratner might be taking, his likely gearing, and his timeline. It's a pity Brown didn't ask if he was talking to Assured Guaranty about bond insurance, though.<br /><br />Oh my god, municipal finance commentary and Star Wars references. This really is turning into a low-rent <a href="http://accruedint.blogspot.com/">Accrued Interest</a>, isn't it?Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com1tag:blogger.com,1999:blog-7358907.post-49523594023019400582009-09-04T16:36:00.002-04:002009-09-04T21:28:04.222-04:00Soon You're Talking Real Money...I finally got round to picking through this extremely interesting, timely, lucid, and well-reported Q&A at <a href="http://www.netsdaily.com/blog/?p=1365&cpage=1">Nets Daily</a> post about a potential sale of the New Jersey Nets basketball team. It's awesome. Go read it. Go read it again. Go pick through it yourself like an episode of The Wire. There at the bottom is a comment from me. I'm going to elucidate here on what I wrote there.<br /><br />The blog's pseudonymous author has worked out that there are a lot of rather angry investors in the Nets ready to vent at the nearest knowledgeable Nets fan, and the author has done a very good job of tracking them down. They also have appeared to have gleaned a pretty convincing idea of the Nets team finances.<br /><br />But buried down in the information is something pretty momentous - Ratner needs to scare up another $200 million from somewhere to finish his new stadium in Brooklyn.<br /><br /><i>According to one insider, half the $400 million [sales proceeds] would go towards the down payment on the Barclays Center and half towards reducing team debt.</i><br /><br />I'd been working on the assumption that the $150 million that he'd sunk into the project - on land acquisitions, fees and site work, would be considered an in-kind equity contribution, its "down payment", as the Nets Daily writer put it.<br /><br />Looking back at that assumption now I should have realised that FCR, which has mortgaged a lot of the footprint property to Grammercy Capital, would probably have to pay back that financing before the site could be considered equity, since I can't imagine that Grammercy would find it very entertaining to try and foreclose on land that's got a massive arena on top of it.<br /><br />But there might be more to this. I've always thought that at some point the ratings agencies, no matter how supine they can be when confronted by the considerable charms of the Goldman Sachs sports financing team, might start to bite back. This is a tremendously over-leveraged developer trying to pitch a tremendously over-leveraged project to the market.<br /><br />My assumption was, without knowing much about the conventions of sports team financing, that the Nets would throw whatever revenues they had at their disposal into the mix until the arena looked like it could cover its debt comfortably. TV, advertising, sponsorship, concessions, and so on. Which they may have done.<br /><br />No matter. Credit markets have thawed a little, and it looks increasingly likely that the Nets - if they get the right financing structure in place - could get the bonds done at an interest rate of no more than about 2 percentage points higher than the other New York team stadiums did. But they won't be able to put in a token equity contribution.<br /><br />What the agencies might be saying is that the project is so speculative, or the economic environment is so poor, that the developer is going to have to kick in some more cash to absorb revenue shortfalls before bondholders do. When the Jets and Giants are struggling to shift some seats at their new stadium this is an understandable position to take. So Ratner <i>needs</i> to sell the team to get this equity contribution, suggesting that additional stock or bond issues by FCE to fund this commitment are not feasible.<br /><br />Now go back to the Nets Daily article and take a gander at the logistics of this. Ratner wants to sell the team, and use the proceeds to fund the stadium. But buyers - with the NBA's support, apparently - do not want to be locked into an above-market lease for a Brooklyn arena. They want to own the arena, but probably don't have the resources to convince the agencies to follow through.<br /><br />The Nets losses then, are only part of the reason Ratner needs to sell. But Ratner might not be able to sell the team until the financing is in place, but needs to sell the team to conclude the financing. Can he bundle both into a single instantaneous transaction? Watch this space.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-14966458752693578772009-08-27T11:16:00.002-04:002009-08-27T11:21:54.746-04:00RIP Ellie Greenwich<a href="http://www.nytimes.com/2009/08/27/arts/music/27greenwich.html?hp">Pop genius Ellie Greenwich is no more</a>. She's probably the reason why, despite his crimes, I'll never stop listening to Phil Spector music. Off to the Brill Building in the sky.<br /><br />Even <i>The Ramones</i> treated her compositions with respect. Though in that case they were encouraged to behave by the presence of one Phil Spector sat behind the control desk and presumably waving a BIG BLUDDY GUN around. Here they are being all respectful on Top of the Pops. If you look closely, you can see Spector on the sidelines pointing a bazooka at them.RIP Ellie Greenwich<br /><br /><object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/l4H9yZBjgSI&hl=en&fs=1&"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/l4H9yZBjgSI&hl=en&fs=1&" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-4140338628679037452009-08-12T13:42:00.000-04:002009-08-12T13:43:05.479-04:00Glue Me BabyFalls into the category of too big for twitter, too political for Facebook, and too personal for blogger. But I'm going to settle on blogger, since it is, aside from occasional AY-related link love, where I have the fewest followers. Probably because I'm pseudonymous.<br /><br />Was getting my daily fix of the Guardian this morning when I chanced upon <a href="http://www.guardian.co.uk/world/2009/aug/11/nhs-united-states-republican-health">this article</a> about how opponents of US healthcare reform are using the UK to demonstrate how poor a job government does at providing healthcare. This is a laughable claim, and I'll come to some substantive criticisms in a moment, based on my experiences of both systems.<br /><br />But first, this little nugget:<br /><br /><i>To the dismay of British healthcare professionals, US critics have accused the service of putting an "Orwellian" financial cap on the value on human life, of allowing elderly people to die untreated and, in one case, for <b>driving a despairing dental patient to mend his teeth with superglue</b>.</i><br /><br />I found this particularly funny since I have false teeth and have indeed been driven to fix them with superglue. Here's the thing. It sure as hell wasn't in the UK where this happened, and it was at the suggestion of a US dentist that I resorted to this fix. When I finally got round to getting a new one, I gently reminded the dentist that whatever impression he took of my gob should take into account the wonky teeth I'd had in it the last few weeks. <br /><br />But US dentists essentially just subcontract all this sort of work to outside makers and have very little interest in the details of this work. It's also telling that the denture I got in the UK lasted for about seven years, while my two US ones have managed maybe three years each. [Actually, it turns out that that the UK anecdote involves a man supergluing a crown to his gums, which is a little different]<br /><br />Of course what any of this has to do with US healthcare is beyond me, because there is no such thing as publicly-funded dentistry in the US. Dentists have little interest in being subject to any kind of cost control, government supervision, or the demands of common sense. They are, if you will, all thieves.<br /><br />But it segues nicely into my larger observation about healthcare reform: how on earth do you have a sensible conversation about the proper functioning of your body and money at the same time? Now a supporter of the hopelessly bloated and unequal US system would say "how can you have a sensible conversation about the necessity of medical treatment?" They'd also add, and I confess they're entirely right, that the UK has built a medical system around its founders' inability to discuss money with its medical practitioners, and it's had the fortunate effect of being very fair too poor people.<br /><br />And they're sort of right, but they very rarely say that the US is super-awesome at treating rare and expensive diseases and awful at dealing with the more pedestrian ones. We're talking about huge copays for drugs that cost pennies to produce, little attention paid to preventative medicine, this weird way that America is proud of Medicare and the VA system and seems to hate public medicine.<br /><br />I'm biased. I'm writing this as I'm trying to work out how to settle some BS copay for a chest x-ray that diagnosed me with walking penumonia rather than Swine Flu. Was I informed about this when treated? Nope, via a snotty letter that says I'm inches from going to a collections agency. It's by no means a horror story along the lines of a lot we've had, it just indicates what a wasteful and time-consuming process private healthcare can be. We focus too much on the cost in money of employer-provided healthcare and not enough on the time cost. Maybe if we did, there would be companies other than GM prepared to face down the private health lobby.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-91507118674934631902009-08-10T11:38:00.007-04:002009-08-10T15:44:46.799-04:00I am the god of capitalism, and I give you nonsenseThey say that the future of publishing lies in <a href="http://www.guardian.co.uk/commentisfree/2009/aug/07/murdoch-free-online-news-content">occupying your niche properly</a>. In which case I would like to make my case as the Best Blog Speculating About The Atlantic Yards Arena Financing Evar. To those pedants among you saying that the proper name for the arena is "Barclays Center", I would say, it ain't called that till it's built, and if Barclays wants me to advertise its execrable banking services it can pay me directly.<br /><br />Anyway, the cause of this haste is a <a href="http://www.nytimes.com/2009/08/10/nyregion/10yards.html?_r=1">workmanlike update</a> on the arena financing from the Times' Charles Bagli, FCR's go-to guy for expectations management. <a href="http://atlanticyardsreport.blogspot.com/2009/08/business-as-usual-times-notes-ratners.html">Oder teases out the juicy bits</a> so you don't have to. But it's fairly thin stuff. <br /><br />Ratner's meeting the ratings agencies, which we knew. What we don't know yet is if he's trying to put something together with Assured Guaranty, the least crap bond insurer in the whole of America. He's scrounging for cash from the public and outside investors, both of which are fairly well-known.<br /><br />Which leaves us with the last paragraph of the story:<br /><br /><i>Some real estate executives and critics said it would be hard to sell the bonds for such an uncertain project. But Jay Abrams, a bond analyst at FMS Bonds, said there “is definitely an appetite for tax-exempt bonds in New York, and elsewhere.” The lawsuit, he added, “is not necessarily a game-killer. At the right price, there’s always a buyer for bonds.”</i><br /><br />I don't know whether Bagli tried to ask Ratner whether he had a plan for getting the bonds out ahead of the litigation being resolved. I suspect Ratner would have been deliberately vague in any case. The reasons being that any way round the December 31 deadline for a bond financing would be fiendishly convoluted.<br /><br />But let's go back to this Jay Abrams at FMS Bonds. He seems like a contrarian sort of fellow. Maybe they should give him a spot at <a href="http://gumbyfresh.blogspot.com/2009/07/pity-goldman-but-still-destroy-it.html">The Big Money</a>. It could well be that he's privy to the machinations inside Goldman Sachs' sports finance shop. More likely, though, he doesn't have a clue what he's talking about.<br /><br />I had a quick gander at the website of <a href="http://www.fmsbonds.com/About_Us/index.asp">FMS Bonds</a>, which appears to be a South Florida-based brokerage with a decent online presence whose bread and butter is persuading retail investors to pile into municipal bonds. Nothing wrong with that. Highly patriotic behavior, encouraging dumb retail money to crowd the market and lower government borrowing costs. Give them a knighthood, um, I mean, Presidential Medal For Virtuous Bond Pimps.<br /><br />I'm just not convinced, they've spent much time on non-recourse private activity bonds. Which aren't like regular muni bonds. Which is fine, because they're aren't that many of them, and after the end of this year there will be even fewer, at least for speciously useful sports facilities. No, the real money will probably be in clean energy, but I will pull up there before I digress.<br /><br />I'm very tempted to speculate on, maybe even recreate, the conversation. In fact, I'll do it, at least in outline. I'll assume that Bagli washed up at their door through the intervention of that wise old capital markets pro we call The Google. He probably outlined a slightly risky and speculative bond issue, maybe mentioned the threat of litigation, and our bond analyst, putting up his feet and donning his Wise Capitalist glasses, assured the reporter that in any market there is a price at which a good clears, and municipal bond markets are no different.<br /><br />There are a couple of issues with applying this theory to the AY bonds, however. The first is that equity also has a price, and the more expensive the bonds get, the less attractive the project becomes to FCE's, and the Nets' long-suffering shareholders. I dare say that the bonds would clear the market with a 15% interest rate, but nether the arena, nor FCE, could sustain that rate. Abrams is assuming that the "how desperate are you for the cash" metric, which is pretty much the only one a municipal treasurer cares about, can be applied to these bonds.<br /><br />But the arena company is a private borrower. I say borrower rather than issuer, because the NYIDC, or the ESDC, I forget which [it's the BALDC, an ESDC subsidiary, I have been <a href="http://atlanticyardsreport.blogspot.com/2009/07/esdc-says-it-hopes-to-sell-650-million.html">corrected</a>], will be the issuer. But they'll lend the funds on to the private stadium company, and the private stadium company, not the state, not the city, and not FCE, will be responsible for paying the bonds. The arena financing will not be like poor Jefferson County, Alabama, which started off trying to deal with a poorly-structured sewer bond issue, and ended up <a href="http://www.reuters.com/article/wtMostRead/idUSTRE5724P720090803">laying off two-thirds of its workers</a>.<br /><br />There's only a certain number of people that a struggling arena could lay off before hordes of Brooklyn Beer-starved hordes descend on the arena for FREE SPORTS and FREE HOT DOGS and FREE BROOKLYN LAGER with not enough staff to stop them getting in. Sort of like a less entertaining <a href="http://en.wikipedia.org/wiki/Dawn_of_the_Dead">Dawn of the Dead</a>. Jacking up the rate, beyond a certain level, is just not an option.<br /><br />Maybe this Abrams guy is talking about discounting the bonds. You issue $780 million in bonds but only bring in $700 million in proceeds. Possibly, but the practical effect of discounting the bonds is to increase their interest rate.<br /><br />What Abrams didn't say was "give them a juicy enough prepayment penalty and they'll pile in". He would have been referring to the idea that the proceeds of the bonds could be kept in escrow until the litigation is settled, and if FCR loses the litigation then the proceeds would be returned to the bondholders, as well as a fee to compensate them for their trouble. There are, possibly, a few reasons for his omission. Muni issues are not very frequently repaid early, and there is an entire class of muni bonds, called refunding bonds, that exist on top of outstanding, more expensive, bond issues. <br /><br />It's possible that the arena could issue tax-exempt bonds with an eye-watering rate of interest before the end of the year, and then try and refund them, though I doubt those bonds would be tax-exempt. More importantly, at some point, the interest rates on a badly-assembled tax-exempt financing would be so high that Ratner might as well wait and just issue the bonds in the taxable market if it takes until 2010 to get the litigation dismissed.<br /><br />But our assumption is that the 2-3% saving from tax-exempt treatment on the arena debt is critical to the economics of the project, though maybe less important than the legal authority to seize other people's property for it.<br /><br />So, back to prepayment penalties. Very well-regarded municipal issuers can avoid paying them. Sketchy arenas can't. It takes time and effort to read through whatever nonsense the underwriters marshal in support of the bonds. The guys that buy these private activity bonds don't tend to allocate much of their time and money to them. So the issuer needs to offer to pay them at least 2% of the proceeds, probably more, on top of handing back what they've borrowed, if they want to pay back the bonds early. If, say, the arena doesn't get built.<br /><br />If you're a local government, then fine. You can fire a few teachers and use the savings to pay back the jackals of Wall Street. If you're a corporation that is bringing in revenues, you can take the same route. But the stadium won't have been built. Won't be making revenues, can't even be sold to make the penalties.<br /><br />There's a glimmer of an idea. FCE might be persuaded to promise to pay the prepayment penalty. But FCE's well below investment grade. Assured Guaranty couldn't counter-guarantee this promise, and the promise might even drag down the bonds' rating. So <a href="http://ftalphaville.ft.com/blog/2009/08/10/66071/paulson-blankfein-phone-fest-fuels-more-squid-outrage/">Goldman Squid</a> will have its work cut out here.<br /><br />UPDATE. Of course it was a short while after I hit Publish that I remembered that The Florida Marlins got a financing for a new ballpark <a href="http://www.miamitodaynews.com/news/090716/story5.shtml">done in July</a>. It doesn't alter my thesis, because the Marlins bonds were backed by tax revenues, not stadium revenues, and there's no indication that the city is looking at shoveling the Nets this kind of support. Just as well, cos according to <a href="http://www.sun-sentinel.com/news/opinion/sfl-marlin-stadium-letter-m07160pnjul16,0,7078182.story">this lady</a>, the flipping thing's half-empty most of the timeGringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com2tag:blogger.com,1999:blog-7358907.post-32364806494363899982009-07-30T16:09:00.001-04:002009-07-30T16:10:55.896-04:00Pity The Goldman. But Still Destroy ItThere's been a yawning gap in financial journalism ever since Andrew Ross Sorkin went on book leave. At least he might be on book leave, or I might just have stopped visiting Dealbook, on account of there being no mergers right now. I'm referring, of course, to the post of Chief Investment Banker Water-Carrier.<br /><br />I've been obviously <a href="http://gumbyfresh.blogspot.com/2008/07/polemic-fashioned-from-purest-envy.html">bitterly envious</a> about Sorkin for a while now. Which is a shame because he's charming and hard-working, and god knows what the investment bankers would get up to without him to talk to. He serves, in other words, a powerful societal need, almost like a <a href="http://en.wikipedia.org/wiki/Sin-eater">sin-eater</a>.<br /><br />Which doesn't mean, however, that he needs to be replaced. Still, if anyone's going to do it it's Heidi Moore, whose best stuff at the WSJ's Deal Journal always focused on the comings and goings of bankers rather than that pesky context stuff. She's noticed that there might be an opportunity for a backlash-backlash where the subject of Goldman Sachs is concerned, or at least room enough for the sort of entertainingly contrarian piece that Slate and its offspring go nuts for.<br /><br />Here she is then, channelling <a href="http://www.youtube.com/watch?v=XrNl6-j9x5w">Bill O'Reilly</a> at <a href="http://www.thebigmoney.com/articles/judgments/2009/07/29/will-everyone-please-shut-about-goldman-sachs?page=full">The Big Money</a>. Of course, the advantage of having such an emptily belligerent headline means that she doesn't even have to set up a straw man Goldman Sachs-hater as opponent. I think we can assume that she has the <a href="http://blogs.reuters.com/felix-salmon/2009/07/01/the-taibbi-debate-in-140-characters-or-less/">Matt Taibbi article in mind</a>, although no <i>proper journalist</i> would spend so much time taking down a single article, so she's free to swing a little more freely.<br /><br />Much like the new scamp in prison, she's already gone after the prison-yard bully, in this instance <a href="http://epicureandealmaker.blogspot.com/2009/07/do-not-forget-to-specify-when-time-and.html">the Epicurean Dealmaker</a>. Thus Mr Dealmaker <a href="http://epicureandealmaker.blogspot.com/2009/07/fish-stinks-from-head.html">is strangely muted</a> when discussing the piece. Which is a shame, because, aside from the reporting, the argument (and yes, it is an argument) is a horrible mess.<br /><br />Moore's argument relies heavily on the idea that Goldman Sachs isn't infallible, that its alumni have a rotten time of things when they leave the firm. Sure, says Mr. Dealmaker, they're not that smart. They're modest, they communicate effectively by voicemail (lord knows how they made so much money in <a href="http://www.chinadaily.com.cn/english/doc/2005-12/01/content_499520.htm">China</a>), their performance reviews seem to be genuine.<br /><br />What I think she's doing here is conflating some of the specific criticisms that Taibbi and others have about Goldman Sachs, with the more generalised hatred of investment banks that existed before, during and after the crash. I don't think anyone has been claiming that Goldman Sachs bankers are flashy degenerates, and I think that criticism of the firm is not dependent on accepting the idea that they're geniuses. We did the whole, smart, modest guys screwing up and taking thousands of jobs with them thing when we noticed that <a href="http://www.portfolio.com/executives/features/2007/08/13/Stephen-Feinberg-Cerberus?print=true">Stephen Feinberg</a> existed.<br /><br />In fact, Moore highlights, and TED fails to pick up on, the most terrifying thing about Goldman - that its employees are selfless, loyal, and utterly disciplined. Goldman's existence is problematic not because it's large, not because its people are smart, and not because its alumni crop up in government, or at least not primarily. It's problematic because Goldman Sachs has assembled a group of rich, motivated, ambitious people whose loyalty is primarily to Goldman Sachs and Goldman Sachs alone. Sort of like the Jesuits crossed with the Fuggers.<br /><br />When Goldman has molded its employees so much in its image that they'll resist often quite astronomical short-term monetary rewards out of loyalty to the firm, is it so weird that they'll carry this loyalty over to the public sector, or that the firm will engage in actions really quite detrimental to their clients and society at large because its best for the firm?<br /><br />Or let's put it another way. I'm actually rather happy with bankers being short-termist, greedy and egotistical, if only because it's unlikely they'll coordinate their actions in a sufficiently dangerous fashion to subvert government or bring the world financial system crashing to its knees. Before you note, quite rightly, that these bankers appear to have done just that, I'll note in advance that these bankers had lots of help. Agencies, government, mortgage pimps, and so on.<br /><br />You might also suggest that Goldman alumni haven't been massively successful in the private sector. As Moore notes, they seem to be rather ineffectual when adrift from the mothership. But then that isn't the point. The point is that they're trying. Can you, after all, imagine a gang of Morgan Stanley doing much more after their stint than running a hedge fund?<br /><br />So, Goldman must be destroyed because it's so effective. What's good for <a href="http://www.amazon.com/Ivans-War-Life-Death-1939-1945/dp/0805074554">Stalin's Army</a> isn't good for American capitalism. Actually, it's probably not even good for Stalin's Army, but you get my point. We want our weasels back.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com1tag:blogger.com,1999:blog-7358907.post-23743963018494519512009-06-17T16:18:00.002-04:002009-06-17T16:39:18.577-04:00Ratings want to be freeEmbedded video is unfortunately not a very efficient way for me to absorb information, particularly when this video does not show up in my RSS feeds. But I not only clicked through, but watched <i>the whole damn thing</i> when Barry Ritholz' <a href="http://www.ritholtz.com/blog/2009/06/freerisk-who-needs-moodys/">Big Picture</a> pointed me to a video of two gentlemen proposing an alternative to the big ratings agencies.<br /><br />The two gentlemen - computer scientists Jesper Andersen and Toby Segaran - have formed an open-source venture called <a href="http://freerisk.org">Freerisk</a>, which describes itself as "project with the goal of making freely available the data, algorithms and tools necessary to perform risk modeling". More bluntly, the founders, as you can see from the above-linked video, want to loosen the stranglehold of the agencies on credit analysis.<br /><br />This is a timely, worthy, necessary and maybe even feasible goal. The founders acknowledge that access to the data necessary for debt analysis needs to be improved, and that this data should be provided, presumably to the <a href="http://www.sec.gov">SEC</a> in a machine-readable format. The algorithms necessary to perform this analysis would be open source.<br /><br />I say timely because the Obama administration's instincts have been to ask issuers and agencies to provide a greater amount of information, and I say worthy because, as the Freerisk founders demonstrate persuasively, investors need to have access to better means of measuring credit risk. The current system of semi-regulated, issuer-paid, nationally-recognised statistical rating organisations is simply not stable.<br /><br />I say maybe feasible, because if you're going to start trying to chip away at the agencies' dominance, you'll start, much as newer outfits like Gimme Credit and Egan-Jones have, by looking at corporate debt. The models are simpler, and the inputs and assumptions are much more transparent.<br /><br />But let me look now at some of the potential pitfalls. I have no idea, for starters, whether publicly-registered bond issuers provide the right information in a homogenous fashion, in the same way that registered equity issuers do. Issuers of bonds that can only be bought by accredited large investors (Rule 144A buyers) do not have to disclose any information at all. You might say that 144A buyers are presumably less in need of this sort of protection, but then you wouldn't have been reading the papers much recently.<br /><br />Then there's the fact that agencies have not had a particularly horrible time with their corporate ratings of late. Now this is all relative, and their work on financial institutions has been, at the very least, far from timely, but the agencies' biggest failure has been in the rating of structured products. <br /><br />The Freerisk principals say quite clearly that having proprietary and closed algorithms was one of the factors that got us into this mess in the first place, but if Egan-Jones can't work out a way to break into the rating of structured products, you can assume that the barriers to entry in that business are fairly high. It could be that it's easier than the big boys make it out to be, but he way the industry developed suggests not. Which is not, of course, to say, that issuers can or should be concentrating on structuring fiendishly complicated instruments these days.<br /><br />They <i>do</i> do things differently in debt markets, this peculiar mixture of wild west and gentleman's club. In equity markets the assumption is that any idiot should be allowed to go out and own any stock they like. In debt markets there's an assumption that some products are definitely left to the professionals. which doesn't make a massive amount of sense because debt products - in general - provide a much more stable income stream and better recovery prospects, though they also require a bit more supervision of issuers, whether directly or by a trustee.<br /><br />Regulators have traditionally enforced this distinction by leaving the decisions to the agencies, and there's no sign that they will either let investors buy whatever debt securities they feel like or staff up in a sufficient fashion to make these distinctions themselves. That decisions still confronts them.<br /><br />But chipping away at the edifice of ratings agency dominance will be a gradual process (I see challenges to their use of First Amendment protections to be another means of doing so). I see Freerisk being complimentary to efforts by competing agencies to check their rivals' work by offering unsolicited ratings. Regulators have traditionally frowned on unsolicited ratings, seeing them as a form of blackmail (hire us or we'll put out an unsolicited rating that makes you look bad). But they're probably the quickest way to establish a means of checking ratings shopping among the big agencies.<br /><br />It would also get investors used to the idea that even if a competitor, whether paid for or free, doesn't have the best analytical tools, then if it has a better record with the way its using assumptions and inputs it could still provide an alternative to the big agencies. I'll be curious how it works out.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-7528700087329462612009-06-05T17:02:00.004-04:002009-06-07T18:23:30.444-04:00Hanger Wan<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/_mfoXGJOZUVw/SimI6OcY0AI/AAAAAAAAALw/pZsvibUNZG4/s1600-h/longhairyouth.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 186px;" src="http://4.bp.blogspot.com/_mfoXGJOZUVw/SimI6OcY0AI/AAAAAAAAALw/pZsvibUNZG4/s200/longhairyouth.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5343952966742757378" /></a><br />About the only thing that can rouse me from my blog torpor these days, aside from <a href="http://gumbyfresh.blogspot.com/2009/05/all-hail-doom-claw.html">Doom Metal</a>, is the latest series of exciting gyrations at the Atlantic Yards project.<br /><br />I happened to be out of the country acting as a heritage management professional when Senator Perkins called a massive public meeting about the project but neglected to stock it with any useful questions or event security. The result was a meeting that by <a href="http://www.nydailynews.com/ny_local/brooklyn/2009/05/30/2009-05-30_hardhats_gone_wild_at_debate_over_yards.html">all accounts</a> managed to be both rowdy and substance-free, not unlike the empty theater that is the city's rent-review process.<br /><br />I'm still unsure about the provenance of the people who were so insecure about the Atlantic Yards rationale that they needed to drown out a rather milque-toast set of interrogations. I read variously that they were genuine unionised construction workers or a mob assembled by the community groups that Ratner has paid to support the project. That said, I have an enduring fascination with the iconography of the American hard-hat. That the use of the hard-hat in the practice of wedge politics still has an edge even as America's native working class has largely abandoned the construction sector to recent, usually non-union, immigrants, and the country's heavy industry sector has hollowed out.<br /><br />I thought about this as I read Rick Perlstein's wonderful <a href="http://www.amazon.com/Nixonland-Rise-President-Fracturing-America/dp/0743243021">Nixonland</a>, and his account of the occasion when the city's construction workers acquired a taste for hippy blood. Perlstein's book has been much praised by bloggers, usually as way of explaining the yawning cultural chasm that exists in American politics. I liked it because my entire knowledge of the politics of 60s and 70s America comes from Hunter S. Thompson books, and I know, deep down, that that isn't healthy.<br /><br />Some of the most fascinating bits of the book are those that illuminate just how culturally divided New York City was. I'm referring, of course, to a period before the flight to the suburbs, a time when the city was host to a huge white working class population. Sorry, I should have said, huge violent white working class population.<br /><br />I'm thinking about the photo from 8 May 1969 of the stockbroker and hardhat apparently joining forces to beat up a student protester. You can see it <a href="http://chnm.gmu.edu/hardhats/tie3.html">here</a>. I'm not going to be crass enough to compare arguments over an undistinguished basketball arena with the Vietnam War, but it's a nice and visceral illustration of the marriage of labour and capital in action.<br /><br />The hard-hats kicked off the beating, and the white-collar worker joins right in. It illustrates the coalition that Nixon assembled to power his two presidential victories despite being massively weird, old and dishonest. So why does this tactic still endure in the Brooklyn of 2009? I mean, this is Old Skool. <br /><br />It's possibly not that weird though, since Bruce Ratner learned his lessons about urban development as director of a Model Cities program for the Lindsay administration, which was the hapless bystander to the unrest of the late sixties in the city. He presumably learned the value of keeping labour onside, as well as, presumably, the value of dubious, though deniable, racial rhetoric in undermining opposition.<br /><br />I doubt, though, that portraying construction workers as the stooges of capital would have any more force now than it did in 1969. It would probably be even less effective than following the marshmallow-brained Marty Markowitz about while dressed as a gigantic phone and screaming "MARTY! IT'S BROOOOOOCE" every time he tried to get on television (it's a reference to a moment in a <a href="http://www.newyorker.com/archive/2005/04/25/050425fa_fact?currentPage=3">New Yorker article</a> when he had a very obsequious phone call with Ratner. Oh, never mind.)<br /><br />I was tempted to carve out the <a href="http://atlanticyardsreport.blogspot.com/2009/06/gehrys-design-was-impossible-so.html">news</a> about the replacement of Frank Gehry with the hanger-building hacks into its own post, but the pub beckons, and I don't have much to say about architecture.<br /><br />I'll just leave you with this datapoint. Last year, the Louisville Arena Authority started construction on a $238 million arena with a capacity of 22,000 seats. That can host ice shows, concerts and swimming. Even after tossing Frank Gehry's design and "value engineering" the hell out of the arena, they've managed to come up with an $800 million arena that won't host ice hockey and has a capacity of 18,000. AND IS UGLY AS HELL.<br /><br />I'm not going to go over <a href="http://gumbyfresh.blogspot.com/2009/01/i-wish-i-could-quit-you-marty.html">the model</a> again. I'm not even going to argue about whether New Yorkers are going to pour three times as much love into a second-rate NBA basketball franchise as the good people of Louisville will into their top-ranked NCAA basketball franchise.<br /><br />Let's remember the <a href="http://gumbyfresh.blogspot.com/2009/03/name-over.html">lower naming rights payments from Barclays</a>, the slowing economy, the lackluster suite sales, the crumbling political support and say: Good. Luck. With. Your. $800 million. Hanger. Brooce.<br /><br />[Addition: It occurred to me, several days after completing the post, hitting the pub, and trolling for link love, that there's an excellent way to tie the two halves of this post together. There reason why Ratner is saddled with an $800 million hanger, despite plumping for the most functional design he could get away with, is the cost of his unionised construction workforce. Those same guys who wrecked the Perkins hearing. That, my friends, is <i>karma</i>.]Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com1tag:blogger.com,1999:blog-7358907.post-67999387602675495442009-05-20T11:03:00.002-04:002009-05-20T11:29:42.968-04:00All Hail The Doom ClawI've been somewhat busy with offline activities of late, or at least activities that don't require the use of <span style="font-style:italic;">this</span> internet persona. It would be remiss of me not to big up the <a href="http://www.ccnow.com/cgi-local/cart.cgi?southernlord_LORD100CD_www.southernlord.com/store.php">new Sunn O)) album</a>. However, I have yet to acquire the album, at least a physical copy, and have also yet to listen to it. <br /><br />I was very close to doing so last night, and was all set to take advantage of Mrs. Cutesome's absence last night <a href="http://www.zuzuramen.com/">slurping ramen</a>. So, I gently warmed up with a listen to the <a href="http://www.amazon.com/Phase-3-Thrones-Dominions-Earth/dp/B0000035H0">Earth 3: Thrones & Dominions</a>. By the time this was finished and I had cued up the aforementioned "Monoliths & Dimensions" my lovely wife had returned, and she has very little patience for drone metal, even played at polite volumes at barbecues, as <a href="http://banananutrament.blogspot.com/">Miguel</a> attempted the other day with <a href="http://www.ccnow.com/cgi-local/cart.cgi?southernlord_SUNN94LPBLACK_www.southernlord.com/store.php">Domkirke</a>.<br /><br />I'm off to the old country for a few days, with little access to high-end audio equipment capable of the volumes that drone metal requires (a blown pair of Mission 760i speakers and a 30-year old pioneer amp with rusty innards will not do the work). So I will have to wait for a while, and possibly save my cash for the inevitable <a href="http://cgi.ebay.com/SUNN-Black-One-DOUBLE-LP-boris-VINYL-SEALED-MINT_W0QQitemZ270383700515QQcmdZViewItem">deluxe vinyl pressing</a>. Vinyl fans really are the last readily exploitable niche in music.<br /><br />But while looking for Sunn O)))-related content I stumbled upon this weird internet meme being spread by self-described rock music and pop culture website <a href="http://thequietus.com/about">The Quietus</a> - the <a href="http://thequietus.com/articles/01670-did-jarvis-cocker-invent-the-doom-claw">Doom Claw</a>. It was moderately funny for a while, and then it was applied to top British Islamic extremist <a href="http://thequietus.com/articles/01493-hook-handed-horror-henchman-hamza-backs-sunno">Abu Hamza</a>, and it got very funny.<br /><br />But needless to day, doom metal, if not for the spurious economic reasons advanced by <a href="http://nymag.com/arts/popmusic/reviews/56586/">New York Magazine</a>, is gaining strength. All hail!Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-38512330240750961152009-05-07T16:55:00.005-04:002009-05-08T07:43:51.353-04:00Stop Me Before I Cook Again<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://3.bp.blogspot.com/_mfoXGJOZUVw/SgNLVPxR1wI/AAAAAAAAALo/zepffFg9WSc/s1600-h/reyesph.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 200px;" src="http://3.bp.blogspot.com/_mfoXGJOZUVw/SgNLVPxR1wI/AAAAAAAAALo/zepffFg9WSc/s200/reyesph.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5333189212119357186" /></a><br />Was jolted out of my month-long reverie by a Double Threat. The New York Times has <a href="http://www.nytimes.com/2009/05/07/sports/baseball/07citifield.html?_r=1">written something dumb about bond insurance</a>. Not any old dumbness about bond insurance, but special dumbness about stadium finance bond insurance (h/t <a href="http://www.nolandgrab.org/archives/2009/05/mets_alerted_on.html">nolandgrab</a>.<br /><br />Here's what happened. The company that insured some of the bonds that were used to finance Citi Field has been downgraded. (By way of digression, I keep referring verbally to the Mets' ballpark as "Shea". Normally I'd spend hours practicing how to adopt such an antediluvian affectation, but this one comes really naturally.)<br /><br /><i>Quelle domage</i>, as they say in Paris, where the parent of one of Moody's competitors, Fitch, is headquartered. And what does the unstoppable New York Times manage to extrapolate from the news that Ambac has been downgraded:<br /><br /><i>"Moody’s Investors Service said that $613 million worth of the municipal bonds that were issued to pay for the construction of Citi Field could be downgraded to junk status."</i> WRONG. The bonds could be downgraded to bond status, just as they could be transformed by passing aliens with a peculiar sense of humour into Yankees bonds. But any downgrade to junk, or below investment grade status, will be entirely separate from the issue of the downgrade of the bonds' insurer. <br /><br />This is because the Mets' stadium bonds have their own underlying rating, in this case one of Baa3, which is the lowest non-junk rating, but is not junk. It's the rating the bonds would have if there weren't insured, which is basically what has happened because of the downgrade of Ambac. This underlying rating is important, because unless it was not junk at the time of issue, the hapless Ambac would not have been able to insure the bonds. This rating, as Moody's stresses in its report, is not under threat. All that happens after Ambac is downgraded is the poor Mets are paying for insurance which is about as useful as a chocolate fireguard, because the insurer is worse rated than the Mets stadium.<br /><br />There are plenty of scenarios under which the Mets bonds' underlying rating might be downgraded, particularly if the New York economy stays in the doldrums and the stadium does not generate as much revenue as it should. But let's remember this is a popular franchise in a large city with a very patient fanbase that gets plenty of excitement in September, if not in, ahem, October. Don't try and pretend that any Nets financing could get a rating like this as easily. I love the Mets, but they're a bit trashy. Compared to the Nets though, the Mets are that really classy lady in the black dress and pearls that fronts the Lexus dealers' adverts. Yes, that classy.<br /><br />Couple of bond basics. The interest rate that a stadium pays, provided that it is fixed at the time the bonds are issued, is basically immune to the effects of a downgrade. There are plenty of financings that can be the victims of insurer downgrades particularly in the floating-rate market, but the Wilpons didn't hold with that nonsense, so we've got pretty boring bonds, except for the whole crappy bond insurer issue. <br /><br />If you're holding the bonds you've got to be pretty sore, because you have to remove them of the metaphorical liquor top shelf and stuff them down behind the bar with the other chemical aftertaste no-brand Military Special gin type stuff. But the holders have been getting these shocks ever since Ambac stopped being triple-A, and are probably resigned to it now. The holders just act now as if they own bonds without insurance, which is hardly the worst thing in the world to be owning. I mean, they could own CDOs or Chrysler bonds.<br /><br />Maybe, you're thinking, and I know the Times reporter must have been thinking when he realised that the Ambac downgrade meant nothing to the Mets, that this might prejudice their future access to the capital markets, what with only being low investment grade and all that. For saddling investors with bonds that collapsed in value they will be be punished! <i>"If they are downgraded to below investment grade, or junk, the team may have to pay higher interest rates if it issues new debt</i> notes the reporter, seeing the light at the end of the tunnel of irrelevant conclusions.<br /><br />"Um, Mr Belson," screeches your blogger, reaching into his draw for the bag marked 'NASTY AD HOMINEM DEBRIS' "you HAVE toddled up on the seven train to Shea of late, yes? You have noticed that the damn thing is built, and there are people wandering around there working out how best to funnel their savings to Danny Meyer? You have noticed, because you wrote it, that they have already come up with the financing to meet the cost overruns? Why on earth is the the stadium going to need to raise more financing? Because they think that that the 5% they are paying in interest (plus I should note, in the interest of fairness, the premium the Mets are paying for bond insurance that doesn't work) is utter usury and needs to be refinanced? It ain't.<br /><br />In fact, now I think about it, the only reason I could think for suggesting that "the Mets" might ever be looking for additional financing, is if the reporter is completely unaware that the issuer for the stadium bonds and the Sterling Mets organisation are entirely separate entities, which do not guarantee each other's debts, and is wondering how on earth the Mets are going to scrape together money for the next big shipment of Jose Reyes bobblehead dolls.<br /><br />Companies, and countries, that issue bonds get downgraded. Sometimes it's a big deal, sometimes it isn't. The Mets bonds and Ambac isn't a big deal, unless you own the bonds and there aren't that many of you and you were presumably well aware that Something Was Up with your bond insurer. A Times reporter resorting to ambiguity and insinuation to stretch a one-line nib to a nine-paragraph laugh-fest was woefully under-employed yesterday.<br /><br />Before anyone says (not that they will, this is hardly a popular blog with the pro-stadium crown, well it's hardly a popular blog at all, what with the infrequent postings and paucity of stimulating subjects, but you get my drift) that the preceding might be construed as a clean bill of health for the business of New York sports, please read the bit about the Mets' resilient brand, and note also that the Mets attracted new financing from the one standing bond insurer (Assured Guaranty) for a small amount for a pretty much complete stadium for a solid team. It won't do the same for the Nets. The New Jersey Nets are the <a href="http://en.wikipedia.org/wiki/Mary_Mallon">Typhoid Mary</a> of High Finance, and no-one wants to eat their delightful cooking.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-29067146674177462152009-04-08T11:27:00.005-04:002009-05-08T16:57:55.776-04:00The New York Times Fluffs Bond Insurance. Again<a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="http://4.bp.blogspot.com/_mfoXGJOZUVw/SdzC_LDNt2I/AAAAAAAAALg/ifZ2GjskbFw/s1600-h/underpants-gnomes.jpg"><img style="float:left; margin:0 10px 10px 0;cursor:pointer; cursor:hand;width: 200px; height: 137px;" src="http://4.bp.blogspot.com/_mfoXGJOZUVw/SdzC_LDNt2I/AAAAAAAAALg/ifZ2GjskbFw/s200/underpants-gnomes.jpg" border="0" alt=""id="BLOGGER_PHOTO_ID_5322343250198902626" /></a><br />Oh, lordy, almost no posts for ages, and then two days in a row. Both about the New York Times' ability to come to quite witless conclusions based on fairly straightforward information. Today, Don Van Natta has a go at probing the municipal bond market. <a href="http://www.nytimes.com/2009/04/08/us/08bond.html?_r=1&hp">The results</a> are far from good-looking,<br /><br />Now I'm a bitter, angry person. You can see it in my treatment of by all accounts blameless, and occasionally impressive, Times reporters such as <a href="http://gumbyfresh.blogspot.com/2008/07/polemic-fashioned-from-purest-envy.html">Andrew Ross Sorkin</a> and <a href="http://gumbyfresh.blogspot.com/2008/07/hating-on-successful-journalists-and.html">Gretchen Morgenson</a>. You can probably dismiss a lot of this as needless sour grapes, if the Times didn't pump out awful adverts talking about how "the Times employs the best journalists in the world. Period." So screw 'em, they can take it.<br /><br />I must say, I thought that I would soon have to hang up my "slightly ropey monoline bond insurer expert" hat, accept that being familiar with bond insurance now ranks up there with being an expert on the workings of the VCR. <a href="http://gumbyfresh.blogspot.com/2008/06/monoline-micturations.html">Had my fun with the Times and bond insurance</a>. Time to move on.<br /><br />Apparently not.<br /><br />Mr. Van Natta is not that familiar with finance, beyond a stint covering some of Eliott Spitzer's antics. As far as I can tell, he's the nearest thing the Times has to a <a href="http://topics.nytimes.com/top/reference/timestopics/people/n/don_van_jr_natta/index.html?inline=nyt-per">Clinton expert</a>, so he deserves more than a little credit for trying to find a more stimulating beat.<br /><br />But really. Guys. This is bad. But let's get through some of the useful angles first. No doubt about it, the cozy collusion between local municipal bond underwriting firms and state governments is an accident waiting to happen. It's not at all reassuring that the only major casualty of a probe into this collusion is the nomination of Bill Richardson as commerce secretary.<br /><br />No doubt that the private sector's tutoring of public sector employees is not as thorough as it should be. Still, let's see how taxpayers react when they try and go on some $2000 a head external training course. Maybe the ratings agencies could run it for cheap. Heh.<br /><br />First we have a couple of paragraphs telling the story of what happened to the town of Lewisburg, Tennessee. Then we get the lede:<br /><br /><i>Lewisburg is one of hundreds of small cities and counties across America reeling from their reliance in recent years on risky municipal bond derivatives that went bad.</i><br /><br />Crikey! They mentioned derivatives! Case closed, <a href="http://en.wikipedia.org/wiki/Robert_Citron">Orange County all over again</a>. [Quick note at this stage - Orange County was using derivatives as investment products, not as part of its debt issuance]<br /><br />I'm now going to quote the offending paragraphs in full, where the reporter tries to explain what happened:<br /><br /><i>For decades, the tax-exempt municipal bond was considered as safe a way to raise money as it was to invest money. If a city wanted to build a bridge, a hospital or a school, it raised the money by issuing a bond and repaid investors over decades. Bonds were considered conservative and dependable.</i><br /><br />[If this was a Michael Moore documentary we'd be hearing perky 50s music and grainy scenes of nuclear families gambolling in the suburbs. This paragraph is not too objectionable, though somewhat loosely-written, possibly to make the contrast between then-prevalent and current municipal finance look greater than it really is. I mean, most municipalities are still issuing long-term debt to build bridges, schools hospitals, sewers, even power plants. Most of these bonds are still considered safe and dependable.]<br /><br /><i>Beginning in the late 1970s, big states like California began to use variable rate bonds as a way to save money. By the late 1990s, some rural counties and small towns jumped on board as a way to avoid raising taxes.</i><br /><br />[See, this is where things might have got interesting. Why did munis switch to the floating rate market? Where did the demand come from? Why, for instance, did the market not have some helpful financing corporation like Fannie Mae propping up 30-year fixed finance?]<br /><br /><i>Not long afterward, interest rate swaps were introduced.</i><br /><br />[At this point the Darth Vader March kicks in. Needless to say, an issuer with revenues that are not correlated to movements in interest rates might want to look at hedging this interest rate exposure.]<br /><br /><i>A swap allowed a municipality to keep a portion of its debt at a fixed interest rate and a portion at a variable rate</i> [Or all of it]. <i>The municipality was, in effect, betting that interest rates would move in its favor </i> [No it wasn't. It was hoping that they wouldn't go lower than the rate at which the swap was struck, at which point letting the bonds float would have made more sense. This is called being out of the money. At this point, you're kicking yourself, but you're hardly in the poorhouse. You might even be able to reassure yourself that while you are paying a little bit more in interest you're not going to suffer if interest rates shoot up again, which they well might over the term of a 20-year plus bond]. <i>Investors protected themselves by taking out insurance that guaranteed they would be paid</i> [Gari's head explodes. No. No. No. No. No. The state and its underwriters set up the bond insurance. It's one reason, alongside hitting up the variable rate market, that the bonds were so cheap.] <i>But as the nationwide credit market collapsed, most of the bond insurers’ credit ratings were downgraded, including the Ambac Financial Group, the primary insurer of Tennessee bonds. That allowed the investors to accelerate the retirement of the debt, usually from 20 years to 7, leading to a steep increase in the interest rate.<br /><br />Although such a provision was in the swap contract, several local officials said that possibility had not been explained to them. </i><br /><br />[By now, the explanation has not so much gone of the rails, but is trundling through a fifth dimension breaking all laws of physics, and the driver's natty striped uniform has morphed into something from George Clinton's band]<br /><br />Please, Don, you're going to have to lay out what happened. Either you, or one of the interns, or one of your sources is going to read the bond indenture. Because this makes no frickin' sense. Was Ambac insuring the issuer's obligations under the swap contract as well as its obligations to bondholders? Could well be. But it ain't what you wrote. The bondholders have the right to accelerate the bonds in the event that the insurer is downgraded. That, my friend, is a story that has already been written, it's about the perils of relying on bond insurers, who buildt a business model built on inaccurate ratings, and it has zip to do with derivatives.<br /><br />Should a municipal treasurer have said "sod the .3% saving in interest costs, I think these bond insurers might go bust'? Maybe. Should he have avoided tapping the auction rate securities market? Maybe, in fact, I'm still not 100% certain that Van Natta isn't describing an <a href="http://www.nytimes.com/2008/02/15/business/15place.html?ref=business">auction rate deal gone wrong</a> (The link, by the way, is to a more lucid Times story to which Sorkin contributed reporting. Can't be hating all day long). But then I haven't seen the indenture. <br /><br />[I have, by slim way of qualification, recently turned down the offer of an interest rate swap on a largish agricultural loan. This is because I think that rates will stay low for quite a while. But if they do head up, I will not complain to the papers about how evil derivatives are. I promise. But I digress]<br /><br />I can lay out a couple of scenarios under which derivatives might have become part of the story. The swap counterparty - the guy taking the fixed-rate payments in exchange for making the variable rate ones, might have had the right to accelerate, or even terminate, the swap, in the event of an insurer downgrade. Happens to a bunch of people, I'm sure. This might, in turn, have allowed the bondholders to accelerate their bonds. Or the swap had nothing to do with it. I don't know, I don't have a copy of the bond indenture. I pray that Mr. Van Natta did.<br /><br />The article's reporting seems to follow the <a href="http://www.portfolio.com/views/blogs/market-movers/2008/12/11/warren-vs-treasury">underpants gnome strategy</a>:<br /><br />Step 1: Load up on risky stuff like "derivatives" and "bond insurance"<br />Step 2: ?<br />Step 3: Ruin<br /><br />If the Times wants to suggest that too much diversity in municipal finance products is a bad thing, have at it. I think my inability to discern from the article exactly what happens gives you an indication that there are several ways to skin a muni. Ditto for inveighing against bond insurance, dubious statehouse-prowling bond firms, floating rate debt and genial but clueless state treasury officials.<br /><br />But don't, for the love of all that is sweet and beautiful, fling out a premise like "derivatives are some scary sh1t, run for your lives", and then fail to explain what went wrong with using an interest rate hedging strategy. This is financial illiteracy of the highest order. Epic fail.<br /><br />[Accrued Interest has the adult explanation <a href="http://accruedint.blogspot.com/2009/04/muni-swaps-lets-hope-we-dont-have.html">here</a>]Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-42331003294279544322009-04-07T11:38:00.001-04:002009-04-07T11:38:54.314-04:00The geography of nasty scummy celebritardsThe New York Times excelled itself this morning with a <a href="http://www.nytimes.com/2009/04/07/arts/design/07buzz.html">hamfisted attempt</a> to read more into a neat geography project than it should have. This is, in a sense, reassuring, because if there's one cultural touchstone that we'd like to survive the current unpleasantness in New York, it is that the NYT is the house journal of thousand-year-old white Upper West Side-dwellers.<br /><br />We'll give you the lede in full:<br /><br /><i>Apologies to residents of the Lower East Side; Williamsburg, Brooklyn; and other hipster-centric neighborhoods. You are not as cool as you think, at least according to a new study that seeks to measure what it calls “the geography of buzz.”</i><br /><br />The Times has come to these conclusions based on where in New York people get photographed by Getty Images photographers. Which is rather like measuring the depth of religious feeling in New York by counting the number of people coming in and out of St Patrick's cathedral. The Times says that "It was not a culturally comprehensive data set, the researchers admit, but a wide-ranging one."<br /><br />No, it's a very wide-ranging data set covering where celebrities are most likely to want to get photographed. Note I didn't even say "appear", since I dare say Getty is not going to pay some poor sap to stand around outside the Bowery Ballroom in the hope that Ric Ocasek from the Cars drops by to catch a show. OK, OK, he's not really a celebrity, and I don't even know if he hangs out at the ballroom any more, but you get my point.<br /><br />Appearances by celebrities constitute the least useful measurement of a city's cultural health since People Magazine's Club Toilet Coke Price bar chart (I made that up, presumably). This is why orange E News anchors, who don't know better, strive to maintain a kind of equivalence between New York and ghastly places like Las Vegas and Miami.<br /><br />If there was ever a moment for the Times, in its constipated, pooterish fashion to say "nice charts, but you're talking out of your derriere, lady", then this was it. Instead it got all excited because the study apparently showed that the Lincoln Center was minting cultural currency by the bucketload. Rather than just attracting a lot of socialites.<br /><br />Further down there's a somewhat impenetrable and needlessly jargon-ridden discussion of the news media as cultural gatekeepers, with a further concession from the organiser of the study that these locations represent "buzz and desirability hubs". Which is kind of a condo-developer's way of describing cultural currency, like those listings you see for Wall Street developments that say "Lindsay Lohan might have been prepared to use the bathroom here."<br /><br />Now I shouldn't get as excited as this about a piece of rank trollery from a major newspaper adapting rather <a href="http://wonkette.com/407512/nyt-news-blog-forgets-it-should-not-be-snarky">awkwardly to the internet</a>. But it's been a while since I posted. What can I say?Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-80293276485795194252009-03-27T17:50:00.003-04:002009-03-27T17:56:20.784-04:00Name OverIntriguing little nugget in the UK's <a href="http://www.independent.co.uk/news/business/news/row-grows-in-brooklyn-over-barclays-nets-deal-1655436.html">Independent</a> (h/t <a href="http://www.nolandgrab.org/archives/2009/03/british_press_w.html">nolandgrab</a>). The article discusses the disquiet in our fair Borough over Barclays' deal to buy the naming rights to the proposed Nets arena in Prospect Heights.<br /><br />We'll leave to one side the hackneyed "grows" headline, on the grounds that British people won't yet be sick of it, and take a look at this sentence towards the bottom of the article.<br /><br /><i>The deal is a 20-year commitment, originally valued between $300m and $400m, but the bank is believed to have renegotiated the cost down since then.</i><br /><br />This is, I'm fairly certain, the first time we have heard any indication that the naming rights deal might bring in less cash than originally anticipated.<br /><br />Still, we're talking about a gap between two unknown numbers, since we only have rumour and guess work to go on about the size of the original deal. The conventional wisdom, echoed by this Independent reporter, is in the region of $300-400 million, over 20 years, or $15-20 million a year. By comparison, I think Citi paid the Mets $20 million per year for 20 years, and I'm tempted, given the Nets' weaker franchise (Mets fan bias here) to assume the Barclays number is nearer $15 million a year.<br /><br />That the deal might have been renegotiated comes as little surprise, given the repeated delays, and the fact that the original naming rights deal had a deadline that had to be extended. Then there was the "<a href="http://gumbyfresh.blogspot.com/2009/01/i-wish-i-could-quit-you-marty.html">value engineering"</a> plan, which involved making the stadium cheaper and less shiny. Finally, there's the lingering suspicion that Frank Gehry isn't really working on the project anymore. I'd want a discount on my naming rights for a discount stadium.<br /><br />I'm going to speculate a little about why this little nugget got out there at this moment in time. If you have the time, go read <a href="http://gumbyfresh.blogspot.com/2009/03/ill-get-back-to-you.html">my earlier rant</a> about the relationship between financial journalists and their PR handlers. I'm guessing that the reporter, not unacquainted with matters of reporting hygiene, went to Barclays for comment. Now when a US-focused scumbag (I use the term fondly) asks Barclays PR about their deal, they're bound to say "we remain fully committed to the fragrant Mr. Ratner. Screw those Brooklyn swine, they don't buy enough <a href="http://us.ishares.com/home.htm">ETFs</a> anyway" (I made the last sentence up, of course. Anyhow, Barclays' ETF business is up for sale, <a href="http://www.reuters.com/article/marketsNews/idUSLQ14092220090327">they say</a>). The intention here is to keep the heat off Ratner and his political catamites in New York.<br /><br />But the <i>Indy</i> doesn't have that many readers in the US (it doesn't have that many readers in the UK, either. Bad-Um-Chah! That's why they pay me the no bucks). So one assumes that if their man in New York goes to the PR, the PR will guess that the bigger story for the Indy readers is why a venerable UK high street bank is flinging money at a second-rate sports franchise in the middle of a financial nuclear winter. I imagine the bank PR might have said something like "this is strictly not for attribution but we're not on the hook for anywhere near as much. We're not <i>that</i> mental".<br /><br />I could very well be wrong, and I apologise profusely in advance if I have traduced the reporter, who in fact has been working on a source inside the Empire State Development Corporation for many months. But if I'm right, then opponents of the arena might indeed have an ally in the form of the Great British Public, and its lack of tolerance for spendthrift bankers. And its <a href="http://www.djmick.co.uk/life/in-pictures-booze-britain-a-night-out-in-cardiff/">poor impulse control</a>.<br /><br />Let's go back that <a href="http://assembly.state.ny.us/member_files/044/20070725/">old set of arena projections</a>, shall we (you can find a discussion <a href="http://gumbyfresh.blogspot.com/2009/01/i-wish-i-could-quit-you-marty.html">here</a>)? We see that the developer was looking to meet between $30 million and $35 million of the arena's then-projected (and probably too low) $43 million in yearly debt service with sponsorship revenue, which would presumably include the naming rights. Any reduction in the naming rights' contribution to this already meager total might be fatal.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com1tag:blogger.com,1999:blog-7358907.post-23889137699163748072009-03-26T11:29:00.001-04:002009-03-26T11:29:44.056-04:00A Ratner momentNo, not <a href="http://www.ratnerville.com/">that one</a>. A reference, and not my first, to <a href="http://en.wikipedia.org/wiki/Gerald_Ratner">Gerald Ratner</a>, who made some unkind comments about his own firm's products, and suffered the consequences.<br /><br />Who would ever again engage in such self-destructive language, especially after a recent painful restructuring? Why, it's the gloriously named Mads Nipper, an executive vice-president at Lego, calling his best customers <a href="http://www.guardian.co.uk/lifeandstyle/2009/mar/26/lego-billund-denmark">"bastards"</a>.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com2tag:blogger.com,1999:blog-7358907.post-46634735180206108422009-03-23T12:51:00.000-04:002009-03-23T12:53:49.232-04:00So Which One Is It, Clever-Clogs?One AIG headline in each of New York City's two quality newspapers.<br /><br />The <a href="http://online.wsj.com/article/SB123776549185209083.html">WSJ</a>: "AIG's Rivals Blame Bailout For Tilting Insurance Game"<br /><br />The <a href="http://www.nytimes.com/2009/03/23/business/23aig.html?pagewanted=1">New York Times</a>: "At A.I.G., the Brand Is Tarnished"<br /><br />Which I guess means they cancel each other out, only you <a href="http://gawker.com/5175745/aig-corporate-securitys-tips-for-surviving-an-angry-mob">still shouldn't be seen in public</a> with any AIG merch (can I keep my <a href="http://www.highstarcapital.com/">AIG Highstar</a> discount mini-Maglite?).Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-50553146373432933172009-03-20T16:41:00.001-04:002009-03-20T17:20:15.891-04:00Towering infernoToday I'm going to try and apply some of the garbage I've picked up following various kinds of financing transactions and apply it to the residential real estate market in New York. Uh-oh. <br /><br />So, I read that the Beekman Tower project, designed by one Frank Gehry and developed by one Forest City Ratner, <a href="http://gothamist.com/2009/03/20/developer_and_economy_cuts_manhatta.php">is struggling</a>. Not a huge surprise, since I hear that if you're a big-ass condo and you're <i>not</i> struggling people look at you funny, like there are crack fumes in your central air or something.<br /><br />Norman Oder, needless to say, has the gamest stab at <a href="http://atlanticyardsreport.blogspot.com/2009/03/if-fcrs-beekman-tower-faces-50-cut-what.html">working out what's going on</a>, with actual reporting and everything. He remembered that the thing was financed with Liberty bonds, and sensibly asked the city's <a href="http://www.nychdc.com/">Housing Development Corp</a> how those are going to work out.<br /><br />The HDC (board member one <a href="hhttp://www.nolandgrab.org/archives/2009/03/under_fire_fina.html">Martha Stark</a>) replied that the Liberty bonds are issued in tranches, and that if Ratner wants to build a smaller project, then he could simply not issue as many as originally planned. <br /><br />From looking at the most recent bond prospectus (which can, I hope, be found <a href="http://www.nychdc.com/pdf/bondarchives/officialstatements/BTower%20031009.pdf">here</a>. If not I might be persuaded to post it, but I'd hate to inadvertently violate any securities laws), we see that on 28 March 2008 the HDC issued $203 million in bonds, that it is issuing another $238 million in bonds this year (I do not know for sure if these have closed, since the prospectus does not have the interest rate written in, but I think they have), and it says that it expects to issue another $238 million in bonds in 2010. Some of these are tax-exempt Liberty bonds, but some are regular taxable bonds, on which you'd have to pay taxes on interest payments.<br /><br />What's the other interesting bit of information about the bonds? Well, they're being issued by Goldman Sachs, which is still nominally in the frame to run the Atlantic Yards financing, as well as Fifth Third Bank. But that's not the interesting bit. The banks that have promised to repay bondholders, in the event that the project does not, are led by Eurohypo and RBS Citizens. We also note that of the 2009 bond proceeds, which my best guess has having closed earlier this month, only $12 million will be used upfront, with the rest put to work down the line.<br /><br />Now it's really easy to point out right now that such and such a bank is working on a financing and then highlight that they're having financial difficulties and then wail "but what happens to the deal"? The short answer is, if they don't have the money to finance the project and it hasn't happened yet, the project doesn't go ahead, but if they've already put up the money then it doesn't matter a damn what financial condition they're in, with a few exceptions, which I'll get to.<br /><br />But the Beekman situation is a tad different. the banks aren't providing the money. They're just promising to be around and be healthy enough to put up the money if bondholders need it. In this instance it is perfectly reasonable to unleash the hounds of snark and point out that Eurohypo, a unit of Germany's Commerzbank, lost 1.4 million euros in 2008, and that RBS is a legendary UK government-owned basket-case brought low by its expansion into markets it didn't understand. Ahem.<br /><br />What also happens to sick banks is they start to become really finickity about borrowers sticking to their promises. And if I had to hazard a guess, I'd say that the banks are the guys slamming on the brakes. My initial thought was that they might have the right to step in if unit sales are not holding up, but I see the building is rental. I don't know whether there could be some kind of metric for measuring lease commitments, or whether banks have the right to rein in the financing based on new market studies. Probably not.<br /><br />I do notice that Forest City Enterprises has provided a guarantee of the project being completed on budget. I can't imagine that their costs have increased much in the current economic climate, but a spike in costs would be the most obvious reason for cutting back the size of a rental project. We also note that the bonds are variable rate and their interest rate resets periodically, and holders, from my unfortunately brief scan of the prospectus, could compel the letter of credit providers to buy them in the event that they could not be sold. The existing letter of credit expires in 2012, and if they can't replace this the bonds get put to the existing banks. I think.<br /><br />You can find a list of events of default on p42 of the prospectus if you're so inclined, and there seem to be a few this might be applicable. This one looks particularly tasty: "any survey required or requested by the Agent shows any material adverse condition not approved by the Agent and such condition is not removed within the applicable time period after notice by the Agent to the Mortgagor." Hard to tell how applicable this is, and it could just apply to the physical condition of the property, but it might be applicable to the financial state of the project. If the banks call a default, then they take over the project.<br /><br />What does this mean for the Atlantic Yards situation? The differences are legion, in particular the fact that probably the first bit of AY to come to market is the arena, which will have a different, though not necessarily better, economic profile than Beekman. But the fact that a project with this bank letter of credit enhancement is struggling quite probably blocks off the last best hope of finding someone to guarantee the AY bonds, since the bond insurers really aren't that interested in terrible basketball team relocations right now. A commenter ages back <a href="http://gumbyfresh.blogspot.com/2008/04/well-we-have-other-bloombergs-attention.html">pointed to</a> the Beekman financing as one model for what FCR might do on AY. I think by now it's a shining example of the perils of applying such a solution to the doomed Brooklyn arena.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com1tag:blogger.com,1999:blog-7358907.post-85704884601564025492009-03-16T12:14:00.001-04:002009-03-16T12:17:27.753-04:00Pay To Not PlayWhile I'm on a roll, and encountering subjects about which I know something. Ratings. Those little letter grades you find attached to bonds, and which have not been amazingly good predictors of how safe the bonds are. <br /><br />San Diego Law's <a href="http://www.nytimes.com/2009/03/16/opinion/16partnoy.html?_r=1">Frank Partnoy</a>, the nearest thing academia has to a ratings expert (Duke Law's Stephen Schwarcz comes close) has an op-ed out asking why we're still dependent on ratings agencies, even after they failed us so badly. Partnoy says, quite rightly, that ratings are much too entwined right now in the corpus of financial markets regulation.<br /><br />All good. And then he gets here:<br /><br /><i>The financial markets can function without letter ratings. Instead of relying on arbitrary letters, regulators and investors should consider all of the information available about an investment, including market prices.<br /><br />Finally, regulators and investors should return to the tool they used to assess credit risk before they began delegating responsibility to the credit rating agencies. That tool is called judgment.</i><br /><br />Which is sort of like wishing that all financial regulators were unicorns. I don't doubt that this novel "judgment" substance he speaks so highly of can be bought in by firms and regulators. But this has a price, and it will need to be passed on to market participants somehow. The hiring of large numbers of buy-side analysts will add appreciably to the fees charged by money-market funds. The hiring of more and smarter regulators will similarly be borne either by some kind of investor insurance scheme or by tax-payers. It may also, and you may think that this is a feature rather than a bug, restrict the types of debt securities that are available to all but the richest and most risk-thirsty private individuals.<br /><br />These developments could all be desirable. I've got more skeptical of late abut the ratings' agencies arguments that they're the only hassle-free game in town. I am, like many people, now convinced that opaque debt markets were a sufficiently major cause of the crisis that the additional expense of an overhaul is now necessary. And I'm one of the agencies' water-carriers. But a huge cost there will be. We can't pretend that putting on a tough face will be enough.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-84552993062273920912009-03-16T11:49:00.001-04:002009-03-16T11:49:31.859-04:00"I'll Get Back To You"I note that the <a href="http://alphaville.ft.com">FT's estimable Alphaville blog</a> is losing patience with financial public relations professionals. I'll give you some illustration of the fact that these poor sods are all that stand between their employers and ritual evisceration in a haze of populist anger. This morning on <a href="http://www.ny1.com/content/features/in_the_papers/default.aspx">NY1's In the Papers</a>, coverage of the <a href="http://news.yahoo.com/s/ap/20090315/ap_on_go_pr_wh/aig_outrage">bonuses paid to AIG</a> dominated the first couple of minutes.<br /><br />But the media relations people working for these organisations are unaware that their audience has changed. Financial PR used to be a very sweet gig, mostly because it involved trading favours and locking horns with a set of journalists with their own pretty small and focused readership. At most, when dealing with, say, the Wall Street Journal or Bloomberg, you'd have exposure to, well, most financial services professionals. But those guys don't write angry letters to congresspeople, they just write cheques, or they don't.<br /><br />The thicket of securities and disclosure rules surrounding financial transactions, not to mention the prevalence of non-disclosure agreements, to which I alluded in this <a href="https://www.blogger.com/comment.g?blogID=20743459&postID=2391943485402657409">comment at the Atlantic Yards Report</a>, together with financial institutions' increasing willingness and ability to enforce message discipline on their employees, has resulted in the creation of a horrible symbiotic relationship between financial journalists and the PRs that service them.<br /><br />I must stress, there's plenty of information sloshing around outside the usual channels. Only it's a) rumour and b) usually being spread around for financial gain. The sort of public-spirited leaks we tend to encounter in national security and political reporting are much less common in the world of finance. Even Harry Marokopoulos the hero of the Madoff scandal, looked over Madoff because he was a competitor. <br /><br />Given that the corporations tend to have access to much better legal help, though much weaker libel protections, than private citizens, these PRs tend to enjoy considerable power as gatekeepers. In fact, as far as I can tell, the London Stock Exchange seems to make employing an outside firm, or at least having a substantial PR capability, a condition of listing.<br /><br />So reporters get hopelessly reliant on PRs to confirm, off or on the record, the stuff that's swilling around as market rumour, or at least to immunise themselves from charges of sloppy reporting. Kudos, then, to Alphaville, for giving us an example of the PR sausage factory in action. Their reporter, Neil Hume, got a tip that Barclays was trying to sell its asset management arm, but couldn't even get an off-the-record nod either way from Barclays' PR people. A nod, in the negative, that the PRs were happy to provide other reporters.<br /><br />Turned out to be (at least partly) <a href="http://www.londonstockexchange.com/LSECWS/IFSPages/MarketNewsPopup.aspx?id=2112392&source=RNS">true</a>, and that Barclays is trying to work out whether it needs a UK government bail-out, whether selling its asset management arm would be enough, or whether selling its asset management arm might be needed to pay for the government insurance. <br /><br />As an aside, because this isn't really an Atlantic Yards post, either outcome is not very good news for the <a href="http://www.thesmartasset.com/2009/03/new_name_for_nets_arena_how_ab.php">Nets arena naming rights deal</a>. A UK government bailout would increase pressure on the bank not to be subsidising Brooklyn real estate ventures. Bt if the asset management sale goes through, there's very little need for Barclays to slap its name on a sports arena. You might sell mutual funds by beaming your logo at basketball fans, you sure as hell don't sell investment banking services. That all said, Barclays might be fine, and neither option would be necessary. But banks' records on insisting they're not in trouble are pretty rotten.<br /><br />Which brings me back to Goldman Sachs, which was also making, this time very public and strenuous, denials about its benefiting from a US government bail-out of AIG. Which turned out to be <a href="http://ftalphaville.ft.com/blog/2009/03/16/53626/point-counter-point-aig-goldman-and-the-nyt/">not entirely operative</a>. <br /><br />Egg on the face for Goldman PR Lucas Van Praag, then. He's now locked in a deathmatch with Goldman's other principal PR, Michael Duvally, over who can come up with the most ridiculous statements to the press. Duvally is a former reporter and, like the <a href="http://www.moviedeaths.com/patriot_games/inspector_robert_highland/">Inspector Highland</a> character in Patriot Games can expect NO QUARTER. <a href="http://dealbreaker.com/2008/12/goldman-sets-the-record-straig.php">Head over to Dealbreaker</a> for one of his bundles of amusement.<br /><br />But the best one by far is <a href="http://www.vanityfair.com/politics/features/2009/03/wall-street-bonuses200903?currentPage=2">his insistence</a> that it was an entirely different type of money that Goldman used to pay bonuses after receiving TARP money. This I sense is one of those moments where a financial PR tries to get a handle on how financially illiterate his new audience is. <br /><br />In Goldman's retelling of the bonus story earnings, the source of the bonuses, and capital, the destination of the TARP money, are two entirely different tthings, and are not at all related. This is humorous because banks' earnings are a key way by which a troubled financial institution could rebuild its capital. By noting that Goldman bonuses were paid out of its earnings, Goldman is saying "we could have used all that money we made prop trading and skirting conflicts-of-interest issues to beef our capital base. But the US government did that for us. So we'll keep paying the bonuses. Cheers!"<br /><br />I'll end this only-slightly-erudite discussion of the trials and tribulations of the financial PR business by noting that financial PRs have at least as difficult a time in their dealings with the institutions they represent. For each of the episodes I mention there's probably a tangled backstory that involves the person in question trying to get sense out of their own people. But then again, that's why they pay them the big bucks. Dealing with scumbag journalists should be comparatively plain sailing.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-85173063733678295962009-03-05T16:44:00.001-05:002009-03-05T16:44:38.082-05:00Gowanus Lounge -> VallhallaRIP <a href="http://onlytheblogknowsbrooklyn.typepad.com/only_the_blog_knows_brook/2009/03/bob-you-had-brooklyns-back-and-for-that-we-thank-you.html">Robert Guskind</a>. This from a much less dedicated, and much less generous-spirited, blogger. I feel bad that my last interraction with him, by Twitter, was far from sympathetic. I'll miss him. He had the best blog in Brooklyn. And now he's gone.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-6757382413440368662009-02-08T21:47:00.002-05:002009-02-08T21:47:53.190-05:00On The Middle Class and Its Lack of UtilityI think the current economic crisis has exposed how useless the American conception of "middle class" has become. Now we British, it is true, take the gradiations of class much more seriously than anyone else, although it's interesting how little definitions of class crop up these days either in conversation or print in Great Britain. I think that's in part a function of how divorced the super-rich have become from the other strata, and how irrelevant the British aristocracy has become.<br /><br />In America, on the other hand, the middle class stretches to include everyone on the socio-economic ladder between the Eddie Murphy character and the two old rich dudes in Trading Places. Neither lower class or working class has much application in the US, with more culturally laden terms such as "blue collar" or "redneck" taking precedence. A lot of this has to do with race and class being so interlinked (anyone who says they're using the word "ghetto" pejoratively but with no racial connotations, is lying)<br /><br />This super-elastic definition of the middle class only really suits politicians, especially those who like to pitch policies most properly targeted at the upper middle class to a constituency that might more properly be described as working class but desires to join the upper middle. It's rather telling that the politicians' own spin-doctors tend to focus on smaller sub-categories, or pat labels such as "soccer Mom" or "Nascar Troglodyte" and so forth. I mean, I'm not asking for the labels that the <a href="http://www.ons.gov.uk/about-statistics/classifications/current/ns-sec/cats-and-classes/analytic-classes/index.html">UK's ONS uses</a>, just that the US learns to talk about class in a way that prevents Joe Biden from ending up as <a href="http://www.nytimes.com/2009/01/31/business/economy/31obamacnd.html?scp=2&sq=biden%20middle%20class&st=cse">"middle class Czar"</a>.<br /><br />Take <a href="http://en.wikipedia.org/wiki/Joe_the_Plumber">Joe The Plumber</a> (please). Joe was making maybe $40,000 a year, but because he aspired to buy a $250,000 business, he convinced himself that a tax plan designed to tax people with <i>incomes</i> of more than $250,000 was going to leave him worse off. I don't want that man anywhere near my grouting.<br /><br />This all came back to me when reading the <a href="http://www.theatlantic.com/doc/200901/chuck-schumer">recent profile of Chuck Schumer</a> in the Atlantic. Schumer, about whom I was <a href="http://gumbyfresh.blogspot.com/2005/08/upstate-ranking.html">briefly unkind</a> a while back (I'm sure he's over it), has a notion of what the middle class is that hews much closer to the rich end than the Joe the Plumber end.<br /><br />There's one very good reason for this: Schumer lives in Park Slope, where you can be much richer than lower middle class and still not feel that rich at all. The obsessions with children's education, the consumer-oriented initiatives, the idea that upward mobility comes through less tangible means. Still, I'm not saying that these are not middle-class concerns, just that Schumer will probably use the cover of the broad middle class definition to implement policies that are priorities to only a sub-sector of this.<br /><br />It's the clearest indication yet, better than speculating on the economic inclinations of Obama's treasury team, that what emerges from the new administration will be a concern for the people that need to be bribed, rather than those that should be bribed. That might sound a tad class envious, but I'm feeling very tenuous right now.Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0tag:blogger.com,1999:blog-7358907.post-80952044085370125332009-02-02T14:27:00.002-05:002009-02-02T14:29:53.149-05:00Ripping FunThe only real rule this blog has is that if I promise to write a post on a particular subject I will never, ever come through on it. The reason I make these promises is that sometimes I don't have the time to put up something substantive, decide instead to put up something scrappy and meretricious, and to bolster my intellectual credentials then promise something really heavyweight later.<br /><br />To whit: Very soon I'm going to put something long up on the massively unhelpful way Americans think about economic strata. Really.<br /><br />But for now, I just want to note that bang in time for top swimmer <a href="http://gothamist.com/2009/02/01/phelps.php">Michael Phelps to be photographed</a> taking hits from a marijuana bong while in line for massive amounts of sponsorship, the mighty <a href="http://stonerobixxx.blogspot.com/">Stonerobixxx</a> blog decides to put up a <a href="http://stonerobixxx.blogspot.com/2009/02/bongripper-heroin-2007.html">couple</a> <a href="http://stonerobixxx.blogspot.com/2009/02/bongripper-hate-ashbury-2008.html">of</a> <a href="http://stonerobixxx.blogspot.com/2009/02/bongripper-winters-in-osaka-meat-ditch.html">releases</a> by doom rock titans <a href="http://www.scenepointblank.com/reviews/2094">Bongripper</a>.<br /><br />Who says stoner rock fans are too wasted to know what's going on around them?Gringcorphttp://www.blogger.com/profile/09254777209701028458noreply@blogger.com0