Wednesday, November 28, 2007

Boo Hoo for Universal Music

Doug Morris is whining in Wired about Steve Jobs and Apple's success in online music distribution:

The problem is, he became a gatekeeper. We make a lot of money from him, and suddenly you're wearing golden handcuffs. We would hate to give up that income.

Boo Hoo. Record labels are no longer economically necessary. The only useful function they serve is promotion in a world where anybody can get distribution through iTunes or competitor. I don't understand why these music business moguls are surprised that their position in the music eco-system was eroded by new distribution. Control over distribution was really all these guys ever had. It doesn't take a lot of capital to record on album.

Morris goes to lament the lack of his customer's willing to pay for his product:

Really, an album that someone worked on for two years — is that worth only $9, $10, when people pay two bucks for coffee in Starbucks? People never really understand what's happening to the artists.

This is so rich since most artists never made much money from music sales when the labels ruled the business. If people are only willing to pay $9 for album, that's all it's worth. Boo Hoo for the music labels. No one is going care when they are long gone.

Monday, October 22, 2007

AT&T is a bunch of crooks

I recently moved my cell phone service to T-Mobile and found that AT&T (Cingular) doesn't prorate your last month's bill. They bill for the month in advance and if you cancel, they keep all your money. I'm throughly incensed by this nasty practice. I ported my number out only about 5 days into the billing cycle so AT&T has effectively pocketed 5/6s of a months charges for doing nothing. I'm sure it's in 8 point font in the terms of service so its probably legal just unethical.

I will never go back to AT&T / Cingular. This practice is throughly reprehensible in my opinion. The cell phone was my last AT&T service. I had already switched to local phone service and internet through my cable company. I'm glad to be done with these crooks.

Tuesday, September 25, 2007

Odious Congressman of the Day

Salon reports Rep Engel making a complete fool of himself.

Rep. Elliot Engel of New York, another Democrat, told the crowd that the United Nations had discredited itself by having Ahmadinejad speak, and that instead Ahmadinejad should have been arrested for terrorism once he set foot inside New York City.

I thought it was only Republicans who didn't understand the UN. A country can not host the UN if it arrests visiting foreign leaders. Regardless of what Ahmadinejad has done it's complete absurd to advocate breaching every diplomatic rule and arresting him on a UN visit. Engle is as bad as a Republican. Instead of negotiating with foreign governments he doesn't like, Engel advocates blatantly illegal action against them.

Saturday, September 08, 2007

San Francisco, a good market for landlords

The business press never ceases to surprise me with how vapid they are. Forbes is claiming that San Francisco is one of the best markets to be a landlord. They have be joking. The cap rate on residential real estate in San Francisco is around 3% which is terrible. San Francisco has one of the worst rent to purchase price ratios in the nation.

Forbes reporters and their friends at Marcus & Millichap need some remedial finance. I admonish them to say "Assets are worth the cash flows they generate" ten times slowly as their penance.

Wednesday, August 22, 2007

Bush must be back snorting coke

CNN was right on the money about Bush comaparing withdrawing from Iraq to withdrawing from Vietnam:

"Whatever your position in that debate, one unmistakable legacy of Vietnam is that the price of America's withdrawal was paid by millions of innocent citizens, whose agonies would add to our vocabulary new terms like 'boat people,' 're-education camps' and 'killing fields,' " the president said.

Unfortunately, this speech is not getting a lot of coverage. It's not even linked on the CNN front page right now. The comparison will backfire because the biggest commonality between Iraq and Vietnam is they are both un-winnable quagmires.

Bush forgot the millions of Vietnamese who died during the war. More would have died if the war continued. Claiming the Cambodian "Killing Fields" were a result of the US withdrawal from Vietnam is utterly false. It was the communist Vietnamses government who overthrew the Khmer Rouge:

By December 1978, because of several years of border conflict and the flood of refugees fleeing Cambodia, relations between Cambodia and Vietnam deteriorated. Pol Pot, fearing a Vietnamese attack, ordered a pre-emptive invasion of Vietnam. His Cambodian forces crossed the border and looted nearby villages. Despite American and Chinese aid, these Cambodian forces were repulsed by the Vietnamese. The Vietnamese forces then invaded Cambodia, capturing Phnom Penh on January 7, 1979. Despite a traditional Cambodian fear of Vietnamese domination, defecting Khmer Rouge activists assisted the Vietnamese, and, with Vietnam's approval, became the core of the new puppet government.

If the Congressional Democrats were such a bunch of spineless wimps, I'd be hopeful that Bush's politically stupid comparison would help hasten the end of the war.

Tuesday, August 21, 2007

Is Bush back snorting coke?

CNN says Bush will claim we should not withdraw from Iraq because it's withdrawing would be like withdrawing from Vietnam.

The president will also make the argument that withdrawing from Vietnam emboldened today's terrorists by compromising U.S. credibility, citing a quote from al Qaeda leader Osama bin Laden that the American people would rise against the Iraq war the same way they rose against the war in Vietnam, according to the excerpts.

"Here at home, some can argue our withdrawal from Vietnam carried no price to American credibility, but the terrorists see things differently," Bush will say.

I predict this argument will bomb with the American public. Comparing Iraq to Vietnam is a stupid political move. The reason we should leave Iraq is that it is an un-winnable quagmire like Vietnam. I can only hope that the media gives this speech lots of coverage.

There's also the irony that neither Bush nor Cheney fought in the Vietnam. Apparently, they think other Americans should have kept dying in the rice fields half away around world just as long as it wasn't them.

Monday, August 20, 2007

Risks of a bailout

Besides the moral hazard problems, one the biggest risks of a government bail is huge losses on the loans that go bad. In California and likely other coastal states, the collateral and not be moved without taking a huge hit:

An auction of about 135 foreclosed homes in San Diego Saturday provided more sobering news for mortgage lenders. Ramsey Su, an investor and former real-estate broker who attended, calculated that the high bids for the homes averaged 67% of the prices they fetched when they were last sold, mostly in 2004 or 2005. At a similar auction in San Diego in May, the average was 73%.

That's a loss of a 1/3rd before expenses! I'm highly doubtful Freddie Mac or Fannie Mae models take these kinds of haircuts into pricing risk. The capital markets see the risk and want nothing to do with this mess which why the secondary market for mortgages has shutdown. If the government steps in, taxpayers could be left holding a trillion dollar bag.

rewarding the irresponsible

There's a great deal of rhetoric both from left wing pundits and Democratic presidential candidates about how we need to save over-leveraged borrowers from foreclosure. I could not disagree more and while this may look cold hearted, I don't think it is.

None of these pundits are politicians are concerned renters can be kicked out their home for no reason at all on 30 days notice. This insecurity is considered the natural state of affairs for the second class citizens renters. However, when first class citizen "home owners" who bought their properties on zero down mortgages on loans they never had any hope of affording when the teaser rates expired are in danger of being kicked out their homes these same politicos declare it crisis and start advocating for massive subsidies from the responsible to irresponsible.

I rent and am subject to 30 day tenancy termination. I concluded that housing prices were dangerous overvalued in my area and I did not want to burden of the large mortgage. Renting if you are not comfortable with the size of the mortgage is the fiscally prudent decision. Unfortunately, renting is an inferior option to buying but because I'm prudent person I accepted the drawbacks. In addition to potentially having to find another home at very short notice, my rent can be raised any amount at any time and the level of repair of residence is only what the landlord chooses to provide.

I'm going to be outraged to pay $1 to bail out people who bought and can not their home afford it. I took hit on renting and now Clinton, Edwards, Dodd, etc want me to pay to somebody else's house because they might be kicked out for not being able to make their commitments. Cry me a river.

Democratic Candidates are almost uniformly pro-bailout

I'm most disappointed to see not a single candidate talked about borrower irresponsibility. It's all the fault of the banks and new economic boogie-man, the hedge fund. Biden sounds like he's the only with a clue which I find unsettling since I tend to see Biden as bloviator.

Here's the their answers from the ABC news transcript. Emphasis is mine.

STEPHANOPOULOS: We're running toward the end of the 90 minutes. I have a couple of quick questions, and then a final question.

This is -- this is basically a yes-no question. We've seem all this turmoil in the markets over the last couple of weeks, caused by the credit crunch and the crisis in the mortgage markets.

STEPHANOPOULOS: We saw, on Friday, the Federal Reserve lowered the discount rate for banks. Should they lower rates for everyone else, yes or no?

CLINTON: I'm glad they did what they did. But it can't be just left to a bail-out for the banks. We've got to figure out how we're going to figure out people facing foreclosures.

And I think a number of us have recommendations on that, that do not lend themselves to an easy yes or no.

DODD: Yes, I think it will happen in September. But we also need more liquidity. And they ought to be allowing Fannie and Freddie Mac to put more liquidity in the market.

It has seized up. You can't get a mortgage in America today.

EDWARDS: I agree with that. But we also need a home rescue fund for all the millions of Americans who are worried about losing their homes.

GRAVEL: All I would say is that there's no answer to that question. Just follow the money of the people on this dais and you'll see a response.


RICHARDSON: This is the Katrina of the mortgage-lending industry.

RICHARDSON: The answer to your question is yes, there has to be more liquidity, more funds in the market. What we need is more transparency between those that are making this business happen.

And what we also need to do is to not appoint officials that are in the industry to regulate that specific industry. The mortgage industry, they've become -- a lot of them -- a bunch of loan sharks.

BIDEN: The answer is yes. But we need, as the governor says, more transparency, particularly with regard to hedge funds and private equity funds. They are the ones that are causing this thing to go under. And there's no transparency, no accountability. We don't know how deep this problem is.

Chris will take care of it in the Banking Committee, and I mean that sincerely.

But we don't know how deep this problem is. But I think it's much deeper. It's almost as deep in terms of dollars, not liability, as the savings and loan crisis.

OBAMA: We do need more liquidity, but we're going to have to not only help home owners who are going to be losing their homes as a consequence of this; we're going to have to go forward and make sure that we've got the kinds of tough regulation when it comes to financial instruments to make sure that people who have saved and are trying to get their own home for the first time are not hoodwinked out of it.

OBAMA: And, unfortunately, the reason that we haven't had tougher regulation in part goes back to the issue of lobbying. This is where special interests have been driving the agenda. We have not had the kinds of consumer protections that are in place.

And that's why, when we have this debate about lobbying, we have to remind ourselves it has very real consequences for the people of Iowa and the people around the country.


KUCINICH: The answer is no. The Fed is actually looking at bailing out the creditors. And what we're looking at is a continuation of the problem and a postponement of the day of reckoning.

We need to have a government take strong action where we'll loan money to those who are in trouble. But we need to do that in exchange for having the power, the money-lending power that the banks have right now, come back to the government; government spends money into circulation; and then government can maintain control over the economy.

KUCINICH: Unless we take this action, we're looking at a situation of the collapse of our economy, and we're looking at a situation where these hedge funds will try to get a bail-out while millions of Americans lose their homes. Save the American homeowners.