Monthly Archives: September 2008

A Sit Down with Rine and the Family Stone

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Gregory Rineberg, a puer of many nicknames, who was at the receiving end of a pyramid scheme, took the time to answer some burning questions.

Colt Forty Fineberg, the world wants to know…

Greg Molyneux (GM) asks: From where do you hail?

Gregory Rineberg (GR): I hail from Central Jersey.  I grew up in Highland Park and Marlboro.  I went to college in Piscataway, I lived in Matawan for a short stint, and now I live down here in Tuckerton.

GM: What was going through your head as you tripped over first base in Little League after going hitless for the entire season?

GR: I was practically in tears and very, very embarrassed.  After making contact with the ball I hustled down the line so hard that when I reached first base, my foot got snagged up and I did a half-assed flip over first.  The entire stadium was laughing at me and I ran back to the dugout completely ashamed.

GM: Where did you go to College and what was your major?

GR: Rutgers University and Classics.

GM: How would you describe your college experience as a whole?

GR: Hmm… very hazy . . . . Can you please repeat the question?

GM: How do you currently serve the real world as a productive member of society?

GR: I recycle, don’t abuse energy, drive a fuel efficient car and donate money out of every paycheck to a charity for the Home Depot.  I do the small things like hold doors for old and pregnant women as well as help strangers in need.

GM: Boston Red Sox or Dallas Cowboys?

GR: A douche and a turd sandwich come to mind, but I’ll have to say Boston Red Sox.

GM: Who is the culprit that first introduced you to Fantasy Sports?

GR: My old college roommate Gary – he still plays like 5 different leagues in each sport every year.

GM: Your biggest role model that you have never met?

GR: Hands down it’s got to be Abraham Lincoln.

GM: Is it true that you once despised the idea of blogging?

GR: Yes it’s true.  I thought that it was impure media and nonsense.

GM: If you could be in a foxhole with anyone, who would it be?

GR: Kate Beckinsale.

GM: Waterboarding or solitary confinement?

GR: Waterboarding.

GM: Roman Republic or Roman Empire?

GR: Roman Republic.

GM: What was your best vacation and why?

GR: Israel.  Climbing Masada and swimming in the Dead Sea were great life experiences.  Being a Classics major, I really enjoyed the history that surrounded the area.

GM: What does Babeled mean to you?

GR: It means to talk about nothing in particular and about something that has no bearing on anything of importance, but perhaps somebody will enjoy reading it.

GM: What are your 5 favorite websites?

GR:

  1. Yahoo!
  2. Google
  3. Facebook
  4. The Movie Whore
  5. Babeled

GM: Can you tell us your favorite nickname and why you have so many?

GR: That’s a tough one.  I guess it would have to be The Child.  I have so many because I probably make an ass out of myself often and people feel comfortable naming me.

GM: And for the record, when did Gorillas first invent bows and arrows?

GR: Ok…ok I get my Chops busted all the time about this one (Chops is another nickname of mine).  About 4 or 5 years ago after watching something on a learning channel, I was having a discussion with my friends about evolution and adaptations.  And I made the bonehead statement saying that gorillas invented bows and arrows 25, 000 years ago in order to hunt.  I based this on the fact that monkeys and chimpanzees fight with sticks, in a sword fighting way, and they throw rocks.

There you have it folks, (insert response type here) from the Czar of Common Sense himself, Gregory Rineberg.

Who Really Caused the Bailout Failure? The Media is Lying to You!

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Notice how, despite what Barack Obama and the media will tell you, it was the Republicans calling for tighter oversight of Fannie and Freddie back in 2004.  But the Democrats were quick to defend those who made them rich, even going so far as to lob pathetic personal insults at regulators attempting to raise the alarm.

Now let’s hear Speaker of The House, Nancy Pelosi’s viscious politcal rhetoric and finger-pointing only moments before the Bailout vote on what was supposed to be a non-partisan bill to help the American people.

Are House Republicans expected to endorse her comments by voting for the measure? So why did the Media give Speaker Pelosi a free pass after they called the following a “Political Stunt.”

But nothing was ever said about Obama’s casual attitude on the subject or his refusal to set aside politics for two days to do his job.  Could this be because Obama benefits from economic turmoil?

So, America, does the montage you just saw at all represent the picture that the media has painted for you about the two parties, the economic crisis, and the candidates?

On the first video, what party attempted to raise the alarm FOUR YEARS AGO on Fannie and Freddie while Senator Obama lined his pockets with their dirty money?  What party was on the side of the “Wall Street Fat Cats?”

On the last three videos, which of those three appeared to reach across the aisle to work with both parties?

Who is the leader and who are the dividers?

The media is lying to you!  Don’t fall for it.

~Man Overboard

The Jeff Ruemeli Interview

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When I was but a young lad at the tender age of 7, I met Jeff Ruemeli (pronounced rum-lee) for the first time.  To this day he remains a good friend and now, a fellow Babeler.  Although he remains the Hailey’s Comet of blogging, Jeff’s insight and unorthodox outlook on life adds a refreshing dose of unpredictability to the Babeled staff.

Now, join me as we dive headfirst into the deep end of eccentricity.  With a dozen lifetimes one might scratch the surface of summarizing his personality.  I will attempt the same with only a few moments of your time.

Without further ado – I give you Jeff Ruemeli

<Applause>

JG: What is Ruemelification?  How does one learn to Ruemelify?

JR: Ruemelification is an act of self-liberation.  It occurs when you excel or dominate ANY activity.  It cannot be learned, only obtained.  Most learn only after being Ruemelified.

JG: Could you explain the origins of the phrase “Listen to Jeff Ruemeli”

JR: I once owned a very popular shirt that exclaimed, “Listen to Bob Marley”.  It was all black with white print so its message was direct.  Upon others reading said shirt they understood my insight and told others to “Listen to Jeff Ruemeli.”  Oh, and my friend, Toph, once made a “Listen to Jeff Ruemeli” shirt, and would wear it to the bar whenever I would wear my Marley shirt.

JG: The about page lists your super power as “invisibility.”   Are your blog posts also invisible?

JR: Indeed.

JG: I understand you’re a man of many hobbies – pick your favorite and elaborate on why it suits you.

JR: A favorite?  Whoa, tough call.  Probably playing music, because in my heart of hearts it’s what I love to do.  But a Ruemeli’s gotta eat so I gotta work a day job.

JG: Are there any instruments that you don’t play?

JR: I don’t play instruments I can’t get my hands on.  Those elusive bitches!

JG: If I had to pick the lyrics of one song to describe Jeff Ruemeli, what would that song be?

JR: “The Good Life” by Weezer.

JG: If I were to produce a remix of that song, what rapper would be most suited to perform it and what new lyrics would he add?

JR: Mr. Kanye West, and he would add whatever he wants because that’s what he does (plus I like rappin’ along with him).

JG: I’m a psychic looking ahead five years – what does the Ruemelifier look like?

JR: Awesome as usual.

JG: If you were given the opportunity to use your talent to create one glass object to be displayed in the Oval Office on the next Presidents desk, what would that object be?

JR: Ok, this one is going to be tough to describe.  You know those cards that are textured and when you tilt them side to side the image moves?  Well, I wanna do that but on a sphere so when you walked around it, it would change from the Earth to Mars and back again.  I would do this to show my excitement that the U.S. wants humans to become a space fairing species.

JG: You’ve just won you party’s nomination for president – who will be your running mate?

JR: Jack Gamble, and the rest of the Babeled crew would be in my cabinet.

JG: If you could write an Episode of South Park – what would it be about?

JR: I dunno, they’ve done almost everything.  I guess the subject would be the boys learning instruments and starting a rock band.  Not a boy group, not a Christian band/ anti-Napster band, not a guitar-hero group.

JG: If your invention saved the world, what would it be?

JR: The never-ending throat lozenge.

JG: If www.babeled.com were to have its own reoccurring comic strip, when might the masses expect the debut?<spoiler>

JR: You must learn patience my young Padawan…

JG: Other than Jar Jar’s mom, if you could go back in time and kill the mother of one Star Wars character before she could Sarah Conner her way to another lousy Prequel character, whom would you kill?

JR: Anakin’s mom. He was a little bitch huh?….ugh….Lack of faith…ugh……. throat closing…ugh…….. Disturbing….

JG: What is your favorite HBO series?

JR: Oh you bastard!  You had to go there!  I’m still going to group therapy over this one.  I still can’t believe they canceled Carnevàle!

JG: Who was your favorite character from that series and why?

JR: I…can’t…don’t…losing…calm…

JG: If your biography were made into a motion picture, who would surely win an Oscar for his portrayal of Jeff Ruemeli?

JR: Johnny Depp.  Oh the girls love them some Depp.

JG: Are there enough figs in the fruit salad?

JR: Oh, definitely not. But good bread, this.

<Studio sound-effects simulation of thunder crashing>  Oh, and that Sound means we’re just about out of time.  So let’s get ready for the Lightning Round.  Point values are tripled and if you hear this sound <eh eh> it means your answer is politically correct and will not be accepted.

JG: Coke or Pepsi?

JR: Soda’s bad, Mkay.

JG: Paris or Britney?

JR: Those two are trash.

JG: South Park or Family Guy?

JR: As if this was a question. South Park.

JG: Jedi or Sith?

JR: Jedi, cooler Lightsaber colors plus picking out crystals sounds like fun.

JG: Regular or Decaf?

JR: Regular, none of that toned down crap!

JG: Coheed or Cambria?

JR: Cambria, she has cooler powers

JG: Stay with the band or go solo?

JR: Stay with the band!

<ding>

So there you have it, folks; A brief glance into the paradox of a man that is Jeff Ruemeli.  Half man, half machine, all funk.  There can be only one Ruemelifier, and he can be found only in South Jersey, and…very rarely…very sporadically – on Babeled.

~Man Overboard

Emergency Economic Stabilization Act of 2008 Discussion & Analysis

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A draft of the Emergency Economic Stabilization Act of 2008 (EESA), which the infamous $700 government bail-out of financial institutions is now officially dubbed, has been issued over the weekend.  Per the draft document the EESA’s main goal is to “restore liquidity and stability to the financial system of the United States” in a manner that:

(A) protects home values, college funds, retirement accounts, and life savings; (B) preserves homeownership and promotes jobs and economic growth; (C) maximizes overall returns to the taxpayers of the United States; and (D) provides public accountability for the exercise of such authority.

The EESA lays out two primary options for financial institutions under what is known as the Troubled Asset Relief Program (TARP), a part of the EESA.  TARP provides financial institutions with the ability to sell “troubled assets”, to be defined within 2 days of the EESA’s anticipated passage, by the U.S. Secretary of Treasury, at a value that cannot exceed the original face value of the asset.  The other option is insurance for those things classified as “troubled assets”.  In this case, the U.S. Treasury will sell insurance to financial institutions to guarantee the values and interest pay-outs on the asset by requiring the financial institution to pay an insurance premium to the government (similar to FDIC insurance).

In order to ensure that the EESA has the desired effect, the Financial Stability Oversight Board (FSOB) was created in the Act to review all financial aspects.  The FSOB consists of the Chairman of the Board of Governors of the Federal Reserve System, Secretary of Treasury, Director of Federal Home Finance Agency, the Chairman of the Securities and Exchange Commission (SEC), and the Secretary of Housing and Urban Development.  These individuals have the ability to appoint third party analysts to review transactions made under the authority granted by the EESA for malfeasance, fraud, and reasonability.  This is the government’s answer to the “blank check” sentiment that is already beginning to circulate amongst citizens.

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The EESA 110-page draft goes on to list in excruciating detail the various committees that may be called and dissolved at will to review myriad aspects of the execution of the EESA and governance.  Those of us who are number-crunchers, eager to challenge and dive into the accounting and finance side of the EESA looking for feasibility and quantitative economic impact data, are left extremely unsatisfied by the EESA draft.  At no point in the draft are the (A) types of assets for purchase or insurance eligibility defined or identified specifically; (B) methods for valuation of the hereto undefined assets specified; (C) vehicles for funding the TARP; or (D) projection of potential value of “troubled assets” that would qualify for government purchase or insurance.

The most clear assertion of things to be classified as “troubled assets” comes from the amorphous language of in the definitions section of the EESA.  This definition reads as follows:

(9) The term “troubled assets” means – (A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the purchase of which the Secretary [of Treasury] determines promotes financial market stability; and (B) any other financial instrument that the Secretary [of Treasury], after consultation with the Chairman of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.

In this case, we see EESA’s focus is mortgage-backed securities and mortgages.  However, part B of the definition is what is most troubling.  While the approval of adding other financial assets for eligibility under the EESA must be recommended by both the Secretary of Treasury and the Federal Reserve Chairman, then approved by Congressional committees, the EESA document itself gives me pause when following the impacts of this Act through to their logical conclusion.  The language above grants the ability for the aforementioned individuals to recommend and approve ANY financial instrument for qualification under the EESA, hinging only on the requirement that the purchase or insurance of said security must promote financial market stability.

This is so troubling because at any point in an economic downturn, many financial instruments could be seen as “troubled assets” as that is the nature of financial decline.  Using the tech stock bubble and 9/11 as an example, a rapid, broad stock market decline causes serious economic impacts to corporations across many sectors resulting in job loss and GDP contraction (economic shrinkage).  If the EESA had been in place during a stock market decline of such magnitude, or larger, would we be seeing the Secretary and Chairman of the Fed requesting to bail-out companies with huge stock losses in their marketable securities or pension funds?  While answering that question is mere conjecture, the fact remains that the language being used in this Act opens the door for future actions such as the one just described to be taken by the government.  I would really not like to see our government develop a habit of throwing money at corporations with irresponsible financial practices.

The funding for all expenses, including administrative costs of executing this Act, is left ambiguously up to the language in chapter 31 of title 31, United States Code (Title 31 Money and Finance, Subtitle III Financial Management, Chapter 31 Public Debt).  This basically says that the funding for this Act is going to come from the issuance of a variety of government bonds and notes, not to exceed the public debit limit.  A little math lesson here: If the government were to sell $1,000 bonds or notes (most carry a face value of less than $1,000, but for sake of proving this point with maximum arithmetic ease we will use $1,000), they would need to sell 250 million bonds/notes to cover the initial $250 billion cash outlay forecasted for the EESA.

Although government bonds are considered less risky than corporate-backed ones, the fact remains that there must be a market of interested buyers for the bonds in order to raise money in this fashion.  With the ever-increasing shakiness of the U.S. economy, the government’s revenue stream (taxes) is in jeopardy due to a higher jobless rate (6.1% most recent figure) and corporate profits on the decline.  Therefore, the government has less revenue to back their securities, making them riskier and reducing the market of buyers for these bonds/notes.  I personally think it is unrealistic to assume that enough capital will be generated through a government bonds issuance to cover the cost of this Act.

The EESA still must pass Congress and be signed by the President, and will undoubtedly see revisions before it is signed into law, but this is a revealing first look at what our law-makers have been working so diligently on over the past week.  While I may not entirely agree with the legislation, I commend our government officials for stepping up to the plate and putting in the hours at night and over the weekend to work on what they feel is best for their constituents.  Even in the face of potentially huge bi-partisan contentions, they were able to go to work and produce a deliverable in a relatively short amount of time in response to an extremely complex situation.  I eagerly await more substance and will report back with analysis and insight that I may be able to provide on the matter.

The Jack Gamble Interview

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Man Overboard!

What you are about to read is an exclusive interview with one of the founders and full time writing staff for Babeled.  Jack Gamble has spent the last year writing some top notch articles concerning nuclear energy, politics, and zombies.  While you may have gained some sense of who Gamble is from the topics he has chosen to write about, in truth only Gamble speaking on Gamble’s behalf can do Gamble justice.

So then, let the interviewing commence…

Andrew Blanco (AB): Explain the name ‘Man Overboard’?

Jack Gamble (JG): The phrase ‘Man Overboard’ is derived from two things:  First and foremost is my former job as a North Atlantic Commercial Fisherman in which I once had the pleasure of falling overboard in January and was forced to call out my future nickname to alert my shipmates.  The second meaning to my nickname is the unfounded accusation that I tend to overreact to or exaggerate certain issues – but whomever contrived that hurtful lie is obviously an anti-American terrorist hippie with one hand on an AK-47 and the other one wrapped around Alanis Morissette’s god forsaken throat.

AB: How did you get involved in a nuclear career?

JG: By chance really.  One day I realized that shucking scallops was not the best way to make use of my degree in Mechanical Engineering.  So after yet another batch of helpful and appreciated advice from Mom I finally caved and applied for a position as a Nuclear Engineer via Monster.com.

AB: What is your dream job?

JG: Right now there is nothing I would rather do than help generate cheap, clean Megawatts of electricity which takes money out of the pockets of those murdering bastards that take our money and use it to try and kill us.

AB: Do you love or hate New Jersey?

JG: Both.  I love my Ocean – yea it’s mine.  However, as a side effect to my residence here I do suffer from an acute case of representation by elected officials from the Democratic Party.

AB: What pisses you off more than anything else on the planet?

JG: Vegans.  I’m going to become a Meatetarian and eat only Vegans.  It’s the only way to maintain the delicate balance that mother nature intended.

AB: If you could be born during any time in history when would it be?

JG: A long time ago, in a galaxy far, far away.

AB: If you could be any Star Wars character who would you be?

JG: Han Solo.  No doubt about it.  Kick ass ride, 7 foot tall and incredibly loyal Wookie bodyguard, and the victory celebration in Ewok village with Leia that they couldn’t show you.

AB: Which episode of Star Wars is the best?

JG: Return – The space battle was incredible even for today’s special effects let alone mid 80′s.  UUU-Tay-DEEE

AB: If you were stranded on a desert island for the rest of your life what three items would you WANT to have with you?

JG: Ginger, Mary Ann, and a monkey butler (one at first, but he’ll train others).

AB: If you had the opportunity to run for president what would be your platform?

JG: It would be a solid platform of reinforced 4×4 lumber with 3/4″ plywood coating. 10′ wide x 10′ long and at least 6′ tall so I might look down upon my constituency from my Mohagony podium.  It would also feature red white and blue ribbon trim and an attractive woman repeating my words in sign language despite no deaf people in the audience.

AB: If you had your own talk show on TV what would it be called?

JG: It would be called “Feeling Better About Yourself by Watching Rednecks Fight Over Stupid Crap” with your host, Former President and Future Hall of Famer, Jack A. Gamble.

AB: What could you build me with a box of paperclips, a jar of peanut butter, industrial strength Epoxy, plywood, a funnel, and a can of black paint?

JG: Well, it’s a work in progress, but my initial sketch looks a little something like this…

AB: If Jack Gamble all of a sudden became God, what would be the new Ten Commandments?

JG:

Just in case you have trouble reading the image…

  1. George Lucas shalt not have creative control.
  2. I am your god – thou shalt force liberals to listen to prayers to me in government buildings.
  3. Thou shalt not display thy parkway exit number on thy bumper.
  4. My boss shalt remember the Sabbath day and especially shalt not call me into work on aforementioned Sabbath.
  5. Thine aren’t the droids thy looks for.
  6. Thou shalt vote Republican.
  7. Thou shalt keep moving and not wait for thy green light at the toll booth especially when thy God is stuck behind thou and late for work.
  8. Thou shalt not bare false witness.  Unless thy false witness is Jessica Alba – in which case thou shalt fully bare false witness.
  9. Thou shalt shun the Metric System as un-American thus ending thy NINE COMMANDMENTS.

Image courtesy of NASA

U.S. Economy in Crisis Explained Part 1 of 3: How it Began

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This is all Bill Clinton’s fault.   Although Senator Phil Gramm (R-TX) introduced the legislation in 1999, ultimately the burden of blame for the U.S.’s current economic crisis rests with the President who let the Gramm-Leach-Bliley Act pass.  This is the bill that overturned the part of the Banking Act of 1933, also known as the Glass-Steagall Act, that said commercial banks, those that accept deposits from customers and lend that money to borrowers, could not engage in the practice of underwriting securities.

The banking industry had been pushing extremely hard for the repeal of this part of the Banking Act of 1933.  Their argument was that more corporations were turning to investment banks because of lower costs due to less regulation.  Commercial banks were losing customers and therefore revenue to both investment banks and foreign banks, many of whom did not have the same regulations that split the activities of deposit acceptance from securities underwriting.

The Banking Act of 1933 was put into place during the Great Depression for very good reason.  The practice of underwriting securities is inherently riskier than traditional loans because credit standards are less of a concern due to the nature of the transaction.  An investment bank essentially borrows money from a commercial bank to give to a corporation in return for either stock or bond agreements that the investment bank then sells to private investors via the stock exchanges and bond markets.

The investment bank, whose repayment depends upon their ability to sell the securities to investors, care very little about the future financial stability of the entity they gave money to in exchange for the securities because the investors who purchase the securities from the investment bank are taking all of the financial risk assumed with giving money to that entity. The risk to the firm underwriting the security is in the nature of the agreement and the current market dynamics.  One of the types of securities causing our current problems is mortgage-backed securities (MBS).

Traditionally, mortgage backed securities were considered very low-risk investment instruments because most people paid their mortgages with a very predictable default rate.  People were riding the internet stock wave of the late nineteen nineties and did not predict that the stock prices were grossly over-valued and therefore must stabilize.  Coupled with the unforeseen tragedy of 9/11 and the subsequent financial market crash, the Federal Reserve systematically lowered interest rates to historic lows to combat the financial crisis at the time.

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The resulting low interest rates on mortgages led to an enormous amount of people purchasing homes.  Basic economics tells us that if demand increases at a rate greater than supply, then prices increase.  Home prices began to skyrocket due to the lowering of interest rates. Increasing home prices starting reaching a point that many people could not meet the requirements for traditional mortgages based on the inflated property values.  To respond to this, banks began offering new loan instruments, such as the interest-only mortgage, that bypassed typical credit standards and down payment requirements.

The Federal Reserve always walks an interest rate tight rope, trying to maintain balance between setting rates too low, which leads to inflation (so they say), or being too high, which stifles economic growth through making borrowing money cost-prohibitive.  While these historically low interest rates were causing economic growth through real estate profits, all good things must come to an end and the Federal Reserve began to raise interest rates by quadrupling them over an eighteen-month period from 2005 into 2006.  This caused variable rate mortgages to suddenly become much more expensive on a monthly basis to the borrower.  People then began to default on these mortgages in record numbers.

Back to basic economics again: if a large population of borrowers are opting to take the credit hit of defaulting on a mortgage, this leads to a large population of people who can no longer qualify for a mortgage thereby decreasing the demand for homes.  Decreasing demand with an ever-increasing supply indefinitely leads to lower prices.  Now, commercial banks are financially burdened with a property that is lower in value than the money they lent to someone to buy it, thus accepting the loss.

Investment banks are being hurt in this situation because of the mortgage-backed securities (MBS).  When borrowers stopped paying their mortgages, investment banks had to devalue their MBS and take a loss.  So, since commercial banks were now allowed to own investment banking firms, ultimately the cash flow of the commercial banks were hurt.  This is how commercial banks are now taking huge losses on two fronts; all a result of the Gramm-Leach-Bliley Act of 1999.

Another part in this history is the formation of the Federal Deposit Insurance Company (FDIC), also a product of the Banking Act of 1933 meant to bring an end to the Great Depression.  Since the FDIC will have to pay banks’ depositors enormous sums of money for claims should the bank go bankrupt, the government usually attempts other means to avert the need to pay out on deposit insurance for a bank failure.  These other means have manifested both directly and indirectly impacted many of the financial crises during 2008: Bear Stearns’ near bankruptcy led to the government relaxation of traditional FTC waiting periods in order to allow JP Morgan Chase to acquire Stearns before it had to liquidate the firm’s assets, the Federal Government takeover of Fannie Mae and Freddie Mac, the Bank of America acquisition of Merrill Lynch through relaxed FTC regulations, the temporary ban on short selling certain financial sector stocks, the Lehman Brother’s deal, and inexorably to the $700 billion Federal Government bail-out that is still not finalized.  These events will be the subject matter for part 2 of the U.S. Economy in Crisis Explained series.

Word Power: Politics

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Crumpled piece of paper that reads Word Power

Word Power will be a weekly (Thursday’s hopefully) course that is intended to teach you the etymology and construction of everyday words.  Etymology in short is understanding the origins of a word and how a word has evolved throughout history.  Today’s lesson is to understand the word politics and words associated with it.

Politics (Noun): [pol - i-tics]

The art or science of government or governing, especially the governing of a political entity, such as a nation, and the administration and control of its internal and external affairs.(American Heritage Dictionary)

Etymology of Politics

The word politics has its origins in Ancient Greece.  All of the cities in Ancient Greece, such as Athens, Sparta, and Corinth, were referred to as city-states and the Greek word for a city-state was polis (πολις).  The word acropolis is not just a clever name, the Greeks named all of the highest points in their city-states that because it literally made sense.  Our culture is not so different for we still see the word polis used today when cities, like Los Angeles and New York, are referred to as a megalopolis or metropolis.

Greek Origin

The Parthenon atop the Acropolis in AthensThe polis was a tight unit where citizens would be heavily involved in the affairs of the state.  All citizens were referred to as polites [pol-i-tes] and obviously this word was derived from polis.  Over time, anything concerning the state, would have some derivative of polis in it.  This was more than ever apparent when Aristotle wrote his Ta Politika, translated into “Affairs of the State”.

Latin Origin

When Greece faded away and the Roman way took over Western Civilization, the Romans retained much of the language that the Greeks had employed.  However, Latin grammar was different than Greek grammar and in order to make Greek words fit into the Latin language, the endings had to be changed.  Thus the Latin word, politicus was introduced.  Politicus was an adjective that was used to describe anything “of the state”.  Therefore, the suffix -us would change dependent on the gender of the noun it was describing, such as in -us, -a, -um.  When the ending is dropped off, we are left with the stem politic and thus politics was born.

Summary

Endings of words have constantly changed the meanings of words throughout history and these changes led to the development of new words.  From Ancient Greek to Latin to Old French to Middle English, words may seem completely different, but in reality this is hardly the case.  The word politics is literally derived polis and thus anything in the state or anything involving the state is political.

Extra Credit

A politician is usually referred to as somebody that holds an office for the government.  Since we already know what the true definition of politics is, the only difference between politician and politics is the suffix -ian. The suffix -ian means related to or from.  So although you may hear of politicians, like Barack Obama, John McCain, etc; just remember that all citizens are considered to be politicians.

Image Used in Post

Athens-Acropolis image courtesy of Flickr user roblisameehan published under the CC license.

Cotai Strip in Macau is the Las Vegas of China

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The Cotai Strip in Macau, China is an impressive site to behold, so I am told. Macau was a Portuguese colony until 1999, then it was handed over to the People’s Republic of China. Macau is still supposed to maintain a certain degree of autonomy until 2049 per the transition agreement.  It is the only place with legal gambling within hundreds of miles in the most densely populated region of the world.  In 2002, the red tape was cut and six gambling licenses were issued to U.S. companies.  This precipitated one of the most expansive and fervently-paced construction projects in history.

The Venetian Macau, a Las Vegas Sands resort property on the Cotai Strip is the third largest building in the world. It is what is known as a fully-integrated resort because it includes the following small list of amenities: three thousand guest suites, 1.2 million square feet of convention space, 1.6 million square feet of retail space, the largest casino space in the world at 550,000 square feet, and to top it off: a 15,000 seat arena that can host concerts or sporting events.

As the name would indicate, the Cotai Strip will encompass many resorts once completed.  The Venetian is one of many mega-resorts that brought 22 million visitors in 2006 and 25 million in 2007.  As the captive market is seemingly an endless horde of tourists from mainland China and Hong Kong, the hotels continue to go up.  Macau is the most densely populated place in the world with 18,196 people per square kilometer.  The entire Cotai Strip is planned from the start, unlike the Las Vegas Strip, and this results in a far more elegant design.

It turns out that it is not that difficult for U.S. citizen to go to Macau because it still maintains its own currency, immigration policies, police force, budget and taxation.  English is spoken, not widely, but those who speak it may be hotel employees since the islands’ economies rest mostly on the shoulders of the tourism industry.

Cotai Strip Panoramic photo courtesy of Flikr user b.cx under the CC license.

Short Selling Ban: Explaining Why this Won’t Help Wall Street

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Short selling is simply betting the per share price of a corporation’s stock will decline.  More precisely, an investor agrees to borrow a certain quantity of stock that another investor (the lender) owns with the intent to return the stock at a later date.  The borrower will then purchase shares at a point in the future to return to the lender. If all goes well for the borrower (the one attempting to short sell, or “short”), the stock price will have fallen so that they can pay the lender back with shares that cost less than the borrowed shares.  The net effect is the short seller profits in the amount the per share price declined.

Short selling is considered a highly risky practice because a stock’s share price can, in theory, rise indefinitely.  This is not the case with the inverse; zero is as far as the stock can drop.  If the per share price were to rise on a stock that you were selling short, you would lose money in the amount that the share price increased over the borrowed share price.

While it is risky, short selling is also regarded as a practice that provides liquidity to the financial markets.  “Provide liquidity,” and its various incarnations, is a ubiquitous phrase in the news, yet rarely explained by the article in which it appears, even to the point of being indecipherable with context clues.  Providing liquidity in the stock market means producing money flow.  It’s that simple.  Providing stock market liquidity is to drive market forces in influencing investors to purchase and sell stock.

Many people are convinced that short sellers are artificially hurting the financial sector through their practices.  It has been said that short sellers spread rumors and falsities to cause a negative reaction to a company they have a short position in so that they can profit from the stock’s decline.  This is probably true, and I am sure someone will come back with an exact example of a scandal coming to light, but for the time being let’s assume that it is probably safe to say that some people are greedy enough to lie to make money.  However, this only affects the certain stock in question, not an entire stock market decline.

The SEC temporarily banned the short selling of 799 stocks in the financial sector on September 19, 2008.  The rationale behind the ban is that short sellers have been and will only continue to make the financial sector share prices tailspin.  The logic of this is inherently flawed because short sellers agree to return higher-priced shares back to the lender by replacing them with lower per share price stock.  The short sellers must purchase stock to give back to the lender.  When shares of a corporation’s stock are purchased, the supply/demand ratio of the stock changes leading to a natural increase in stock price.

The connection to make here is that in a time when stock prices of financial sector corporations are plummeting, short sellers are continuously borrowing and then purchasing stock to repay the lender at various price points.  The short sellers are virtually the only investors purchasing shares in these tarnished stocks because they are more than happy to purchase so that they can “pay” back their stock lender and pocket the difference.   One could make the argument that at a time like this with stocks in a very specific sector all in a downward spiral, that short sellers are providing the liquidity to the market necessary to help these corporations’ share prices level off.

Banning short selling of these stocks has mostly caused backlash from the markets as it is seen as too overt of government interference in the market.  It is worth noting that the United Kingdom’s financial regulator, the U.S.’s SEC counterpart, the Financial Services authority (FSA), has also introduced a similar ban on short selling.  It was also acknowledge by Chancellor Alistair Darling of the U.K. that short selling does indeed provide needed liquidity in periods of decline, but that it was harmful in their current situation.  This rhetoric sounds oddly familiar.

The Slow Economy is an Opportunity: Get in Now

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The good news is:

  • I  am over twice my annual income in debt
  • My 401(k) is down 20% on the year
  • My Company stock is 30% down from its 52 week high
  • I purchased my home in the summer of 2006 (at the top)

My financial outlook has never felt so good.

Why?

I believe in the strength of the US economy.

Imagine if you had loaded up on a wide array of nearly worthless stock during the great depression.  The massive number of then-worthless shares today would no doubt amount to large fortune.

Granted today is no great depression, and I don’t claim to be able to pick the next big winner on Wall Street.  Actually, quite the opposite, 3 out of my 5 stock picks from a few years back have tanked and the other two are flat.

So what am I happy about?

  • I am loading up on cheap shares of several leading mutual funds that have all been hit hard this year.
  • I am only 28 years old and I don’t need the money in my 401(k) for decades so I can afford the time to wait out this storm
  • I knew the housing market would collapse so I bought a home well within my means that has not lost one cent of value due to a good location and a solid market for low/mid income housing.
  • My company stock is in the energy sector which has overreacted to the drop in oil prices and has allowed me to get in at or near the bottom.

In a nut shell, I am looking at the economy today not with a sense of panic or disarray.  I instead ‘lick my chops’ at the opportunity to position myself to profit greatly when the market recovers.

And recover it will.

It may take one year or it may take five.  Given my ability to live beneath my means and my lack of taste for the fine things in life, I believe I have the luxury of riding out this storm for as long as it takes.  When the storm is over, and it will end, I will be there to grab the rebound.

My friends, things obviously don’t look good right now, but we, the young professionals need to find the silver lining in this economic cloud and put ourselves in position to make the most of it.

My advice to all of you is to make a small sacrifice over the next two years or so.  It may hurt in the short term.  You may need to be smart with your next vehicle purchase.  But this lull in the economy is a blessing in disguise for those of us who missed out on the opportunity of the real estate market a few years back.

Do your diligence, ask a professional, tell a friend.  There is money to be made here and this time we won’t need to be filthy rich to do it.

~Man Overboard