“Things will get much worse before they get better. I fear the worst is ahead of us.”

Nouriel Roubini, who at the moment is as close as you can get to being a celebrity economist, today said the following at the Hedge 2008 conference here in London:

“This is the worst financial crisis in the U.S., Europe and now emerging markets that we’ve seen in a long time,” Roubini said. “Things will get much worse before they get better. I fear the worst is ahead of us.

“There are about a dozen emerging markets that are now in severe financial trouble. Even a small country can have a systemic effect on the global economy. There is not going to be enough IMF money to support them.”

Yikes. For the record, this is the guy they call Dr. Doom. So he’s a bit bearish… well, a lot bearish. He’s a Kodiak grizzly bear of immense proportions. Also for the record – in a now famous February ’08 essay, he predicted the recent triggering of banking industry collapse down to the sequencing. (See The Rising Risk of a Systemic Financial Meltdown: The Twelve Steps to Financial Disaster).

If you’re unfamiliar with Roubini, he runs a pretty great economics/finance site and blog and distribution list called RGE Monitor. EVERYONE should have a poke around there. The amount of alarming and ultimately prescient analysis there has made it my daily read for the past 3 months.

For more on this, Bloomberg has an article up here.

A platter of shit with bits of broken glass in it

David Sedaris writes in this week’s New Yorker about undecided voters in this year’s presidential election:

“I look at these people and can’t quite believe that they exist. Are they professional actors? I wonder. Or are they simply laymen who want a lot of attention? To put them in perspective, I think of being on an airplane. The flight attendant comes down the aisle with her food cart and, eventually, parks it beside my seat. ‘Can I interest you in the chicken?” she asks. “Or would you prefer the platter of shit with bits of broken glass in it?’”

To be undecided in this election is to pause for a moment and then ask how the chicken is cooked.”

Whole thing here.

“U.S. pilot was ordered to shoot down UFO”

This comes from Reuters – U.S. pilot was ordered to shoot down UFO. The 9-year old boy in me is freaking out right now.

“The pilot, Milton Torres, now 77 and living in Miami, said it spent periods motionless in the sky before reaching estimated speeds of more than 7,600 mph.

“After the alert, a shadowy figure told Torres he must never talk about the incident and he duly kept silent for more than 30 years.”

Palin’s $150,000 problem and the lipstick on a pig prophecy

If the difference between a hockey mom and a pitbull is lipstick, whats the difference between a hockey mom and a greedy politician with a $150,000 Fifth Avenue make-over? The conclusion I suspect a lot of beleaguered hockey moms will be forced to admit: probably a lot.

Let’s have another go: you can put lipstick on a pig, but it’s still a pig. You can brand a corrupt, inexperienced, self-righteous governor a maverick and a qualified choice for VP, but you still have a corrupt, inexperienced, self-righteous governor.

How can any campaign be this tone-deaf to the social and cultural nuances of its professed electorate?

The best account of this story of dumb, dumb excess so far is at the Washington Post, After $150,000 Makeover, Sarah Palin Has an Image Problem.

Wow. This may be the straw that breaks the camel’s back. This story is going to blow-up. After the huge amount of evidence that shows she used Alaska’s governship as a personal fiefdom, is anyone surprised?

And just how many outfits can be bought for $150,000? 150? 75? 30? Stop me when I’m getting close…

Simultaneously, new polls show Obama now commands a 10% lead.

Anatomy of a blowup

I met Nassim Nicholas Taleb a few weeks ago at a friend’s party. Fascinating guy with a variety of interpretations of the credit crisis. His own history as a derivatives trader gives him a special edge as an academic taking potshots at the financial establishment.

His theories of risk-modelling are at the center of his recent best-seller The Black Swan. Loosely, they are a jazzed-up collection of anecdotes based largely around David Hume’s philosophical tradition of empiricism. Hume said that because we have witnessed the sun rise every day for our entire existence, we cannot say for certain that it will rise tomorrow. Our past experience is the only known territory. Taleb takes this a step further to highlight the importance of unknown, unpredictable events that break our chain of experience and force us to rethink our assumptions.

He provides the example of a turkey who has been generously fed every day for 1000 days. Based on this track record, it could be assumed that this would continue indefinitely. On the 1001 day, however, the turkey is killed and served for dinner. The pattern of the first 1000 days had little resemblance with the one outlier event that would prove disasterous for the turkey:

Check out this essay from Taleb for more on flawed assumptions and the failure to predict the credit crisis.

The Autumn of the I-Banker

Vanessa Grigoriadis writes a good piece on the listless cast-offs of fallen investment banks…

Read it here
http://nymag.com/news/business/51402/

“Throw the Blackberry away and enjoy life.”

The FT published a letter from California hedge-fund manager Andrew Lahde explaining the reasons why he is retiring at 37 years of age. In it he ridicules upper-class Ivey leaguers, the rat race, the broken concept of an American meritocracy, and sings the praises of hemp and marijuana. I sincerely wish this guy happiness til his dying days.

Some quotes:

“I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.”

“Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.”

“Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant – marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating.”

Full version here
http://www.ft.com/cms/s/0/128d399a-9c75-11dd-a42e-000077b07658,s01=1.html

Sarah Palin’s Hopeless Pandering on Saturday Night Live

SO if by now you are one of the 21 people left on Earth who doesn’t yet know this, Sarah Palin was on SNL last night in two different sketches. For a woman whose key skill seems to be a tenacious ability to lie through her teeth, the whole thing was drastically uninspired.

She appears first in a bizarrely dream-like sequence in which Tina Fey addresses a press conference (fantasy) while Palin watches this impersonation of herself backstage (pseudo reality). This is followed with a cameo by Mark Wahlberg (fantasy), a cameo by Alec Baldwin (scathing insults coupled with comic pseudo reality). Finally Palin replaces Fey to decline questions (pseudo reality) from the fantasy press corps and deliver the opening announcement. All together it was the 5 most emotionally layered minutes of network television in recent memory: contempt from all sides, masked in comic delivery.

Her second sketch consisted of passively observing a pretty scathing rap, i.e. “when i say ‘obama’ you say ‘ayers’/obama. (ayers) obama (ayers)/i built me a bridge – it ain’t goin’ nowhere”. Her proximity on the sidelines became so irrelevant that the head bop/shoulder dance she sustained for 3 minutes seemed almost not embarrassing. Almost. It took 2 eskimos (as Governor of Alaska, shouldn’t she take offense to this slightly perjorative term for Inuits?), a dancing caribou, and a Todd Palin impersonation to distract from this.

The otherwise funny skit gave the uncomfortable feeling of watching a celebrity roast for some vaguely senile geriatric performer where everybody laughs at the expense of the guest of honour, who is too befuddled to participate. 

Interaction with regular cast-members was markedly minimal. As in all of her appearances, she was unwilling to even attempt to poke fun at herself. I’ve always considered self-deprecation to be a sign of intelligence so perhaps no surprise there.

So why do it at all? Obviously the point was to show that she can take a joke. I picture her and Tadd discussing this strategy with the excitement of delusional Confederate generals on the cusp of defeat – she would commandeer the vanguard of the liberal elite media! She would retake that elusive, anti-American youth/gay/Jew vote in one fell swoop!

But as has often been the case, it was executed with a hopeless degree of haphazard pandering.

Watch it here
http://www.nbc.com/Saturday_Night_Live/video/clips/gov-palin-cold-open/773761/

I think it’s a sign that you’re in the wrong line of work when you realize that you don’t want your boss’ job.

Latin hides the stupidity of the priest

The title of this post is taken from a Sicilian proverb. I think it partly describes the corporate culture that helped create the current banking catastrophe. I also think that it helps explain a phenomena endemic to a lot of bubbles throughout history: the corresponding madness of crowds, or suspension of common sense, which leads to their creation.

Risk models that didn’t account for crisis conditions have proven worthless in the midst of a seemingly impossible crisis. When supposedly riskless mortgage-backed securities seemed too good to be true, the prevailing wisdom provided that they were too complicated for most people to understand. The financial products at the root of this crisis are often described in the popular media as highly complex, esoteric, and arcane. The first descriptor is at best an excuse for ignorance, but the second and third imply something vaguely supernatural. Perhaps in this case, as with alchemy or voodoo, skepticism is easily exchanged for a good return on investment.

Amidst the cutthroat culture of the now mostly bygone investment banking industry, few were willing to confess they didn’t understand how such large returns were possible with such little risk. The profit prophets spoke in tongues, but the message was insidious. As told in this now infamous account, heretics, though few in number, were persecuted.

Now it is clear that so much financial Latin hid not just the shortsightedness of experts. It also hid risk, only in plain sight.

Welcome to the Gin Diary

Welcome, bienvenue, aloha.

Initial topics to include living and working in central London, the financial meltdown, and the U.S. presidential election. Baseline material will relate broadly to the media, politics, history, science, human progress, film, music, art, business innovation, the social life and food.

The name is a play on Hunter S. Thompson’s first novel, The Rum Diary, which is set in Puerto Rico in the 1950s. Written between notorious bouts of drinking while working a beat for the local newspaper, it captures his thoughts on work, life and his surroundings at the time. It also tells a story of ambition, angst, and a desire for authenticity that I think are common to most twenty-somethings today, not just me. But I don’t really drink rum. I like gin better. I also live in London, UK, whose history is as soaked by gin as Puerto Rico’s is by rum.

Regular and ongoing updates to follow.

Which way to Nashville

The new Kings of Leon album, Only by the Night, is a mediocre rehash of the worst stadium pop that has defined them of late. Maybe I’m just waking up to this and it’s been there all along, but these guys are now truly cheesy.

The songs don’t have much new or interesting to really write about, although I concede that the track Crawl is a relisten. The guitars still go to work, albeit in mellower form. Overall the lyrics are trite, affected, and pointlessly repetitive – clear signs they’ve reached international rock and roll stardom. The closing track caps off with

”I’m too young to feel this old/Nobody knows/Nobody sees/Nobody but me.”

Ahem. I guess it’s tough strip mining vague memories of angst and belligerence from the cloistered confines of the celebrity lounge, so evident in their manner when I saw them last year at Wembley. No surprise then that they now look so overly stylized, so Hollywood manicured, that they are indistinguishable from, say, (please don’t) Nickelback.

Pardon the vitriol in my lament. It’s just I saw them a few years back (Metropolis in Montréal in 2004) and left that night thinking they’d struck the taproot of rock and roll. Chain smoking and drinking throughout the show, bragging about the drugs they’d scored in the alley out back, every song was played with total conviction and feeling. Not to equate substance abuse with rockstar authenticity, and irrelevant since they claim painkillers played a role in this latest record. But to borrow an album title, these were youths and young men having fun. The hangdog grins exchanged between songs only confirmed the swagger at the heart of their music. They were raw yet focused and at instants almost visibly breathless to be playing to a thumping crowd of less than a thousand. Their ragged appearance and bold delivery were electric; as up and comers they had no use for the semaphore of 5-hour hairdos and wristfuls of bangles to broadcast their credentials. They poured their talent into songwriting, and then just got up and played.