Much of the current financial crisis is due not so much to realized losses on mortgage-backed securities as on uncertainty as to how much the derivatives are worth. Perhaps it’s time to start reversing the process and producing individual mortgages back from derivatives, which at least have some assessable value, even if real estate prices fall by 30%.
People are only now beginning to realize the real estate bubble of the noughties was naught but a gigantic pyramid scheme. There is unexpected resistance to the idea of bailing out the investment bankers who did most to get us in this mess (while paying themselves handsomely to do so), and one of the counter-proposals is to give money to insolvent mortgage owners, i.e. reward the imprudent over those who followed the rules, did not lie about their income on a loan application. Economists call this moral hazard.
That said, the idea may have political wings. Investment bankers are not the only ones who like the idea of feeding at the public through. When a substantial enough proportion of the population loses its shirt in a pyramid scheme, it expects to be compensated by the public purse, and sometimes the entire social order breaks down, as happened in Albania circa 1990. Might this be the direction the US is headed towards?
It’s an open secret that most public corporations exhibit abysmal corporate governance. Insider management is skilled in using corporate by-laws against the shareholders that are nominally their bosses. One good example is HP’s acquisition of Compaq. Whatever the merits of the deal, the company (i.e. Carly Fiorina) spent half a billion dollars of shareholder’s money in PR expenditures opposed by a significant chunk of the said shareholders, lobbying for an outcome that would handsomely profit the same executives with retention bonuses, a flagrant case of self-dealing.
Most shares are owned by large institutional investors that are too lazy to do proper due diligence. In many case, they are pension funds or investment banks that curry management’ favor in the form of contracts. Index funds can’t even vote with their feet. The only way out would be for corporate by-laws to be standardized and made statutory, rather than one-offs rife with potential for abuse.
A simple question: if a board’s job is to hire and fire a company’s CEO, why is the CEO, who is after all a mere employee, allowed to participate in the board at all, let alone preside it? The CEO should be accountable to the board, not a member of it, or privy to the board’s deliberations. This is in part due to gross over-hyping of CEOs’ importance. What they do is neither unique or as rare a skill as is often supposed, and their prima donna demands should be resisted. Of course, most companies’ boards today are already dominated by their management, so the rot is set too deep to expunge easily.
I concluded years ago that most public corporations are run by self-dealing kleptocracies. They loot most of the companies’ profits, and leave some crumbs to the shareholders. The only way to realize the true potential of investing in a profit-making enterprise is to be an active majority shareholder, either by buying a controlling stake (an option available only to those already wealthy) or by starting one yourself. Belgian financier Albert Frère had a saying “The difference between a big minority shareholder and a small minority shareholder is the difference between a big chump and a small chump”.
I wrote a script several months ago to go through an Amazon wish list and find the combination of items that will best fit within a given budget. Given that the Christmas holiday shopping season seems to have started before Thanksgiving, it seemed topical to release it.
It used the Amazon Web Services API, which is a complete crock (among other failings, it will consistently not return the Amazon.com price for an item, even when explicitly instructed to do so). It does not look like Amazon pays any particular attention to the bug reports I filed. I just gave up on the API and re-implemented it the old-fashioned way, by “scraping” Amazon’s regular (and most definitely not XML-compliant) HTML pages.
It is still very much work in progress, but already somewhat useful. You can use it directly by stuffing your wish list ID in the URL (or using the form below):
A better way is to drag and drop the highlighted Amazon optimizer bookmarklet link (version 6 as of 2007-05-08) to your browser’s toolbar. You can then browse through Amazon, and once you have found the wish list you are looking for, click on the bookmarklet to open the optimizer in a new window (or tab). By default, it will try and fit a budget of $100 (my decadent tastes are showing, are they not?), but you can change that amount and experiment with different budgets. Surprisingly often, it will find an exact fit. Otherwise, it will try to find the closest match under the budget with as little left over as possible.
There are many caveats. The wishlist optimizer only works for public Amazon.com (US) wish lists. There does not seem to be an easy way to buy multiple items for somebody else’s wish list in one step, although I am working on it, so you will have to go through the wish list and add the items by hand. Shipping costs and wish list priorities are currently not taken into account. Sometimes Amazon will not show a price straight away but instead require you to click on a link, the optimizer will decline to play these marketer’s games and just skip those products.
Be patient – Amazon.com is rather slow right now — it seems they did not learn the lessons of their poor performance towards the end of last year. One of my coworkers ran the optimizer through an acid test with his wife’s 13-page wish list, and it took well over a minute and half to fetch the list, let alone optimize it. One can only imagine how bad it will get when the Christmas shopping season begins in earnest. To mitigate this somewhat, I have added caching – the script will only hit Amazon once per hour for any given wish list. As it works by scraping the web site rather than using the buggy and unreliable Amazon Web Services API, there is a real risk it will stop working if Amazon blocks my server’s IP or if they radically change their wish list UI (they would do better to add additional machines and load-balancers, but that would be too logical).
Update (2005-12-02):
Predictably, Amazon changed their form (they changed the form name from edit-items to editItems) and broke not only the wishlist optimizer, but also the bookmarklet. I fixed this and upgraded to the scraping module BeautifulSoup, but you will need to use the revised bookmarklet above to make it work again.
Update (2010-04-27):
The script has been broken for quite a while, but I fixed it and it should work again.