got 5 minutes?

check out this story we shared with you a while back.

got 15 minutes?

check out the wikipedia entry explaining the crisis and its origins.

got 30+ minutes?

check out the above and then watch these 60 minutes segments  (part 1 and part 2) on the crisis and how we got here.  this one has some obvious opinion, but it gives good insight into how it all works.

image courtesy of kevindooley

how else did you think they were going to pay back the expenses associated with this mess?

photo courtesy of mindluge

part 1

part 2

• if you think you might one day be charged with overseeing the national budget and spending reform, you might want to make sure you don’t ever acquire a tax lien. nancy killefer, obama’s nominee for chief performance officer, withdrew her resignation today because of a $946.69 lien she had which she paid within 5 months (although there are rumors there are some other tax issues).
• if you want to be treasury secretary, it’s ok to have a history of unpaid payroll taxes. after it was discovered during the vetting process that tim geithner didn’t make payroll taxes for 2003 and 2004, he made the payment of over $25,000. he has since been confirmed.
• it’s best to not have in excess of 100k in unpaid taxes… and to not lie on your tax returns. tom daschle, nominee for secretary of health and human services withdrew his nomination today over $140,000 of taxes which was a result of over $300k of undisclosed income.

one’s gotta ask, does this say something about obama’s judgement, his bad luck in making bad picks or is this an indication of how the americans are trying to cheat the government? either way, it’s not good.

image courtsey of dooleymtv

before we get to the list, here’s some interesting facts about the US cabinet:

• like high school – there’s an inner circle. the “big four” hold the most important positions within the cabinet (the sec. of state, sec. of the treasury, sec. of defense and the attorney general). sec. of homeland security has started to muscle in the past few years and it might not be long before they’re known as the “big five”
• unlike high school – you can’t sit with your friends. cabinet members are seated according to their order of precedence during meetings. this also deters note passing.
• you probably didn’t know – all cabinet members are in the line of succession to become president. because of this, there’s always a “designated survivor” who is held at a undisclosed location while the rest of the cabinet, the president and the vp meet or attend ceremonies.

you might recognize some of these names as many are bush and clinton cronies:

photo by derrickb

what is a ponzi scheme?

a financial operation that usually offers abnormally high returns right out of the gate, required to attract new investors.

why is it illegal?

in order to pay advertised high returns in the short term, the scheme’s organizer takes money from new investors to pay earlier investors; even if there are no actual real gains.

why is it called a ponzi scheme?

in 1921 charles ponzi duped thousands of investors into investing in a postage stamp speculation scheme–he thought he could take advantage of differences between u.s. and foreign currencies used to buy and sell international mail coupons.  ponzi told investors he could provide a return of 40% in just 90 days (at the time, a rate 35% more than a straight bank investment). a few early investors were paid off to make the scheme look legitimate, an investigation found that ponzi had only purchased about $30 worth of the coupons.

is the madoff debaucle a one-off?

these types of schemes have a long history. boy band impresario lou pearlman (pictured above) ran one for 20 years.  his scheme involved a a fraudulent savings and loans program that was not fdic insured (he claimed it was) and it cost investors an estimated $500M.  in 2008 pearlman agreed to plead guilty to charges of conspiracy, money laundering, and making false statements and was sentenced to 300 months in jail.  he has the opportunity to cut one month of of his sentence for each $1M he pays back to investors.

how can i detect a ponzi-like scheme?

in short, use your head–if it’s too good to be true, it probably is.  look really hard at anything that very high returns without similarly high risk.  also, investments sold through weird means like email or cold call or via an un-regulated business that is not appropriately regulated is probably illegal*.

* the article goes on to say that you can check with regulators but um, we know how that went.

now i understand why they put a ban on shorting financial stocks.

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* borrowers behind alt-a mortgages typically have clean credit histories, but some aspect of the borrower’s profile does include risk such as higher loan-to-value and debt-to-income ratios or inadequate documentation of the borrower’s income.

**option-arm mortgages with very low interest rates at the start of the mortgage but at reset after about 3 years with a sky rocketed rate (a payment could go from $800/month to $2000/month). this type of mortgage is typically for borrowers who want maximum payment flexibility or who expect to own their property for a short time period.

inflation or deflation?

like the heads of the auto companies, we are in a private jet plane toward something bad and its either called deflation which refers to a persistent tendency, over an extended period of time, for prices and incomes to decline or inflation which is “a rise in the general level of prices of goods and services in an economy over a period of time.”

side by side, one may think that you’d rather live in a world where prices are deflated than inflated but you’re probably wrong and here’s why: deflation leads to slashed prices which leads to slashed jobs so say the economists.  unfortunately, signs that we’re headed into deflation (beyond the cheap oil) are beginning to show up:

• room rates at luxury hotels fell 5.4 percent in the 28 days ending on november 15 (i myself experienced this when re-booking a hotel stay over thanksgiving)
• pre-christmas sales are starting before the day after thanksgiving, even in the posh places
• people are scooping up unemployment checks like these commemorative plates

deflation, inflation –either way it seems like the times ahead aren’t good. in my mind we’ve got two options: be like that frightened turtle and hide or be like george and try to find explanations for your predicament. i’m obviously for the latter. you are going to have a lot of time on your hands anyway, since it doesn’t look like you’ll be able to afford that house in the the hamptons this summer.

some speculate that this may be why they brought in someone like my future husband/outspoken hottie bono to do some occassional editorial work but you know how i feel about that.

photo courtesy of wallyg

Watch CBS Videos Online

i heard that last week when the you-know-what hit the fan, there was a run on duct tape. to exact revenge, the bankers are going to go on a serious bun-taping mission*** to punish any geek still showing up for work.

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* derivatives are financial instruments whose values depend on the value of other underlying financial instruments. the main types of derivatives are futures, forwards, options, and swapsand they are used to is to reduce risk for one party. The diverse range of potential underlying assets and pay-off alternatives leads to a wide range of derivatives contracts available to be traded in the market.
** a swap is a derivative in which two counterparties agree to exchange one stream of cash flows against another stream. the streams are called the legs of the swap.
*** come on, that is an easy movie reference. a facebook bakery treat or super-poke high-five goes to the first identifier.