Friday, April 04, 2008

Who Pays the Bills?

Here is a graph of the current losses of Swiss Bank UBS. The dashed line is my guess at a worst case projection. I have absolutely no facts to back it up. From my years as an engineering student we would often pencil in expected future results. It is more a test to see if your model is a working one. My model supports the theory that the banks are hiding as much as possible until it becomes obvious. If the facts were known, the problem would feed on itself. The nice thing about a blog is that we are not limited to just facts like a newspaper. We can manipulate our models and try to forecast the future.

Your average bank has a good idea what is going to happen three months out. They have to calculate what is being paid off in the near future in order to issue new loans. The graph projects an increase of 43 billion more in losses, three months out, as a worst case scenario. It could be way off, we can't measure the human psyche. Loss of faith in a bank is an abstract process. It doesn't have to be based in truth, but the results are always the same, people tend to vote with their feet. In this case, they have been doing a lot of voting with this bank.

UBS has 37 billion of losses, Deutsche Bank has 4 billion, Citi Group has 21 billion and Merrill Lynch 22 billion. That’s about 83 billion dollars in bank losses (skipping the Bear Stearns Tooth Fairy bailout). Look on the good side, it could be worse. On the bad side, it probably is worse. We didn’t spend it on anything that we really needed, like teacher’s salaries. Our money left the building and took an "Elvis walk." We are talking spirits here, 100 proof or better.

The US government gives 150 billion to the tax payers and 30 billion to JP Morgan. Didn't we cure the whole savings and loan fiasco of the 1990’s with 120 billion dollars? Na, must be my imagination.

This whole mess started near the end of July last year with the implosion of two of Bear Stearns’s Hedge Funds. Eight months after the event, our government is mailing us a big check to spend. That there, ought to be enough to make you sleep with one eye open. It's kind of like your wife getting you a hooker for your 60th birthday. What's the catch? Especially if you knew she would feed you through a blender for cheating on her. The check makes cents but no sense! The question not being asked, "Who ends up paying the bills?" "Congress" is not the right answer.


Kibitzer 2006 said...

First, I want to tell you how much I enjoy your blog. I check it nearly every day and am always pleased when I find an update.

Second, there is a marvelous irony in the advertisement at the top: The “27% Bank Account” Secret “Bank Account” Makes 27% a Year for the Last 13 Years

Out of morbid curiosity, I actually checked it out and entered a email address for updates. (If you haven't used you should try it. They'll accept any email to any username and keep it for at least a few hours. You can use it for things that you wouldn't want coming anywhere near any of your real email addresses.)

Within seconds I got my first “investment report”. It's way too bizarre to try to describe, but here's a sample:

"P.S. I thought you might be interested in another one of our favorite ideas right now. As you'll see, it's a lot like 401k investing, only better. In fact, you could realistically make two... three... even four times what a typical 401k plan generates -- and in just a fraction of the time. [WTF does that mean :)?] But what's most surprising is that the government actually restricts the advertising of this opportunity (which is why you may have never heard of it), even though it's perfectly legal and supported by America's biggest corporations. If you're interested in learning more, click here."

Gee, I wonder why even this government might restrict the advertising of such "opportunities" :).

For more hilarity, see:


Jim in San Marcos said...

Hi Kibitzer

I took a look at mailinator. Looks like a good idea. I typed in a few well known Anglo-Saxon vulgarisms and they look well used as email addresses:>)

As for the ad on my blog, I have no real control over content. I mentioned ex-lax and Viagra in one article and the ads were real weird. I guess the google Bot scans the blog for key words and then links an advertiser to it.

Thanks for clicking on the ad. Believe it or not, I get anywhere from 2 cents to 25 cents a click. One day I'll have 9 clicks and get 16 cents and another day have 4 clicks and get $2.00, no real rhyme or reason.

The one thing you have to remember about advertising is "The 3% Lead Pipe Cinch Rule." 100 hits gets you 3 customers guaranteed. So be careful (tongue in cheek) when you click on an ad.

I'm glad you like the blog. An ataboy always makes my day!

Thank you for your comments,

Kibitzer 2006 said...


I just sent you another $0.02 - $0.25, but thanks for the warning. I'll be sure not to click the add more than another 27 times :). BTW, remember when typewriters had a "cents" symbol (a "c" with a slash through it)? What ever happened to that? And why did it come after the numbers rather than before?


Jim in San Marcos said...

Hi Kibitzer

Don't click on those adds too many times. I just got a warning letter from Google about erroneous clicks (can you believe that!) thanks for the effort it is appreciated. As for the cent sign, you can still generate it. If you hold down the ALT Key and key in on the numeric keyboard 0162 you get a ¢ sign. 0163 is the £ sign. You have to use the numeric key board if you have a lap top, you are SOL

Take Care

OriginalFrank said...

Good post, except I take issue with this: "We didn’t spend it on anything that we really needed, like teacher’s salaries."

At least where I live, the county taxes increased right along with the housing bubble (since they did not lower the property tax rate). That means that the county splurged on all kinds of things during the bubble, including supporting fast-growing teacher's salaries and reduced class sizes (i.e., more new teachers).

So I think it is more fair to say that we spent money on all KINDS of things, especially on wasteful home "investments" but also on unsustainable government spending too.

Jim in San Marcos said...

Hi Original Frank

You are right,I was thinking back to what I wrote March 8th "Our Future, Written Today for Tomorrow." A lot of California teachers have their pink slip for next year. It is a poorly written sentence and reflects my frustration over our present lack of funds for next years school budget.

Thank you for your comments