twitter explained

i felt like it was the end of my ability to grasp technology as i've watched dumbfounded by twitter's staggering growth. but after talking to a number of people about twitter, i think i at least have a clue. so for those that already know and love twitter, move on. for those that can't explain why tweets are taking over the world, read on.

Twitter, quite simply, is a real time set of information for anything. want to know why caesar crossed the rubicon, check out wikipedia. but if you want to know whether 1oak is having a good night, go to search.twitter.com and search for 1oak.

current events like swine flu for example can be scooped by searching twitter. latest restaurant reviews are best viewed by searching twitter.

facebook has really blown their status updates by not making it searchable. presumably because of privacy controls, fb has not made status updates searchable, but it's kind of pathetic that you can't search among your friends for updates which include specific words.

i have often asked the question, why would anyone twitter at all. the best answer i can come up with is because you can. all of a sudden with a few seconds of your time, you can reach out to all your followers and get a point across. further, with their ability to re-tweet what you've written, your idea can reach thousands or even millions of people within a few minutes. that's very powerful! nothing else available today can facilitate that.

if facebook doesn't get their act together, twitter could end of being the social network of choice for the world. when you're up over 500 friends on facebook, what does it matter if your comments are open for the whole world (i don't consider myself to be particularly friendly and i have over 400 friends on FB)?

there's such a thing as bad PR

some famous actress once said, "the only kind of bad publicity is no publicity" (i believe it was elizabeth taylor but i can't seem to find any reference to it so if you know the origin, please let me know).

i have always thought that was the case until this pirate thing came up. somalia has gotten some seriously bad publicity.

finally, the country has an enemy that we can all vilify - these pirates rob aid ships to give to local warlords. not only that, but they seem to be pretty bad at terrorizing. somehow they managed to have a hostage at gunpoint yet they all end up dead or captured.

well, like almost everything else in the world, things are not as cut and dry as the media would like to report. sure, many of the pirates seem to be out for profit, but many more are doing the job of a defunct government.

first of all, the media's portrayal of pirates from the hey day of piracy (around 1700) is just wrong. they were not simply blood thirsty heathens, but were often employed by governments themselves for protection (ron paul is pushing for this now - see below). for example, Sir Francis Drake was one of the first to circumnavigate the globe. To some, he's a great explorer and military men. But to many, he was just a pirate (he robbed many spanish ships).

today, "pirates" from somalia are robbing ships. some are simply criminals, but others, at least began as doing the job that a national navy or coast guard should have been doing. the government of somalia collapsed in 1991. the US and Clinton tried somewhat to bail them out but after the black hawk down incident, we have essentially allowed somalia to exist in crisis ever since.

this set up the situation where you have a coast line nearby a major shipping lane (the gulf of aden) with no policing. international ships began using this area to simply dump toxic waste on the way to or from their ports. that's right, ships began turning somalia into the world's oceanic trash dump.

further, international water rights exist for fishing. but more than $300 mm worth of catches were essentially being stolen without taxation by foreign fisherman.

meanwhile the people of somalia were starving and now they were also being poisoned. so in response, locals began going out to the ships to prevent them from dumping and/or demanding money to fish in the area. and that is largely where the "pirates" of somalia came from.

now, you have dogmatists like ron paul trying to convince the world that we should be instituting the policy of letting private citizens (read: pirates) police that area under the auspices of the united states of america. i'm sorry but the austrian school of economics isn't always the best way of handling things.

i feel badly for the people of somalia. clearly citizens policing waters - whether done by somali's or american's is a bad idea. and some pirates really are thugs. but this super mean pirate who was captured is probably only 16 years old. this is going to turn out to be a mess.

the only clear thing is that somalia needs a lot of help and the world (ie, the UN) must stabilize somalia for the benefit of the world.

pay no attention to the banker behind the curtain

i have to give goldman sachs credit. everytime i think they are completely cornered and have no where else to go other than into the dustbin of history, they manage to pull off another trick. i still believe you can't fool all the people all the time (this is not an endorsement of david einhorn).

but this time i gotta give the wizards at goldman extra credit because this one is obvious and yet no one seems to notice. that's the best kind of trick. goldman announced earnings yesterday which surpassed guidance and by most accounts was a blow out quarter.

but check this out - they reported net income of $1.66 billion from january - march. however, they changed their fiscal year. their year end used to be november but they switched to january. the net effect was they reported their quarter for the last three months and separately reported december as an "orphaned" month. and guess how they did in december? they lost $0.8 billion. so it seems goldman took all its losses and crammed it into the orphaned month which won't show up on any specific quarter.

bravo goldman! i don't think you can use that trick again, so i wonder what you will do for an encore.

how can banks possibly be doing well? banks traditionally make money from the following sources: investment banking advisory work (this business is basically dead except perhaps restructuring), loaning money (they likely made money on this since they can borrow from the government for almost nothing and lend out at higher rates - but that's what caused this whole mess to begin with - so i doubt they are doing much lending), trading (with major hedge funds blowing up and the rest all hating on goldman sachs this cannot be doing well) and wealth management services (this has to be going terribly). so besides some chicanery, how is goldman making its numbers?

lastly, i want to point out that the real problem at Goldman and Citi and all the other banks is the toxic assets which are not marked correctly. with the suspension of mark to market accounting we are likely to create zombie banks that never make money as they slowly trickle out the losses on their balance sheet. think of it like this - if you have a loan portfolio that you've said is worth $100 billion but if you went to sell it, would only fetch $80 billion, then what does $1 billion or $2 billion in profit really do for you? you're still $20 billion in the hole. so when citi reports earnings for the quarter, how does it matter when their assets are massively mismarked? it reminds me of my friend who reported winning $3,000 in blackjack. so i said, "congrats, drinks on you tonight!". he responded, "no way, i lost $10,000 on blackjack this morning". i don't see how you can call any of these banks profitable.

good news

while the administration continues to set up the country for a financial implosion, i do want to give some credit for for some of their other moves.

specifically, the relaxation of the trade restrictions with cuba is a great idea.  i'm not exactly sure what the thinking was when the embargo was put in place, but clearly it has not worked on any level.  people in cuba suffer because of a mostly insane government, but they suffer more so because of our misguided embargo that keeps their economy in shambles and keeps things as basic as simple medicine out of reach.  hopefully this is a pre cursor to something more sweeping with cuba.

additionally, while i understand that his hand was forced and the military deserves most of the credit, it still happened on his watch.  and the rescue of the ship's captain, at least at this point, seems like it was a perfectly executed operation.  hopefully, as i mentioned earlier, this will cause the US to take a larger role in policing that region of the world.

finally, i want to give props to obama for hosting a seder.  not only does this show a general open-mindedness and kinship with another faith, but i believe the lessons of the story of passover are important ones for the current administration.  now, which kind of son do you think obama was?

new york city 2009 is san francisco 2001 - NYC to get worse

i lived in san francisco 1997 through 2002. so i saw the giant hey day of the internet bubble and also the precipitous decline. now, having been in new york from 2006 to present, i can say without a doubt that i see many obvious similarities (being in the front row for both calamities does beg the question of whether i am the harbinger of disaster). here's a list of some of the similarities:

• when i moved to new york, everyone i knew had a job. today, i would say about 20% of those people are not gainfully employed yet still live in new york city. in san francisco, about the same happened, but by 2002, those without jobs had moved to another city (many new york!)
• in san francisco, there were some people with millions of dollars and others with nothing. the fairness gene that humans have gets irritated by this, but that was the reality. smart people made money and smarter people didn't make money in san francisco. dumb people made money in the dot coms and dumb people missed out too. there really seemed to be a massive luck component. as i survey the scene in new york, i see the same thing.
• real estate plummeted in SF and it has already declined quite a bit in new york. this report suggests that real estate could call by another 50% in NYC.
• the biggest similarity that i've noticed is people seem to vastly underestimate the depths of the problems. as businesses were laying people off in the tech sector, people clinged to hope that this was temporary and would soon turn around. certainly tech has made a comeback but not nearly to its heights. one only needs to look at the tech laden nasdaq to see that it's a far cry from the nearly nasdaq 5000 level. certainly new york will recover. but all this speak about recovery by year end is preposterous.

and with all this going on, new york city and the state are vowing to raise taxes. take a look at the chart below. the financial implosion along with the taxes are going to at least temporarily make new york a very sad city.

i'm sorry - apparently gold is not glittering

i wrote about how gold is the future world currency. and all signs still point that direction. but it turns out, the market punishes gold. so just as i tell you when i make good calls, i'm obliged to tell you when i've made bad calls.

obviously following the day to day vicissitudes of the stock market or a single commodity is basically a waste a time. i continue to believe that over a long haul, gold is a lot safer bet than the dollar. that being said, gold is down to under $870 / oz (from over $900 when i recommended it - though it did rise to over $950 shortly after my call). right now i would consider the gold trade to be the maximum pain trade. lots of fund managers are panicking out of the trade putting short term pressure on gold. as long as this market rally continues, gold will continue to be pressured. but at some point, maybe in 6 months, maybe in 3 years, putting your cash into hard assets, like gold, will look like a very good decision.

AIG driving GM into bankruptcy

sorry for the bad pun.

continuing to prove that government intervention will only make problems worse, here's an article that explains how the 100% payment of AIG counterparties will lead directly to GM going bankrupt.

GM: Bankrupt, UNLESS....

basically, since a lot of the bond holders of GM (who have control over whether to ok a haircut or force GM into bankruptcy) also own a lot of CDS on GM (issued by AIG), it's in the bond holders' best interest for GM to go chapter 11. now, i know a get a lot of complaints (well, just one from Ivan but that's 12.5% of my regular readers) when i blame the leftist, interventionists like Geithner and Obama for making matters worse than they already were, but here seems to be a clear case example showing how the rescue of AIG resulted in the failure of GM. of course, GM would have failed earlier without government intervention. but now, the taxpayers are out of trillions AND GM is still going bankrupt AND AIG counterparties (like foreign banks) are made whole. certainly, this will result in fewer (if any) benefits to GM pensioners and a massive loss of jobs - which means a further burden on taxpaying americans. for those that disagree, please explain how the "best and brightest" that obama has supposedly brought in are actually making things better.

post updatez

the day after i posted the end of newspapers, the chicago sun times media group (the tribune already filed) filed for bankruptcy. it also seems that today NY city is contemplating shutting down a number of post offices around the city.

further, i wrote about the coming gold standard a couple of weeks ago and today russia called for a partial return.