mystico_tala’s Neighborhood

Italian has to be the most beautiful language in the world  - at least some dialacts. Lots of people are in agreement about that, so it's not just my personal opinion. It's about as easy (or difficult, if you see it that way) as Spanish. The languages are closely related. Just like Spanish, Italian comes from Latin, which was spoken in Ancient Rom. Italy was the homeland of the Romans.

Since I'm interested in history and subjects related to it, it's especially nice to know Italian. In Italy many books are written about history, archaeology, art history and so on.

Italian is spoken mainly in Italy and in parts of Switzerland. I also happen to know that the people of Malta speak Italian, along with their native language Maltese and their 'adopted' language English. Also, there are people who have emigrated from Italy and who still speak their old language. They might be found anywhere in the world, but I think mostly in the US, Canada and Australia. In all, about 60 million people speak Italian, most of them in Europe.

And even if it's got nothing to do with the language, I love Italian food. The various pastas and pizzas have such incredibly appetizing names. Don't words like fettucine, lasagna, cannelloni och tagliatelle seem to taste just as well as the pasta by those names?

I've also studied Latin, but it's really difficult. It's a language that is at the same time unsophisticated and hard to learn. The grammar is tough. Though I have heard that ancient Greek, Russian and Serbo-Croatian are more difficult. A bit of Latin is good to know, if you want to study other modern languages. (Well, maybe not Chinese or Japanese, but many different European languages).

There's a modern version of Latin - Interlingua. It's a language that has been created. Basically, it's simplified but more expressive than Latin. Mainly, it's based on Spanish and Italian (with a bit of French, English and a number of other languages). The best thing about this language, is that you don't need to learn it to understand it. If you've studied Spanish or Italian you'll have no trouble understanding Interlingua. Of course, it's more difficult to learn to write and speak, but then the same goes for every other language.

Since Interlingua has been created without any complicated grammar, it should be easier to learn than other languages. I haven't studied it myself, but I can assure you that it's very easy to understand text written in Interlingua.

You sometimes hear proposals about turning Latin into the EU's official language. Whoever is suggesting that, can't possibly have tried to study Latin himself - or it's some professor of Latin who's forgotten how difficult the language really is. However, now that there's Interlingua (and a few similar languages), we could use that instead. Since it's so easy to understand, most people would be able to read all the documents and articles written in it, without any further studies. Only the people who write those documents (or translate them) would have to learn Interlingua. Even if you did have to learn it, it doesn't seem to be difficult.

I suspect that the reason proposals are made about making Latin the offical language of the EU, is because it would be awkward using a modern language that is still being used by one or several countries. That might give that country (or countries) an unfair advantage over the other member countries. Latin, on the other hand, isn't officially spoken anywhere except for in the Vatican. Even better, Interlingua is spoken nowhere and everywhere, depending on wherever the students of the language live. It seems to me that it couldn't get any fairer than that. 

11:09 really really really wants her iphone now.

11:12 would like to register her disgust for powerpoint

16:11 wonders where that colombia aroma went...

^{Note: This next post is not from my group or myself and I won't reveal who it is from. Yet I think they would want as many as possible to read it. Exerpts of the text are shown here.}

"They own or guarantee $5 trillion worth of mortgages -- nearly half of all the country's outstanding home loan debt -- and they're crashing."

- Fortune magazine

The Federal Reserve seized the assets of IndyMac, an S&L mortgage lender whose failure counted as the second- or third-largest bank bust in U.S. history (depending on whom you ask).

Now the plan is to save Tweedle Dum and Tweedle Dee -- er, make that Fan and Fred -- by opening the Federal Reserve discount window to the two companies, and getting authority from Congress to buy "unlimited stakes" in both.

In other words, taxpayers are on the hook for a blank check once again. This is Bear Stearns on a bigger scale. "Too big to fail" is becoming an epidemic.

How Did We Get Here?

To better understand, let's take a look at Fannie Mae, the Federal National Mortgage Association (as little brother Freddie basically followed in big sister's footsteps).

Here is the bottom line: As a "quasi-government entity," Fannie was always seen as "too big to fail." What's more, Fannie enjoyed implicit backing from the U.S. government the very strong hint, though, not the spelled-out promise, that its finances were guaranteed by Uncle Sam.

This quasi-public status and implied guarantee helped Fan sell massive amounts of debt at super low interest rates.

The thing is, Fannie was also a private company with stockholders, a share price and a profit-driven culture. This created an intense pressure to drive profits higher. Everyone from Fannie Mae execs to big shareholders wanted to see rising earnings, a rising stock price, and so on.

A Hedge Fund in Drag

In the mid-1980s, Fannie Mae almost went under thanks to horrible management of its loan book. Then a new (and much smarter) team stepped in and brainstormed on how to get profits up.

The new managers quickly realized what a huge asset they had in terms of the public/private straddle. This unique deal let Fannie borrow huge sums from investors at piddling interesting rates. The rock-bottom borrowing costs meant they only needed a few percentage points of return to make a lot of money.

Here's how it works: If you have a super-safe strategy that earns you, say, just 0.5% a year, you can still get very rich. All you have to do is borrow huge sums to magnify the return.

If you can borrow, say, 40 times your original capital and plow it all into your 0.5% strategy, then all of a sudden you're making 20% a year (0.5 at 40x leverage = 20% return).

Mortgage market stake

This is pretty much what Fannie Mae figured out... that they could borrow insane amounts of money thanks to their public status, plow the borrowed funds back into mortgages for a slightly higher rate of return, and basically operate as a hedge fund in drag.

Then they figured out how to make the mortgage pool bigger... much, much bigger... by chipping away at the "20% down" feature that traditionally kept riskier buyers out of the mortgage market.

Basically, Fannie started a series of political campaigns aimed at improving the plight of the poor would-be home owner who couldn't afford 20% down on a house.

Home ownership was as American as mom and apple pie, the campaign argued, and who are we to stand in the way of the American dream just because John and Jane Public can't scrounge up a hefty 20% down.

The strategy worked like gangbusters; down payments fell, and everyone was happy. Politicians loved it, because more of their voters could own homes. First-time home buyers loved it, because 5% down (or even 0% down) made it so much easier to buy the house of their dreams. Wall Street loved it, too, for obvious reasons.

But Fannie and Freddie execs loved it most of all, because the more the mortgage market expanded, the higher their profits soared into the stratosphere.

As the mortgage market grew by trillions, Fannie's and Freddie's mortgage books grew by the trillions, too. Their leverage strategy made Long-Term Capital Management look like pikers. Eventually their eyes got bigger than their stomachs, the market turned with a vengeance, and now here we are staring down the barrel of a housing crisis.

It was pure greed, plain and simple. And we all bought it...

No Free Lunch

There is no free lunch on Wall Street. (Some say that diversification counts as the one free lunch, but that's baloney, too. You can't get rich avoiding concentration.)

Now we are realizing, the hard way, that there is no free lunch when it comes to the American Dream, either. The dream of homeownership has become a nightmare for millions of Americans.

Just remember this: When politicians, executives, and investment bankers get together to do something for the greater good, you can be sure that the first and last "good" that will be served is the good of their wallets.

With the Bear Stearns failure, the IndyMac Bank failure, and now the Fannie and Freddie rescue, we are paying for the ill-gotten gains of many years prior.

The motto of the players might well have been, "Reap billions now; let others foot the bill later." Later being right now and the bill-footers being taxpayers... you and me.

If the cost is not paid via the IRS, then it will be paid via rampant inflation, as the printing press slowly turns the dollar into monopoly money.

Paulson

Cool Hand Hank

As with Bear Stearns, Treasury Secretary Hank Paulson is working to make sure Fannie's and Freddie's current shareholders don't get any love in the rescue.

It was Paulson who originally insisted on a $2 share price for Bear, to send a stern message along with the bailout. (In defending the low price paid, JP Morgan's CEO later said, "There's a difference between buying a house and buying a house that's on fire.")

We'll probably see some similar harshness to the Fannie/Freddie rescue... but don't be fooled. Those who reaped true riches from Fannie and Freddie -- the bigwig execs and politicians -- have already ridden off into the sunset with anywhere from tens to hundreds of millions each. Those hurt by the recent share price collapse are mainly holders of poorly managed mutual funds.

Still, you have to admire Hank Paulson's game face. As the former head of Goldman Sachs, he's got a very good one. His stage reaction to the carnage thus far reminds me of the Road Captain in Cool Hand Luke:

What we've got here is... failure to communicate. Some [banks and hedge funds] you just can't reach. So you get what we had here last week, which is the way he wants it. Well, he gets it. I don't like it any more than you men.

... you've been staring at a computer screen so long that your eyes feel like they've been peeled? kthxbye!

• 14:07 @MsRedPen That's the next book on my list! It's for book club. #
• 14:07 @sassenach I hope everything turned out OK on your street. #

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Show us the last thing you bought.

I've totally been engaging in therapeutic retail expenditure as a result of the recent work woes... These were purchased from artallnight on etsy. Am very excited to give the horseshoe ring as a pressie to my best friend at work Cheapie who has been struggling a bit lately and could do with a bit of good luck in her life.

The best thing about etsy is how fast everything ships! I'm hoping to get these before I leave for The City next week, although that would be very fast indeed for overseas shipping. Especially since the post in G-town seems to be run by donkeys.  

It is our belief that Jim Cramer is shorting Sirius (SIRI). A once advocate of the merger between it and XM. Cramer has been against it in recent weeks. At the close today, he was warning about diluted shares.
 
Let Cramer sway his followers we say or buckle in for the ride up the money hill for if the 3rd Republican on the FCC, Deborah Tate votes yes, it will be a fast ride up in price from what it has been over the last month.

Let Cramer take a loss on this one!
Ride up the profit from the merger on this. Cramer simply gave up on this one and now he is trying to get it to come back down with his scare tactic.

In classical times when Cicero had finished speaking, the people said, ‘How well he spoke,’ but when Demosthenes had finished speaking, they said, ‘Let us march.'    

What makes a great trader?

I just finished watching a seminar by a gentleman that was in an experimental trading group. I was so interested in the idea of this experiment that I had to watch the whole thing.

In the early 80s, two men were in a debate about how great traders are made. Is it nature or nurture? Are great traders born with a natural intuition for economics, human psychology and self-discipline, or are great traders a product of intense education and practice? Out of this question emerged an experimental trading group called the "Turtles". These people, with little to no trading experience were put through a vigorous training in trend following.

Of all the things I've read and heard, trend is one of the most important parts of trading in the markets. I've written here in this blog about one of the key tools I use in my trading decisions. The tool is called Market Club and it uses trends too as its exclusive solution to better trading.
Out of this experimental group, Russell Sands was one of the first trainees. In this INO TV presentation, "I Am A Turtle," Sands shares the lessons and methodologies that his professional trainers taught him.

It's a great seminar and I hope you check it out and send me your feedback. The seminar is free to watch at this time.

Click the photo above to go to the site.