Wednesday, March 25, 2009

Cool U.S. Household Debt/Savings Charts

"Wealth can only be accumulated by the earnings of industry and the savings of frugality" - John Tyler

Courtesy of Nomura:

Good Read on AIG Bonuses

March 25, 2009
Op-Ed Contributor
Dear A.I.G., I Quit!

The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.

That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”

That may also be why you authorized the balance of the payments on March 13.

At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.

I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.

You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.

As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.

The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.

This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.

Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”

Sincerely,

Jake DeSantis

Wednesday, March 11, 2009

Cool quotes of the day

"I don't know the bottom. I mean, if I knew the bottom, you know, I wouldn't have to look up 10-Ks and do all that stuff, I'd just buy the S&P 500 at the bottoms"
- Warren Buffett, CNBC interview Mar 9, 2009

"There are no such things as absolute values, independent of the subjective references of erring men. Judgments of values are the outcome of human arbitrariness. They reflect all the shortcomings and weaknesses of their authors."
- Ludwig Von Mises, Bureaucracy

Monday, March 09, 2009

Mundus vult decipi, ergo decipitatur

Quote of the day, courtesy of Marc Faber and his genius March 2009 issue of Gloom, Boom & Doom Report. None so captures the past and present state of affairs so succinctly and accurately. Of the truths that the world would rather ignore--the fact that our fragile world remains ever so such, and yet the fleeting solutions and seducing words of amateur gods ring through the hearts of men; the discord mistaken for profundity.

Yep... thats pretty much it!

Friday, March 06, 2009

This made my day... courtesy of a jolly salesman from one of our Swedish bank coverages

Sent as what I presume to be as a metaphor for the markets these days? haha.

--

4. Ragnarok - Viking Mythology to prepare for the worst winters and wars and the renewal that follows.

http://en.wikipedia.org/wiki/Ragnar%C3%B6k#Etymology http://en.wikipedia.org/wiki/Ragnar%C3%B6k

The long nights and the short, dark days followed fast upon each other, and as the time drew near when summer would come again men's hearts grew light with hope once more. Each day they looked into the sullen skies, through which clouds of snow were whirling, and said to each other, "To-morrow the summer will come;" but when the morrow came no summer came with it. And all through the months that in other days had been beautiful with flowers the snow fell steadily, and the cold winds blew fiercely, while eyes grew sad and hearts heavy with waiting for a summer that did not come. And it never came again; for this was the terrible Fimbul-winter, long foretold, from which even the gods could not escape. In Jotunheim there was joy among the frost-giants as they shouted to each other through the howling storms, "The Fimbul-winter has come at last." At first men shuddered as they whispered, "Can it be the Fimbul-winter?" But when they knew it beyond all doubting a blind despair filled them, and they were reckless alike of good or evil. Over the whole earth war followed fast upon war, and everywhere there were wrangling and fighting and murder. It hardly snowed fast enough to cover the blood-stains. Mothers forgot to love their little children, and brothers struck each other down as if they were the bitterest enemies.

Three years passed without one breath of the warm south wind or the blossoming of a single flower, and three other years darker and colder succeeded them. A savage joy filled the hearts of the frost-giants, and they shook their clenched hands at Asgard as if they had mastered the gods at last. On the earth there was nothing but silence and despair, and among the gods only patient waiting for the end. One day, as the sun rose dim and cold, a deep howl echoed through the sky, and a great wolf sprang up from the underworld and leaped vainly after it. All day long, through the frosty air, that terrible cry was heard, and all day the giant wolf ran close behind, slowly gaining in the chase. At last, as the sun went down over the snow-covered mountains, the wolf, with a mighty spring, reached and devoured it. The glow upon the hills went out in blackness; it was the last sunset. Faint and colourless the moon rose, and another howl filled the heavens as a second wolf sprang upon her track, ran swiftly behind, and devoured her also. Then came an awful darkness over all as, one by one, the stars fell from heaven, and blackness and whirling snow wrapped all things in their folds. The end had come; the last great battle was to be fought; Ragnarok, the Twilight of the Gods, was at hand.

Suddenly a strange sound broke in upon the darkness and was heard throughout all the worlds; on a lofty height the eagle Egder struck his prophetic harp. The earth shook, mountains crumbled, rocks were rent, and all fetters were broken. Loke shook off his chains and rushed out of his cavern, his heart hot with hate and burning with revenge, the terrible Fenris-wolf broke loose, and out of the deep sea the Midgard-serpent drew his long folds toward the land, lashing the water into foam as he passed. From every quarter the enemies of the gods gathered for the last great battle on the plain of Vigrid, which was a hundred miles wide on each side. Thither came the Fenris-wolf, his hungry jaws stretched so far apart that they reached from earth to heaven; the Midgard-serpent, with fiery eyes and pouring out floods of venom; the awful host of Hel with Loke at their head; the grim ranks of the frost-giants marching behind Hrym; and, last of all, the glittering fire-giants of Muspelheim, the fire-world, with Surt at the front.

The long line of enemies already stretched across the plain when Heimdal, standing on the rainbow bridge, blew the Gjallar-horn to call the gods. No sooner had Odin heard the terrible call to arms than he mounted and rode swiftly to Mimer's fountain, that he might know how to lead the gods into battle. When he came, the Norns sat veiled beneath the tree, silent and idle, for their work was done, and Ygdrasil began to quiver as if its very roots had been loosened. What Odin said to Mimer no one will ever know. He had no sooner finished speaking than Heimdal blew a second blast, and out of Asgard the gods rode forth to the last great battle, the golden helmet and shining armour of Odin leading the way. There was a momentary hush as the two armies confronted each other, and then the awful fight began. Shouts of rage rose from the frost-giants, and the armour of the fire-giants fairly broke into blaze as they rushed forward. The Fenris-wolf howled wildly, the hosts of Hel grew dark and horrible with rage, and the Midgard-serpent coiled its scaly length to strike. But before a blow had been struck the shining forms of the gods were seen advancing, and their battle-cry rang strong and clear across the field. Odin and Thor started side by side, but were soon separated. Odin sprang upon the wolf, and after a terrible struggle was devoured. Thor singled out his old enemy, the Midgard-serpent, and in a furious combat slew him; but as the monster died it drew its folds together with a mighty effort and poured upon Thor such a deadly flood of venom that he fell back nine paces, sank down and died. Frey encountered Surt, and because he had not the sword he had given long before to Skirner, could not defend himself, and he too was slain. The dog Garm rushed upon Tyr, the sword-god, and both were killed, Tyr missing the arm which he lost when the Fenris-wolf was bound.

And now the battle was at its height, and over the whole field gods, monsters, and giants were fighting with the energy of despair. Heimdal and Loke met, struggled, and fell together, and Vidar rushed upon the wolf which had devoured Odin, and tore him limb from limb. Then Surt strode into the middle of the armies, and in an awful pause flung a flaming firebrand among the worlds. There was a breathless hush, a sudden rush of air, a deadly heat, and the whole universe burst into blaze. A roaring flame filled all space and devoured all worlds, Ygdrasil fell in ashes, the earth sank beneath the sea. No sun, no moon, no stars, no earth, no Asgard, no Hel, no Jotunheim; gods, giants, monsters, and men all dead! Nothing remained but a vast abyss filled with the moaning seas, and brooded over by a pale, colourless light. Ragnarok, the end of all things, the Twilight of the Gods, had come. (My Comments: This is not the end of the story. It is just the end of the beginning. Fear is as old as human life)