Gold/ man

Ok, so back to Goldman Sachs for a moment. It appears the firm using its new taxpayer-subsidized status to bring increased risk to the financial system, a group of House members charged Monday. Here is the letter:

"
Dear Chairman Bernanke,

In the fall, Goldman Sachs secured access to government funding by converting from an investment bank into an ordinary bank. Despite this shift, the CFO of the company, David Viniar, said last week that the company is continuing to operate as if it were still a high-risk investment bank: "Our model really never changed," he noted in a quote to Bloomberg. "We've said very consistently that our business model remained the same.
...
"

This statement appears accurate. Earlier this year, the Fed granted a temporary exemption to Goldman from standard bank holding company Market Risk Rules, allowing them to continue operating as an investment bank. Goldman and its employees have taken advantage of its new government subsidies, and the retained ability to bet big. In its most recent quarter, Goldman earned high profits of $2.7 billion on revenues of $13.7 billion, with 78% of this revenue derived from high-risk trading and principal investments. It paid out much of this revenue in compensation, setting aside a record $772,858 for each employee at an annualized rate. The company's own measurement of risk, its Value-at-Risk model, recently showed potential trading losses at $245 million a day, up from $184 million last May.

Bloomberg reports that despite Goldman's exemption from bank holding company regulations, thay have accessed taxpayer subsidies, including FDIC-backed bonds, TARP money (since repaid), counterparty payments funneled through AIG, and an implicit backstop from the taxpayer that allowed a public equity offering in a queasy market. The only difference between Goldman today and Goldman last year is that today, the company is officially gambling with government money. Ta da - "heads Goldman wins, tails I - the taxpayer - loses."

Photo of Goldman Tower in New Jersey from earthinpictures.com.

Ocean Pacific

Shot of the OP from several moments ago, sent to me by surfing and investment buddy Hans (note the order). I cannot compare to Britain having never surfed here, but I do know there are good breaks in North Devon - here is a description of Cambeak from Global Surfers (dude!): "Left hand point breaking over rock. A hideously shaped stand up barreling sledge hammer lipped peak. Take off is free fall into a dredging pit, the wave then chills to a fast vertical wall. If the bottom turn from take off doesn't rip the fins out then you have pretty much made it. " Sounds about right.

There is no feeling that compares to knowing a swell hitting the following morning and you, up at 4AMwith your best friends, to paddle into 60-degree water to .. surf. Or boogey board. It is like being eight years old all over again - and sadly, very few things in life compare to that. One day I will return to my beloved ocean but it won't be for a while.

Sonnet with the kiddos today as Madeleine having her neck lump scanned to make sure not dangerous. Sonnet reports back nothing - absolutely nothing - to worry about.

Nuoto Roma

This neat photo by the AP of Mark Gangloff, a Munroe Falls native and graduate of Akron Firestone High who finished 11th in the semifinals of the 100-meter breaststroke at the swimming world championships Sunday in Rome. His family must be way proud. The swimming takes place all week with trials televised live 8:30AM GMT and finals from 5:30PM. Eitan and I watch together in the mornings and today Michael Phelps qualifies second in the 200 meter fly in 1:54 and change - his world record is 1:52.09 (which he swam without a rubber suit). To put this in perspective, when I was competitive it was a Big Deal to be under 2-minutes in the 200 meter fly and the great Michael "The Albatross" Gross never cracked 1:56, which this morning was needed to qualify for the consolation finals. One difference from now and then is the racing suit, which aids performance. After only three days in Roma, for instance, 11 World Records set including the women's 100 and 400 meter freestyle (first women, Federico Pelligrini, under 4-minutes), 100 breast, 100 butterfly, 200 I.M., and 4X100 freestyle relay and the men's 400 freestyle and 100 breast.

And what of the suit? The LZR Razer, which is sooo yesterday, uses ultrasonically bonded seams that fit a swimmer like a true second skin, as opposed to the stitched-up suits of the past. With low-drag panels embedded within the fabric, the suit designed in conjunction with NASA scientists to find the best performing fabric. The suit's pressure pulls in body mass, making the user more streamline. This has a particularly powerful effect with larger, muscled athletes like Dara Torres, who maintain a consistent exertion yet propelled further thanks to less water resistance. The LZR and similar suits also raise a swimmer's buoyancy levels, which also play an important part in speed. Ian Thorpe introduced a unique and powerful swimming style which took advantage of the saran wrap. Some of the women wear two of them at same time. These suits speed pace by 3-4%.

So swimming's governing body FINA reacts, finally, banning the seal skins from January 2010 making Rome the last competition where they are in use. This presents its own problems like what to do with the great majority of the recent records aided by technology? Do we ignore them or an astrix? Eventually things will equal out but it may take years for the last two to be surpassed. It bothers me that my times, which I worked hard for and am proud of, cannot be compared to what I see on television. It's like juice in baseball - it robs today's participant of their legacy and us old timers of our bragging rights.

"We've lost all the history of the sport. Does a 10-year-old boy in Baltimore want to break Paul Biedermann's record? Is that going to make him join swimming?"
--Bob Bowman, coach of Michael Phelps

Dumb Ass Drivers Who Text

Drivers who text should make everybody on the road more than mad (photo from arkansasonline.com). I often wag a finger when I see some dude or mum driving a Range Rover looking at their blackberry or iPhone. It happens all the time. So today the NYT reports on a Virginia Tech study that finds when a driver texting, their collision risk 23 times greater than when not texting. And here is something equally scary: in the moments before a crash or near crash, drivers typically spent nearly five seconds looking at their devices — enough time at typical highway speeds to cover more than the length of a football field. I am not particularly worried about the SUV drivers BTW they are plenty protected behind their tons of steel. Pitty the fellow in a smaller car, minding his own business. Driving his kids to swimming practice .. What is further remarkable in the US is that it is not illegal. Thirty-six states do not ban texting while driving. This while texting has soared: in December, phone users in the United States sent 110 billion messages, a tenfold increase in just three years, according to the cellular phone industry’s trade group, CTIA. I don't have the data for the UK but as I mentioned, I see these assholes thumbing at red lights or while driving; using a hands-free mobile is illegal and nets 3 points on your driver's license if caught. This is some stupidity that must not be tolerated.

On Mobility

Here is something to consider: "tomorrow's professional is today growing up in a family richer than seven in ten of all families in the UK" says former Home Secretary Alan Milburn Sunday. This means that lawyers beget lawyers, doctors doctors, accountants accountants and so on and so forth. This not particularly surprising since the motivated wealthy guard access to the best opportunities via internships, professional introductions, exclusive networking and private schools which account for 75% of the professions. Social mobility, always questionable given Britain's ancient social classes, more rigid in the economic downturn which leaves fewer jobs at the top and everywhere. Any parent the fool who ignores this phenomenon. A solution might be to direct one's child towards above average opportunity like renewable energy or elderly something-or-other; teach them Chinese or Spanish. If not private school, grammar - which means pushing the brats hard in their academics. The alternative today's yobs, who are often in trouble with unwanted pregnancy, alcohol and drug (The Times reports that a million Britons used coke last year and 60 children admitted to hospital with acute cocaine poisoning; these stats a month after Britain dubbed "Europe's cocaine capital" by the UN). It is no good if our talented never see the light due to their birth station but it is also not government's job to bring this talent forward. It starts at home then the community.

Two markers of Englishness:
1. Starting from today, British children from the age ten are to be routinely asked by GPs how much alcohol they drink.
2. English Heritage is to rewrite its guides to ensure they can be understood by visitors with the reading age of a ten-year old.

Peggy Or Palin

I am not the only one who sees a striking similarity between Peggy Hill and Sarah Palin other than the fact that they are cartoon like characters with an attractive form.

For those not familiar with "King Of The Hill," the cartoon launched in '95 or '96 by Mike Judge (Beevis and Butt Head fame) and unfolds in small-town, family-values Arlen, Texas, or one of the last places where "real Americans" can be found. Peggy, on left, is a substitute Spanish teacher who has a poor grasp of the language (referring to it phonetically as "es-puh-nole").

Peggy is also a freelance newspaper columnist, real estate agent, notary public, and Boggle champion. She oftens displays her naïveté and arrogance with an inflated sense of her intelligence and appearance.

She considers herself knowledgeable, clever, and very physically attractive. More often than not, Peggy's ego preempts better judgement, leading to actions that, while initially "helping" her, ultimately lead to a path of agonizing realization of what she has done. Uncanny, no?"

We believe that the best of America is not all in Washington, D.C. ... We believe that the best of America is in these small towns that we get to visit, and in these wonderful little pockets of what I call the real America, being here with all of you hard working very patriotic, um, very, um, pro-America areas of this great nation." --Sarah Palin, in Greensoboro, N.C., Oct. 16, 2008

"As long as it took that river to carve the Grand Canyon, that is how long women have been learning to subtly manipulate relationships."
--Peggy Hill, undated

Worry

Aggie has Eitan and Madeleine over for Saturday night allowing me and Sonnet "a fabulous time to ourselves" says Sonnet. We go to yoga. We stroll Richmond. We have dinner out and go to a movie ("Moon," which we like). This morning, a lie-in and I run 20 miles for my marathon. While I'm out, Sonnet goes through each kid's room and bags le crap then to the dump. Agree, it is a gross violation of their trust, my dear, but every now and again it must be done.

This photo got me thinking - what worries our kids? I ask Eitan: "war" (without hesitation). I suppose good that he is aware of these things. Madeleine more personal: "I worry about getting left at Waitrose" (Sonnet notes that she was lost several times at Carrs Supermarket in Alaska. Stan, Silver?). We try to shelter or filter Eitan and Madeleine from the world but it is always there seeping onto the computer or background on the radio and the television which is often fixed to the BBC. Eitan notes BTW that "it (the news) is always bad" and I try to explain that usually "bad news" is interesting or news. "Who wants to hear about ice cream cones?" I ask him. We chat a bit about sports which at least is not violent accept that Felipe Massa, a Brazilian Formula One driver, nearly dies yesterday in a crash. Eitan chooses to worry about the data. Madeleine, on the other hand, A) is an optimist or B) doesn't care. A simple test: before visible, I ask Eitan/Madeleine if the guard rail will be 'up' or 'down' at a nearby level crossing. Every time Eitan says "down" and Madeleine "up". This says something. I think.

Eitan: "The World Cup is in South Africa."
Eitain, after a long pause: "We have to get ourselves to the England games."

Eitan (while watching the World Swimming Championships in Rome): "Can you do two sports when you grow up?"
Me: "Very difficult at the professional level."
Eitan: "Tevez is a rock star. And Michael Owen races horces."
Me: "Michael Owen races horse?"
Eitan: "I could do football and swimming"

Peloton

The finish of the Tour de France takes place now, with laps around the Tuileries Gardens, Le Champs and, of course, the Arc de Triumphe (photo of Carlos Sastre of Spain winning last year's race from the Independent). Brit Mark Cavendish leads the last stage sprint to prove he is for real - he is otherwise fourth. Speeds, including cobblestones on the Place de la Concorde, are 25-30km per hour. The race otherwise all about the peloton, or a "moving platoon" of cyclists described, in elegant detail, by wikipedia:

"

The peloton travels as an integrated unit, each rider making slight adjustments in response to the riders around him (or her) (particularly the one in front of each). When developed, riders at the front are exposed to higher loads, and will tend to slip off the front in order to rejoin the pack further back. In some cases, with sufficient room to maneuver, this will develop into a fluid situation where the center of the peloton appears to be pushing through its own leading edge.

The shape or formation of the peloton changes according to many factors. A strong headwind or a hard effort tends to spread-out or string-out the riders, while a slow tempo or tailwind tends to bunch up the peloton into a wider formation. Side wind forces the peloton to form into echelons in the direction of the wind. Often, the width of the road forces the peloton to form into several echelons. When more than one group of riders want to contest control of the peloton, several lines may form racing one another.

While only the riders exposed to the wind at the front (and the windward side when there is a significant crosswind) of the peloton are the ones doing most of the work, it is usually advantageous to be positioned closer to the front of the peloton. One reason is to avoid being affected by the 'elastic band effect' in which a change in speed becomes amplified as it propagates to the back of the peloton. The rider riding behind a rider who is changing his/her speed must make the adjustment at a slightly faster rate (due to reaction time) to avoid collisions.

Moreover, being closer to the front means that the rider can react to attacks and changes in position with less effort. Gaps sometimes form in the peloton, and being closer to the front also reduces the risk of getting caught in the rear group when the peloton breaks form. Also, the chance of ending up in a crash declines when nearer to the front, because the frontmost riders have the fewest fallen riders to evade. Finally, being at the front of the peloton means dictating the tempo to some degree, and some teams or groups of riders may prefer different speeds as part of their tactics. Being at the front of the peloton is also necessary to initiate a breakaway.

Tactical factors also apply. Teams generally attempt to cluster their members in the peloton in order to maximize their ability to affect the pack as a whole. For instance, if a team member is currently in a breakaway in front of the peloton, it is advantageous for the remaining members to slow the peloton as much as possible in an attempt to avoid catching the breakaway. This can be particularly effective in tight turns or narrow roads, where a single team can block the progress of the pack if they are in a favorable position. A similar situation occurs at the end of the race when teams will cluster in front of their sprinter, blocking the wind as long as possible while still leaving an open path in front for the sprinter to break out near the finish line.

It is typical for large hills to split up pelotons, as the aerodynamic factors are less important at the slower climbing speeds, and power-to-weight ratio is the key determinant of speed.

"

Alberto Contador of Spain is the overall winner while Cavandish leads a powerful charge to become the first British cyclist to win the Paris stage.

Freak Out!

Swine Flu has captured the nation, with government last week announcing out of the blue that 100,000 caught the virus, which could inflict 40% of the population (here's a live shot from Mexico and they seem to be doing OK). Not surprisingly, Government's new online diagnosis service crashed within minutes as >3,000 people per second tried to log on. Otherwise, there are 840 patients in England receiving hospital treatment for H1N1 virus, with 63 in intensive care (comparable figures for the previous week were: 652 in hospital and 53 in intensive care); our Chief Medical Officer reports 26 "provisionally validated" swine flu deaths in England since the beginning of the outbreak. Combined with four deaths reported in Scotland, the UK total stood at 30. Out 60 million. This is no laughing matter but reason to panic? Flu occurs every season, and kills people too - probably many thousands. And why are we like the only country in Europe to suffer the virus?

Britain loves a good crisis. Two years ago it was "bird flu" which was going to wipe out a quarter of the population. There was a scramble for the anti-virus like nobody's business. Pandemics legacy has been with us forever - population density, poor hygiene and the Thames have made our island nation vulnerable over the ages. Plague did kill half of London in the 15th century. Pets quarantined for six months on arrival though no rabies for a century. Still, we are a different country today and the NHS an efficient primary care provider including distribution of vaccine, if needed. We also know to wash our hands. Unfortunately, Government releases a worst-case scenario without its risk weighting (like: there is a .001% chance 40% of the population will get blah blah). Governments job to keep us informed of reasonable risk, not terrify the old age pensioners and every mum in town.

I have yet to meet a swine flu. Sonnet notes that a nearby day-care closed for for a week when one child diagnosed. I am told somebody in my office has the virus (he's quarantined) and we now have sanitation gel and wipes everywhere in sight. So life goes on and we hope Government's assertions, most aggressive assertions, prove to be yet another misplaced communication.

Silvio Redux

Speaking of children in the penalty box, Silvio about to get there following publication of his third sex tape (nearly a box set!). Recall "high-end" call girl Patrizia D’Addario recorded the pair having sex and then discussing performance (Silvio: "it's a family thing") and there is an impact: political outrage in Italy. Massimo Donadi, parliamentary leader of the left-wing Italy of Values party, called the Prime Minister’s behaviour “morally reprehensible”. Dario Franceschini, leader of the main centre-left opposition, said Mr Berlusconi was trapped in his own reality show. Voters are also growing tired of the PM, whose popularity now below 50% (three months ago it surpassed 70). Trying to brush these things off, notes Silvio casually: "I'm no saint." You can just hear the Italian drawl. Wonder what the Pope thinks?

For all of us ex-pats, and particularly followers of Vitter, Craig, Jon Edwards, Sanford et al, we can finally rejoice: a scandal that lives up to the Americans! Hookers, under-aged mistresses, political intrigue, island sex parties and divorce. All this from our main guy Silvio! I am forced - forced, dear reader, to ask myself if there is another motive. Silvio too sly a fellow so maybe, just maybe, he is putting his business - his shareholders' interest - first. Afterall, Burlesconi owns three national television channels, which together have approximately half the national viewing audience; his Arnoldo Mondadori Editore the largest Italian publishing house in Italy whose publications include Panorama, one of the country's most popular news magazines; he retains substantial interests in cinema and home video distribution firms and we know today's antics good for that. Indeed, Silvio's performance may be keeping an entire industry erect employing thousands of people while creating corporate value. Rather than a philanderer and baffoon, he is a philanthropist shareholder, sending young women into politics, paying them direct aid for services rendered, saving jobs and providing a distraction for his people otherwise suffering the economic crisis. He will be remembered as one of the Great Ones. Of this we can be sure. Photo from the Telegraph online.

“You should have sex with yourself — you should touch yourself often.”
--Silvio Berlusconi gives some advise to "high-end" call "girl" Patrizia D’Addario

"I'm No Saint"

The kids are going through a phase where they fight. Not, like, yell and shout but punch, really punch, and kick each other. I often observe with a cocked eye - they do need to burn off some steam, the little buggers, and what better way then a smack down? Usually the losing party (and usually Madeleine) resorts to tears knowing full well the battle not over until it is over. The post-action recount often concerns the first punch (or kick, or whatever). Madeleine no dumby - by proving the instigator, she can still stick her brother in the penalty box and no TV or Harry Potter.

The other night, for instance, I turn around to find Eitan on top of Madeleine choking her.
Eitan: "Well, she started it!"
Madeleine: "Did not!"
Eitan: "Did! You did!"
Madeleine: "So what if I did. You were choking me!"
Me: "Eitan no TV. No Harry Potter!"

And so it goes from generation again.

Luke

Here is Eitan's classmate pal Luke ("Lucozade") who is from an impeccable family. His sister goes to one of the most prestigious secondary schools in London and his family vacations in St Lucia on a sailing boat hopping from island to island.

Luke uses knife and fork properly, placing his utensils on the plate between bites. I quizz him on multiplications and he knows his tables.

These kids have boundless energy and, though I might try, it near impossible for me to entertain them as I once did. I am out of shape not having spent large chunks of time with the brats since Christmas BUT I pride myself on being goofy at their level, a wonderful training from my mother. 

Today instead I find myself reading the riot-act on several occasions and giving Freddy a time-out for rude behavior (says he: "so what?" and looks at me coolly). Sometimes it is a matter of breaking their will. One. Day. At. A. Time.

Madeleine: "Dad, you are the best dad ever. And it is not like there is a lot of choice."

Shooting Fish In A ..

Madeleine wants a fish and is relentless about it. Her persistence a fine quality. Usually.

Along with everything else, US corporations have been slashing internal, long-term research and development spending, and, most recently, investments in venture backed start-ups and venture funds (my photo from the local pet shop). Where our nation once at the forefront of global innovation, we are being surpassed by places like Korea or China. Consider GM. Those blowhards should own the electric or hybrid market; instead they fought Washington to keep their SUVs while failing entirely to commit anything to the next, next thing. Now they are a fraction of their size and might. GM an easy example, but not alone: AT&T's Bell Labs, IBM's Watson Labs, and XEROX PARC were turbines of innovation and the envy of the world. They were also cool. Imagine being some super-educated geeko with computer science or engineering degrees (sorry Roger on both counts) working in the salt mines - here was the way out. And more: perhaps the closest thing to rock-stardom as these tighty-whities might get. Today, no more.

The data shows: in 1981, US companies with more than 25,000 employees represented approx. 70% of the investment in industrial innovation, according the the National Science Foundation. By 2006, it was 36%. The slack during this time picked up by small companies who absorbed investment: from 10% of US R&D in '81 to 40% today. No surprise. Further, public companies originally venture capital-backed today are 17.5% of the US GDP and have created more than 12 million high-paying jobs over the last 30 years (source: Venturebeat). Without venture capital, we would be Germany. Or Bulgaria. High growth tech businesses re-employed the redundent during America's 1980s downsizing - remember all that m&a and Gordon Geco stuff?

I learned in MBA school that the first thing to shutter, when looking for "efficiencies" to justify a merger or"unlocking value" after the deed done, is the research department. The reason, other than conserving or freeing cashflow, the market - which can do things better than an individual (company). In short, better to buy, or have the option to buy, technology developed on somebody else's risk. It also eliminates the problem of "project creep" which, as Arthur has told me, is what happens when 100 engineers given a free hand. They do what smart people do - explore, test, waste shareholder money.

Today's increasing problem stems from corporate isolation, some arrogance plus a dose of complacency and a pinch of corruption. From the 1980s, substantial R&D cost savings transferred back to venture innovation via m&a and investment partnerships, where a General Partner (GP) managed commitments in return for a share - 20% - of the take. This kept the brain muscle working, gave corporates access to best-of-breed entrepreneurs and universities and made a lot of people rich. All good in our capitalism. Today, I often must argue that venture an asset class given the miserable returns these last ten years but this silly: of course it is, only the best investments not looking for IPOs or mega-exits. Base-hits, ie, smaller deals in capital efficient companies, have always been the industry's bread-and-butter before large cap funds arrived circa 1999 (a large-cap fund making a $50MM investment in one company, for instance, looks for a $1B exit to get its multiple). Smaller, specific deals exactly what buyers want or need. So today, without corporate dollars and tax incentives, we lose the ability to innovate and lead having squandered resources in larger, value destroying funds. Britain has suffered this fate (who recalls the de Havilland? Neither do I but it was the first commercial airline and British). By failing venture, our companies are a fish in a barrel.

Albert Bridge

From the Internets (mostly): the Albert Bridge is Grade II listed, connecting Battersea and Chelsea, and designed/built by Rowland Mason Ordish in 1873. The "Ordish-Lefeuvre Principle" modified cable-stayed bridge proved unsound so Sir Joseph Bazalgette retooled it as a suspension bridge in 1887. The Greater London Council carried out further strengthening work in 1973, adding two concrete piers (pictured) which changed the central span into a beam-bridge. Albert is the rare hybrid with three designs.

So.. Albert was built as a (horse) toll-bridge but commercially unsuccessful; six years later it was taken into public ownership and the tolls lifted. The toll-booths, however, remain and the only surviving examples of bridge toll-booths in London. Go figure. Albert is nicknamed "The Trembling Lady" because it used to vibrate when large numbers of people walked across; even today signs warn troops from the nearby Chelsea Barracks to break step while crossing the bridge. This same phenomenon closed the Millennium Bridge, much to our embarrassment.

Albert's roadway is narrow, only 27 feet wide, and with its "serious structural weaknesses" ill-equipped to cope with motor traffic. Despite calls for its demolition or pedestrianisation the Albert Bridge has remained open to vehicles throughout its existence and is one of only two Thames road bridges in central London never to have been replaced. The strengthening work carried out by Bazalgette and the the Council unable to prevent further deterioration of the bridge's structure. A series of increasingly strict traffic control measures have been introduced to limit its use and prolong its life, making it the least busy Thames road bridge in London except for Southward Bridge which I don't know. The bridge's condition is continues to degrade however, from traffic and rotting of the timber deck caused by urine of the many dogs using it as a route to Battersea Park, little bastards.

In '92 Albert was rewired and painted in an unusual colour scheme to avoid shipping collisions. At night it is illuminated by 4,000 bulbs.

Madeleine: "Can we go now? It is just a bridge."