Good TV?

I agree with Terry Pratchett when he says that Doctor Who is not Science Fiction and that it “breaks most of the laws of narrative” in that its generally accepted to be a “bad thing to introduce into a narrative some last-minute solution that was totally unexpected and unheralded … The unexpected, unadvertised solution which kisses it all better.” He even (wonderfully) invents a new name for the element Dr Who injects into Sci Fi ‘makeitupasyougalongeum’.
Which makes it strange that it feels to me like the writers of Dr Who have lead a resurgence in quality writing for Television.
I’m not saying that Russell T Davies – who masterminded the resurgence of the Dr Who Franchise in 2005 and wrote much of it up to this year – taught or even acted as a direct example for those writing for TV on both sides of the Atantic. To my mind it was the boldness of his concepts and they way the broke with the accepted wisdoms that all moulded into a satisfying whole.
Each series had bold ‘Story Arcs’ leaked slowly out across the course of the series and suddenly tied up towards the end – usually with a revelatory ‘Ah! That’s what that was all about’ moment for the viewer. The tradition has always been for a TV series to have modular self contained stories so that the new episode each week could begin from the same start point. For the new Dr Who, everything was Bold and Colourful and Fast and Bright, charging forward at such a breakneck pace that it grabbed the viewer and kept that grip until released as and when the writer chose.
As Pratchett hinted there were times when it used this remarkable ability to persuade the the viewer to willingly suspend disbelief so as to hold onto the viewer through weak and nonsensical stories, but having nerve and confidence in their own ability to tell a story on TV seems to me to be something new.
And that it was a worldwide smash hit gave others the confidence to do similar things or even other new ones and the networks the push to support writers doing so.
In the US Cable channels have pushed quality writing with The Sopranos, Dexter and The Wire, but it was True Blood that truly pushed the craft of TV writing into new territory in the way it used techniques similar to those of Davies to tell big stories with confidence. It presented concepts that were hard for the ordinary viewer to grasp (such as the existence of Vampires) and made them mainstream by concentrating on character and the sheer dramatic power of many of the episodes.
To my mind all of this is what has lead to a Golden age of Tv writers with the confidence to take risks. What else explains recent fantastic TV such as:
Luther – a BBC TC series with a clearly unbalanced Police Detective as the lead. His main ‘sidekick’ is a female serial killer who he can’t figure out how to capture and his dogged and loyal ‘Sarjeant’ turns out to be the bad guy and a nasty one at that. The whole thing skirted the totally insane time and time again throughout the series but always held the attention in an iron grip as it headed towards a bizzarely logical, scarily wonderful conclusion. Creator Neil Cross has said that Luther is influenced by both Sherlock Holmes and Columbo but he must have crossed those roots with characters from Lovecraft and Steven King somewhere in the creation.
Father and Son – an ITV/RTE co production written by the late Frank Deasy. Dougray Scott with really strange accent played a former gangster trying to go straight with the new woman in his life. It was full of superb moral challenges as he slowly finds himself reluctantly sucked back into a world he thought he had left behind. It was all narrative power and it gave us a precious glimpse into a world we do not know (and hope not to) and these were the hooks that pulled the viewer in. It also achieved a remarkable casting coup with Irish actor Stephen Rea as a wonderfully ambiguous bad guy to contrast with Reece Noi as the more traditional bad guy ‘Gangsta’.
Justified – a US series developed by Graham Yost broadcast on the FX network and based on the character Raylan Givens from the writing of Elmore Leonard. Timothy Olyphant stars as the handsome US Marshall with a southern drawl and a knack for finding trouble and upsetting authority. The series itself did break as much new ground as some, but was beautifully written, driven by some strong attractive characters and used its southern location and a bucketful of humour to nail the viewer to his seat.

I Couldn’t say this better

Con Lib V Labour Govt – Polly Toynbee – Taxes not cuts

Cuts will hit the poor hard. Tax rises would be far fairer

Polly Toynbee: If Cameron’s plans go through, the increase in inequality will be huge. But we could avoid this relatively painlessly

Saturday, 12 June 2010

My first outdoor swim of the season in south London’s beautiful Brockwell lido came with a nice surprise. Instead of paying the £5.20 adult price, the receptionist told me that it’s free for the over-60s, from a government fund.

Swimming up and down, I considered my winter fuel payment of £250 and my free eye tests, along with my valuable Freedom Pass to travel by tube or bus in all six London zones. Despite the crisis, before the election all these had been safely ring-fenced for me by David Cameron, because most older people vote – and a lot vote Tory.

I make no argument here against universal benefits, which give everyone a stake in the welfare state. But this is an example of how well this government may look after their core vote in these hard times. I regard myself as a good test case for Cameron and Clegg’s idea of fairness in this month’s budget. I am lucky enough to be in well-paid work. What’s more, like a lot of well-paid people, the new 50% top tax rate has not touched me as Labour only applied it to earnings over £150,000 – though those like me can well afford to pay more.

Thanks to Gordon Brown’s imprudence, the basic income tax rate was cut by 3p, paid for by hitting the lowest earners hard when their 10p tax rate was abolished. The recession has lowered my mortgage rate and quite a few prices. Cameron is making sure my children will not pay inheritance tax either.

So when he keeps saying “we’re all in this together”, I can’t see exactly where or how many of the better off are going to share the pain of the monumental cuts to come. By next year, some 750,000 people will join those already out of work, and forecasts this week warn many will stay unemployed for years. Not only will those families suffer, but welfare and public services cuts will be sharply felt by their most frequent users. So far few yet quite realise how crushing this landslide of cuts will be. Ministers announcing cuts in their departments still look proud as cats catching mice: that won’t last long when the public grows angry.

This week the Office for National Statistics produced its report on the effects of taxes and benefits on household income, 2008/09. It tells us, unsurprisingly, that the level of income inequality stayed the same. But it goes further, analysing who pays what in tax and who receives what in services and benefits. These facts will be vitally important in assessing Cameron’s “we’re all in this together” claim.

Professor John Hills of the London School of Economics chaired the National Equality Panel’s recent Anatomy of Economic Inequality in the UK. It found the top 10% had 100 times more wealth than the bottom 10%. By age 55-64, the top 10% of professionals owned on average £2.2m in property and pensions, while the bottom 10% of manual workers owned less than £8,000 worth of anything. Gordon Brown called its verdict “sobering”, as indeed it was: after 13 years Labour had no more than stabilised the gap, while the report concluded “the large inequality growth of the 1980s has not been reversed”.

I asked Professor Hills to look at this week’s ONS figures to consider the effect of the coming cuts. Are we about to plunge into another 1980s episode of steeply rising inequality? Examining the charts, he said that depends on whether the deficit is to be shrunk by cuts in welfare and services, or by raising taxes.

The bottom half of the population are heavy users of services and benefits, with more children and elderly than the top half. To raise £30bn, half the sum Cameron pledges to cut from the deficit, means raising on average £1,000 from every household. Hills calculates that if the money is raised by spending cuts, then the bottom fifth loses 12% while the top fifth would lose less than 1% – a startling difference.

But if that money were raised across all existing taxes, the burden would be more fairly shared, with the bottom fifth paying another 3.4% of their income and the top fifth paying 3.7%. “That shows starkly how different the impact will be depending on whether the money is raised in spending cuts or in taxes. Public service cuts fall disproportionately on the bottom half.” The Conservatives said they would raise £4 from cuts for every £1 in tax increases: the coalition says “most” from cuts.

If the money was raised through tax, how steep would that feel? Hills says to raise £30bn from across all taxes, VAT would go up from 17.5% to 19%, and income tax up from 20% to 21.7% – NI, tobacco, car licences and everything else rising by the same proportion. To raise the full £60bn Cameron pledges over the parliament would cost twice as much, so basic income tax would go back up to 23% – which is the same rate it was the last time the Tories were in power.

It would certainly be hard for many – but would that still be better than throwing 750,000 people out of work while cutting schools, social care, children’s services, transport, arts, benefits and almost everything by a brutal 25%? That is the hard question that was never put to the voters. That is the question Labour’s leadership contenders should be willing to put now. When people feel the cuts bite deep by next year, the worst since the war according to the Institute for Fiscal Studies, a wide consultation might well reveal people would rather pay more taxes, spread fairly, than see this slash and burn. But no one has put the case.

The CBI and British Chambers of Commerce have just put in their budget submissions to the Treasury. Demanding the cuts fall on public spending, they call shamelessly for easing tax on the rich: for the capital gains tax rise to be watered down with broad tapers, abolition of the 50% top rate soon, and tax reliefs on top pensions restored. The pain should fall on public spending and pay, but no cuts in business projects such as Crossrail.

If they prevail, the distributional effect will be shocking, falling 12 times harder on the bottom fifth than on the top. I don’t know if Cameron means what he says about social justice and fairness, but the ONS figures show the coalition government at a crossroads: if they choose mostly public spending cuts and few tax rises, Britain will suffer another soaring increase in inequality that, once entrenched, has proved almost impossible to reverse.

guardian.co.uk © Guardian News and Media 2010

Thanks Polly!

July 2010 Facebook Status Film Quotes (with Answers)

July 2010 Facebook Status Film Quotes:

“Yippee-ki-yay…………………………..” Die Hard (1988) Bruce Willis
“One morning I shot an elephant in my pajamas. How he got in my pajamas, I don’t know!” Animal Crackers (1930) Groucho Marx
“What do you say we try that again? – Yes – yes, yes, without the oops” Independence Day (1996) Will Smith Jeff Goldblum
“You know what they call a Quarter Pounder with cheese in France? No. A Royale with cheese.” Pulp Fiction (1994) John Travolta Samuel L Jackson
?”I saw what they’re planning to do. They’re like locusts. They’re moving from planet to planet… their whole civilization. After they’ve consumed every natural resource they move on… and we’re next. Nuke ’em. Let’s nuke the bastards” Independence Day (1996) Bill PUllman
“We’re not gonna get rid of anybody! We’re gonna stick together, just like it used to be! When you side with a man, you stay with him! And if you can’t do that, you’re like some animal, you’re finished! *We’re* finished! All of us! ” The Wild Bunch (1969) Wiliam Holden
?”So what got you in to, uh, carpentering? – Carpentry? (smug laugh) I guess I’d have to say Jesus. He was a carpenter and I just figured if you’re gonna follow in someone’s footsteps, who better than Christ? – Greg’s Jewish. – Are you? – Yeah – Well so was J.C. You’re in good company.” Meet the Parents (2000) Ben Stiller, Robert De Niro
?”Et maintenant, would monsieur care for an aperitif, or would he prefer to order straightaway? Today, we have for appetizers – uh, moules marinières, pâte de foie gras, beluga caviar, eggs Benedictine, tarte de poireaux – that’s leek tart- frogs legs amandine or oeufs de caille Richard Shepherd – quails’ eggs on a bed of pureed mushrooms. It’s very delicate, very succulent.” – “I’ll have the lot.” Monty Python’s The Meaning of Life 1983 John Cleese Terry Jones
?”He was quite fond of the drink. It was the drink that killed him – How awful, he was an alcoholic?- No, he was hit by a Guinness truck, so it was quite literally the drink that killed him” Mrs. Doubtfire 1993 Dustin Hoffman
?”Could I ask you what provision you made for the wounded? – I was ready to help any who applied – General, how does a child shot with a 303 Lee-Enfield “apply” for help? ” Gandhi (1982) Geoffrey Chater Edward Fox
“Whenever I despair, I remember that the way of truth and love has always won. There may be tyrants and murderers, and for a time, they may seem invincible, but in the end, they always fail. Think of it: always.” Gandhi (1982) Ben Kingsley
?”…we’re an anarco-syndicalist commune. We take it in turns to act as a sort of executive officer for the week. But all the decisions of that officer must be ratified at a special bi-weekly meeting; by a simple majority in the case of purely internal affairs – Be quiet! -…. but by a two-thirds majority in the case of more serious – Be quiet! I order you to be quiet! – Order, eh? Who does he think he is? Ha!” Monty Python And The Holy Grail 1975 Michael Palin Graham Chapman
“There’s always an alien battle cruiser, or a Corellian death ray, or an intergalactic plague intended to wipe out life on this miserable little planet. The only way these people can get on with their happy lives is that they DO NOT KNOW ABOUT IT!” Men in Black (1997) Tommy Lee Jones Will Smith
“You’re going to look pretty silly with that knife sticking out of your ass.” High Plains Drifter (1973) Clint Eastwood
Option A: You talk, we listen, no pain. Option B: You don’t talk, I remove your thumbs with my pliers, it will hurt. Option C: I like to vary the details a bit but the punchline is you die.!” Mr. & Mrs. Smith (2005) Brad Pitt
“You are a sad, strange little man, and you have my pity.” Toy Story (1995) Tim Allen
“The joint I’m about to roll requires a craftsman. It can utilise up to twelve skins. It is called a Camberwell carrot.” Withnail and I 1987 – Richard E. Grant
“What makes saloonkeepers so snobbish? – Perhaps if you told him I ran the second largest banking house in Amsterdam. – Second largest? That wouldn’t impress Rick. The leading banker in Amsterdam is now the pastry chef in our kitchen” Casablanca 1942 -S.Z. Sakall
“I’ll have what she’s having.” When Harry Met Sally… (1989) Meg Ryan and Billy Crystal
“Listen and understand. That t********* is out there. It can’t be bargained with, it can’t be reasoned with. It doesn’t feel pity, or remorse, or fear, and it absolutely will not stop. Ever. Until you are dead.”The Terminator (1984) Michael Biehn Linda Hamilton
“Do you want to know why I use a knife? [pause] Guns are too quick. You can’t savor all of the little…emotions. You see, in their…last moments, people show you who they really are. So in a way…I knew your friends better than you ever did. Would you like to know which of them were cowards?” The Dark Knight (2008) Heath Ledger
“This isn’t flying. This is falling with style!” Toy Story (1995) Tim Allen
“He’s not the Messiah. He’s a very naughty boy!” Life of Brian (1979) Terry Jones
“I want ’em stopped. – Stopped, how? – I don’t know how, I wouldn’t be asking you if I knew how to fly this thing, would I? Now you listen to me, flyboy: I want ’em stopped, I don’t give a good god damn if you gotta crash right into him. You hear me? ‘Cause if you don’t, you’re gonna start screaming mayday, ’cause I’m gonna give it a try!” Dirty Mary Crazy Larry (1974)
Vic Morrow about Susan George and Peter Fonda
“To infinity, and beyond!” Toy Story (1995) Tim Allen
“What in heaven’s name brought you to C*********? – My health. I came to C********* for the waters. – The waters? What waters? We’re in the desert. – I was misinformed.” Casablanca 1942 Claude Rains Humphrey Bogart
“It’s 106 miles to Chicago, we got a full tank of gas, half a pack of cigarettes, it’s dark, and we’re wearing sunglasses. – Hit it.” The Blues Brothers (1980) Dan Ackroyd John Bellushi
“TEN-HUT! Good morning, you fascists. You pigs. You bigots. You PINKOS. You FAGS! You BASTARDS. Fuzz. This indoctrination of vocal harassment was compiled by our own Juvenile Division in preparation for the concert this weekend.” Electra Glide in Blue (1973) Joe Samsil
“I’m not the Messiah! Will you please listen? I am not the Messiah, do you understand? Honestly! – Only the true Messiah denies His divinity. – What? Well, what sort of chance does that give me? All right! I am the Messiah! – He is! He is the Messiah! – Now, fuck off! -[Silence] How shall we fuck off, O Lord?” Life of Brian (1979) Graham Chapman
” …Why me? I retired six months ago. You remember? – Three reasons. One as a member of the elite special forces unit of the Federated Army, you are expert in the use of all major weapons & space craft needed for this mission. Two of all the members of your unit, you were the most highly decorated. – …and the third one? – Of all the members of your unit, you’re the only one left alive.” The Fifth Element (1997) Brion James Bruce Willis
“Forget whatever you’ve seen in the movies: they don’t turn into bats, crosses don’t work. Garlic? You wanna try garlic? You could stand there with garlic around your neck and one of these buggers will bend you fucking over and take a walk up your strada-chocolata WHILE he’s suckin’ the blood outta your neck, all right? And they don’t sleep in coffins lined in taffata. You wanna kill one, you drive a wooden stake right through his fuckin’ heart. Sunlight turns ’em into crispy critters.” John Carpenter’s Vampire$ (1998) James Woods
“Oh lay off, I’ve had a hard time! – You’ve had a hard time? I’ve been here five years, they only hung me the right way up yesterday” Life of Brian (1979) Michael Palin Graham Chapman
“Apparantly this speed maniac you’ve been chasing all over your territory is a former professional road racer named Kowalski, K-O-W-A-L-S-K-I, repeat Kowalski. First name unkown, other particulars also unknown. All we do know is that he’s employed as a car delivery driver by an agency in Denver. He’s presently driving a Dodge Challenger, Colorado licence plate OA-5599. This is not a stolen car; he’s driving it to San Francisco for delivery due Monday. – It’s only Saturday, what’s his hurry?” Vanishing Point (1971) Unknown about Barry Newman
“The path of the righteous man is beset on all sides by the iniquities of the selfish and the tyranny of evil men. Blessed is he, who in the name of charity and good will, shepherds the weak through the valley of darkness, for he is truly his brother’s keeper and the finder of lost children. And I will strike down upon thee with great vengeance and furious angerthose who would attempt to poison and destroy my brothers. And you will know my name is the Lord when I lay my vengeance upon thee.”Pulp Fiction (1994) Samuel L Jackson

Never Trust the Money Men

Never Trust the Money Men (They get paid whatever happens!) or 1001 things you need to know (but won’t want to) before taking out a Mortgage.
In the old days if you wanted to buy a house you saved up (or begged or borrowed) the deposit then you spent several weeks going through a Mortgage interview where you and your partner’s credit history, wages, etc would all be examined carefully. If the lender felt you met their criteria then you would get a mortgage offer and could proceed to buy the house.
On the day that you took ownership your solicitor would transfer the deeds to the property to the Mortgage owner and there they would stay until you redeemed the mortgage in full. For the life of the mortgage you would make monthly payments to the company. If you had an issue you could go to them and talk about ways of resolving the situation, sometimes they would agree to ‘rollover’ a payment or two into the overall balance due to help you out, but in the main if you could not pay you would either have to sell or have a sale forced on you (repossession).
If you put money in a bank you expected that to be a secure if unspectacular investment unless something desperate happened to the bank in which case the govt and the Bank of England would hopefully help. If you had some spare money you could invest it in stocks and shares yourself or give the money to a fund to invest on your behalf. Investors are expected to be aware that this is inherently more risky and there is always the possibility that your investment could go down as well as up. You wouldnt expect the government to help out if this went wrong although there have been a number of cases where people have tried to persuade the govt to help.
Following the big Stock market crash in the US in the 1920’s the Glass–Steagall Act was enacted to legally enforce this split by banning deposit taking institutions from making more risky investments. This lead to the setup of separate Investment Banks to make riskier investments, a protection that has never been enacted in the UK but is under consideration at this time. The Glass-Stegall act was repealed in the late 90’s.
After the UK’s big bang (financial deregulation under the Conservative government in the 80’s), new ways of financing mortgages began to become popular.
There had always been a limit on the amount of money available for this kind of loan as the main lenders (Building societies) were quite deliberately rather safe institutions with strict, carefully observed lending practices. To fill this gap there was a growth in lending based not on traditional ‘face to face’ lending but on investment securities.
A security is simply where a financial institution repackages something into a product. An example might be where it takes 1000 mortgages and puts them together in a block then allows investors to buy a small or large part of that block until all of it is covered. This investment could come from anywhere or anyone – they don’t need to know the individual borrower. It meant that a small investor in Japan or America, a bank in Beijing, the New York Bus Driver’s retirement fund or even the Government of a country you had never heard of could all be contributing to your mortgage.
To help make this sort of investment predictable for the investor the Financial insitution creating the security would make available statistical data as to how secure the loan was with the use of credit ratings figures, which were used to rate applicants. We have all been scored when applying for credit – if you have enough ‘points’ (things like your credit history and wages are given a number) you get the loan, if you don’t then try somewhere else. For the investor knowing that say 80% of the mortgages in the fund met the highest calibre of rating was meant to be a reassurance of its integrity.
This influx of new money into the housing market from lending based on Securitised sources of money helped fuel the housing boom both sides of the Atlantic. It also fuelled Housing price rises as well – the ready supply of money and credit points based lending criteria meant that if I chose to bid £500,000 for a 1 bed flat in London there would be a lender to grant me the money provided I met those criteria, no matter how stupid the price was in reality.
There was also a new group of Mortgage salesmen both in the US and UK – the Mortgage Broker. Financial salesmen such as this were in the situation where on the one hand they could advise a customer to do something safe but get lower fees and on the other hand advise something risky for a fat commission (and meet the targets given by their employers). Many of them worked in Banks or closely with banks in the UK sometimes actually having desks next to the deposit desks.
The brokers who made up the securities up and sold them on made huge fees and their company’s made huge profits turning financial transactions into financial products.
In the UK the use of Endowment mortgages grew enormously in the 80’and 90’s.
The idea is a simple one. Instead of making a single payment to the mortgage owner that covers both the interest on the loan for that month and a contribution towards paying off the original amount, you make a payment to them to cover only the interest on the loan and at the same time make a payment into an investment fund (endowment) which would invest your money in the stock market until the time came to redeem the mortgage. In theory you would have paid the same amount over the life of the mortgage, but when the time came to redeem the mortgage your payments towards the original loan would have been invested for you and have been gaining interest all the time. Over a long period this kind of investment can produce big returns because of a sort of multiplier effect as the interest or profits begin to ‘compound’ and you get interest and then interest on the interest and then interest on interest on interest.
Combine this with the housing price rises that were taking place pretty much consistently over this period and you have a situation where a large number of people were able to redeem mortgages early and the house that they now owned outright was worth a vast amount more than they paid for it. Instant security for many.
The market falls related to the Dot com bubble of the late 90’s lead to many of the funds that endowments were invested in suddenly looking much less attractive. Those borrowers who were faced with potentially not being able to pay back their Mortgages at the end of the term began to take a long hard look at what they had been sold. “We were not told that this could go down as well as up” they said and the financial regulator had his own long hard look at those who had sold the mortgages and realised that it was true – most of them had not been told of this possibility.
Some people complained and/or sued the endowment companies and were successful and then backed by the news that the regulator had officially censured several of these companies the few began to become many. In the main the companies only had one place to take these payments from – the fund itself – they were not going to take back the commission payments and bonuses they had paid themselves – so this process lead to several funds collapsing and even for the best run of them a disastrous loss in their value.
Most people who invested in Endowment Mortgages from the late 90’s until they fell out of favour ended up losing money and eventually having to renegotiate their mortgage. For these who held onto their property this was often not as bad as it sounds because their investment (the house) was still continuing to rise in value and whereas the original mortgage was for 80% or 90% of the value of the property it might now be only 40% or 50% of it – a much easier loan to obtain, if not always to pay back.
The lesson then is that moving boring traditional Mortgages into the investment field brought both benefits and issues but the thing that brought the whole project to its knees was the incompetence of the financial industry itself.
In America their traditionally rather flat housing market began to take off in the late 90’s also driven by new sources of funds and the recognition that investing in Property could be profitable.
AS menmtioned before the Glass Steigal Act meant that the US has number of large financial institutions called Investment Banks (eg JP Morgan, Goldman Sachs, Bear Stearns, Lehman Brothers) who specialise in making investments for customers often in sophisticated securitised products.
Another quirk of the US system is that if an Investment fund has only a limited number of investors it is not subject to the same regulation as other funds are. This lead to the set up of funds aimed at investing money for those who are already rich enough to be prepared to entrust a chunk of this wealth to a single fund manager (50 people investing $ million rather than 5,000,000 people investing $10).
They became known as Hedge funds because their primary method of making market profits was traditionally to buy stocks that they thought would go up, but at the same time hedge or offset this by selling the same shares short – basically borrowing the shares and selling them hoping to buy the same shares back at a cheaper price when they have to be returned. In all but the most extreme markets therefore a hedge fund would make money whichever way the market moved.
There was a huge influx into hedge fund management and some areas of Wall St of the ‘Quants’ (Quantitative Analyst) mostly very highly qualified Mathematicians, Engineers or Physics experts who were trying to use advanced mathematics such as chaos theory and a whole host of modern mathematical modelling tools to try and predict the market.
By the mid noughties these transactions were making consistent profits, but the profits were very small scale on each transaction because of the cost of the hedge and the fees involved. They therefore began to leverage their investments – basically borrow enough to buy a million shares rather than a thousand so as to multiply profits.
By the late noughties the Hedge funds were making unparalleled profits for their investors. For example Citadel Investment Group run by the strange and charismatic Ken Griffin was rumoured to be making unheard of returns of 20-60% per annum up to 2007.
The American housing market continued to rise and provide good returns on investments throughout the early noughties to such an extent that investment funds began to look at the ‘subprime’ mortgage category – basically those who were more of a risk to lend to. In return for this lending the investor claims a higher rate of return, but also bears a greater risk in that these mortgages are far more likely to go wrong.
The subprime sector in the US had begun back in the 90’s but had collapsed when the stock market ‘wobbled’ in the late 90’s amid accusations of Gross Incompetence and fraud.
In his dark and cynical book ‘The Big Short – Inside the Doomsday Machine’ Michael Lewis describes how the system was rebuilt in the Mid Noughties by corrupt and incompetent Brokers who knew the loans they were selling were not worth the paper they were written on, how they structured the loans to be unaffordable in the knowledge that they would then get a 2nd fee for re-organising it. Investment firms were then repackaging these loans and selling the resultant securities all over the world (taking hefty fees for themselves for doing so) based on information from ‘credit rating’ agencies who continued to insist that in their experience 80% of the loans in a sub-prime mortgage security were AAA (highest – the same rating as a govt bond) rated no matter what rubbish was actually included.
Lewis’ fascinating book is actually written about those who recognised this House of Cards for what it was and eventually decided the only safe investment was to bet against the whole mess. While most of Wall Street and almost all investors were merrily pocketing huge fees and profits they were looking for ways to bet against it having recognised that this was the only safe bet.
To sustain these profits the Investment banks began to securitize these investments in ever more sophisticated ways to try and increase the profit and limit the risk. One example was to take all of the lowest rated (and hardest to sell) portions of a security and put them all together into a new security called a CDO (Collateralised Debt Obligation). The credit agencies obliged by applying their usual criteria and although the new security was made up of elements which previously been in the lowest portion of their previous securitised existence, 80% of them suddenly became AAA rated! The temptation to hide the really dodgy loans in this way and take more Fat fees for doing so must have been hard to resist.
For those who wanted to ‘bet against’ this increasingly fantastical process there was an easy option. If you wanted to hedge an investment it had always been possible to take out insurance against it defaulting. It was popular with hedge funds for obvious reasons. For the Subprime market this was the CDS (Credit Default Swap) basically insurance which would pay out if the level of ‘defaults’ on a subprime investment fund reached a certain level. It was supposed to be for these who owned the stock to offset their investment, but there was no technical limit on who could take them out.
Michael Eisman a Hedge fund manager with a bleak view of Wall St purchased over $50 billion worth of these for a few million a year and sat back to wait for the house of cards to fall. Despite explaining clearly over and over again he suffered an investor revolt in 2006 as his investors questioned why he was betting against a still rising market. The Wall Street securities firms then proceeded to package up the CDS’s into even more complex sub-prime securities (Synthetic CDO’s) which they sold onto investors. I can only assume neither they nor those who bought them were really sure what they were by this time!
In his book ‘The Greatest Trade Ever – How John Paulson Bet Against the Markets and Made $20 Billion’ Greg Zuckerman describes how a wealthy but secretive investment fund manager call John Paulson decided to short the subprime market in late 2008 and how he too looked to CDS’s to do so leading to one of the largest profits on a single trade ever in Wall St history. The regulator in the US is currently pursing legal activity against Paulson’s Investment banker (Goldman Sachs) for their part in this trade. Paulson is not hugely popular in the UK because of his role in betting against 4 of the 5 major UK banks in Sept 2008. He eventually realised over £250m for this trade after the government was forced to prop them up.
In late 2006 the housing market began to fall in the US. The impact of this on these on housing investments was dramatic and for sub-prime investments particularly spectacular and unexpected.
The first major issue was simply that in the morass of securitised mortgages lenders could not work out what proportion of their investment was still good so that they could work out how much of a loss they might take. The sale of sub-prime investment securities suddenly became almost impossible as everyone realised what a bad idea they were and that rather than spread the risk, they effectively contaminated all of the other loans that they had been securitised with. Because they could not be sold hundreds of billions of pounds worth of investment effectively became worthless overnight.
Two funds which were heavily invested in this market which belonged to Bear Stearns effectively ceased to be viable and were closed down with huge losses. These losses lead in the next few months to the collapse of the company (which had been the 5th largest investment bank in the US) and its sale to one of its rivals at a knocked down price. Another of these firms – Lehman Brothers was so heavily tied into this type of lending that it collapsed totally despite the govt and regulator trying to put together a sale or rescue package – the largest Bankruptcy in US history at the time.
The next shock came for those firms with less investment in this market but whose assets were very highly leveraged. Borrowing to multiply your investment would indeed multiply your profit but it also multiplied losses – the firms not only have to cover the original loss but a hundred or a thousand times that loss.
Hedge funds were then hit by the way that many of them were using sophisticated financial models to predict changes in stock prices and to predict a market that they essentially saw as rational enough to be analysed in a mechanical way. All of a sudden investors began to act irrationally – for example thousands of investors lost confidence and were suddenly charging out of housing investments in far greater numbers and far more rapidly than the potential losses might indicate, effectively destroying the whole market. Their computers suddenly became very bad at investing for a while which only helped to make things far far worse. One accusation levelled at Hedge funds is that they and their models were behind massive ‘shorting’ of stocks (borrowing them and selling them knowing that when the market went down you could buy them back for less). The impact of this was to drive down market prices to such an extent that for nearly a month in late 2008 the regulator stepped in and outlawed the practice.
Some Canny investors such as Michael Eisman had taken out CDS insurance on the losses but for the crisis the impact of this was to move a huge part of the losses into another field. It turned out that the giant American AIG held many of the CDS’s and had to pay out. The company had to be propped up twice with multi billion pound injections of cash during the crisis.
In his book ‘On the Brink’ the Treasury secretary at the time Henry Paulson tells how he repeatedly underestimated how severe the crisis was and its effects because of these factors each of which just built on the other to make it worse.
Paulsen helped introduce a scheme to avoid the worst impact of Mortgage default, which helped many of those who struggled with their payments to refinance in affordable way, but he says that the hardest to help were those who had overfaced themselves, those whose financial situation had changed (eg unemployed) and those who had made the investment as a speculation. In the subprime category were many of what became known as NINJA mortgages – to those who had ‘No Income No Job or Assets’. Lewis tells the story of a Californian fruit picker with very little English and an annual income of $14,000 who was given a loan of $720,000 to buy a house and Eisman tells of his nanny approaching him to ask what she should do as her and her sister had ended up owning 5 houses in Brooklyn as they speculated and refinanced with the market, but were now unable to make the payments.
Much of the money that was invested in US Housing came from abroad and much money from abroad was invested in the devastated US markets, meaning that a ‘correction’ of overpriced housing in the US, the effects of which were hugely magnified in this way, spread to become a multi billion pound global catastrophe which will affect us all for some time to come.
I dont think anyone would disagree that this was a classic ‘bubble’ – housing prices in the US were clearly being pushed to unsustainable levels. The interesting question is why it was such a disatrous one with such widespread consequences – one way to look at it is to see it as a series of bubbles – all building one on top of each other to create a particularly massive pop when they burst.
The first bubble was that the investments themselves (in Sub Prime mortgages) were far more risky than the investors were told they were because of the silly and corrupt practices of the brokers.
The second bubble was that the financial institutions were making so much money on these deals that they began to apply pressure to the brokers to sell more (Effectively taking off almost any sane limits to the lending).
The third Bubble was that the financial intuitions repackaged the investments into increasingly complex forms which obscured the risk (with the knowing or unknowing connivance of the ratings agencies).
The Fourth Bubble was the new breed of investors whose computer models told them this was a good investment when good old fashioned investors like Warren Buffet steered clear.

The fifth Bubble was that in order to maximise profits investment funds in particular had started to use Leverage (borrowing) at an amazing level.
The sixth bubble was those who recognised that the huge bubble was about to pop and were now betting against it meaning that the risk was being spread across the economy.
The last bubble as always with investments was that there was only value in subprime mortgage securities as long as they could be sold – the market depended upon investor confidence that they were a good investment. When that collapsed the whole investment suddnly became worthless.
And what caused the issues – once again we have to put a tick by greed and incompetence by the Financial Industry – in this case those who sold the product without care and for their own profit, those who used it very unwisely as an investment vehicle and those who produced a product so complicated no one could see how tragic the downside might be.
One of the most worrying (and under reported) aspects of this that struck me is that in America you can make a reasonable bet that sub-prime actually means mostly Black, a group that has historically been denied both access to credit and the opportunity to own their own land or property. Suddenly along comes a way of owning your own home – it must have seemed a dream to millions and it is that dream that has been flushed down the toilet here. There is probably enough evidence to say for that this was a case of white educated salesman selling products to poorly educated blacks they knew they could not afford or understand – sign here and the house is yours – and walking away with the profits, and this disaster for whole communities is one of the darkest nastiest aspects of the whole mess.
This is the NYT on the impact in Atlanta:
For me though the enduring lesson is to always remember that whilst Bank Deposits are safe and go up albeit very slowly – they usually lose value in times of high inflation – Investments are inherently more risky and the people who sell them to you don’t always have your best interests at heart.
If a mortgage is the largest monetary decision most of us make in our lives it might be best to remember that investments can go wrong – maybe a safe boring building society mortgage is a good thing!
Appendices and further reading:
Appendix 1:
In its “Declaration of the Summit on Financial Markets and the World Economy,” dated 15 November 2008, leaders of the Group of 20 cited the following causes:
“During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions”
Books:
1: On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by Henry M Paulsen
..and a reviews of the book
2: The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It by Scott Patterson
..and some reviews of the book
3: The Big Short – Inside the Doomsday Machine’ by Michael Lewis
This is an article based on the book:
..and some reviews of the book
4: The Greatest Trade Ever – How John Paulson Bet Against the Markets and Made $20 Billion by Greg Zuckerman
..and some reviews of the book
Wiki’s:

Biodiesel

Last spring a company set up in a trading estate near to me who make and sell Biodiesel (Link Below). My car is a Diesel which does a lot of miles (approaching 20,000 Year) so it seemed an obvious choice.

When I compared the price it seemed even more obvious as, depending upon the grade, you can save about 6-20p a litre over High St Prices.

I Googled it and looked up the known issues with using Biodiesel:

1: Biodiesel can be more corrosive the ordinary fuel and can poses a risk to the rubber pipes in your engine – I looked in this a bit more and it turns out nearly all manufacturers switched to more resistant compounds in the 90’s – certainly it’s not been an issue in my 53 plate Toyota and shouldn’t be in any modern car.

2: It turns out Biodiesel is slightly more dense than fuel from fossil fuels. The risk this poses is that over time some of gunge that has sunk to the bottom of your fuel tank will be pulled through to the engine. It will be caught by the fuel filter, but this will normally need changing after a few weeks or months usage because of the additional gunk. In my case after about 4 months a warning light on my dashboard told me there was water in my fuel filter. I replaced the filter which cost me £16 – annoyingly this is probably a lot of the financial gain I had made if you add it up! There was a lot of brownish gunk in the filter – presumably an emulsion of the petrol and the water – but I’m told that someone reasonably handy (Not me then) could wash out the filter with petrol and replace it. It should be only a one time thing.

3: There can be loss of performance – I can’t say my car and I are high performance on the road anyway, but I didn’t notice a real difference.

4: Issues in cold weather – Diesel gets ‘waxy’ at very low temperatures and this make it difficult to start the engine. In very cold climates Lorry drivers have special heaters to keep their engines/fuel warm (Ice road Truckers!). This is slightly more of a worry with biodiesel than ordinary diesel because of the denseness – but it has not been an issue for me. In cold weather I just use the heater plugs and it still starts first time. This garage stop selling 100% biodiesel in the coldest part of the year.

5: Biodiesel is designed to run in ordinary cars without adaptation – it is not the same as adapting you car to run on waste oil. If the Biofuel garage is closed I can just go to Tesco’s.

In the UK we don’t normally buy 100% biodiesel – probably because of these issues. My supplier offers B30 (30% biodiesel) B50 (55% biodiesel) and B100, with the price going down by a few pence for each step.

I have used B100 a couple of times, but I mostly stick to B50. I honestly can’t tell the difference in the cars performance – the only way to tell is to sniff the exhaust which has a kerosene note to it that Is not there with ordinary fuel.

The only other issue is that the company don’t have a chip and pin machine – its cash only so you tend turn up and ask for ’40 Quid’s worth’ rather than ‘fill her up’.

The company tell me they use Rape seed oil and/or Soya oil to make the fuel

Overall then, my experience has been pretty positive one.

Looked at from purely financial point of view there has not been a great saving because of the new fuel filter. It has also taken a bit or organisation to turn up with the cash in my hand – I don’t carry that sort of cash around – usually I have to go to Tesco’s and ask for a cashback or use their Hole in the wall (driving past their garage!).

But there is a real personal satisfaction in feeling greener whilst driving and the Kudos is fantastic … Just before Xmas I drove my Partner and her parents (both in their 80’s) around for a couple of days and even they were impressed by the idea of being driven round in a car powered by a green fuel. That feeling of doing my best for the environment (and saving a few pennies along the way) is why I will continue to use Biodiesel.

Links:

My supplier:

http://www.prestigefuels.co.uk/

Background

http://alternativefuels.about.com/od/vehiclemaintenanceguide/a/dieselcoldweath.htm

http://en.wikipedia.org/wiki/Biodiesel (a bit American for my tastes)

http://www.bioroute.co.uk/biodiesel.htm

http://autorepair.about.com/cs/generalinfo/a/aa102001a.htm (About diesel engines and heater plugs)

Facebook

To my surprise I really like Facebook.
I only joined a few weeks ago after resisting for a long time on the grounds of advanced age and extreme grumpiness.
I like the Newsfeed with info and photos about people I know and how they are doing. Its interesting to poke gentle fun sometimes and say thankyou (or not) as needed. It surprised me (don’t know why) to discover that my Niece (14) swears a lot! I didnt know what NEAD’s was (Non Epileptic Attack Disorder). I kept in touch with others when off work and during the snow and enjoyed their pictures of huge amounts of snow and Snowmen and Snow Angels.
I been surprised how many of my friends joined randomly stupid groups like ‘1,000,000 to join this group before Thursday and my Dad wont have our cat put down,’ or ‘if we all jojn this group Facebook wont charge us for being members when they begin charging next month’ – I just hope their data is not going to be misused. There is a small part of me though that will be amused when the Dad posts the cat to one of the members saying ‘here you cared so much’.
I spent much of the day last week trying to work out why women (mostly!) were changing their status lines to just a colour – Red or Black or Grey etc. I only found out later thanks to the Telegraph (link below). At the moment people are changing their line to read ‘My fine is £XXXX’ but I think the reasons are a bit less laudable than the colours were.
I really like the way it handles photos – making albums you can share pretty much effortlessly.
The best thing though is the games!
As an Old Pc Gamer they often seem rather familiar due to their simple animation and isometric viewing angle. They have added a totally new element to the game – Time managment. Instead of playing until you reach an objective or until you get bored (or until your Mother, Partner, S.O. yells at you enough) the game just keeps on going when when you are not there. They are not really designed for you to sit at the keyboard all day – it would be pretty boring watching Wheat grow or Pot Roast cook, but by chosing which dishes to cook or crops to sow you can work out when you need to log back on and harvest the crop or serve the dish.
The 2 best known are Farmville (Farming) and Cafe World (Cooking). The New York Times wrote about the way the mania for Farmville had taken off in the autumn of 2009 (link Below) although it is now less of an obsession for most as familarity sets in.
Cafe World is my current passion – I have spent hours working out a strategy which gives me the best chance of catching up with those who started before me (in my defence I have caught quite a few). I know off by heart which dishes give me the best CP (Cafe Points)return in the shortest timescale. I can work out which dishes to leave on the cooker in the morning so as to be ready when I am getting home at night.
To be honest I am becoming a bit of an Geek about it – I even found myself giving a lecture on the mathematical probabilities of the game to an old friend via facebook Chat the other day! She just said I was sad.
All of these games will burn out like Farmville in the end – I spent much of the weekend looking for alternatives myself as I know there will be limit to how far I can take the game before I get bored (Country Life looks quite good).
In my case at least part of the limit is cheaters. In Cafe world it didnt take some bright Spark long to figure out that if you get a load of points for preparing a dish and then a load more 12 hours later for serving it, if you just prepare it and then delete it you lose the points at the end but can immediately prepare another dish and get the serving points for that one, potentially making thousands of points in that 12 hour Gap. There are people out there with 3X 4X 10X the points I have which is just not possible without ‘cheats’ such as this. I’m pretty sure from the number of sites with Farmville hacks and cheats out there that this is affecting long term users of that game too.
Is it a natural human urge that overtakes you when you begin to see others moving ahead of you and despite your best efforts a gap begins to open? “Oh well they must have a cheat – If I can find out what it is I can join them”. Or are some people just ingrained cheaters who start out looking for the sly way to get ahead?
What has happened with these games has been a gradual realisation that some of those alongside you are not peddalling as hard as you are. In those circumstances most sensible people will probably chose to drop out – after all its just a game – not worth rocking the boat about. What will be left is just the cheaters playing a different game from that they started with, a debased version where playing straight wins no prizes at all.
The funny thing is that I find myself wondering if this what what happened with the Banks?
Links:

Warning Explicit Opinions!!!