A Collection of Thoughts

As I watched the house of representatives ram through a law that taxes all bonuses given out to AIG I couldn’t help but watch in amazement. The employees who had contracts guaranteeing them those contracts based on performance are now supposed to pay a 90% tax on them? Does anyone realize that almost every one of these employees work in different parts of AIG from the one that actually caused this problem and that all of AIG other than this one division actually is profitable? AIG is a HUGE company that handles so many services it’s almost mind boggling.

The offending division, or unit as many call it, is AIG FP (Financial Products). This is the division that allowed over leveraging of its assets to guarantee (insure) against debt going bad for other companies. They were able to do this through loop holes in the process that by which financial companies are governed.

My biggest problem with this AIG situation is why we bailed them out in this fashion at all. Here’s a company that has trillions in assets yet is broke. In the real world this means their assets aren’t worth anything. So if this is the case why didn’t we just walk in and tell everyone who had a insurance policy through them that it would now be backed by the power of the federal government? Then we could have sold off these policies to the highest bidder and simply taken AIG out of the equation all together. I don’t understand why we can’t do this now, we do own the company after all.

I don’t even know how to address the audacity of congress actually passing that 90% tax on AIG’s employees bonuses.  It’s just plain wrong.  It goes against the fundamental reasons this country was founded.  I don’t think congress deserves their inflated salaries, health care or pensions so let’s institute a 90% tax on them.  Obviously this would never happen since they feel they deserve their salaries.  Better yet, let’s pay our government based on long term performance incentives.  None of this short term incentive crap like so many CEO’s have done.  LONG TERM.  Then they’ll be forced to make things work or they’ll get nothing.

Everyone is in a panic about the declines in the stock market these days. I guess I’m the only one who isn’t. I think the problem is based on the short term thinking instead of the long term outlook. Let me explain.

If you look at the 20 year chart of the Dow Jones Industrial Average ($DJI) and the S&P 500 ($SPX.X). You will see that I’ve drawn a line based on the average appreciation of the DJI from 1990 up to today. In 1995 you can see the break out of the average. This is the beginning of the “dot com boom”. For the next four years you can see a drastic uptick in the DJI. In roughly the end of 2000 to the beginning of 2001 we can see the decline after the “dot com bust”. Technically speaking this bust should have retraced the back to the normal DJI average, which in 2003 should have been in the 6000 range.

Then in 2003 in order to arrest the fall of the markets the government made changes to the mortgage and loan market. They raised limits and lowered qualifications. This allowed more people to buy homes. Nothing wrong with this per se but it became a mess. The adjustable short term mortgages, which were originally designed for investors, started to be available to everyone. I have no clue how anyone COULDN’T see this as a disaster building but that’s another post all together. So in 2003 more people bought homes, took out second mortgages to do home improvements, pay back loans from the dot com bust, buy a boat or who knows what. Credit flowed like water. This in turn allowed tens of millions of people to spend like drunken sailors. When people spend it makes stocks of companies go up because the companies are selling a lot of products and making a lot of profit.

So while all these people are spending and companies are making a killing we’re falling into an unrecoverable mess. Suddenly the tens of millions of people ran out of the “cheap money” and had to start paying it back. The problem was with all these adjustable rate mortgages their payments were skyrocketing. When they went back to refinance the loans they couldn’t. They had no equity in their homes any longer. What does all this mean? A huge drop in the stock market.

So here we are, fifteen years after the dot com boom started and the stock market is right where it should be. Yes, there are many other issues with unemployment, bankruptcy, etc. The problem is that no one realizes this is where the values should be. They’ve been over inflated for years and now we’re back “in the groove”. All these companies that over built and over hired during this inflated time are feeling the pain now. The companies that stayed the course are the ones who are still doing well. The ones that are being dragged down but haven’t done anything are wrong are the real bargains in this market. If you have the ability to buy now, and hold for the long term, you’ll probably be very happy in five or ten years.

So let me get this straight.  Congress approves 700 BILLION DOLLARS to be used to buy up “toxic mortgage debt” from all these banks.  This is supposed to remove the huge losses from those banks and allow them to start lending again.  This “bailout” is then changed around by your good buddies Henry Paulson and Ben Bernanke.  They decided to just recapitalize their old friends banks instead.  Wait, you mean you didn’t know that Paulson and Bernanke came from Wall St.?  So they dole out about 300 BILLION to their buddies from the TARP fund.  Congress is going to make them come back when they need the second half of the 700 BILLION, which oddly enough no one has seemed to really need.

Then I read that the Federal Reserve, you remember them right?  The private corporation that has a license to print the money we use and charges us interest for it.  Anyway, the Federal Reserve is going to buy up 600 BILLION in mortgage debt from Fannie May and Freddie Mac.  Now hold on just a second.

We had to borrow 700 BILLION from the Federal Reserve to give to the banks.  We pay interest to the Federal Reserve to use that money.  In order to get that money we have to sell T-bills and other securities to whomever will buy them, China, Japan, Princes in Dubai, and we pay interest to them.  Then we give this money to the banks, who we pay interest to for loans they make to us.  What in the hell is wrong with this picture?  Yes I know that the banks are supposed to pay the money back to us with interest but in reality it’s no loss to them.  They’ve been able to keep the “toxic mortgage debt” on their books, which they can now write off on their corporate tax returns.  This write off gives them YEARS of heavy “losses” to show on the books.  In effect they write down the debt and then SELL IT for some percentage on the dollar to other companies who try to collect on it.

So the banks get recapitalized, write off the bad debt and actually make money on it but they can’t find a way to give loans to normal people?  I realize that the American car companies have build some pretty crappy cars over the years but are you telling me that their sales are down over 50% because of craftsmanship?  That’s absurd.  The sales are down because people are going in to buy a car and they are being turned down for the loan.  Sorry, that’s for another post.  I’ll get back on track now.

So anyway.  Now people are talking about how the mortgage rates are coming down to 5% and probably below.  Which is going to make a slew of people refinance their homes to get out from under the “toxic” loan they’re in.  Which means the mortgage brokers will get their commissions and the banks will now get loans that are solid and able to be paid back.  It reminds of a scene in a movie.  It’s from the HBO flick Breast Men.  I know, I know but just listen.  These two doctors invent the silicone breast implant.  They want to make it saline but Dow Corning says no, make it silicone.  So years later all these women start having problems from the things leaking and want them taken out.  Now here is the scene.  The woman goes into the doctors office to get them removed and knows that insurance will pay to take them out but the doctor wants to get paid to put the new saline ones in!  So she paid him twice for the same boob job.

Welcome to the biggest boob job ever given to a country.

So I’ve been MIA for a while.  What are you gonna do?  I’m back now and I have a WHOLE lot to talk about.

Link to the wiki article is here

OpenVZ supports VPN inside a container via kernel TUN/TAP module and device. To allow container #101 to use the TUN/TAP device the following should be done:

Make sure the tun module has been already loaded on the hardware node:

# lsmod | grep tun

If it is not there, use the following command to load tun module:

# modprobe tun

You can also add it into /etc/modules.conf to make sure it will be loaded on every reboot automatically.

Granting container an access to TUN/TAP
Allow your container to use the tun/tap device:

vzctl set 101 --devices c:10:200:rw --save
vzctl set 101 --capability net_admin:on --save

And create the character device file inside the container:

vzctl exec 101 mkdir -p /dev/net
vzctl exec 101 mknod /dev/net/tun c 10 200
vzctl exec 101 chmod 600 /dev/net/tun

Configuring VPN inside container
After the configuration steps above are done it is possible to use VPN software working with TUN/TAP inside container just like on a usual standalone linux box.

The following software can be used for VPN with TUN/TAP:

• Virtual TUNnel (http://vtun.sourceforge.net)
• OpenVPN (http://openvpn.sourceforge.net

These parameters can be overridden using the –ftp-user and –ftp-password options for FTP connections and the –http-user and –http-password options for HTTP connections.

Download a file called foo.pdf from theos.in:
$ wget --user=vivek --password='myPassword' http://whatever.you.are.downloading.com/file


This guy is without a doubt, the best journalist reporting today.

I have just finished watching all two weeks of the Conventions. Aside from feeling robbed because they are paid for with tax payers money (Except for Ron Paul, who had his convention nearby the Republicans and charged people $17.76 entry fee) I think these conventions are a complete waste of time in their current form. It’s all settled ahead of time now. In the past these conventions were required so that the nominees could actually be picked there, on the floor. It’s nothing more than a giant show on borrowed money, our money.

Here is my take on the two candidates:

Obama and the Democrats
He’s a sharp guy. I think I genuinely trust him. I don’t agree with everything he proposes, like windfall profit taxes on oil companies. He didn’t hit below the belt in his speech. He clearly outlined what he wanted to do without being long winded. The people who also spoke at the convention before him were generally above board. They took some shots at the Republicans, which is to be expected. Generally though they stayed on point. I could have done without the spectacle that was Hillary Clinton asking to suspend the voting and have everyone get behind Obama as the nominee. I understand why they did it but please, if you want to show true support for Obama then put away your differences and tell Bill to stop sulking. I think my biggest problem with Obama is he seems to laid back. I want to see this guy get fired up.

I’m a believer that everyone should have basic health care, as Obama is. I’m not talking about a completely Government run system but at least if you get very sick you should be able to get the best care and not lose your home in the process. The richest country in the world should be able to provide basic health care to all of its citizens. When I end up paying a total of 68% in taxes I believe we can pay for health care. You want to know where the 68% comes from? When I add up every tax I pay: income, payroll, property, sales, fuel tax, electricity, oil, gas, food, clothes, etc and it works out to 68% of my income. Yet I still need to pay over $500 a month to insure myself and my daughter. I don’t know exactly how to get out of this mess we’re in but I can tell you a for profit system for health care isn’t working.

Sorry for the rant, back to the subject at hand…

McCain and the Republicans
This guy is a true hero. Fighting not just for his country but for other peoples freedom. Five and half years as a POW is truly amazing. Think of how long that is. My daughter isn’t even that old, its simply mind blowing. That being said, does that alone qualify him to be president?

The speeches that were given, other than McCain’s, were reprehensible. Lies, lies and more lies. Rudy Guiliani, Mitt Romney, Joe Lieberman and Fred Thompson were WAY out of line. It just seemed like more of the dirty Bush/Rove politics to me. Taking cheap shots and telling blatant lies. They seemed to want to divide more than unite. Take a look at factcheck.org for the real scoop. McCain on the other hand made a decent speech. He separated himself from Bush in a way that almost seemed he was apologizing for the mistakes made by that administration. Bush’s name was never uttered, he didn’t even say Bush’s fathers name although he referenced him by the 41st President.

I want to see McCain put away the dirty politics and run on the issues. I don’t want every answer to a question to be, “I spent five and half years in a POW camp being tortured.”. I want to see what Sarah Palin does over the next few months. Putting her on the ticket to garner the female and disenfranchised Clinton voters seems like a slimy move to me, it might just work in his favor though. I was shocked to see how many Clinton supporters said they would vote for McCain now just because he chose a woman to be VP. Never mind that Palin and Clinton couldn’t be more opposite.

In any case, I think it’s going to be a great couple of months.

I ran across this article today.  It’s basically stating that colleges want to lower the drinking age to 18, from 21, in order to help curb the binge drinking of college students.  On the other hand is MADD (mothers against drunk driving) saying don’t do it, it will just kill more kids.  Kids will get drunk, drive and kill themselves.

I have a radical idea regarding all this thinking.  Kids are at college to learn right?  So why not teach them about alcohol, what happens to them when they drink, how their judgement becomes impaired.  In an even more radical departure from the norm, how about PARENTS teaching their kid something about it?  It’s a fallacy that people think kids get exposed to drinking in college.  They get exposed to it at a young age when parents have parties or friends over, or even just at dinner.  The problem is its taboo.  Kids shouldn’t drink, its an adult privilege.  Yet in Europe many kids are brought up drinking a little wine with their meals.  This makes kids not want something they can’t have.  It encourages knowledge and doesn’t make them crave.

More than 50% of kids are drinking in high school.  They’re getting alcohol from older siblings, friends and in a lot of cases, their parents liquor stash.  I think the legal drinking age is irrelevant if there is no education focused on alcohol.  I think that parents need to educate their children about these things.  By education I don’t mean avoidance.  I’m referring to real talk here.  I know it might feel awkward but wouldn’t you have rather had someone educate you about alcohol then have your first drunken experience?

Of course everyone is now up in arms about Exxon’s profit for the quarter again. Here’s a summary story.

“Exxon Mobil once again reported the largest quarterly profit in U.S. history Thursday, posting net income of $11.68 billion on revenue of $138 billion in the second quarter.”

They made 8.5% profit.

Frankly, if I ran Exxon I would be VERY upset. 8.5% profit is no big deal. I’m in business and if I made 8.5% profit I would probably be out of business. What makes everyone so upset about this are the sheer numbers. We’re talking 12 FIGURES here. BILLIONS in sales and profits. Well I hate to break it to you but when you do 100 BILLION in sales you’re going to have tens of BILLIONS in profit.

I’ve been through this many times and the article even touches on it. Exxon buys more oil than they pump. Exxon doesn’t set the price for which they buy and sell oil, it is set by the open market. The open market being commodities traders. Commodities traders and speculators guess what they think the price of oil is going to be in months to come. Some bet it will go up and some bet it will go down. The problem is that a majority of them are betting it will go up. So when you have so many on one side the price gets driven up. It’s artificial inflation. We actually had less demand for oil and gas than this time last year but the prices are higher. Once again this is blamed on China and India. China by the way has shut down hundreds of factories and required their citizens to not drive their cars all of July and August to help with the pollution with regards to the Olympics.

Oil prices started falling and almost got under $120 a barrel the other day. So what happened? An analyst at Goldman Sachs wrote a report stating oil would head back up and reach $149 a barrel. I wonder what his motive was behind releasing that report as oil was falling? Could it be that Goldman Sachs is long on oil stocks and commodities? (long meaning they expect them to go up).

Then in an even more confusing bit of news it was said that gasoline demand reached its highest point of this year but was still 2% lower than this time last year. So demand is lower than this time last year but prices are $1 a gallon higher? This seems odd to me and it should seem odd to you. It’s been stated many times over the last two years that right now 50% of the price of oil is inflated due to speculators. They’re doing it to hedge their bets against the falling US dollar. In layman’s terms, instead of investing in stocks which they can’t buy as much of because the dollar isn’t worth a dollar anymore, they buy commodities. Commodities are the only true international currency. Things like oil are used by everyone on the planet but they’re price is based on the US dollar. So if you take your US money and buy the commodity its now worth more. The interesting part to all this is that the Euro and other currencies are worth even more. So now people from overseas are getting in on the act and everyone is pushing prices higher and higher.

Same thing is being done to food. Corn prices are going through the roof while US farmers are being paid by the US Government to destroy millions of acres of crops each year due to farm subsidies. It’s absolutely absurd. I don’t have a plan to make it right but as in most cases like this, things work themselves out. People will lose it all, companies might go belly up and you can be guaranteed that the tax payers will foot the bill in the end.