nFold

The Golden Sieve debuts as an IPO tomorrow.

Well, the "Golden Sieve" (description: on two WRLDs sites, here and here ) goes live tomorrow; PennyMac, debuts as an IPO (Initial Public Offering, when a stock first trades on the exchange); symbol $PMT

Somehow, I find this disturbing. I suppose because I hate seeing homeowners, who suffered some of the worst consequences for being just numbers in a profit or loss column, once again being used as fodder on a balance sheet. I know markets involve our participation, but in this case, I think many homeowners had no idea how integrated home ownership was with derivatives and REITs which were bought, sold and traded.

Eime Ochandarena

A new experimental work of fiction on the economy:

Eime Ochandarena

The unfolding story of what is expected and what is exchanged in a world founded on transforming markets.

“There are times when normal rules do not apply.” —George Soros

It is published in chapters which can be found here:

http://eime-ochandarena.tumblr.com/

Artist Björk Turns Venture Capitalist

Artist, Björk has just founded an Investment Fund to help the Iceland Economy. She has made only a small initial investment, ($800K), which I am sure is primarily a statement of good faith. Others will need to follow suit and contribute to her fund. There is nothing in our recent history that shows those in the financial sector are somehow better qualified to identify investments, or manage funds, (thank-you Mr. Madoff). On the other hand, creatives are known for identifying and establishing cultural trends. I would not be surprised if this Fund succeeded, and broke ground, as never before. Congratulations Björk!

Update:

On further reading it appears the initial 800K did not come from Bjork, and that the fund is hoping for 17 million. It will be interesting to watch, though I am now unsure what her role actually is.

"It is hoped that the fund will have close to ISK 2 billion (USD 17 million, EUR 12 million) in capital and that companies will be able to apply for grants from the fund next year. Audur Capital has already contributed ISK 100 million (USD 867,000, EUR 614,000) to the fund."

http://www.icelandreview.com/icelandreview/dail...
http://audurcapital.is/english/private-equity/b...

The Exploitation of the Housing Crisis: We need an alternative.

Many financial institutions and investors profited on the upside of the housing bubble, and on the downside, by investing in “short positions”. Last summer, there were announcements in the financial news, discussing a meeting in Switzerland, of Hedge Funds who were going to start investing in distressed properties. Since then banks, hedge funds and other private investors have begun buying distressed properties and mortgages, anticipating the recovery of the housing market.

One such effort was the formation of PennyMac, (http://pennymacusa.com ) funded by the Blackstone Group, a publicly traded Hedge Find. As part of this effort, others are now increasing their efforts to offer “loan modifications”. These may sound good, but they actually just provide the financial institution or organization more leverage over the homeowner, in order to expand future profit. The recent news by Secretary Paulson, that the TARP would not be used to buy distressed mortgage assets, (a reversal of the centerpiece of justification for the bailout), further pushes homeowners towards accepting mortgage modifications. If anyone would do even a small amount of research on America’s Servicing Corporation, a subsidiary of Wells Fargo, which services distressed homeowner loans, with extremely unethical tactics, it would be clear, that distressed home owners need an alternative that is not only motivated by greed.

Attempting to build a bridge over an abyss

I observe stock movements, and have been doing so, and studying them since 2002. I do not do so in order to make money in the markets. I do so because I think living in a country based on free and public markets impacts my life. As I have said many times, it is as if the markets are a dragon on whose back we ride. To not understand the dragon, seems foolish. I look at the markets from many different sources and perspectives, including the use of charts. I am particularly fond of Japanese Candlestick charts, (this image is not a Candlestick chart, but an image based on one). I am fascinated by the fact that the charts represent not only a network of computers, but also a network of millions of humans exchanging something, as if one hand touches another.

Today, the trading of stock symbol $AIG, produced some of the most interesting visual formations I have seen for a while. I was unable to capture some of the earlier data, but After Hours trading provided another incredible formation which I was able to print. I processed it in Photoshop, in order to emphasize some of the characteristics that I wanted to remember.

AIG is one of the insurers, that the US government bailed out, before the TARPS bail out. AIG had sold a huge amount of Credit Default Swaps (insurance for defaulting loans), to Lehman Brothers. Tomorrow, 10/21/2008, it will be determined how much AIG will have to pay for the failed credit the CDS insurance was to cover. There is some discussion that the government will supply additional capital to AIG to help fund the Lehman defaults. There was also some discussion earlier, that Prudential is looking for funds from the Middle East and China in order to take a 20% stake in AIG. If either of these things happen the stock will likely rise dramatically. If neither happens, the stock and the company could fail to exist. There is a dilemma, and the chart reveals this.

The dilemma created very symmetrical tension between the buyers and sellers of AIG shares. At the end of the day this tension was broken by an upward burst to a higher price, and then the tension resumed, resulting in this "bridge" formation. It was as if the even number of buyers and sellers were reaching out to the next trading session, creating a form that extended out over an abyss.

Addendum:

On October 22, 2008, this article came out on the dilemma the US government faces regarding the payment of  Credit Default Swap obligations.

Another article appeared after the markets closed, on October 22, 2008, stating that all of Lehman Brothers Credit Default Swaps had settled without a problem;  Good news for $AIG.