Karl's Weird News

Dear A.I.G., I Quit!

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

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter.

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

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

As the saying goes, read the whole thing.

More Than 9,000 Ticketed For Using Cell Phones While Driving:

The New York City Police Department issued more than 9,000 tickets yesterday to drivers caught using their cell phones while on the road. The 24-hour citywide crackdown began at midnight yesterday.

It served as a reminder to New Yorkers that using a hand held cell phone while driving is illegal in the state.

 Drivers who were ticketed face a $120 fine. Police say they normally issue around 500 tickets for cell phone use per day.

How Harvard’s Investing Superstars Crashed

Stocks were tumbling last fall as the new school year began, but at Harvard University, it was as if the boom had never ended. Workers were digging across the river from Harvard’s Cambridge, Mass., home, the start of a grand expansion that was to eventually almost double the size of the university. Budgets were plump, and students from middle class families were getting big tuition breaks under an ambitious new financial aid program.

The lavish spending was made possible by the earnings from Harvard’s $36.9 billion endowment, the world’s largest. That pot was supposed to be good for $1.4 billion in annual earnings.

Behind the scenes, though, a different story was unfolding. In a glassed-walled conference room overlooking downtown Boston, traders at Harvard Management Co., the subsidiary that invests the school’s money, were fielding questions from their new boss, Jane Mendillo, about exotic financial instruments that were suddenly backfiring. Harvard had derivatives that gave it exposure to $7.2 billion in commodities and foreign stocks.

With prices of both crashing, the university was getting margin calls–demands from counterparties (among them, JPMorgan Chase and Goldman Sachs for more collateral. Another bunch of derivatives burdened Harvard with a multibillion-dollar bet on interest rates that went against it. It would have been nice to have cash on hand to meet margin calls, but Harvard had next to none.

That was because these supremely self-confident money managers were more than fully invested. As of June 30, they had, thanks to the fancy derivatives, a 105% long position in risky assets. The effect is akin to putting every last dollar of your portfolio to work and then borrowing another 5% to buy more stocks.

On Our Fraudulent Economy

This morning Rick Santelli went nuclear on the entire “fraudulent mortgage” game – the culmination of a series of rants that he has (correctly) launched over the last year.
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 Here’s the point folks, when you get down to it:
* The entire last two decades of so-called “Economic Growth” has been fueled by one fraud after another, starting with the Internet Bubble.

* This fraud has been systematic and the mainstream media has been both an implicit and explicit enabler of these frauds, instead of doing its job, which is to root them out. The looks on the faces of the other CNBC “anchors” was one of abject fear – perhaps parts of “The Fourth Estate” is coming to realize that when the pitchforks and torches come out – and they certainly will if we hold the course we’re on – they might have some trouble explaining why they shouldn’t be near the head of the list of those being “sought”?

* The conflicts of interest in the media, where their advertising dollars come from those who are promulgating and profiting from these frauds means that they must choose between their job of protecting the public (their essential purpose under The First Amendment) and being a willing accomplice in the theft being performed by the prime actors in these frauds.

* With the exception of a few months around 1995 (which roughly coincided with Microsoft’s release of Win/95, the first “consumer” system of wide acceptance that had a dialer built in along with a web browser) the Internet NEVER doubled in size every three months. Yet this was paraded as the statistic to justify all the bubble companies up until the bubble burst in the spring of 2000.

Failure to save East Europe will lead to worldwide meltdown

If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung.

Austria’s finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria’s GDP.

“A failure rate of 10pc would lead to the collapse of the Austrian financial sector,” reported Der Standard in Vienna. Unfortunately, that is about to happen.

The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a “monetary Stalingrad” in the East.

World’s first refrigerated BEACH to be built next to luxury hotel in Dubai

The world’s first refrigerated beach is to be built at a luxury hotel in Dubai so the filthy rich holidaymakers don’t burn their feet on the scalding hot sand.

The revolutionary beach will sit next to the new Palazzo Versace hotel and will include a system of heat-absorbing pipes built under the sand and giant wind blowers, designed to keep tourists cool in the searing 40-50C heat.

The hotel, which is due to open late next year or early 2010, will be controlled by thermostats linked up to computers and feature a cooled swimming pool.

Starbucks to shut majority of its Australian stores

Iconic US coffee chain Starbucks said Tuesday it would shut most of its Australian stores within a week, having already taken the axe to hundreds of US outlets as an economic downturn bites.

The company said it would shut 61 “underperforming” stores from a total 84 in Australia because it was refocusing to concentrate on the major cities of Sydney, Melbourne and Brisbane and surrounding areas.

“This decision will result in the closure of 61 underperforming locations throughout the country by August 3,” it said without detailing how many jobs would be lost, although media reports put the figure at 685.

Starbucks said earlier in July that it would shut 600 US stores in a move widely taken to reflect the slowdown in the world’s biggest economy, where high fuel prices and a credit crunch are forcing consumers to tighten their belts.

The giant coffee chain’s chairman Howard Schultz said the firm had developed a transformation plan in January that had led to the “difficult but necessary” decision to close stores in Australia.