Dubai 46

Reading Kevin Nance's PR-piece about SOM's Adrian Smith and his designs for Trump Tower in Chicago and Burj Dubai in, well, Dubai (both set for completion in 2008), my mind wandered to a film I saw recently: Code 46, directed by Michael Winterbottom. The "sci-fi love story" is set in the not-too-distant future, taking place primarily in Shanghai. The story centers around two characters played by Tim Robbins and Samantha Morton. Robbins uses "empathy drugs" to find people that are taking advantage of his clients, while Morton plays a worker that Robbins finds out but falls in love with. It's a time when genetic decoding influences choices more than human will.

I enjoyed watching the movie, though more for the visuals than the story. From the very beginning, it's apparent the film uses existing locations to convey this not-too-distant but also not-too-far-fetched future. For the approach to Shanghai from the airport, Winterbottom uses the highway near Dubai to subtly illustrate the effects of environmental damage.


Images found here

In another scene, Robbins finds himself in an interior made famous by Andreas Gursky, a hotel interior that conveys the impression that - through our "choices" in how we create habitation - we're not that far removed from other creatures, like bees, as we think. It fits well into the movie's impersonal treatment of people in this fictive future.



This impersonalilty/universality is consistent throughout the film in the decision to have the characters inhabit spaces that are sleek, modern, cold.



So much so, that when we see Morton's character exiled for her "sins" the contrast hits you over the head.



So what does all this have to do with Nance's piece on Adrian Smith, outside of the fact he's designing a building for Dubai? Well, in some ways Dubai is a present-day version of Winterbottom's future. It's a land of contrasts. Rich and poor. Desert and greenery. Big and small. Real and surreal.

Smith even admits to being inspired by the depiction of the Emerald City in the Wizard of Oz for his design of Burj Dubai: "I just remembered the glassy, crystalline structure coming up in the middle of what seemed like nowhere." In the Burj Dubai, via Smith's subliminal inspiration, we now have the embodiment of these contrasts under construction in the desert playground that is Dubai.

Finger Pointing Over Trade

The Washington Post is reporting EU Will Not Improve on Farm Trade Offer.

The European Union said Wednesday it will not enhance its offer on farm trade, calling on the United States and others to match its concessions in talks to liberalize global trade through the World Trade Organization.

"I have no plan to make a further offer in agriculture," EU Trade Commissioner Peter Mandelson told the European Parliament.

He said the farm trade concessions he has put on the table in the WTO talks were "the most substantial offer" the EU has ever made, and that making more "would further unbalance the (WTO) negotiations" that head for a ministerial round in Hong Kong in two weeks.

The EU has offered cuts of 70 percent in trade-distorting subsidies to farmers and farm produce exporters and cutting the EU's average agricultural tariff to 12 percent from 23 percent.

"Taken as a whole, this is the most substantial offer ever made by the European Union in any trade round," said Mandelson.

Mandelson accused the United States and others of dawdling, posturing and focusing excessively on farm trade issues at the expense of progress in other areas of liberalizing world trade. He said a global trade deal can only happen if Europe's partners "stop hiding behind unfounded criticism of the EU, or patently unrealistic and tactical demands ... If they continue merely to ask for more from Europe, without paying into the pot themselves, they _ not we _ risk destroying" the current round of negotiations.

Is that the biggest finger pointing episode since Babe Ruth's famous point in the 1932 World Series between the Cubs and the Yankees?

Probably not, but even if so, I doubt anyone makes a movie out of it.
There are neither legends nor heroes in this round of finger pointing.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Is it 1966 again?

Flashback 1966: Just as the US was sinking ever deeper into the quagmire known as Vietnam, Vermont Senator George Aiken delivered a famous speech in which he said that "we should declare victory and go home." Unfortunately the war dragged on for six more years and eventually North Vietnam won.

Take a look at North Vietnam today: Three decades later, Vietnam is a quasi-capitalist country, cultivating US investment, consumer markets, and tourism. How might history have changed if only we had the guts to admit a stupid mistake in 1966, declaring the war "won" and going home? For starters we would have spared countless American and Vietnamese lives. The outcome of history would have been far different and we would have had one less huge black spot on the soul of the US.

At the time, "staying the course" was posed as a test of American credibility. I was in the 7th grade at the time. Our science teacher, Harry Don Wirth told us "I do not think we should have entered this 'conflict', but It's too late to pull out now". As Lyndon Johnson liked to say: Who would follow the lead of a superpower who "tucked tail and ran"?

Harry Don Wirth was drafted and left in the middle of our 7th grade year. I have no idea what happened to him. He was the single best teacher I ever had. Mr. Wirth was simply amazing. He even had the class dunces motivated to work. The class in general was disappointed if we did not receive enough homework. We ran roughshod over his replacement. I can not even remember his name.

Public sentiment changed against the war in 1968 and Nixon decided to masquerade as the "peace candidate", on a "peace with honor" campaign. By the time I reached senior year in high school, however, the stupid war was still going on. Then on January 23, 1973 Nixon gave his "Peace with Honor" television broadcast announcing the initialing of the Paris 'Agreement on Ending the War and Restoring Peace in Vietnam'.

Fighting between South Vietnamese and Communists continued despite the peace agreement until North Vietnam launched an offensive in early 1975. South Vietnam's requests for aid were denied by the U.S. Congress, and after Thieu abandoned the northern half of the country to the advancing Communists, a panic ensued. South Vietnamese resistance collapsed, and North Vietnamese troops marched into Saigon Apr. 30, 1975. Vietnam was formally reunified in July, 1976, and Saigon was renamed Ho Chi Minh City. U.S. casualties in Vietnam during the era of direct U.S. involvement (1961�72) were more than 50,000 dead; South Vietnamese dead were estimated at more than 400,000, and Viet Cong and North Vietnamese at over 900,000.

Is it 1966 again?

It sure feels like it.
All this talk of "cutting and running" is as much horse hockey today as it was in 1966 when George Aiken proposed doing the same. The only difference is that Senator Aiken was smart enough to package his proposal as a "victory". The sad truth of the matter is that we can no more win this war than we could win the Vietnam War. The entire basis for the Vietnam War was based on one stupid theory and one big fat lie.

Back in the 60�s that Stupid theory was known as "The Domino Effect" whereby if we lost South Vietnam, Communism would spread over all of Asia. The lie was the Gulf of Tonkin incident in which supposedly North Vietnam supposedly attacked the US in international waters.

One can only ask, would Vietnam be any better off today if the US managed to win the war? I think the question is moot because winning was not possible. Vietnam had more willpower and stamina to fight the US than the US public had stamina for sending masses of soldiers to their graves. In short, winning the war was not possible because there was nothing ever to win.

Today�s Stupid Theories and Stupid Lies

Today�s stupid theory is that we can cram Democracy down the throats of people that do not want it and/or are ill equipped to deal with it. President Bush campaigned against "nation building" in the 2000 election yet violated that pledge. It is obvious that he has learned nothing from either the Vietnam War or Russia�s miserable failure in Afghanistan, as he now seems bound and determined to continue his failed policies of "nation building".

Everyone knows today�s lies: Weapons of mass destruction, mushroom clouds, uranium "yellow cake" from Niger, and trumped up charges by Colin Powell in a speech to the UN that he now regrets.

Reminiscent of Aiken�s 1966 speech, Congressman John P. Murtha, in a press conference as well as in a speech before Congress Murtha had this to say...

"The war in Iraq is not going as advertised. It is a flawed policy wrapped in illusion. The American public is way ahead of us. The United States and coalition troops have done all they can in Iraq, but it is time for a change in direction. Our military is suffering. The future of our country is at risk. We cannot continue on the present course. It is evident that continued military action is not in the best interests of the United States of America, the Iraqi people or the Persian Gulf Region.

"We spend more money on Intelligence that all the countries in the world together, and more on Intelligence than most countries GDP. But the intelligence concerning Iraq was wrong. It is not a world intelligence failure. It is a U.S. intelligence failure and the way that intelligence was misused.

"I said over a year ago, and now the military and the Administration agrees, Iraq can not be won "militarily." I said two years ago, the key to progress in Iraq is to Iraqitize, Internationalize and Energize. I believe the same today. But I have concluded that the presence of U.S. troops in Iraq is impeding this progress.

"Our military has done everything that has been asked of them, the U.S. can not accomplish anything further in Iraq militarily. It is time to bring them home."

Unlike the chickenhawks in this administration, Murtha won two Purple Hearts as a combat Marine in the Korean and Vietnam wars, and then tacked on 23 more years in the Marine Reserve. In Congress he has been a huge supporter of the Pentagon, and since 1989, he has been either chairman or the ranking Democrat on the Appropriations Subcommittee on Defense. In other words this was a stunning switch for Congressman Murtha.

Chickenhawk Scorecard

In marked contrast, here is the administration scorecard:

• President Bush hid out in the guard and arguably did not even bother showing up for duty.
• Cheney had 5 deferments.
• Ashcroft had 7 deferments.
• Rove did not serve.
• Hastert? Frist? Did not serve.
• DeLay Did not serve. In fact, in one of the silliest assertions ever, Delay actually said: "So many minority youths had volunteered that there was literally no room for patriotic folks like myself."
• There is not a single member in Congress with a son or daughter actively serving in Iraq
  

Rather than admit the obvious, supporters of this stupid war immediately went on the attack by questioning Murtha�s patriotism. The debate in Congress was rather heated to say the least. At one point in the emotional debate, Rep., R-Ohio, told of a phone call she received from a Marine colonel.

�A few minutes ago I received a call from Colonel Danny Bubp, Ohio Representative from the 88th district in the House of Representatives. He asked me to send Congress a message: Stay the course. He also asked me to send Congressman Murtha a message, that cowards cut and run, Marines never do. Danny and the rest of America and the world want the assurance from this body � that we will see this through.�

By the way, exactly who is this "Colonel Danny Bubp", some kind of war hero like Murtha? No, all of his time was spent in the reserves. In other words, this was a self serving stunt by Jean Schmidt on behalf of a state legislator who never served active duty. Bubp's big claim to fame is receiving a plaque along with Schmidt in support of keeping public displays of the Ten Commandments.

Harmy on the Motley FOOL had this to say about Danny Bubp:
"Danny Bubp is typical of many military and political types who do the tub-thumping that sends young men to war. It has always sickened me the way these people manage to stay out of the real war and yet suddenly appear on the dais when it's all over complete with immaculate shiny shoes and a chest full of medals for the military and civic honours showered upon the politicians. You needn't think that the US is unique in this respect. It happens and has happened in every country. At the conclusion of WW1 the British held a victory parade with the King and Queen, Generals and Politicians all on the dais. The parade took hours to pass but shamefully a battalion of the war's maimed were not allowed to participate because the extent of their injuries might offend people."

Vice President Cheney also attacked Murtha, to which Murtha responded:

�I like guys who have never been there to criticize us who have been there. I like that. I like guys who got have five deferments and never been there and send people to war and then don't like to hear suggestions about what needs to be done.�

Let�s return to reality.
Here is that reality:
CNN/USA Today/Gallup Poll. Nov. 11-13, 2005

Q: "Do you approve or disapprove of the way George W. Bush is handling the situation in Iraq?"
A: Approve: 35% Disapprove:63% Unsure:2%

Q: "In view of the developments since we first sent our troops to Iraq, do you think the United States made a mistake in sending troops to Iraq, or not?"
A: Mistake: 54% Not a Mistake: 45% Unsure: 1%

Q: "All in all, do you think it was worth going to war in Iraq, or not?"
A: Worth it: 38% Not worth it: 60% Unsure : 2%

Q: "Do you approve or disapprove of the way Bush is handling the situation in Iraq?"
A: Approve: 30% Disapprove: 65% Unsure 5%

Q: "Do you think Dick Cheney deliberately misused or manipulated pre-war intelligence about Iraq's nuclear capabilities in order to build support for war with Iraq?"
A: Cheney deliberately misused 52% Did not deliberately misuse: 33% Unsure 15%

Whether or not you agree with this war or not, the reality of the situation is clear.

• The public has turned against this war.
• The public thinks we were misled about the war.
• The public thinks it was a mistake to enter this war.
• Support for this war even by some former Congressional hawks has ended.
• This administration is blowing up in scandal after scandal and senators are distancing themselves from the president.
  

Flash back once again to 1966.
We made a horribly foolish mistake to enter the Vietnam War and an equally stupid mistake to not just admit it and leave.

Flash forward 29 years.
Oddly enough it seems to be 1966 all over again.
We have a chance to admit we were wrong as Congressman Murtha is asking us to do or we can play politics with "Cut and Run" speeches as the chickenhawks are doing.

Can We Win?

Politics aside, we can no more "win" in Iraq than we could "win" in Vietnam. For starters our original goals were too high, based on lies, and we fought the war with to few resources without ever planning for the aftermath. We have made far too many mistakes to "Win their hearts and minds". It was a serious misjudgment to think we could EVER win their hearts and minds at gunpoint. Current polls reveal that 80% of Iraqis want us out of there. Unless we can turn those numbers around it is impossible to win either their hearts or their minds let alone both. Can those numbers possibly be turned around given our use of white phosphorous on civilians, prison torture by US soldiers, and countless collateral damage on civilians? I think not. It is simply too late.

Yes, Iraq is likely to break out into Civil war if we leave. Then again we can stay six more years, waste another $800 Billion dollars on top of the $200-$300 billion we have already wasted, waste possibly 6,000 more US lives, and then leave only to find Iraq break out in Civil war as we eventually toss in the towel. If it plays out like that, it will be an exact repeat of Nixon's "Peace with Honor" victory, only to see South Vietnam overrun the moment we left.

The bottom line is this war can not be won for multiple reasons.

1. It was never really winnable in the first place given that its foundation was based on hopeless intelligence at best and a pack of lies at worst, all on top of a false premise that we could cram Democracy down their throats at gunpoint while they would shower us with flowers in glee.
   
2. We made far too many mistakes to ever win their hearts and minds now, and without doing that there is no way to win.
3. The Iraqi "insurgents" have more willpower as an occupied nation than we do as occupiers
4. Even if you disagree about the above, history is clear about what happens once public support for a war wanes. We will eventually pull out, consequences be dammed. The public seems likely to insist upon a pullout, voting out anyone that gets in the way.
5. Just as in the 1983 movie "War Games" , the only way to win was to not play. It's too late to adopt that strategy now. Seriously, if you have not seen that movie, I suggest you check it out soon.
   

Mish Peace Proposal

We can no longer "win" as defined by our original goals, but perhaps we could escape with some semblance of a "draw" if we could just manage to turn our problems into an Arab problem. The first step in correcting a problem is to admit you have a problem and admit the many mistakes that caused it. It simply must be done to have any chance. We have made dozens of mistakes but refuse to admit any of them. Nor has anyone but low level scapegoats been held accountable for those mistakes. Here is my four step proposal.

1. Apologize to the world and Iraq for the mistakes we a have made.
2. Offer to turn Iraq over a consortium of Arab nations including Saudi Arabia and Iran as well as the UN.
3. Agree to let that consortium set Iraq policy regardless of what happens or how we feel.
4. Hold accountable some higher up military and administration officials for mistakes that have been made.
   

It is unclear if a consortium of Arab nations would agree to take on the problem even with our admission of guilt. Following are the potential outcomes of that proposal:

• The Arab nations refuse to take on the problem. Far from being a total disaster we could immediately wash our hands of this sordid affair and begin pulling our troops out. We would at least be able to say we made a good faith effort.
• They accept the proposal and ask we withdraw our troops. This is likely the best case scenario. We effectively hand over our problems to someone else. We relinquish all control of course, but it is a mistake to assume we ever had any in the first place.
• They accept the proposal but still want a US military presence in Iraq. This is highly unlikely and not realistic. The consequence would be that US military would be under control of UN or Arab command. I doubt that would be acceptable to the US.
• The Arabs want to study the plan for something like forever. If this happened we could force a choice by setting a timetable to withdraw forces in nine months or so if agreement was not reached. In the end, it would probably be better to have the plan rejected upfront rather than after we waste more money and lives.

Personally, I think the odds that we would admit our mistakes at something close to zero%. In other words such a peace proposal would be "politically incorrect" and therefore dead on arrival. Given that likelihood, the best practical approach is probably to do what Senator Aiken proposed in 1966: Declare Victory and Leave.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

The Urbs

Unbeknownst to me until today, this little page has been nominated for not one, not two, but three Urbs! What's an Urb, you ask? Well, it's an Urban Blogging Award that's run by Gridskipper and features multiple categories that cover the gamut of urban life.



This page has been nominated for World's Best Urban Architecture Blog, World's Hottest Urban Blogger (!?), and World's Best Urban Blog. Thanks go out to whoever nominated me and, needless to say, I'm in great company in each category.

So head on over to Gridskipper (before Dec. 7) and nominate like crazy, as "only those top blogs with the most total nominations will make it into actual voting."

Friends of the Trenton Bath House

Referring to the Trenton Jewish Community Center, Louis I. Kahn said, "I discovered myself after designing that little concrete block bathhouse in Trenton." While the small structure hasn't received as much recognition or attention as the architect's other buildings, such as the Kimbell Art Museum or Salk Institute, this quote illustrates that these later masterworks owe a lot to the ideas initially fleshed out in New Jersey.

To monitor the fate of the Bath House and later Day Camp by Kahn, the Friends of the Trenton Bath House was formed just this month, chaired by Susan G. Solomon. The organization's web page indicates that the "current owner...is planning to relocate to a new facility outside of Princeton. It is unknown who will purchase the property, which includes the Kahn buildings, and whether or not there will be a commitment to preservation."



Membership is free and will help the organization raise attention to the buildings' "fragile conditions" and worthiness for preservation, as well as in finding an appropriate buyer.

Do GSEs help make housing affordable?

Reuters is reporting the GSE Mortgage limit raised to $417,000 for 2006.

U.S. mortgage finance regulators on Tuesday raised the limit for loans that can be bought by government-sponsored mortgage enterprises Fannie Mae and Freddie Mac to $417,000 for 2006, in most areas.

Stephen Blumenthal, acting director of the Office of Federal Housing Enterprise Oversight (OFHEO), announced the rise in what is called the conforming loan limit for single-family mortgages purchased by Fannie Mae and Freddie Mac. The 2005 limit is $359,650.

Excuse me but I have a few of questions:

• Weren't we trying to limit the mortgages going to Aunt Fannie and Uncle Fred?
• Wasn't the whole point of Fannie and Fred to make "housing affordable"?
• Aren't Fannie Mae's books still so screwed up that they can not make heads or tails out of their derivative mess?
• Shouldn't Aunt Fannie at least have to get her books in order before we start raising loan limits on conforming loans?

It seems to me that the mission of Aunt Fannie and Uncle Fred has been long lost. One of the reasons housing is not affordable is there are 280 active Federal bills to "make housing affordable".

By charter, the GSE mission is to provide liquidity, stability and affordability to the nation�s mortgage markets. Well we sure have witnessed (for now) success on the liquidity front, but as for price stability and affordability I doubt the failure could possibly have been any greater.

If anyone really wants to make housing affordable, they should scrap nonsense about the "ownership society", eliminate the housing deduction, cancel 280 government programs to "make housing affordable", not cut interest rates to 1% in a silly panic, and with tears in my eyes (I am a sentimental kind of guy), finally bury Aunt Fannie and Uncle Fred.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Now and Then

Let's take a look at what David Lereah, chief economist for National Association of Realtors is saying now :

• "The drop in sales and rise in inventories in October signals that the housing sector has likely passed its peak"
• "Make no mistake, slowing has occurred"
• "We expect further cooling in coming months"

Gee, it only seems like yesterday.....
Well not quite but it was February of this year when David Lereah published

Are You Missing the Real Estate Boom?
The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them

"It�s not too late to increase your stake in the greatest real estate boom of our generation. Whether you are a first-time buyer or already own your home, Are You Missing the Real Estate Boom? will show you how you can dramatically increase your overall wealth. Author David Lereah, chief economist for the National Association of Realtors, shows why the real estate market is poised to climb higher over the next decade�and explains what you can do to profit from it."

Let's look at a couple of charts from my friend Professor Piggington:






The professor lays out the evidence of the bubble for everyone to see.
Take a look at the charts above, read the professor's case, and decide for yourself.

Is it really a "Once-in-every-other generation opportunity"?
I happen to think that it is.
For all the bubble areas especially California and Florida, it is perhaps a once in a lifetime chance to cash out.
Actually, it WAS last spring and summer just as David Lereah's book was rolling hot off the presses.
For those that bought several years ago it's still a great time to cash out.
Unfortunately many of those that recently bought into the hype are finding that they are now underwater.
Heaven help those underwater in condos in bubble areas.

The once in a lifetime opportunity to buy came about 10 years ago. But that was then and this is now. Now it's time to sell.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

The Archi-Tourist

Back in August, I posted about the appeal of Galinsky and the need for a guide that would include contemporary architecture that might not make the cut into Galinsky...the more obscure, if you will. Spurred by a comment from Marcus, I opted for the wiki route, set up a free page and have been adding to it and tweaking it for the last few months, getting it ready for a public release. Well, it's not necessarily "ready" (a lot of information is still needed on certain pages), but now's as good a time as any, given that wiki software enables multiple users to create and edit the documents, filling in any gaps.

So without further adieu, I give you The Archi-Tourist.



Basically, each document is a different building or space or place, with information about the architecture, images, address and map, directions, and various links. At this point the format is consistent from document to document, though, like everything else, this may change over time as more people contribute and more bells and whistles get added to the site. But this initial "release" is, in my mind, a good place to start.

The most popular use of the wiki software is wikipedia, which allows anybody with an internet connection to edit documents on a gazillion things. While The Archi-Tourist uses the same sort of software, to start only invited users will be able to create and edit documents, so as to keep a reasonable amount of quality control. Check out the contributing page if you'd like to contribute.

Parties, Gifts, and Bonuses

The USA Today is reporting firms are cutting back on parties, gifts, and bonuses.

This year marks the first drop in companies holding holiday parties since 2001, when the weak economy and terrorist attacks caused companies to pare festivities. Even long-held traditions, such as the free company turkey, are going by the wayside: Just 2% of employers will give their employees turkeys this year, according to the Washington, D.C.-based Bureau of National Affairs (BNA).

"The findings were quite startling to us," says Dale Winston, CEO of executive search firm Battalia Winston International, whose yearly holiday survey found a decline in year-end company parties. "It is significant, and it's also probably reflective of the spirit of the country. We're at war, there's uncertainty about the economy."

� Parties. 87% of employers will have some type of holiday celebration down from the 95% who had parties last year. Only 17% of companies expect to have more expensive parties this year.

� Bonuses. In keeping with a recent trend toward basing pay on employee performance, more companies are doing away with the year-end bonus. About 60% of companies will not award them this year, according to human resources firm Hewitt Associates.
"They're seeing that as a way to reduce their costs in some places," says Ken Abosch, compensation business leader at Hewitt. "Some might think employers are taking a Scrooge mentality, but they're putting it into a different form."

� Gifts. More than half of companies gave gifts in 1988, the Battalia survey found. But this year, 62% say celebrations will not include gift giving.

Hmmmm. Let's compare pictures.

Picture Number 1:

• Corporation cash coffers are extremely high
• Profits and earnings growth have been favorable
• Share buy-back announcements are extremely high
• Outsourcing continues unabated adding to corporate profits
• One time enormous windfall by repatriating cash from overseas
• CEO pay and bonuses skyrocketing
• Foreward guidance has generally been favorable
• Productivity is up
  

Picture Number 2:

• Corporations are not expanding their businesses
• Corporations are not really hiring compared to normal recoveries
  
• Corporations are being extremely stingy at sharing profits with employees
• Corporations are shifting more benefit costs to employees
  

These contrasting pictures are not sign of a healthy economy. Real wages are declining even while corporations are sitting on record levels of cash. The "Trickle Down" theory does not seem to be working. The fact that corporate cash coffers are so high is sign that companies do not see anything worthwhile to invest in. Overcapacity everywhere? You bet. Instead of investing cash in operations, corporations are buying back shares at bloated prices at the tail end of a three year "recovery".

76% of the GDP is directly related to consumer spending but consumers are going deeper in debt every day. Only rising asset prices on houses and stocks have kept the consumer going. Signs are everywhere that housing and autos have both peaked.

Cutbacks in corporate parties, bonuses, and gifts are still more signs of tougher times to come. It remains to be seen if consumers throw one last Christmas bash before the light go out in 2006. Recession dead ahead.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Monday, Monday

My weekly page update:

Maag Recycling in Winterthur, Switzerland by Open Operating System oos ltd open operating system and Rotzler Krebs Partner.

The updated book feature is A View from the Campidoglio: Selected Essay 1953-1984", by Robert Venturi and Denise Scott Brown.

Some unrelated links for your enjoyment:

Free Soil
"An international hybrid collaboration of artists, activists, researchers and gardeners who take a participatory role in the transformation of our environment." (added to sidebar under blogs::landscape)

Portland Architecture
Just like the title says, a blog about architecture in the Portland, Oregon.

The Beautiful People Take the Red Line
Three b/w photo galleries of people on Chicago's red line. Hit "look" to flip through images. (via Gapers Block)

Gobble, Gobble

It's time for a brief Thanksgiving break. Posts will resume on Sunday or Monday.


Image found here

Another Mish Household Tip

Once again it is time for practical posts for the practical homeowner.
That could only mean one thing......
Yes Mish bloggers, here is another long awaited and long overdue Mish Household Tip.

[Note: This is strictly off track and certainly has nothing whatsoever to do with global economics. I periodically post my "tips" on a couple of stock message boards that I am on and they generally have been received well. Previous posts have been on how to catch raccoons living under one's porch, why it matters the order in which one paints their front porch vs. sealing their driveway, how to fix a flat on a wheelbarrow, and other such helpful advice. Actually my advice is generally practical advice on how NOT to do something. As a public service announcement and without further ado I am pleased to announce my latest set of household tips.]

Mish's Tips For Today.

1) Do not attempt to thaw out a frozen bottle of Pompeian Red Wine Vinegar on a high setting in your microwave. Even if you think you can watch it, the phone just might ring and you just might leave to take the call, only to return to the kitchen and find that the label on the bottle of vinegar actually caught fire with smoke billowing out of the microwave.

2) This is a taste preference kind of thing but I prefer Pompeian over some of the crappier brands.

3) Enquiring minds might wonder how that bottle of vinegar got frozen in the first place. That of course leads to tip number three: Do not turn the settings on your freezer and refrigerator to max and leave them there for extended periods of time.

4) Some feeble minds might leave it at that. But many Mish readers are made of sterner stuff and would not easily be satisfied with such fluff answers. More inquisitive readers just might be enquiring as to why Mish turned up the settings in the first place. This of course leads to tip number 4: Do not go on a rampage buying pork chops and steaks and other stuff that is on sale, so much so that it does not really fit in one's freezer compartment. If you do, you might be tempted to cram it all in to the point there is no cold air circulation and stuff starts to thaw out. In time this leads to one's freezer compartment and ice maker dripping water all over the floor, forming big puddles that have to be mopped up. Then, in an attempt to stop the dripping, one just might be tempted to turn the refrigerator dials to the "cold side".

Here is the bottom line: If you overstock your freezer you just might end up with the label on a bottle of Pompeian Red Wine Vinegar catching fire in your microwave to nicely compliment the puddles of water all over the floor the day before.

As always, I speak from practical experience on these matters.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Lumber Dispute Resolved?

The New York Times is reporting
U.S. to Accept Nafta Ruling to Cut Duties on Lumber.

The Commerce Department said Tuesday that it would accept a Nafta dispute panel ruling in a long-running dispute with Canada and would substantially reduce hefty duties on Canadian softwood lumber.

But while the United States government accepted the settlement's finding that countervailing duties should fall from about 16 percent to less than 1 percent, it did not endorse it. And John Sullivan, general counsel for the Commerce Department, said that the acceptance of the ruling did not prevent the United States from starting an extraordinary appeal later.

"We start off with the premise that Canada subsidizes lumber," Mr. Sullivan told reporters during a conference call. "We're complying with the panel's decision, but we don't agree with it."

The United States will continue to collect its 20.96 percent tariff on Canadian softwood - which includes a separate antidumping duty of about four percentage points - until the Nafta panel completes the case, which may take more than six weeks. Any extraordinary challenge would further extend that period.

Mr. Sullivan also said that the ruling had no impact on duties that have been collected to date but set aside because of the trade dispute. Canada estimates that those funds total about 5 billion Canadian dollars, and it is demanding their return.

At the heart of the case are differences in the sources of lumber. In Canada, the vast majority of lumber comes from logs harvested from government land, while private land is the primary source in the United States. American producers contend that Canadian provinces subsidize their industries by charging artificially low cutting fees.

While Tuesday's move is far from the final word in the dispute, it may provide some political relief for the Canadian prime minister, Paul Martin, and his Liberal Party. His minority government could be facing an election shortly, and early Tuesday, before the Commerce Department announcement, he was attacked by the opposition Conservative Party for failing to advance the softwood case.

The Coalition for Fair Lumber Imports, a group representing American producers involved in the dispute, condemned the move to reduce the duty.

"I could go on for hours about how outrageous this subsidy decision is," said Harry Clark, a Washington-based lawyer for the group. "What we have here is a Nafta panel that simply decided to flout its obligation to enforce U.S. trade laws."

I am not sure if the word "accept" is exactly correct.
In spite of 5 separate NAFTA rulings the US is still saying "We start off with the premise that Canada subsidizes lumber".
Furthermore the US is going to continue to collect 20% tariffs for 6 weeks or so until the case is "final", then issue an "extraordinary challenge" to further extend the case.
Does this come close to "accepting" the decision?
I think not.

In one of the silliest statements on free trade yet, Harry Clark, lawyer for "The Coalition for Fair Lumber Imports", said Nafta is "flouting" its obligation to enforce U.S. trade laws. Flouting? Mr. Clark, why shouldn't NAFTA want the US to enforce its treaties? If ever there was "flouting" it was blatant flouting by President Bush on behalf of US lumber companies to collect mammoth tariffs in spite of 5 arbitration rulings in favor of Canada. That is the essence of "flouting" and that is why there has been little or no progress in reaching new trade accords earlier this year in South America. Point blank: The US is not afraid to play the bully in one-sided agreements, and that is why the US and EU are becoming increasingly isolated on free trade issues while China, Australia, and others forge ahead.

One more thing: Anytime one sees there is a Coalition for "Fair" Anything, rest assured it is in reality a Coalition for Increased Protectionism, Unfair Subsidies, and/or other Government Handouts, all at taxpayer expense. That Mr. Clark, is exactly what you and your coalition are all about.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Door Is Ajar

Gregory Crewdson is all over the place these days.



An exhibition of his latest series, "Beneath the Roses", at White Cube earlier in the year.



Part of the "The New City: Sub/Urbia in Recent Photography" exhibition currently at the Whitney.



Part of "the real ideal: Utopian Ideals and Dystopian Realities" exhibition at Sheffield Galleries and Museum Trust.



And articles all over the place.



His surreal, David Lynch-esque photographs are cinematic undertakings, usually requiring multiple bodies for extensive and elaborate staging (especially with lighting) and just as much time and effort with computers during "post-production". For me, the payoff is worth it. Not all of his series appeal to my senses, but this latest series hits me just right.

Get Yr $$ On

Just in time for the day after Thanksgiving, traditionally the biggest shopping day of the year in these old United States, Oprah Winfrey told millions of people what to buy for the Holidays. For those of you residing in the States - though this might apply much elsewhere - you've probably been bombarded one way or another by holiday consumer hype much earlier than usual this year, as companies try to make for anticipated drops in consumer spending caused by higher energy costs and such.

Personally, I'm aiming to make my gift-giving (and receiving) this year less about material goods and more about life's intangibles, such as donations to public radio, music classes, etc. This approach is more difficult than procuring "stuff" but ultimately a bit more rewarding, if not initially appealing to people.

The opposite end of Oprah's spectrum, though, is Buy Nothing Day, taking place on Friday in the States and Saturday in the UK. Billed as "a day where you challenge yourself, your family and friends to switch off from shopping and tune into life," this movement may or may not have been created by Adbusters but the organization definitely plays a hand in promoting it. Looking at their "BND Action Pyramid", buying nothing isn't enough. Non-spenders should spread the message via posters, t-shirts, banners, join Jammergroups, and generally get in shoppers faces with commentary on consumerism and corporations.



But does Buy Nothing Day really have a noticeable impact? Probably not. Like other "days" (Earth Day, Great American Smokeout, etc.), it's more publicity than anything. And while that might call attention to something, the next day people usually just go about their business, in this case shopping. An extension of the day that might have a slightly better chance is the Buy Nothing Christmas, though I don't know how anybody can pull that off.

In both cases, the emphasis on Nothing might be the biggest problem. Instead of countering 1 with 0 (in binary terms), why not counter 1 with 0.5? or 0.33? That might not get as much attention or publicity, but it's more realistic, especially given that so many people live in society's dependent on the commercial market. As an individual, to abandon it completely is so difficult that people probably won't even bother or pay attention, but to be more responsible about what, how much, and why we spend, is more feasible and may be more effective.

(thanks to Maria for the head's up)

No Social Security Number? No Problem!

It's the American dream : owning a home.

With the recent spike in housing costs, it's become more difficult for many Valley families to qualify for a home loan. But some local banks are giving out loans, and they don't even require a social security number.

David seems like your typical first-time homeowner. The house is small, money's tight. But his family is happy. "It was our dream." he said. "So it was like our dream became true, finally."

But getting a loan from the bank almost didn't happen. An employee from the bank called and said it seemed they had a problem. The problem was David's social security number ... it's a fake.

He is undocumented, an illegal immigrant. David thought it was a dead end, but not in California. It's among a few states where banks are offering mortgages to people who they know are illegal.

David got a 30-year, $135,000 loan. He pays $950 a month for his house in the South Valley.

The Valley non-profit group Acorn is helping people like David. They set him up with Citibank in Fresno, where a social security number is not required.

Instead, it asks for an Individual Taxpayer Identification Number, or I-TIN. It proves they pay taxes to the IRS. Applicants also have to have a bank account, proof of US residency for two years, and two years of credit references.

Diana Hull, an illegal immigrant opponent and president of a group called Californians For Population Stabilization says against the law. "There is a law against aiding and abetting illegal aliens to continue to live in the United States. Issuing a mortgage to an illegal alien is helping him establish himself and remain the United States, which is clearly illegal. It's a felony," she says.

Despite the accusations that what they're doing is illegal, Citigroup and Acorn stand by the program.

Acorn issued a statement saying everything about their program is legal. They say in the United States, it is perfectly legal for non-citizens to own property.

When asked about its opinion on whether the program is indeed legal, or unlawfully entices illegal immigrants to stay, the U.S. Attorney's office refused an answer.

The attorney general refused to answer a question as to whether or not the practice is illegal?! What kind of nonsense is this?

This is how I see it.

There is nothing illegal about foreigners owning property in the US but it an entirely different matter when they lie about their status, lie about income earned illegally, and lie about their owner occupied status in order to get a lower rate. Then again, they will be occupying that house, so who cares if they do so in a legal or illegal manner? Certainly not Citicorp who is more than happy to process the loan sell it for a fee to Fannie Mae. As long as someone can make money on these loans no one really cares if they are aiding and abetting illegal aliens or not.

Here is the bottom line.

• Money speaks louder than principles.
• The US Attorney General is a wimp.
• Unless there is a huge tightening of our borders, illegal aliens will come pouring in.
• Neither the Democrats nor the Republicans have the backbone to face this issue right now.
• The problem is likely to simmer until one of two things happen: 1) there is a massive public outcry against illegal immigration over jobs 2) some sort of disaster happens such terrorists slip over our porous, poorly guarded border and cause some sort of huge problem somewhere.
  

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Monday, Monday

My weekly page update:

Colonie in Paris, France by BOB 361 Architects.

The updated book feature is A Guide to Contemporary Architecture in America: Volume 1, Western U.S.A., by Masayuki Fuchigami.

Some unrelated links for your enjoyment:

Brand Avenue
Blog on "Place, Space, & Identity." (added to sidebar under blogs::urban)

All Jurors Wear Black
"Architecture is hard to understand. Noble minds and smart people have advanced it's debate in spite of their abilities. The observations, notices, and insights recorded here are to help the rest of us understand what's going on. Sometimes its a lot of hype, other times its pretty inspiring." (added to sidebar under blogs::architecture)

Design Spotter
"The web-based platform for publication and publicity for designer-makers."

A Competition, a Conference, an Award

Competition:

Burnham Prize 2006
"Learning from North Lawndale: Defining the Urban Neighborhood in the 21st Century" is the title of this year's Prize, whose winner will receive an extended fellowship at the American Academy in Rome in Fall 2006.

Conference:

Tropical Green
Taking place February 9-10 in Miami, "learn how to design and build sustainably - and profit from it."

Award:

CAF Patron of the Year Winners
Da Bears, Da City, Crate & Barrel and so forth.

Half Dose #19: Palace Fouquet's Barriere

This 80-room hotel, located on the Champs Elysees and set to open in 2006, is designed by Edouard Francois for the Groupe Lucien Barriere. The corner addition connects to its neighbors to create a unified hotel, while also linking aesthetically between the two.



This last is accomplished by copying a Hausmanian building on the Champs Elysees and creating its replica in a moulded concrete facade.



Given that this articulated facade doesn't relate to the interior rooms, openings are punched into the concrete wherever necessary, creating a mash of (traced) old and new.



This concept is a very intriguing approach for relating to, and integrating with, historical buildings. It falls somewhere between contemporary buildings that strive for contrast and neo-traditional buildings that use less-literal means of copying. Reminiscent of artwork by Rachel Whiteread, it's a design that I hope receives widespread press when complete, as it's an idea ripe for discussion if not replication.

Links:

:: Groupe Lucien Barriere
:: Eduard Francois

What card does your pet carry?

It seems that distinguished cats prefer American Express.

Last month Marilyn Hecox's 4-year-old black domestic short-hair, Samson, received an offer for the American Express Rewards Plus Gold Card.

Mish note: Click on the above link to see "samson".

"At first it's funny. Then you get a little nervous about it," Mrs. Hecox said, sitting in her dining room and thumbing through the application with a puzzled look on her face while Samson sat at the door waiting to be let outside.

"As the membership criteria at American Express remains stringent, the Rewards Plus Gold Card is difficult to acquire for all but the most financially disciplined," the application letter starts off.

"Only a select group of people will ever carry the Rewards Plus Gold Card. It instantly identifies you as someone special - one who has earned a superior degree of financial freedom."

According to the Federal Reserve, Americans were carrying $2 trillion in credit card debt in September, a $300 billion increase since 2000.

How much of that is carried by cats?
Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Short Anxiety

In last Sunday's Chicago Tribune, Blair Kamin argues for "a need for the city [of Chicago] to develop a planning framework that offers specific guidelines about where tall towers should go, how they can be placed so they block as few views as possible, and how they should behave at ground level." This article is definitely responding to the Spire-Tweezer one-two punch levied in the last couple months. Below's "composite photo prepared for this story," illustrates the crowding of the two towers and their proximity to Trump's tower down river (though this view is slightly misleading, as was mine in the link above, as it's a view that will rarely be experienced, except as one flies by in a plan or sails by in a boat).



Elsewhere in the article, Kamin uses Park Tower and the Peninsula Hotel as an example of "a growing movement in the design community to educate the development world that tall, slender buildings are not bad things," in a quote by Lori Healey, the city's new commissioner of Planning and Development. He states that the soaring Park Tower is more appealing than the short and squat Peninsula, though there's more going on than tall vs. short. Park Tower's location pretty much dictates a tall tower, not just because of its relationship to the city's historic Water Tower, but because of the unimpeded views to the east and the lake. Beyond the Water Tower is the equally-historic fire station, the MCA, and a park. Each of those should be around a long time, guaranteeing views for residents of Park Tower. The Peninsula, on the other hand, is a hotel (where views are important but not as much so as in residential) and faces tall buildings to the east. While its architecture may be as equally uninspiring as Park Tower, its stoutness alleviates the areas spiked towers, opening up the Water Tower to some sky and sun. Basically, both practically and as urban design, both types are worthwhile.

This gets to Kamin's conclusion, where he quotes Ralph Johnson and agrees that the city should dictate where "wall" buildings go (Grant Park) and where tall buildings go. Furthermore, retail and other "public" uses should line the ground floor below the ubiquitous parking garages that usually sit below towers. I definitely agree that we need a lively pedestrian-level streetscape, though the location of tall and short buildings should be more flexible and perhaps even on a case-by-case basis, taking into account other nearby developments.

What isn't mentioned in the article is the FAR bonuses that the city has provided in its latest zoning revision. If a developer sets aside space for a space like a winter garden or an arcade, or pushes parking underground (these and other bonus schemes are definitely costly but may be outweighed by the additional units or leasable space created by the bonuses), they gain FAR. And given the lack of a height restriction in most of downtown, it's no surprise that developments are aiming higher. While there's bound to be arguments over how to achieve a well-scaled and quality city environment, it's going to have to be done by the city, be it via zoning reform or the like. And the way things are going now, that's not very likely while a certain Mayor's in power.

Update 11.18: The following snippet written by Ada Louise Huxtable (emhasis added by me) that's featured in The Architect's Newspaper's article "On Criticism" (worth reading, by the way) seems particularly apt in regards to the issues discussed above, even though it was written in 1980. The fact it was written 25 years ago (in a NYTimes article called "Zoning: The End of the Line") shows that lessons are hard to learn and practice when there's a way and an incentive to do something else.

In an attempt to legislate an impossible balance between a profitable city and a livable city, New York has created a monster�call it Frankenstein zoning. The process by which good intentions and innovative practice are turned into an urban nightmare has been gradual and technically arcane. But what has been happening, insidiously and overtly, is that the whole idea of zoning has been turned upside down. It has been subverted from a way to control building bulk and size to a method for getting bigger buildings than ever.

If that seems like an anachronism, it is; exactly the kind of overbuilding is being encouraged that the law was designed to prohibit. The result, which is just beginning to be visible, is the rapid appearance of ranks of oppressively massive, sun- and light-blocking structures of a size that we have never seen in such concentration before. Their outline and impact appeared first on Madison Avenue from 53rd to 57th Street, with the 42-story, block-long Tishman building from 53rd to 54th Street, another tower across Madison at 55th Street, and the gargantuan AT&T and IBM buildings, from 55th to 56th, and 56th to 57th Street. This enclave of blockbusters was joined by the huge Trump Tower looming on the Bonwit Teller site at 56th and Fifth.

When the first of these immense projects designed under the city�s revised 1961 zoning regulations appeared, such as Olympic Tower on Fifth Avenue or Citicorp on Lexington, they seemed unique; as singular structures they were more interesting than overwhelming. As a standard to be replicated, however, they have become cautionary examples�What must be understood is that this wave of bigger-than-ever New York buildings is not some overreaching passing fancy. It is the new and future norm�The bottom line is that the developers build what they are permitted to by law.

These new buildings, therefore, are equally revealing of the manipulative, negotiable, and mutable art that New York�s zoning has become. And because what New York does in zoning is emulated by the rest of the country, whether it is innovative and constructive or dangerous and foolish, other cities will probably follow an example that has evolved from a reasonable system of controls, including creative attempts to balance restraints with public amenities, to an ad hoc exercise in horse-trading that is a clear environmental disaster.

Can GM be saved?

The problems at GM continue. Its stock price is near 52 week lows and GM is reportedly looking to sell a stake in its consumer financing unit to raise some $11-15 billion dollars to fund operations.

Not so fast says the Pension Benefit Guaranty Corp. It seems The PBGC may seek additional pension funding from GM to safeguard against a taxpayer bailout should GM go bankrupt sometime down the road according to the Wall Street Journal article Pension Agency Casts Shadow on GM Sale.

If General Motors Corp. raises $11 billion to $15 billion by selling a stake in its highly profitable consumer-finance arm, the U.S. agency that partly guarantees defined-benefit pension plans could demand that a chunk of the windfall go to GM's pension funds rather than to shareholders or to the development of new auto models.

Douglas Elliott, president of the Center on Federal Financial Institutions, a nonpartisan think tank, said a termination of GM's $100 billion pension plan could result in a claim on the PBGC larger than the total of all the previous claims on the agency since it was created in 1974.

"The PBGC could get some agreement on what GM will do with the proceeds from GMAC in return for protecting the buyer or approving the [General Motors Acceptance Corp.] transaction," said Brian Johnson, an analyst with Sanford C. Bernstein & Co.

Separately, the Securities and Exchange Commission is investigating whether the assumptions GM has used to calculate its pension liabilities are overly optimistic. Even a relatively small change in those assumptions could drop GM's pension funds into the red, according to GM's own measures.

At the heart of the issue is whether or not GM's pension funds are fully funded now. GM claims that its pension plans are fully funded. The PBGC calculates that the plans are underfunded by an estimated $31 billion. Technically both are correct under the arcane rules that govern pension accounting. On a practical basis, however, the PBGC is correct: GM's pension funds are enormously underfunded.

Meanwhile GM has sustained $3 billion in losses this year, its debt has been downgraded several times to junk status, GM is losing market share, and it appears the economy and car sales are both slowing as well. Although GM Chairman and Chief Executive Rick Wagoner has repeatedly stated that bankruptcy isn't an option, the S&P has placed the bankruptcy odds at 30%. GM's stock price is hovering near 52 week lows around $25.

The risks involved with GM spinning off part of GMAC and relying more on its core auto business are considerable, says Standard & Poor's Corp. auto analyst Scott Sprinzen. "We have a B-minus rating on, and we're still reviewing that rating," said Mr. Sprinzen. "It's still on credit watch, and we could lower the rating further, even if there's a transaction with GMAC. The risks are high, that's how we see it."

Mr. Wagoner acknowledged in a recent interview that spinning off GMAC will put more pressure on GM's auto business to perform, but said the spinoff is needed to secure GMAC a better credit rating.

"We're going at it to get GMAC back to an investment-grade credit rating, and, frankly, support the business purpose of GMAC, which is to support GM and its growth options," Mr. Wagoner said. "That's sort of step one in the discussion. What we will do with the proceeds is to be determined."

I think what Mr. Wagner means is "What GM is forced to do with the proceeds is to be determined." It will also be interesting to see if the PBGC or the bond markets forces GM to cut its dividend. Were that to happen in a timely enough manner (as in now), GM's stock would likely plunge but its bonds would likely gain. If the market forces the issue at a later date it might not be good for either. The point is all moot however, since in my mind the real debate is not whether GM will go bankrupt, but whether said bankruptcy occurs sooner rather than later.

The real question then should be how to handle the upcoming bankruptcy in the most equitable manner possible rather than wasting money trying to prevent it. I would not wish for GM pensioners to go through the torture that the airline industry employees just went through.

In that regard Mish actually has a five step plan to "save" GM.
Here it is:

1. GM should sell off all its profitable units
2. Fully fund its pension plan
3. Declare bankruptcy
4. Dissolve the union agreements
   
5. Start all over on a smaller scale
   

Following are the benefits of the above proposal:

• The plan would protect GM pensioners.
• The plan would protect US taxpayers from a bailout.
• The plan would reduce much of GM's cost disadvantage.
• The plan would give a future GM some semblance of a fighting chance at competing in a global marketplace. Those that believe GM knows how to design and manufacture cars that people want would have their chance to prove it, without fighting excessive cost overheads.
  
• The plan would remove unneeded auto manufacturing capacity that is depressing the sector.

GM is currently on collision course with bankruptcy anyway so it may as well happen in a manner that protects the most people. The 5 step program above would protect both GM pensioners and US taxpayers. No doubt union members will object to step number 4, but a reduction in the power of the UAW would appear to be a foregone conclusion anyway. All one has to do to see the writing on the wall is look at how the unions were treated in the airline bankruptcy proceedings. I see no reason to believe that the UAW would be treated any differently coming out of bankruptcy than the airline unions were when they came out of bankruptcy. Finally, the union may as well lock in a good deal for its pensioners right now as opposed to a poor one later that might also affect taxpayers to the tune of $30-100 billion or so.

The Mish proposal is unlikely to be implemented as Chairman and Chief Executive Rick Wagoner has declared repeatedly that "bankruptcy isn't an option". Furthermore GM stockholders and bondholders would not particularly be pleased with my plan to say the least. If a CEO has a duty to shareholders, then as a practical matter what anyone deems "fair" to pensioners or taxpayers is irrelevant. What that means of course is that regardless of the obvious benefits (or lack thereof) depending on your viewpoint as a GM shareholder or UAW worker, the Mish plan to save GM in a "fair and equitable manner" was a purely theoretical exercise that favored pensioners while ignoring huge implications to GM stockholders and bondholders. In that regard it can not be viewed as a serious proposal.

That said, to the extent that the PBGC is willing to force GM to fund its pension plan rather than fund its operations, we just might be following the proposed 5 steps anyway. If my read is correct, then the PBGC is determined to prevent an enormous mess from being dropped in its lap down the road. Given that forcing GM to fund its pension plan is likely to have negative shareholder implications, the PBGC just might be steering GM to a smaller taxpayer bailout sooner rather than a bigger taxpayer bailout later. Furthermore it would not surprise me to see new legislation protecting pensioners in the next Congress. Such a law would certainly not do GM share prices any good. For now, $31 billion seems like a lot of cash for GM to come up with and that does not take into consideration what might happen to its pension investments or its ongoing operational funding requirements in an economic downturn either. Hmmm. Are we back to square one? I believe we are.

Here is the bottom line: No matter what CEO Wagner believes about bankruptcy, it seems likely the market or the PBGC or perhaps even a new law protecting pension benefits over bondholders will force him to change his mind. If history is any guide, not only will GM go bankrupt, but pensioners will get the shaft and taxpayers will end up footing some of the bill. Right now, the PBGC seems like it is trying to minimize that taxpayer bill that will be coming due.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

TSUNAMI+

Got this in my inbox and thought I would pass it along. Click on the image for more information on the TSUNAMI+ Conference on Post-Disaster Planning and Reconstruction.

Bank Lending Practices

The October 2005 Federal Reserve Survey on Bank Lending Practices shows that most banks still haven't altered lending standards for home equity lines of credit even after the FED raised concerns about whether lenders were adequately weighing risks.

The report shows domestic commercial banks reported a further net easing of lending standards and terms over the past three months.

In response to the special question about changes in terms on mortgage loans to purchase homes, notable net fractions of domestic institutions reported that over the past two years they had eased a number of terms, including the maximum size of primary and second mortgages, spreads of mortgage rates over an appropriate market base rate, and the maximum loan-to-value ratio.

Here are some highlights of the survey:

• Nearly 10 percent of respondents, on net, reported having eased their credit standards on loans to large and middle-market firms.
• About 30 percent of domestic respondents reported that they had reduced the costs of credit lines in October.
• Almost all domestic banks that reported having eased their lending standards and terms in the October survey cited more-aggressive competition from other banks or nonbank lenders as an important reason for doing so
• Almost 40 percent of domestic banks, on net, reported that over the past two years they had increased the maximum size of primary mortgages they were willing to provide.
• About 30 percent, on net, indicated that over the same period they had increased the maximum size of second mortgages.

According to CFC October 2005 Operational Results, it seems that Countrywide Financial is one of the purveyors of the yet still looser bank lending practices that the regulators are talking about. Here are the highlights:

• Adjustable-rate loan fundings for the month were $23 billion, up 42 percent from October 2004. Year-to-date adjustable-rate fundings totaled $214 billion.
• Nonprime loan fundings totaled $3.9 billion in October, which compares to $3.3 billion for the same period last year. Year-to-date nonprime fundings were $36 billion.
• Pay-option fundings for the month were $8.5 billion, as compared to $3.4 billion in October 2004.
• Interest-only loan volume was $8.9 billion for the month of October 2005, which compares to $5.9 billion, for the same period a year ago.

The most amazing of those statistics is the rampant increase of "pay-option loans" smack in the face of flattening or declining home prices and a FED that seems bound and determined to break the housing bubble by hiking interest rates.

The LA Times recently discussed The hidden perils of pay-option loans. Let's take a look.

Borrowers with dangerous adjustable rate mortgages that give them the option of paying just about any way they like may find the loans even more perilous � and more expensive � than they ever imagined.

For starters, borrowers may find that as the rates on their mortgages adjust, they could be paying as many as three or four percentage points more than they would had they chosen a different type of adjustable mortgage.

Perhaps even worse, once borrowers realize they acted unwisely, they may not be able to get out of their loans without paying a hefty penalty. Even if you sell your house, you could be required to pay a prepayment fee totaling six months' interest to terminate the mortgage.

In exchange for all this, the broker who put his client in this precarious position is getting paid three times as much as he would had he placed the borrower in a more consumer-friendly adjustable mortgage.

Typically, lenders who actually fund the mortgage pay brokers a half-point � 0.5% of the loan balance � when they bring in borrowers who want a so-called payment-option ARM. But if the loan carries a prepayment penalty, they'll pay the broker a larger incentive.

These kinds of extreme charges are not attached to any mortgage other than pay-option ARMs, a loan that allows the borrower to choose from four different payment options each month.

Borrowers can pay the absolute minimum as calculated by a complicated formula. They can make an interest-only payment based on the fully indexed rate but with nothing going toward the outstanding balance. Or they can make a full interest and principal payment based on either a 15- or 30-year payment schedule.

Borrowers are drawn to pay-option ARMs because of their 1% start rate. But what they often don't realize � and sometimes aren't being told � is that while their payment doesn't change for a year, the rate starts adjusting after the first 30 days.

Of course, with these loans, the payment doesn't change until after 12 months. But because the rate moves on a monthly basis, the result is what's known as "negative amortization." That means that whatever the difference between what you pay and what you owe is added to the loan balance.

For pushing such an unfriendly loan on uninformed borrowers, mortgage brokers are paid handsomely, as are loan reps who work for lenders themselves.

"The kind of stuff going on out there is wrong," says Mitch Ohlbaum, a West Hollywood mortgage broker. "I think these loans work well when explained and priced properly. The problem is that no one is educating borrowers on what they are getting into."

A regular person with a regular job will fall behind very quickly if he makes interest-only payments. "People who know what they make each month have no business in a loan like this. They will get demolished."

Mish, is that what this is all about: greed on behalf of the lender and stupidity on behalf of the borrower? That seems likely but it really is impossible to say. Perhaps it is more like stupidity on behalf of both the lender and borrower to be taking risks like this at the pinnacle of this bubble in the face of repeated FED warnings. At any rate please remember the excuse the lemmings gave in the survey before they followed each other off the cliff: "Almost all domestic banks that reported having eased their lending standards and terms in the October survey cited more-aggressive competition from other banks or nonbank lenders as an important reason for doing so."

What this most assuredly boils down to is:

• Fear of losing a deal
• Desire to increase market share or "make the numbers" regardless of risk
• Plain out and out greed
• Belief that Greenspan (or Bernanke) will bail them out if anything goes wrong
  

Mish, how rampant is this nonsense? That is a good question and enquiring readers might make note of the fact that in bubble areas such as California, 28% of new mortgages in the first half of 2005 were subprime vs. 5% in 2000. 42% of first time buyers made no down payment on their home, and over a third devoted at least 33% of the incomes to mortgage payment.

It seems like this is starting to matter right now, but even if not, it is going to matter sooner rather than later. Much sooner in fact, as evidenced by this chart.



Some time within the next year 60% of all of the outstanding subprime adjustable loans are going to reset. This is going to be a rude awakening to many who will see monthly mortgage payments skyrocket. Worse yet, given rising inventories and falling or stagnant home prices it is going to be hard to sell.

Right now it does not seem to matter. That is the way it always is. Nothing matters until it matters, and the corollary is that it never matters until the bitter end. Right now it seems that the fat lady is singing but few hear the tune.

Mish, Saxon Capital just reported, what did they have to say?
That is a good question so let's take a look.

Saxon Capital, Inc. Reports Third Quarter 2005 Operating Results .

"During the third quarter, we continued to see the unfavorable market conditions that we discussed in the second quarter", said Michael L. Sawyer, Chief Executive Officer of Saxon. "The continued rise in short-term interest rates, and accelerated prepayment speeds, coupled with the extended period of muted market pricing increases continue to adversely effect our results. We remain committed to prudent management through these times, concentrating on reducing general and administrative expenses, growing our centralized retail origination platform, focusing on capital preservation, and ensuring a strong balance sheet."

Well so much for honesty as the following chart shows.



Is Saxon being punished for honesty while CFC is taking on more risk?
Unfortunately I have no answer to that question other than perhaps CFC's day of reckoning is coming.

Mish readers might recall that we previously discussed Saxon Capital in Are we headed for a "credit derivatives event"?

In their last conference call Saxon was saying:

• "At the point in time WHEN the credit event comes, AND IT WILL we will be very well placed to take advantage of what happens next"
• "I am concerned about the level of capital" of our competitors "to service the bonds as those portfolios age"

It seems to me, based on the above chart, that the market is more worried about a "Credit Event" at Saxon than its competitors.

Meanwhile, from The Economist Global Agenda, Buttonwood is asking With a pfffffffft or a fizzle?

What could give this scenario an uglier twist is the sharp increase in funny loans to funny borrowers over the past few years. �Subprime lending� to people who would not normally be able to make the grade is running at about $500 billion a year. Much of it takes the form of variable-rate, interest-only and negative-amortisation loans. Both debtors and creditors are now more exposed to interest-rate changes.

Banks have been happy to lend to marginal debtors, safe in the knowledge that they could unload many of the loans either on one of the quasi-governmental housing agencies (Fannie Mae, Freddie Mac) or to private investors in asset-backed securities. Many of these loans end up in collateralised debt obligations (CDOs, which slice up bundles of referenced loans into tranches of different riskiness for different investors). Japanese and European investors have been especially enthusiastic buyers of this sort of paper, but there are signs of battle fatigue now: spreads have widened sharply over the past couple of weeks.

Indeed. Hot potato is the name of the game.
Take what you can when you can and pass the trash if you can.

Can this go on forever?
Not likely if the following headline is the start of any kind of trend:
Swiss pension fund shifting away from U.S.

Switzerland's $15.5 billion state pension fund plans to reduce its investment in U.S. bonds and dollar-denominated debt because of concern that rising U.S. government debt and interest rates may hurt the U.S. economy.

Higher market interest rates could lead to defaults on loans by homeowners and affect mortgage finance companies including Fannie Mae and Freddie Mac, Eric Breval, managing director of the Swiss pension fund, said during a recent interview in Geneva. Assets will be shifted into euro-denominated bonds, he said.

U.S. government debt stands at a record, and Congress has increased its scrutiny of Fannie Mae and Freddie Mac amid concern that their debt may be too large, posing risks for the economy. Together, the two companies own or guarantee almost half of the $7.6 trillion U.S. mortgage market.

"There is a greater risk in the U.S. than elsewhere," Breval said. "When you see some institutions such as Fannie Mae and Freddie Mac and the time bomb they are sitting on, something may happen there one day, and we want to be less exposed."

Fannie Mae is a "time bomb".
I couldn't have said that better myself.
But the party continues. Right now money is still flowing into stocks and the market seems bound and determined to have a year end party. Who am I to argue? All I can say is that it will be one hell of a hangover when the party ends.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Monday, Monday

My weekly page update:

Simons Sauna in Sipoo Molandet, Finland by Heikkinen-Komonen Architects.

The updated book feature is American Playgrounds: Revitalizing Community Space, by Susan Solomon.

Some unrelated links for your enjoyment:

Museum for Missing Places
"Situated in Houston, Texas, the Museum is...a public information project that addresses contemporary issues of urban place identity through the eyes and actions of city residents. Using interactive exhibits, the Museum proposes alternative ways of mapping a city in the context of rapid and uncontrolled urban change and the uncertainty of enduring architectural landmarks." (via Archinect)

Revitalization
"The magazine of community renewal and natural resource restoration" that will debut in January 2006. (via The Place Where We Live)

Hoberman Transformable Design
Work "centered on the fundamental idea that a designed object can transform the way a natural organism does."

Outsourcing Lawyers

India Times is reporting that Indian offshore firms are courting lawyers.
Let's take a look:

Close to the rugged farmlands of Haryana near Delhi, dozens of shirt-sleeved graduates are busy at work in an office park. Much of this work at a firm called Evalueserve in the town of Gurgaon is the same as is done thousands of miles away in wood-panelled Manhattan law offices by young attorneys, some of whom command six-figure dollar salaries. Although Indian lawyers cannot argue in a U.S. court, local start-ups reckon they can take on much of the legal back-office burden, such as filing patents that mix high technology and U.S. law -- the latest in the outsourcing wave that uses high-speed telecoms and low-wage, English-speaking Indians to save Western firms hundreds of millions of dollars a year. "The only thing that can't be outsourced to India is something that requires physical presence," said Sanjay Kamlani, co-founder of Pangea3, a firm employing 23 lawyers in India and five in the United States, plus technical engineers. Kamlani insists that training Indians for U.S. law is easy. "Both the U.S. and India were British colonies and common law is British," said the U.S.-based lawyer of Indian origin whose firm has 20 clients helping in legal document management, contract drafting, legal research and patent filing. According to India's National Association of Software and Service Companies (NASSCOM), India has so far tapped only 2-3 percent of an estimated $3-$4 billion U.S. market of "outsourceable" legal services.

One by one white collar jobs are following blue collar jobs to India and China. The following quote sums up the situation nicely: "The only thing that can't be outsourced to India is something that requires physical presence". In the meantime even jobs that do require physical presence do not necessarily go to US citizens.

The St. Petersburg Times is taking a look at Who's rebuilding New Orleans?

Locals angrily point out migrant workers, saying they're taking jobs to the exclusion of residents who can't afford to come home.

As military helicopters thumped overhead, R.J. Rouzan paced and waved his arms inside an office in City Hall.

National Guard troops that morning last week had blocked him from visiting his property in the Lower 9th Ward. Something to do with needing a permit. City officials didn't know what he was talking about.

Then, in the middle of an argument that seemed to be about red tape, Rouzan veered suddenly toward a subject that has angered many local residents.

"They let trucks full of illegal aliens in there and not the property owners?" Rouzan yelled at a weary-looking receptionist.

Immigrant workers - some in the country illegally - have been pouring into New Orleans since Hurricane Katrina devastated the city.

While no one knows how many Hispanic workers are in New Orleans, teams of Mexican and Central American laborers drawn from around the United States appear throughout the city. Wearing white protective suits and yellow boots, they pressure wash mold-infested rooms, tear out Sheetrock, rip down soaked insulation and empty rotten shrimp from refrigerators.

Rouzan, a black owner of construction and trucking businesses, said his employees are scattered across several states. Without a place to stay, they can't come back to work. Watching Hispanic workers take similar jobs, Rouzan seethes.

"They are allowing people to come in who are getting jobs while we as homeowners who built this city, they don't let us get access to our property," Rouzan said.

At some point there is going to be a huge backlash over the loss of jobs.
You can see it coming and you can feel the heightened protectionism that will likely come of it.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/

Half Dose #18: Mount Tindaya

Mount Tindaya is located on Fuerteventura in the Canary Islands. It was chosen by artist Eduardo Chillida, after a long and exhaustive search, as the location for a large-scale sculpture, a carved space of roughly cubic proportions (50m per side) inside the mountain that would be capped by two skylights.


Mount Tindaya

Ove Arup Engineers began work in 2003, performing a feasibility study and mapping the geology of the location. The most difficult aspect of the design's carved void is the flat ceiling that Chillida desires, given that the weight above would best be transferred to the "walls" via an arched, or similar ceiling.



Since the project's inception, in the form of small-scale models as shown here, the Canary Islands has been enthusiastic about realizing it full-size in Mount Tindaya. The three-phase project (I-feasibility, II-drilling, III-construction) is expected to be completed in 2010, according to Arup's page.



Check out the highly informative Mount Tindaya web page below for lots of information on the project, the artist, and the process behind its realization.

Links:

:: Mount Tindaya
:: Eduardo Chillida
:: Arup feature
:: Floornature feature

More Water Tanks

Although I couldn't find anything on MoMA's web page, Gothamist mentions that Rachel Whiteread's long gone Water Tower has been resurrected on MoMA's inaccessible roof, visible from its garden.


Water Tower in its original location

About five years ago I featured the installation on my web page. And even though I heard about it too late to see it in person, I have mixed feelings about its resurfacing at MoMA. While this does enable me and many other people to see the resin tank -- which I described as "a quiet glimmer in the city's visual cacophony" and as simultaneously an object and non-object -- its removal from its original context is ultimately disappointing.

Visible from the corner of West Broadway and Grand in Soho, its initial incarnation sat in an area not only dotted with functioning water tanks but an area partly defined by this presence, almost as much as the landmarked cast-iron facades. By putting it in an area with fewer (visible) tanks, its context changes and so does its presence. What I found appealing about the work was its double nature, the way it existed as an object while also disappearing. This effect was not only due to the translucent container but also to its location alongside other working tanks. One might be looking towards the artwork but never really pay attention to it or realize that it's different, due to the conditions of light and/or its not-out-of-place shape. This will be missing at MoMA. If I find myself in New York and in Midtown, I might look up at the Water Tower, but I'll still wish I saw it in Soho.

Facade Project

Since my recent move, I've seen this from the "L" station every morning:



When I previously lived near that station I remember the building's unfinished facade and empty interior, awaiting a fit out to be turned into condos, I assumed. It sat that way for years, not surprisingly since it sits five feet from the tracks. Now the Chicago Printmakers Collaborative, who occupies the building's storefront, has installed The Facade Project: A commemorative work in progress.

Each window on the upper three floors of the Collaborative building contains the faces of 9 of the US soldiers who have died in Iraq. Altogether, the piece shows the faces of 648 of the troops as a tribute and reminder.

I usually don't get into this sort of thing, but the interaction of the faces with the unfinished building -- as well as the sheer number of faces -- make it a powerful statement. From the photo above, it seems like the Collaborative should open the space to visitors to heighten the aesthetic and emotional experience.

Bob the (Messy) Architect

Last night, a packed house crammed into IIT's Crown Hall to listen to Robert Venturi talk about Mies van der Rohe and himself, who he called Bob. As part of the Chicago Humanities Festival's recent embrace of architecture, Venturi was a natural choice to shake things up at the bastion of Mies's preaching.


Mies

Brief history: Mies coined the phrase "Less is more". In reaction to that, and pretty much all of Modernism, Venturi countered with "Less is a bore". (Late in Venturi's talk he mentioned a twist on his quote that somebody coined, one I actually prefer to the original: Mess is More)


Bob

Thus Bob, the "Anti-Mies" spoke last night about classicism, symbolism, and mannerism. In the first case, he stated that Mies was a classicist, because his buildings and spaces were stripped-down renditions of what came before; in the second case, he attested that Mies used symbolism, most apparently in the non-structural, applied steel sections on the facades of multi-story buildings, symbolizing industry; in the third case, he argued that given the first two -- and the fact that Mies did not acknowledge the classicism or the symbolic ornamentation, Mies was not mannerist. Bob is mannerist, according to Bob, because he is overtly symbolic. His conclusion was that Mies was covertly symbolic and classicist in a complex and contradictory time, while Bob is overtly symbolic and mannerist in a complex and contradictory time.

So what does this mean? To me, Bob is trying to bring Mies closer to himself by aligning him with his beliefs. Having popularized the phrase "complexities and contradictions" in the influential book of the same title, he takes that as the defining characteristics of the 20th century, the industrial century. If one doesn't take this to be true, then his argument pretty much falls apart, as Mies's architecture has a different frame of reference. But that won't work for Bob. For him, the 20th century was complex and contradictory and only symbolic and mannerist architecture accurately represents that time. While I've never been a big fan of him and his wife's architecture, the duo's updating of their theories to the signs, symbols, and iconography of the digital age is unfortunately just as off-putting.