Maybe it's a duke or prince...

I guess cash is not the king any longer.  And it held the throne for less time than an Italian prime minister.

Now a slew of economists and business school professors lecturing at the annual TEPAP management course here in Austin this week are mincing no words: Refinance now. Trillions of dollars in federal bailout funds will eventually ignite double-digit inflation, said Ed Seifried, a professor emeritus of economics at Lafayette College. "You may never see long-term fixed interest rates this low again." Yes, they might inch a bit lower, but the downside potential is small. His advice: Do it this week.

Likewise, TEPAP director Danny Klinefelter is urging growers to convert their equity into long-term debt and eliminate their annual operating lines in the process. If that means they have to park the excess in ultra-safe interest-bearing checking accounts, so be it. You might earn slightly less on savings that you spend on interest, but consider the margin "an insurance policy," Klinefelter said. [More]

I have long felt that cash-worship was based more firmly in psychology as opposed to long-term business planning. Farm business advisers are similarly biased to cash because it's easy to measure and offers that buffet-table allure - you can always convert it to any other asset.

Except when you can't.  The prime example of this situation is farmland, or more particularly nearby or adjacent farmland.  The illiquidity of the land market is severe, since few parcels come on the market except when prompted by generational change.

I fully recognize my aversion to cash, but suddenly more economists in farm country are looking father ahead than 2009 and speculating on the possibility of significant inflation.  I won't belabor my comments that this is now very probable and may even be part of policy plans.  Consequently, this argument strikes me as sensible to a point.

Rates will likely stay lower for longer than many observers suspect, simply because of the power of the economic down-spiral we are now working through. Asset value losses of 40-50% will not be easily forgotten, and consumers may have truly absorbed an attitude shift concerning consumption versus savings.  As a result, I think it will take 2-3 years after we reach the bottom for them to begin looking for slightly better returns than absolute safety (T-bills) can offer.

This is good news for the government which is borrowing those deposits, and good news for farmers.  There may be less urgency than Danny expresses above. This is a small quibble, of course, as interest rates for long-term money probably can't drop too much further.  

[Why do I have a bad feeling I just put that prediction on paper?]

I need to buy a power tool...

A really big, noisy one.  This has not been a good week masculinity-wise on my farm.  While you may think it was the emasculating crop report on Monday (from which we have surprisingly bounced up), it actually began the night before.

Jan and I had been watching Tess of the D'Urbervilles by Thomas Hardy.  Since I had crawled my way through Return of the Native in high school, I should have suspected something.  But no such luck.

We had invested 90 minutes the week before and the actor playing Tess was (ahem) able to hold my attention, I must admit.

 [More about this stinkin', man-hating TV show]

And I was confident I could exist my way through the last half with moderate attention and consciousness.

Little did I know that old Tom had the most wretchedly depressing ending waiting for me. The more self-sacrificing and noble the devastatingly gorgeous heroine behaved, the worse the men in her life treated her. I can't spoil the ending because it could not get any rottener.

Women are right - we are scum.  I have despised my gender for days, too despondent to enjoy even deeply fried foods.

Amazingly, the Brits can't seem to get enough of Victorian living, and its class-worshiping society.  Consider the hot new show on BBC: Victorian Farm.

Described as an "historical observational documentary", Victorian Farm follows a team of people who effectively step back in time to the turn of the last century. Filmed during the course of a year, they use only materials and resources that were available in Victorian times - to tend to livestock, repair buildings, prepare food and make furniture and food.

Acton Scott Historic Working Farm itself is recognised as one of the premier farming heritage attractions in the UK. Caught in a time warp, and deep within the Shropshire Hills, it retains all the atmosphere of daily life on a late Victorian upland farm. [More]

Good luck with that one, chums. 

But just when the shroud of self-loathing was lifting (along with corn prices I might add), another blow to my manliness destroys the feeble momentum of my rehabilitation: it seems I am to attend a baby shower.

My own son - the fruit of my loins - has permitted, even encouraged this spectacle to take place. Don't get me wrong.  I am ecstatic he and Kristi are springing off, so to speak, and can't wait to welcome a new whatever (they haven't peeked at the sex, unlike practically all expectant couples), but I had just assumed all the goofy pregame festivities would occur at a safe distance from me.  

But it has come to pass in our depraved times that instead of women going to showers and...well, doing whatever you do at one, the practice now includes couples. Even couples of advanced years.  My sixty-year spotless record of shower avoidance (not the hygienic kind, of course) is down the drain, along with whatever drops of testosterone Hardy left me.

Don't look back, comrades, it would only deepen my humiliation.  March on without me, and remember better days.


[Please, God - don't let there be games]

The death of the death tax...

Like some other observers, I think we are in a whole new ball game for the estate tax. While a middle course (freezing at this year's rates/exemptions) seemed to be gaining widespread acceptance and Obama seemed OK with it, the recession will change many dogma about wealth and income growth.

Perhaps the most important reason for the death of the “Death Tax” movement is what might be called the Paris Hilton affect. In 2001, with inequality mostly a buzzword among a few left-wing professors, it was easier to get public support for killing a tax on the wealthy. Many Americans felt they could become wealthy someday, too, so they opposed any punitive tax on their imagined futures. That was especially true in 2006, when Congress took up repeal again and Americans felt newly wealthy because of rising home values.
But in the intervening eight years, the nonwealthy actually became less wealthy and Americans realized they would be lucky to retire at all, let alone get rich enough to become the target of an estate tax. They also resented the rich Wall Streeters and corporate chiefs who lost so much of other people’s money and publicly paraded their wealth.
Capping it off was a populist branding campaign that was just as clever as the “death tax” brand. The term was “The Paris Hilton Relief Act,” suggesting that abolishing the estate tax would merely give more money to wasteful, dog-and-diamond-toting heirs such as Ms. Hilton. Mr. Obama used the term in 2006 when he said the “Paris Hilton tax break” would give “billions of dollars to billionaire heirs and heiresses.”

So while lobbyist strategy and internal bickering may have played a role, the real reason for the preservation of taxes on the wealthy is the public’s attitude toward the wealthy themselves. [More]

I waffle daily in my outlook for our economic future, but am confident there is another side of this chasm.  That said, it cannot look like our recent past, if only because we are shaping it with our rescue efforts.

As those few of us who have largely escaped the ravages of deflation and income loss are slowly sucked into the maelstrom, the number folks who have a dog in this fight dwindles. Meanwhile the rising tides of resentment toward Wall Street is easily transferable to anyone with more wealth.  Far fewer harbor even unlikely dreams of taxable estates, and the need for revenue will be enormous in 2010.

If we can settle for an estate tax with 2009 parameters, we'd be crazy not to do so. Once again allowing our farms to be the poster children for a repeal movement would only lump us in the company of those who are now most reviled in our society, and further damage our brand.

Why phone receptionists are hard to hire...

In Toronto.  It seems businesses there have an affinity for puns.  Despite myself, I loved these:

Wait for it...

[Way, way too many more - seriously, you'll kill 20 minutes at least.  I warned you.]

[via neatorama]

All kinds of destruction...

At Murray State University last night speaking to soybean growers, I followed Jeff Beals, who works with Jerry Gulke at SMS.  After listening to Jerry state he was going to cancel his seed corn order and plant all beans this year after Monday's reports, it was great to have Jeff fill in some the details in their thinking. (Of course, I sure ol' Jer will have revised his position by the TP Seminar next week, but that goes with the job - especially this year)

Anyhoo, Jeff used the term production destruction.  I could not find a credible defintion, but I think the meaning is obvious.  And I think he (they) are on to something, since rumors I've heard seem to confirm how the credit crisis is a pain here, but a game-stopper in places like Brazil, and especially Eastern Europe.  Even the EU, whose governments and investors were diving into places like Ukraine and Georgia are thinking twice.

The European Commission would like to draw Ukraine and Georgia closer to the EU through European Neighborhood Policy agreements on trade, economic aid, energy cooperation, institution building and the rule of law, while leaving aside the long-term question of possible membership of the bloc.
But EU officials are dismayed that Ukraine has done so little in economic reform, tackling corruption and improving transparency and the rule of law to qualify for more assistance.
"Instead of fighting corruption, they spend their time fighting each other," the energy official said.

It was politically inconvenient that both states voiced enthusiasm for joining the EU just as the bloc was suffering enlargement fatigue after taking in 10 new members in 2004. [More]

More to the point for us, a machinery insider told me this morning the rumor is sales of big sprayers from John Deere to Russia/Eastern Europe have fallen through due to lack of credit. US dealers who had been told in December not to expect any inventory any time soon, suddenly found a few (about 800 units) had become available.  

And my dealer told me delivery times on new combines been rolled forward remarkably.  For instance when he called me last July to warn if I wanted to trade up to a bigger machine (I was negotiating for a significant chunk of rented ground that  -  thank God - fell through) I had to have the order in immediately to guarantee fall '09 delivery. [BTW - a great video of where combines come from here]

Not only are machines being delivered in February instead of October, dealers can now have one on the lot.  Last year to prevent big dealers from hogging the output, a signed order with a farmer name on it was required, I was told.

To make a short story long, lots of overseas competition for farm machinery just disappeared due to the credit freeze. If Citibank doesn't trust Wells Fargo (or is that backwards?), I doubt if it wants to deal with First National of Moscow,  especially given the rouble rout.

But my point - and I'm pretty sure I have one - is the credit crisis and commodity bust is destroying commodity production capacity as well - or at least delaying its expansion. Without money, competitors in developing nations are hamstrung in their push to gain competitive tools to match ours.  I think our myopia on our own problems has left this factor unconsidered.

While we complain about the bailout schemes, at least we still have government institutions trying to prime the credit pump, and a currency still (miraculously) in demand.  Most of our fastest growing competitors have nothing faintly similar for help, and capital inflows from rich countries have essentially reversed.

Steel prices are plummeting, ditto rubber, copper, you-name it, but that only helps for machines yet to be built, so add farm machinery to the list of industries trying to figure out how to avoid whacking losses as demand falls. Many of them also have a construction side which is really not much help right now either.

Along with input prices and customer credit issues, ag production could actually be declining for many crops.  And I'm not so sure it will bounce back up very quickly without money flowing a lot more freely.

So bash Wall Street and our finance sector if you choose. But I'm beginning to root for those quasi-rascals. At least they're our rascals.

Now we're talking...

Of all the stimulus ideas offered to date, this one I like the best:

Republicans said more tax cuts were needed in the stimulus. Senate Minority Leader Mitch McConnell of Kentucky said one idea discussed during a Republican caucus lunch yesterday was a two- year suspension of the payroll tax as part of the stimulus.[More]

To be fair, I'm just one greedy taxpayer, of course (although accelerated, bonus, super-duper depreciation allowed me to postpone too much of them for next year - I'll hate myself in 2010).  But serious economists think this is the best tax cut of all.

But the centerpiece of any tax cut should be employment taxes: in particular, a permanent halving of the current 12.4 percent Social Security payroll tax on the first $106,800 of wages, split evenly between workers and employers. The direct revenue effect of that would be a bit under $400 billion per year, roughly in line with the present quantitative needs of the economy. It also meets our three tests of effective stimulus.

First, the funds would flow directly to households through higher take-home pay and indirectly through a reduction in the cost of employment. Economic studies conclude that the benefits of a reduction in the employer portion of the payroll tax are ultimately received by employees. But the immediate effect would be an improvement in the cash flow of credit-starved businesses (as well as being a marginal incentive to keep employment up).

Second, the funds would be extremely timely, with the benefits hitting the economy with the first paycheck after the plan was implemented.

Third, by lowering the taxation of labor, the plan would help produce a higher-employment recovery than would otherwise be the case.

Since the tax cut should be permanent to have maximum effect, the biggest challenge would be how to make up for the lost revenue once the macroeconomic need for fiscal stimulus had passed. In the short run, effective fiscal stimulus requires that government revenue drop, thereby enriching the private sector, and with the Treasury making the Social Security trust fund whole by way of intergovernmental bookkeeping. Longer term, however, spending cuts or a new source of revenue would be needed. [More]

More importantly, I think Obama and his economic advisers are persuadable.  Not withstanding the democratic opposition to tax cuts, this one is clearly targeted to lower-earners and can be implemented instantly.



Now all I need is a one-year capital gains holiday to sellout to Aaron and I'm golden.

Here come the readers...

It would seem we are slowly turning into a nation with mostly readers, thanks to younger Americans.  The National Endowment for the Arts reported these findings (among others) in a recent survey.

• For the first time in the history of the survey - conducted five times since 1982 - the overall rate at which adults read literature (novels and short stories, plays, or poems) rose by seven percent.
• The absolute number of literary readers has grown significantly. There were 16.6 million more adult readers of literature in 2008. The growth in new readers reflects higher adult reading rates combined with overall population growth.
• Young adults show the most rapid increases in literary reading. Since 2002, 18-24 year olds have seen the biggest increase (nine percent) in literary reading, and the most rapid rate of increase (21 percent). This jump reversed a 20 percent rate of decline in the 2002 survey, the steepest rate of decline since the NEA survey began.  
• The U.S. population now breaks into two almost equally sized groups – readers and non-readers.
• A slight majority of American adults now read literature (113 million) or books (119 million) in any format. 

[More]

This sort of confounds the image of video-game-playing slackers.  But is also raises the question of what aren't these new readers doing?  It would appear they are more selective in watching TV.

According to a new study from Deloitte (h/t TVTattle), "millennials" (Americans aged 14 to 25) watch 10.25 hours of TV per week—although they spend more time with "media" (including computers, videogames and music) than other age groups. Beyond that group, TV use goes up with age: 15.1 hours for Gen X (those aged 26 to 42), 19.2 hours for baby boomers (43-61) and 21.5 hours for "matures" (62-75). 
...

The question is whether these gaps are related to age or generation: i.e., whether "millennials" will watch more TV as they get older, or whether their cohort has developed other habits they'll keep through life. (Will TV-watching someday be a cartoon shorthand for age, like holding a cane or using an earhorn?) The corollary question is whether, by the time they get older, the distinction between "TV" and other forms of media will be so blurry that the preceding question will be moot. [More]

Now add in the technical problem of measuring who is watching what in the age of DVRs and online broadcasting, and what young people are up to is pretty much a guess, especially at the individual level.

For the last 20 years, the television industry has been all about young-adult demographic groups, or "demos" in the slang of Madison Avenue, because marketers have believed that young people are most likely to develop lifelong loyalties to certain brands. Thus, whichever network attracts the most adults under 50 has been considered the winner, commanding premium rates for commercial time.

As a result, network executives have driven themselves to distraction chasing young people, struggling to find programs with appeal for viewers in their 20s and 30s. During the 1990s, for instance, executives spent enormous sums trying to find youth-oriented shows in the vein of NBC's smash sitcom "Friends." Meanwhile, people of other ages slowly drifted away to their own niche shows on cable TV or other media.

Yet there are growing signs that network TV is moving away from its relentless focus on demos -- and that could have a huge influence on future programming. There's a growing sense in the industry that the 18-to-49 category's importance to marketers may be wildly overblown. Moreover, in an age of DVRs, multichannel systems and increasingly tiny ratings, the demo obsession may itself be pushing down ratings, exacerbating the industry's problems and excluding from consideration too many programs that could have broad appeal.  [More]

The actual problem could be growing individuality or at least, micro-populations that defy lumping together. It seems to me the news ways of maintaining personal connections is giving rise to viable social groups with eclectic or even eccentric preferences. Indeed those preferences may be how they establish identity. as a result, they defy aggregation and pose major headaches for advertisers.

It will be interesting to follow how TV habits change during the recession.  Typically bad economic times have raised demand for cheap entertainment, but this time there are so many more choices for escapist leisure activities.

Like, umm, reading blogs.

This is your brain on glyphosate...

Not really.  Just some neat fractal images.

[More]

Hey - it beats watching the markets.

[via mefi]

Another use for hot air...

Other than blogging, of course.



How many traffic accidents could these things cause?  For that matter, how many nearby-pedestrian heart-attacks?

Still, it has a WI (Whimsy Index) of over 40.  [In comparison, Incoming is 8.2]

Is credit un-crunching?

Maybe.

The Department of Food Stamps and Ag...

Farmers have always loudly pointed out how much of the USDA budget does not go to farmers, but those crocodile tears have long been discounted, since old ladies on the street know the farm program wouldn't make it past the first House subcommittee without some reason for urban Congressman to give hoot.

As economists are looking for the "biggest bang" for the stimulus buck - AKA "the multiplier" - guess what pops up at the top of the list?      

      
Tax Cuts   
 Nonrefundable Lump-Sum Tax Rebate 1.02  
 Refundable Lump-Sum Tax Rebate 1.26  
     
 Temporary Tax Cuts   
  Payroll Tax Holiday 1.29  
  Across the Board Tax Cut 1.03  
  Accelerated Depreciation 0.27  
     
 Permanent Tax Cuts   
  Extend Alternative Minimum Tax Patch 0.48  
  Make Bush Income Tax Cuts Permanent 0.29  
  Make Dividend and Capital Gains Tax Cuts Permanent 0.37  
  Cut Corporate Tax Rate 0.30  
     
Spending Increases   
 Extend Unemployment Insurance Benefits 1.64  
 Temporarily Increase Food Stamps 1.73  
 Issue General Aid to State Governments 1.36  
 Increase Infrastructure Spending 1.59  
     
      Source: Moody's Economy.com 

Of course, these estimates are highly debatable.

The catch here is that when you’re dealing with giant numbers, these multiplier estimates are going to break down. Food stamps gives you great bang for your buck. But just because $1 billion in increased food stamp spending might generate $1.7 billion in GDP doesn’t mean we could spend $1 trillion in extra food stamps and generate $1.7 trillion in extra GDP—there are only so many poor people and they can only eat so much! Much the same is true with infrastructure spending. The general idea of spending-side stimulus is to put idle assets to work doing things. We have a fair number of idle people. But to build new infrastructure you machines and so forth and we only have so many on hand. And of course you need the right people—the guys who got laid off from Lehman Brothers aren’t the engineers we need to build the Purple Line. [More]

In addition, the idea of two-decimal place accuracy is amusing, but the power of stats like this in the current environment could result in an even more lopsided ag budget split.  A significant increase in food stamp spending looks inevitable to me.

Is this bad news? I don't think so, since it could help to slow the erosion of demand for meats and other higher end foodstuffs. Lord knows we need all the feed demand we can get now.

The bigger hope is the size of the food stamp budget will make it susceptible to reform efforts to move it to say, HHS, consolidating all welfare payments together.


Except ours, of course.

Buying the big ones?...

There are anecdotal reports of sales of SUV's and big pickups showing some life as gas prices have dropped.

One was that customers, now that last summer's gas-price freakout has begun fading in their memories, are buying big pickup trucks again. The other was that nobody coming into the showroom seemed at all worried about Chrysler's possible bankruptcy. Now it's possible that many of the masses who stayed away from the showroom were put off by the bankruptcy threat, but as I'm at least a little bit dubious of the market research on this topic that GM keeps flogging, Phelan's comment heightened my dubiosity a touch. [More]

Even the incredibly improper Hummer is seeing renewed interest.

DePaula Chevrolet sold 14 of Hummers’ smallest HT3 models in December, a record for 2008.

The dealership is offering the HT3s for about $24,000, a $11,000 discount off the original sticker price.

“That kind of tweaked my interest,” Leggieri said.

December also logged some of the cheapest gas when prices dipped to $1.64, the lowest in five years.

Consumers have a short memory span for fuel prices, said Tony DePaula, president of his family’s Albany dealership.

“As soon as they came back to normal, truck sales came right back,” he said.

Sixteen­ of the 30 vehicles that DePaula sold the weekend after Christmas were large vehicles; six were Hummers and 10 were Chevy Silverado pickups.

Northway Toyota in Latham also saw an uptick in the sale of its full-sized SUVs and Tundra pickups. [More]

As for me, after this morning's reports, I'm not buying nothin'.

Gad, I love this business...

Even if it makes no economic sense.

The world of blogging is slowly becoming a factor in the information industry. Two illustrations that lead me to this weird conclusion.

First, look at how the Ultimate Newspaper  - the New York Times - is experimenting with the Internet. Totally cool.  I can't imagine I would read a "people piece" of this length, but I was fascinated by the first person voice and photos.

MSM is struggling to adapt to a world where editors and publishers have lost control and people are voting with their mice. This type of work is evidence somebody is thinking ahead.

Second, please take the time to listen to this amazing talk by Dan Gilbert on TED.  Imagine how impossible this entire effort would be without the Internet, and then imagine how you would have found out about it without blogs.  My source, f'rinstance was Andrew Sullivan.



Bottom line: being here now and doing what I do is a privilege. Thanks to all of you who read my work, and I hope you feel the same frisson as you share my excitement in participating in the evolution of communication.

Information is power. And this power will, I believe lift our civilization from our current problems.

The problem in a nutshell...

From Stu Ellis' superb weekly recap of Extension expert reports:

The 2009 calendar year may be the first that ethanol production could be less than the
federal mandates for production.  Chad Hart at Iowa State says the ethanol industry has
suffered financial stress as seen by the Verasun bankruptcy.  He says that means there
will be less DDGS produced and a greater demand for corn by the livestock industry.
• Chad Hart is not expecting 2009 total acreage to expand has it has been for several
years because of the higher production costs and lower profitability.  He says some
forecasts have been for record acreage of soybeans as farmers shift away from high
priced fertilizers for corn.  Hart says prices in the early part of 2009 and weather going
into the planting season will ultimately decide the allocation of corn and bean acres.
• The federal ethanol production mandates makes marketing specialist Jim Hilker at
Michigan State think corn acreage will expand by 2.3 mil. over last year.  He said 2 mil.
more acres will be needed and the ethanol industry will bid up prices to buy some
insurance acres.  He says, “If you look at corn prices relative to soybean prices, corn
yield relative to soybean yields, and you look at the huge drop in wholesale fertilizer
prices, corn will deliver a higher return per acre. Thus more corn acres to be planted.” [My emphasis]

Well, that clears up the picture.

Opinions have ever been thus, of course, but this year seems remarkable for the depth of uncertainty at many levels.  I think it is noticeable because of the underlying fear that now abides throughout the economy.  Agriculture is not immune to this infection, regardless of how well our farm is doing.

In fact, the market for fear is an interesting arena itself right now.

But there is a somewhat more precise definition of a depression (although by no means is it one universally agreed upon by economists): that is a 10 percent decline in real GDP over the course of a year or more. This is the definition that the predictions market Intrade uses. And the latest trade at Intrade just put the chances of a depression occurring at some point in 2009 at 40 percent -- or about ten times more likely than the odds that Norm Coleman prevails in his election lawsuit in Minnesota.
...
What the Intrade traders may be betting on, in other words, is other traders becoming more pessimistic at some point between now and close of the contact -- a "pessimism bubble", if you will.

But here's the real question. Is there a risk of a "pessimism bubble" in the real economy? And if so, are the real markets and the professional forecasters adequately accounting for it?

What will happen, for instance, when the government releases its 4Q GDP estimate? It's going to be an ugly number: -2% if we're lucky, and maybe -6% or worse if we aren't. When this occurs, there will be an awful lot written about it. While the stock market has perhaps priced in this expectation, individual consumers and individual businesses perhaps have not. If they perceive the world as crashing all around them, they may behave in such a way as to actually beget such a catastrophe. We're already to the point where you can't read the food section or the sports section of the New York Times without reading about the recession.

The advance estimate of 4Q GDP is due out on the 30th, timing that intersects in interesting ways with the period during which the Congress is hoping to pass the stimulus package. The number the BEA announces will almost certainly be the worst figure since 1990, when the economy declined at an annualized rate of 3.0 percent in the fourth quarter, and will quite possibly be the worst since the first quarter of 1980, when the economy experienced a 6.6 percent decline. The headlines in the newspapers the next morning will be very grim. A good time for the stimulus to pass, arguably, would be within a few days of the BEA's announcement. Obama could hold an evening press conference after signing the stimulus bill, doing his best to allay the fears of a worried nation -- for fear itself is something we very much do have to fear. [More]

Nate Silver offers some very probing questions with this observations. It is hard to truly gauge the "fear factor" now at work across the economy, but one indication may be the decline in "easy-going-ness".  It seems people are reading between all the lines, and the words as well, seeking unknown threats about to spring on them.  And they are finding them.


Most of the perceived threats have always been there, of course, we just had more confidence in our ability to withstand them. I think we will find after about six months we can do so still.




 

This seems extreme...

A curious note about car maintenance.  My commuting car is a Pontiac Vibe, with which I am very happy.  About 18 months ago, some mice found their way into the heating/air conditioning system and proceeded to abide there happily for some time.

It wasn't too bad until you turned the heat on and the redolence of mouse aroma filled the small car. I could not for the life of me find out where the nest was.  I lived with the odor.

In a fortunate coincidence I had to consult the owner's manual about resetting the low tire inflation warning light (another story altogether) and while thumbing through the manual (real men don't use the index) I discovered there is a passenger compartment air filter located behind the glove compartment.  Removal of the glove compartment is not quite as straightforward as described, and some small plastic clips were misplaced, but I got to the filter and, sure enough - a large mouse nest.

Happily I removed and discarded the filter and vacuumed thoroughly as far as I could to clean out the ducts. Then I went to replace the 10" x 10" x 1/2" pleated paper filter.

A new one cost $37.  I asked twice to make sure I heard correctly.

Am I missing something here?  Are these things handwoven by Old World craftsmen or constructed of rare materials hard to find in our part of the galaxy?

Topic of the meeting...

Here at the Pioneer Outlook meeting 63% (my rough guess) of the conversation is fertilizer. We're heading for an economic brawl, I think.  And I don't think acres are close to being established until the winner of that battle emerges.

This could work either way for us...

Do you feel like you compete with the guys in FJ and TP, or just your actual neighbors?  It could make a difference in your competitive drive.

If you've ever had to take a test in a room with a lot of people, you may be able to relate to this study: The more people you're competing against, it turns out, the less motivated and competitive you are. Psychologists observed this pattern across several different situations. Students taking standardized tests in more crowded venues got lower scores. Students asked to complete a short general-knowledge test as fast as possible to win a prize if they were in the fastest 20 percent completed it faster if they were told that they were competing against 10 people rather than 100. Students asked how fast they would run in a race for a $1,000 prize if they finished in the top 10 percent said they would run faster in a race against 50 people rather than 500. Similarly, students contemplating a job interview or Facebook-friending contest said they would be less competitive if they expected more competitors - even if "winning" only required finishing in the top 20 percent. The authors conclude that competitiveness was curtailed because the larger the group, the more difficult it is to compare oneself directly to others. [More][More]

We tend to overplay I think the anxiety-producing and socially corrosive aspects of competition too much, even as our professions becomes more intensely competitive. These are also attitudes prominent is well-established producers who have more to lose than gain. Understanding where those judgments come from might be a good start. An even deeper look at invisible competition from Tyler Cowen:

We tend to forget that competition often breeds cooperation. What is the contest between Archie and Reggie for the attention of Veronica but a bid for an alliance, a cooperative relationship? Very often, cooperation is needed even before one can compete. In order to succeed in the global marketplace, corporations strive mightily to instill the cooperative spirit in their employees, training them, investing in a shared corporate identity, and working to keep up workplace morale. And as both businesses and individuals become more successful, they are brought into more numerous relationships with other firms and people that require coordination and collaboration. Managing these proliferating relationships has become a major preoccupation of American ­business.

The same technologies that foster invisible competition also promote new kinds of social ties and cooperation. Through my blog I come into contact with strangers around the world, and some I eventually meet for interesting meals and conversations. Even before she started her freshman year of college this fall, my stepdaughter was trading instant messages with her future classmates, starting new friendships with people she had never seen. Of course, she might use Facebook to get a competitive edge in flirting with some guy; that just shows again how closely competition and cooperation are ­intertwined. [More]

 I'm still trying to decide what if anything this says about global competition in agriculture.  I do know I think differently about how my farm needs to perform after going to national meetings and especially after visiting to farmers overseas.  Does it make me a better farmer?

That's a tougher call.

 

136th Place...

What color is that ribbon?  Best to worst rankings of 200 jobs.

 

[Whole list]

FWIW, "farmer" is 136.   I have to wonder about the next 200 jobs on the list.

The posting problem...

I may not have much time to post until this weekend, as Jan and I are slaving away at a resort in Puerto Vallarta for Pioneer, where I am am to speak tomorrow.

Here I am hard at work for all you faithful readers:

 

and the Motel 8 we're staying at.

I never realized tequila was such an all-purpose condiment.  Anyhoo, some pretty interesting discussions with growers that I will share when I am freezing my whatever off back in IL.


Anything going on in the markets?

[Fascinating Fact: You can be on the Pacific Ocean and still be on IL (CST) time if you go far enough south.]  

Apocalypse-o-rama #5...

I think I'll terminate this series with perhaps the most extreme example I've found.  If nothing else, reading through these scenarios reinforces my conviction a significant number of people are deeply unhappy with our culture and see the current economic crisis as a way to force others to their belief system.  More than a little note revenge seems to be on their minds as well, prompted perhaps by unrelated grievances.

Most fail the test of simple mathematics, most underestimate the power of technology to produce answers now unimagined, and almost all take a dim view on humanity in its present state, finding little to admire in our collective lives.

Anyhoo, one last look into a dark chasm of the future:

What then must things be like when we have used up all or almost all of the underground resources? Cars are out since steel and other metals are out. Planes and rockets and even trains are out. Motors as we know them are out. Concrete is out. In a word, the fundamentals of our current way of life are out.
Agriculture, of course, must be in. It will have to be diversified and local. Everything will have to be recycled, and that taken from the soil returned to it. Draft animals will replace tractors. Human labor will sometimes replace tractors. Because motors are out, manual labor is back in (not that it ever completely left, as any gardener knows). Other farm animals are in. Trees are in, and forests will be allowed to grow and be replanted.
Will farms be (primarily) individual plots? It doesn't seem likely. It seems far more likely that agriculture will operate directly out of dense small towns. Dense because motorized transportation may be lacking. The bulk of the food for these towns will be grown directly in the surrounding areas. Dense because amenities can be shared, such as libraries, schools, a doctor, etc. Dense because a greater division of labor can be supported, but nothing, of course, remotely approaching what we have in metropolitan areas today.
How will such towns be interconnected? Roads can be built. Canals can be dug. Land and water vehicles can be built. What will power them? Horses or oxen certainly. Motors? One doesn't know. How much metal will still be accessible or left over from the industrial era? More interesting still, to what extent can we find biological replacements for metals? It seems extremely unlikely that we'll ever be able to build rockets out of biological materials. Or even motors.
Energy? Clearly a certain amount can be extracted sustainably - e.g. wood and other biomass. Solar, wind and hydro were around long before the machine age. How much they were independent of metals I do not know. There's no fundamental reason wind and water mills cannot be constructed out of purely biological and aboveground materials (e.g. rocks). And there were draft animals of course.
Communication? This is crucial, because without it, global interchange, culture and science are impossible - another, this time permanent, dark age supervenes. Snail mail has been around a long time, and represents a worst-case scenario. Were it to be the best case, that would represent a considerable regression in tempo, if nothing else. (Not that there is something holy about our current frenzied pace.) Copper? Fiber optics? Satellites? It's hard to see that these, in ascending order of unlikelihood, will continue being available longer term. Of course there are reflecting mirrors and other such possibilities when and where conditions are appropriate. But the fun of solving such problems as these will belong to later generations.

All in all, the three key items are: 1) a local near self-sufficiency in food staples, and a regional self-sufficiency in a broader range of items; 2) small town density in order to retain a minimal level of specialization and cultural level; 3) communication with the outside world and the global community as best as can be done. [More]

I've also noticed an understated theme that since people are the problem, any cultural change that diminishes population is not to be despised. Another key is a return to non-technical work - i.e. working horses. For those who feel left behind because of lack of aptitude or training in computers for example, a career requiring simply showing up and brief muscle-skill lessons can look ideal.

I have come to respect the power of these ideas to exploit such emotions in a large number of people, even as I refute the shaky logic and the values proponents attribute to culture rather than persons.

My guess is when we pull out of this recession and renew economic progress (about which I have no doubt) the disappointment in the cultural regression movement will be painful, even as the rest of us find ways to adapt to the problems they outline without marching backwards.

Morality and free markets...

Capitalism and free markets have been the focus of withering criticism recently, and for good reason. Even strong proponents of unfettered market action are forced to admit the presumed self-regulating nature of free markets was oversold.

But a better explanation for the failure may lie with the simple behavioral characteristics of markets.

I am not sure if it is the same question or not, but one might also ask: “Does the free market punish moral character?” On balance, the answer is no. Markets tend (but do not guarantee) to reward hard work, calculated risk-taking, applied creativity, amiability and honesty. Competition is the key here: it allows us to find alternatives to doing business with lazy, timorous, unimaginative, rude or dishonest people.
All this assumes that we can see such people coming. Often we can. Most market interactions are repeated, directly or indirectly. I buy something from the same corner shop every day, and it is in neither the shop owner’s nor my own interests to rock the boat. So we smile, chat, perform (very) small favours for each other and do not cheat. My relationship with a Tesco shop attendant is less straightforward, but, although unlikely I will ever see the attendant again, Tesco has an ongoing relationship both with its own employee and with me and does its best to ensure things run smoothly.
When market interactions are not repeated, there is more temptation to cheat. There is a logical reason why holiday guides, estate agents and pension salesmen tend to be regarded with caution.

All this is closer to pub philosophy than science, but some scientific evidence does exist. One suggestive finding comes from a cross-cultural study carried out by three economists and published earlier this year in the journal Science. Simon Gächter, Benedikt Herrmann and Christian Thöni invited subjects in 16 cities across the world to play a “public goods” game, in which players had to choose, repeatedly, between contributing to a pot for the benefit of all or selfishly hoarding their own resources. [More]

Perhaps we have more "one-timer" transactions as the economy globalizes, and hence the creeping dishonesty in markets, or the elaborate abstraction of previously simply exchanges creates strangers even when a long term-relationship exists. Poorly understood transactions like derivatives would seem to be very susceptible to sharp practice.

For whatever reason, it may be more helpful to remember when free markets work well and not expect the same results when we venture outside those parameters.

It's what's for dinner...

And providing it is not easy. But how did out the beef segment of our food system arise?  Sometimes a brief refresher course can be helpful.

The industrial and agricultural revolutions changed the cow's existence from four-legged co-worker to so much beef "on the hoof." Innovations like improved plows and, eventually, tractors made animal muscle less necessary for farm work. Meanwhile, the growth of huge cities vastly increased the demand for meat. With this appetite in mind, pioneering British agriculturalist Robert Bakewell developed new feeding and breeding methods at the end of the 18^th century to raise tanklike "Dishley longhorns." These bovine behemoths, Rimas and Fraser explain, were not really suitable for milk production or field labor but amazing for sheer beef poundage. While Bakewell's ideas did not take hold immediately, his writings were highly influential for 19^th-century British beef farmers as they ramped up production to feed a hungry empire (whose very symbol was the beef roast). 

As our beef cattle grew bulkier, our approach to slaughtering these cattle became less intimate. Before the modern era, cattle were generally killed by the very butcher who would sell you your meat. Centralized slaughterhouses emerged first in post-revolutionary France. In 1807, Napoleon himself ordered four central slaughterhouses built to get the messy business out of Paris' streets. Not only was the act of slaughter consolidated in (or at the outskirts of) large cities, but it was also concealed in plain sight, with purposely forgettable architecture. It became easier and easier to avoid reflecting on how many animals need to be killed in order to feed a metropolis. [More of a concise history with good book recommendations on our beef industry]

Lost in the anthropomorphizing of food animals and nostalgia for imagined past food practices is the fact that our industrial food system arose for good reasons of supply and safety. Butchers are disappearing because shoppers choose shrink-wrapped meat to save time, not because of any animosity toward butchers.

Above all the sheer size of our food systems in the US is too often ignored when reformers propose alternative systems. They need to do the math, and then figure out what happens when you scale up to reach those enormous quantities.

No wonder we're so smart...

City life hurts your brain. 

Now scientists have begun to examine how the city affects the brain, and the results are chastening. Just being in an urban environment, they have found, impairs our basic mental processes. After spending a few minutes on a crowded city street, the brain is less able to hold things in memory, and suffers from reduced self-control. While it's long been recognized that city life is exhausting -- that's why Picasso left Paris -- this new research suggests that cities actually dull our thinking, sometimes dramatically so.
"The mind is a limited machine,"says Marc Berman, a psychologist at the University of Michigan and lead author of a new study that measured the cognitive deficits caused by a short urban walk. "And we're beginning to understand the different ways that a city can exceed those limitations."
One of the main forces at work is a stark lack of nature, which is surprisingly beneficial for the brain. Studies have demonstrated, for instance, that hospital patients recover more quickly when they can see trees from their windows, and that women living in public housing are better able to focus when their apartment overlooks a grassy courtyard. Even these fleeting glimpses of nature improve brain performance, it seems, because they provide a mental break from the urban roil.

This research arrives just as humans cross an important milestone: For the first time in history, the majority of people reside in cities. For a species that evolved to live in small, primate tribes on the African savannah, such a migration marks a dramatic shift. Instead of inhabiting wide-open spaces, we're crowded into concrete jungles, surrounded by taxis, traffic, and millions of strangers. In recent years, it's become clear that such unnatural surroundings have important implications for our mental and physical health, and can powerfully alter how we think. [More]

All kidding aside, I think many of us in agriculture have experienced this effect instinctively, without fully appreciating its benefits.  It's why we look forward to days spent on tractor or combine (or at least until we got our cell phones).

Our brains did not evolve dealing with large groups or constant stimuli.

Other evidence suggests that 150 may be a functional limit on interacting groups even in contemporary western industrial societies. Much of the sociometric research on industrial and other comparable organisations, for example, has demonstrated that there is a marked negative effect of group size on both group cohesion and job satisfaction (as indicated by absenteeism and turnover in posts) within the size range under consideration (i.e. 50-500 individuals: see, for example, Indik 1965, Porter & Lawler 1965, Silverman 1970). Indeed, an informal rule in business organisation identifies 150 as the critical limit for the effective coordination of tasks and information-flow through direct person-to-person links: companies larger than this cannot function effectively without sub-structuring to define channels of communication and responsibility (J.-M. Delwart, pers. commun.). Terrien & Mills (1955), for example, found that the larger the organisation, the greater the number of control officials that is needed to ensure its smooth functioning.

Other studies have suggested that there is an upper limit on the number of social contacts that can be regularly maintained within a group. Coleman (1964) presented data on friendships among print shop workers which suggest that the likelihood of having friends within the workplace reaches an asymptote at a shop size of 90-150 individuals. (The small size of the sample for large groups makes it difficult to identify the precise point at which "saturation" is reached.) Coleman explicitly argued that this was a consequence of the fact that there is a limit to the number of individuals within a shop that any one person can come into contact with. Moreover, his results also seemed to suggest that the large number of regular interactants that an individual can expect to have within a large work group limits the number of additional friendships that can be made outside the workplace. [More]

The resurgent desire for agrarian living may not simply be a fad then, but a primordial urge. Given this intensity, taking it seriously would be of cardinal importance when dealing with urban dwellers.

Or in other words, listen carefully when non-farmers rhapsodize over our lifestyle. 

Guess who's back in town?...

No, not Mack the Knife.

Lard.

You heard me, sweetheart.  Pig fat.

The Mangalitsa is the latest example of a trend toward choosing chubbier breeds and raising them in a traditional manner, Berkshires being the more famous case. Plump animals fed richer foods and allowed to stretch their legs on occasion taste better, chefs contend. "That blend of fat and flesh is where you get that great flavor and mouthfeel," Knell says.
For many producers and users, however, rethinking animal production has broader implications. The organic and sustainable food movements contend the industrial food system's reliance on drugs, chemicals and unnatural feed are sickening humankind and the environment in manifold ways. The increasing use of lard fits right in - it's hardly ecologically consistent to buy a free-range animal and then toss out 15 or more pounds of a perfectly usable part.
"That's one of our core beliefs," says Scott Vermeire, farmers' market manager for Prather Ranch Meat Co., the organic animal operation in the Mount Shasta foothills that began retailing lard from Berkshires earlier this year. "We try to have the most reverence for the animal by using it from head to tail."

Fortunately, the specific properties of pork fat make it a versatile tool, a veritable lipid chameleon. Because of its high smoke point, lard is exemplary in frying and sauteing, producing the clean and crisp results that Perbacco's Terje seeks. Because lard has little water and melts into comparatively large crystals, it acts as ideal spacers between layers of dough, creating flaky and tender pastries. [More]

While I think our taste buds will all agree with the upside of lard (real pie crusts, for one thing), like other retro-food fads, this one faces challenges.  But unlike raw milk, free range eggs, etc. I suspect lard has the intensity of flavor and the utility to surprise food retailers with its popularity. Especially if economic necessity makes actual home cooking more likely.

Another angle is I'll bet pig breeders would love to have a sea change in desirable genetic traits. That's how you sell more gilts and semen. While it may seem high-cost food is in for a real beating in the current economic environment, it could also be consumers will save up for some truly memorable taste experiences.

I'm not the only one who has noticed the limited choice of uniformly unrecognizable and bland meat.  We've even switched almost totally to chicken thighs from breasts just to get some flavor. (Of course, by "we" I mean the person who actually makes the food decisions around here).

While this may be an emerging niche market, it is hard to ignore an awakening to food taste and quality that could very well change livestock farming in the US even as ethanol has.

A number to remember...

This statistic pole-axed me for a few minutes.

It has been a year of record misery: the largest bankruptcy, bank failure and Ponzi scheme in U.S. history; $720 billion in writedowns and losses by financial institutions; $30.1 trillion in market valuation wiped out.
The biggest loss and the hardest thing to recover, though, may be something that can’t be precisely measured -- confidence in the markets and the firms that rely on them. [More]

By following the link in the quote, you can also get acquainted with The World Exchange Market Capitalization quote.

THIRTY TRILLION DOLLARS.  Of course, much of that wealth was over-estimated to begin with, but a 50% drop in value changes the future for all of us in one way or another.

The trailing indicator for the economy is employment.  And my feeling is this is when farmers will become more interested - as landowners, family members, children, and spouses lose a paycheck.

And sadly, access to health insurance.

One last meaningless look back...

At 2008, from the master of the irreverent, Dave Barry.  My favorite excerpts:

. . . the International Atomic Energy Agency releases a report stating that Iran is actively developing nuclear warheads. In response, Iran issues a statement asserting that (1) it absolutely is not developing nuclear warheads, and (2) these are peaceful warheads. The United States, the United Kingdom, Germany, France, Russia and China convene an emergency meeting, during which they manage, in heated negotiations, to talk France out of surrendering.

Meanwhile John McCain, at a strategy session at a golf resort, tells his top aides to prepare a list of potential running mates, stressing that he wants somebody ''who is completely, brutally honest.'' Unfortunately, because of noise from a lawn mower, the aides think McCain said he wants somebody ''who has competed in a beauty contest.'' This will lead to trouble down the road.


. . . the National Bureau of Declaring Things That Make You Go ''Duh'' declares that the nation has been in a recession since December of 2007. The bureau also points out that, according to its statistical analysis, ``for some time now, bears apparently have been going to the bathroom in the woods.''

 Is it me or is it harder to sort out the parts he makes up?

Living at the mall...

Oddly this idea makes some sense to me (and I'm not alone). While the feasibility could be harder than first glance, why not add residential buildings to overbuilt malls to end up with walking-friendly communities?

The lonely box of concrete plopped in the suburban diaspora, outdated and, in many cases, dying, isn’t quite what Victor Gruen, the Austrian-born Holocaust survivor largely credited with inventing it, envisioned. Instead, the regional enclosed shopping mall was supposed to be a community center—a little bit of downtown and a car-free haven that would include day care facilities, offices, and, perhaps most importantly, residential living components a stone’s throw from the building; the mall was always supposed to have housing nearby.

Perhaps today Gruen would finally be satisfied, because in its newest incarnation, the mall has finally become not just a place to shop, but to live. The mortgage meltdown, shifting demographics and a growing antipathy toward suburban sprawl have caused developers to see malls not as retail dinosaurs but as giant land banks, where going vertical can appease environmentalists, potential buyers and stockholders alike.

It’s happening slowly, but it’s happening all over America, and industry experts expect the trend to grow. If inner cities are starting to see condo projects go rental or remain unsold, and some new suburban subdivisions are settling into modern ghost towns as the foreclosure crisis deepens, the one bright spot in the housing market might just be here: at the mall. [More]

I mean, it's not like we can turn them back into cornfields.

The key factor might be energy prices and/or energy policy that makes suburban car-dependence even less enjoyable.

Color me clueless...

The Transport for London puts out very clever clips to test your awareness (if any, in my case).



I attribute my failing to intense powers of concentration.

Plus the maid distracted me.

[via mindhacks]

Another inheritance issue...

No, not estate taxes, but something even more important: trust. Although I was powerfully persuaded by Putnam's description of how we build social capital, there is some new research on the topic of where trust comes from that seems to indicate our task of rebuilding trust in many of our economic institutions will be harder than we thought.

Our trust habits are perhaps less cultural and more heritable than previously thought.

Trust has been declining in the United States as economic inequality has been rising–and
also as immigrants from historically disadvantaged (and lower trusting) groups make up a larger  share of the population.  If we worry about the decline in trust, we might pay less heed to the  waning of league bowling and dinner parties–and more to understanding why people from some cultures are less trusting than others.  And this is likely to lead back to economic inequality in the home country (Uslaner, 2002, ch. 8) and discrimination in the new homeland.
Overall, there is evidence for both culture and context.  Where you live shapes your level
of trust.  But the evidence is far stronger that where your grandparents came from shapes your  values.  Who you are seems to matter more than who your neighbors are. [More]

I'm struggling with the implications this has for our culture and economy.  It strikes me as fairly pessimistic and bordering on genetic determinism, even though I seem to come from fairly trusting stock.

 

[More] 

Part of my uneasiness may arise from approaching turmoil science is about to hand us via cheap genetic (DNA) testing. As new linkages between medical outcomes and genetics are discovered, ideas that social characteristics such as trust align with ancestry may pressure new importance on lineage, and all the dark history associated (fairly or not) with it.

Right now mendacious political activists and sensationalistic journalists could misrepresent and misinterpret genetic risk information. However, it is unlikely that such genetic risk information would be more toxic than claims that Obama is a secret Muslim. More and more Americans will learn about how to interpret genetic risks as genetic screening becomes routine and even more widely available in the next four to five years, making it less likely that such information can be abused. In any case, politicians, celebrities, and the rest of us should get ready for a world in which our DNA can be screened by anybody at anytime. [More of a superb, but disturbing article on DNA testing today]

The moral would seem to be: pick your parents well.  But it also makes me wonder what happens to these tendencies as Old World heritages become diluted.  How many generations before people like me are simply Americans, and what will our trust heritage be?

This may be an accurate analysis of social capital formation today, but my guess it it will fade very rapidly as populations intermarry and especially move about so much more than even our near past.

Update on Smoot-Hawley-Tinkers-Evers-et al...

Justin Fox isn't buying a return to protectionism (earlier post). 

At least, he starts out that way...

News to me...

File this under science: adrift

Agricultural crop production relies on composted waste materials and byproducts, such as animal manure, municipal solid waste composts, and sewage sludge, as a necessary nutrient source. Studies have shown that human hair, a readily available waste generated from barbershops and hair salons, combined with additional compost, is an additional nutrient source for crops. [More]

Still, with P & K prices where they are...

More autopsy results...

I had to read some paragraphs several times, but if you want to get some handle on the role ratings agencies like Moody's played in the financial meltdown, this article is a good start.

The agencies got so much more wrong than that (for example, they didn’t rate the quality of servicers or originators of loans, which you would think would be important in assessing the credit quality of the mortgages in a securitization). But the thing they got most wrong was ignoring the quality of their own data set. The sub-prime mortgage market was still young when the agencies began rating securitizations dominated by such mortgages. And the structured finance market was in its infancy when the agencies began rating CDOs backed by asset-backed securities backed in turn by sub-prime mortgages. There is simply no way that the agencies had an adequate data set to justify rating these deals at all. And I can best illustrate the agencies’ disregard for the quality of their data sets by reference to a product unrelated to mortgages: the constant-proportion debt obligation, or CPDO.
This obscure little product was launched in late 2006 to great fanfare. And it was, indeed, an ingenious little fraud of a product. Here’s how it worked.
Some clever structurer noticed that, historically, investment-grade companies don’t default very often. Rather, they deteriorate for a while first, get downgraded to junk status, and eventually they default. That’s why the short-term ratings for relatively low-rated investment-grade companies may be reasonably high: even BBB companies are generally good for the next 90 days; if they weren’t, they wouldn’t be rated BBB. And this suggested the possibility of a trading strategy.
What if you bought a portfolio of investment-grade corporate debt and, every six months, purged it of the bonds that were downgraded to junk, replacing these with new investment-grade bonds. Obviously, you’d expect the downgraded bonds to underperform the remainder of the pool, so you’d have losses you need to make up, so assume you also sell out of a handful of bonds that have done well, and replace these with higher-yielding bonds that are still investment-grade, thus keeping your yield relatively constant. You’d still expect some losses if you wanted to keep your average rating relatively constant, though. So you need some excess yield to make up for these losses.
You find that yield by leveraging the portfolio. After all, it’s an investment-grade portfolio, very unlikely to default in the short term. You can borrow very cheaply short-term, invest in longer-term bonds, and earn the spread differential. If the bonds go against you, that’s OK, because you’re going to hold them to maturity and you’ll always be able to roll your short-term borrowing. And, if you can get a high enough degree of leverage, the excess in current yield from the differential between where you borrow and the yield on your portfolio should more than pay for the cost of rolling out of your losers every six months. And if you do that successfully, you’ve got a trading strategy that never loses principal, but has a surprisingly high expected yield. Sound good?

Well, it sounded great to the ratings agencies, who blessed this strategy by giving it a AAA rating.
Leading to this conclusion at the end:

This collapse of confidence is having a material impact on the ability of the credit markets to find their footing. I don’t want to minimize the impact of other factors – rates held too low for too long, Wall Street greed, an Administration with an ideological aversion to regulation – but I want to emphasize this one because of its unique contribution to this particular bubble and because I don’t see an obvious solution to it. The old model is permanently broken, and we have not yet come up with an alternative. Right now, we’re in the low-trust environment that is the reality when the libertarian fantasy of eliminating the market-distorting regulators actually comes to pass. The market is inevitably focused on a short time horizon, fickle and volatile by its very nature. We want major financial institutions – banks, insurers, etc. – to look beyond the market to longer term risk metrics. Without the agencies as an independent arbiter of what these might be, the market is all we have left. Trust is a very hard thing to rebuild, and structural changes – having the agencies be government-sponsored, or paid by investors rather than issuers – are insufficient solutions (government-sponsored entities are also capable of seeking to monetize their position – look at Fannie Mae – and investor-sponsored agencies would be subject to the same pressures to facilitate the business that investors want to do).

Note the comment about rebuilding trust.  I'll post about how hard that might prove to be later.

Getting Jan's approval...

Will be the tricky part.

The occupation of maid is making a comeback. (At least in France)

Eliete Gomes Ricardo cooks, scrubs and irons. She will also shine your shoes, pop out for a bottle of champagne in an emergency and buy a bouquet of flowers for your wife if you have forgotten your wedding anniversary. She might also save the French economy.

“We are at the beck and call of our customers,” she told The Times. “We do whatever they want so they don’t have anything to worry about when they get home.”

Meet the modern French maid — a profession given a new lease of life by a government attempt to create a service economy. With France’s diminishing industrial base certain to shrink farther during the economic crisis, ministers said this weekend that they were banking on the €15 billion (£12.5 billion) domestic sector in the fight against unemployment.

Laurent Wauquiez, the Employment Minister, said that fiscal incentives would help 130,000 people to find work as cleaners, gardeners, nannies, home-helps and other services à la personne — a third of all jobs created this year. He was speaking at a trade fair in Paris where domestic services firms such as Axeo and O2 listed the domestic employees — from DIY experts to cooks — who have been made tax deductible. Among them is the maid, a role that had almost disappeared and which is staging a comeback. [More]

No, they don't wear that outfit.

Look, I'm just thinking of Jan here. 

Honest.