An ugly job, but it’s a living


Thank you, Oh Pharaoh, for the gifts you have bestowed upon us.

So, I’m car shopping for more than one vehicle.  With the kids mostly grown and driving themselves places, we no longer need the SUV that was the Princess’ Mom-Taxi.  That’s one car.

And for the same reason I need to buy another vehicle for one of the kids so he can drive himself to school and all his extracurricular stuff (plus off to college next year I hope).   That’s two cars.

While I was working I always had a city car, and so I never even owned a car until the last few years of work when I bought a pickup to take to the ranch.  But driving a F-150 everywhere around town is a pain just on parking issues alone.  I would love to have something small and fuel efficient that’s easy to park.  That’s three cars.

Even though I grew up in and around the car business, and I know the ins and outs of buying and selling cars, I still hate the process.  Mostly because I hate spending money to buy a big hunk of metal and plastic that is a liability rather than an asset.  So it brought a smile to my face when I read how poor August car sales were going.  Sucks to be a dealer or salesman, but I can get behind a buyer’s market when I am a buyer.  Especially when I am a triple buyer and only plan on selling one of the current vehicles.

Except there are some twists and turns to this that are making it a sucky process.

First, I am in the market for three cars, but two of them will be well used cars.

And a bad market for new car sales is not turning into a bad market for used car sales.  All thanks to cash-for-clunkers, or the Car Allowance Rebate System, as the government called it.

Anybody with half a brain knew that cash-for-clunkers was economic idiocy in the making. It didn’t save any jobs, cost the taxpayers billions, was so poorly designed and administered that dealers were dodging participation left and right, and now has raised the cost of used cars thanks to all the good used cars that were destroyed. From the Boston Globe Clunkers a Classic Government Folly.

According to, a website for car buyers, a three-year-old automobile today will set you back, on average, close to $20,000 — a spike of more than 10 percent since last summer. For some popular models, the increase has been much steeper. In July, a used Cadillac Escalade was going for around $35,000, or nearly 36 percent over last July’s price.

Part of the increased prices for used cars is that the economy sucks so much that people who would normally be buying a new car are now buying used cars because they are afraid they will be the next one to lose their job.

But an even bigger part of the answer is that the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers. That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine, and send the car to be crushed or shredded.

This explains why there are almost no decent late model used cars for sale by private owners, and most of what I’m finding on car lots are old lease vehicles that have been dogged to death and have outrageous prices.   I can make a hell of a deal on a new car, if I want to hose off 20% of it in depreciation the second I drive the car off the lot.

It’s time to face reality – the government we have today is comprised of people who don’t have a clue how business works.  This successful program took money from hardworking taxpayers on a budget and pissed it away so the foolish could get a new car at a discount price and government workers could get paid to process the paperwork.

I’m ready for the Great Half White Father Who Camps By The Potomac to stop helping me out so much.  I don’t think I can afford it any more.

Trust, but verify

That was a Ronald Reagan signature line, from the Russian proverb (“doveryai, no proveryai”). I found it interesting to learn that Reagan learned how to say it in Russian so he could repeat it to Mikhail Gorbachev, the leader of the old Evil Empire, whenever they met. That amused Gorby to no end.

“You repeat this phrase every time we meet.”

It reminds me of something I heard a small businessman say about the keys to success for sole proprietors. At the end of a short list of things to do, he emphasized his final point, “…and keep your eye on the register!” The way he said it, and the fact that this is the only part of his message I remember, seems to emphasize that everything before that final bit was not that important if you did not keep an eye on the money.

The message he wanted us to hear was, “…nobody will safeguard your economic interests as well as you.

One employee with his hands in the till can rob a business blind. And, if that employee runs the books as well, it can go way beyond theft and take one to financial ruin and serious legal issues.

I remember a case involving a very successful family run business that hired a comptroller that they came to trust too much. There was a production manager who ran one side of the business and the comptroller handled all the money issues. The family, survivors of the founder of the business, let these two men run everything and just collected their profits in the form of regular checks.

Their world went to shit one morning when they got a call from the office saying that there was something strange going on. The Internal Revenue Service wanted to know why the company had not paid payroll taxes in years, and why they had ignored their repeated written demands for payment and an explanation.

The business manager was responsible for making those payments, and he also was the only employee trusted with a key to the company’s post office box – the same box where the IRS had been mailing their demands.

I can’t remember how much the guy actually stole from the company, but when you added in what the IRS said was owed, and all of the fines and interest charges, the company found itself more than $5 million in the hole.

One guy, working alone, brought a company to financial ruin. He was not the first, nor will he be the last. And, apparently, when it comes to the record for the dollar amount stolen, he is not even on the list of “also rans“.

French prosecutors on Sunday ordered trader Jerome Kerviel to be held in police custody for another 24 hours as a probe continued into multi-billion-dollar losses at the Societe Generale bank.

Kerviel, 31, turned himself in to police on Saturday, two days after Societe Generale — one of Europe’s biggest banks — revealed it had lost a staggering 4.9 billion euros (7.15 billion dollars) at the hands of a rogue trader.

Say that number out loud and then try to see that much cash piled up in one place. Here’s a visual aid to help you, click to get a good view of a million dollars in twenty dollar bills.


Imagine a stack one thousand times as large and that’s a billion. It takes a little work to wrap your mind around that picture, doesn’t it?

Now, imagine a stack 7,150 times as large as the one in the picture. Then imagine Jerome Kerviel with a can of gasoline and a book of matches.


The 7.15 billion figure is just what Jerome lost. According to the most recent reports, he had $73 billion in real money on the line when he got caught.

Le Societe General claims that Jerome was some kind of mad computer genius who was able to hack through three levels of security to pull this off, all by his lonesome. Through his lawyer Jerome is claiming that Le Societe is blaming him in order to cover up losses that the bank took without his help. There are more shoes to drop before this story is done.

As you consider the case of Jerome Kerviel baisez le chien*, you might want to wonder, “what happened to all that money?” Jerome was playing with real money – who foots the bill? Do you think le Societe General just writes a check to cover Jerome’s fuck up?

More importantly, what happened to the $73 billion in trades that Jerome had on the felt when somebody at Le Societe unraveled what was going on? What role did the unwinding of those trades have on the hundreds of billions that disappeared from the markets last week?

There is more to this story.

You have to wonder how someone like Kerviel was able to make all of these moves without someone stopping him, or at least catching him before he had a king’s ransom laid out on the craps table of the hedge fund world.  He was in a position where his job was to make investment decisions based on his analysis and read of the markets, but there has to be some administrative oversight  Trust is important, but somebody should have been verifying the transactions in Kerviel’s accounts.

* screwing the pooch

Sheep get sheered; Pigs get fat; Hogs get slaughtered


Confidence games rely on one important factor – the greed of the “victim”. The Jamaican Switch, Pigeon Drop, Pyramid Schemes, Nigerian Email Scams, etc., all rely on a willing and greedy idiot who believes that he is getting something for nothing. Among my favorites: The “white van guys” who con marks into buying crappy stereo speakers by claiming that they are delivery men who find themselves with too many speakers due to a warehouse error; or the “warehouse” worker who is selling a brand new television – still in the box – that he lifted out of the warehouse.

Someone’s misfortune could mean a heck of a bargain for you, until you plug in the speakers to hear static or open the box and find some heavy junk and no TV.

When I was a detective and someone called to report being “victimized” by one of the something for nothing schemes, I refused to take a report.

Let me see if I understand this correctly. You thought you were buying stolen merchandise so you didn’t check it out too closely. And now that you’ve discovered that you were ripped off by a smarter crook, you want the police to get involved and look out for your interests? I think the better question here is why shouldn’t I arrest you for attempted theft by receiving.

Hello, are you still there?

So, the US stock markets just opened and all the indexes, and almost all of the stocks, are deep in the red. The Asian and European markets got the hell slugged out of them yesterday and earlier today, and the Fed just announced a 75 basis-point (.75%) cut in the fed funds rate. Billions of dollars in unrealized capital gains have evaporated, and it’s shaping up to be one of those days when either you cowboy up or you run for the hills. This is where the suckers get cleaned out and even the steel nerved veterans find themselves hanging on with white knuckles.

The stock markets are not a scam in themselves, but there are flim-flam men selling cons by the dozen. People get in the market because they want to make a profit, and there are always predators there who will try and take advantage of anyone whose desire for profit outweighs their common sense. What we’re experiencing now is the fallout from the latest con game played in the markets.

The subprime mortgage mess is just the aftermath of a scam in which someone created a new investment vehicle and announced that “this time is different and the old rules don’t apply.” Yeah, right. Everybody saw money to be made and they jumped in the water without checking for the sharks. And they were all lying to each other, and themselves.

As defaults and foreclosures rise, the various players in the housing market are all pointing fingers at each other. State prosecutors like Andrew Cuomo, the attorney general of New York, are investigating whether investment banks that packaged mortgages into securities disclosed the risks to investors and credit-rating agencies. Investment banks, in turn, are accusing lenders and mortgage brokers of shoddy business practices.”What strikes me here is that this a tainted system from A to Z,” said Tamar Frankel, a law professor at Boston University. “Everybody blames everybody else. If you look at what is being said, there isn’t one who doesn’t blame another and there is half-truth in everything.”

Anybody who didn’t see this one coming is an idiot because they didn’t understand what they were investing in. There is a reason why some people are identified as being poor credit risks – loaning them money is a risky proposition. Creating a whole industry to extend billions of dollars of credit to such people might not be a bad idea, provided that everyone involved understands the degree of risk, and that there is adequate compensation for that risk. Even then, a wise investor finds a way to hedge the bet.

Greedy people ignored common sense and extended that credit and then passed the risk on to someone else – after they took as much as 20% of the loan value in “origination fees”. Some genius came up with the idea of bundling these risky mortgages together as a kind of bond and they were sold to investors all over the world – with some nice fees and commissions attached. It didn’t hurt the sales of those bundled mortgages that credit rating and insurance companies stamped AAA ratings on paper of questionable value – after they got their commissions. And the final greedy suckers to line up were all the fools that are now stuck holding this garbage – all of whom were willing to believe that the so called “collateralized debt obligations” and “structured investment vehicles” were really sound investments – and “Oh, look at the interest rate we’re getting!”

Once again, we are learning that anybody who says “this time is different” is a lying thief or a moron. We are also learning that the new global economy and markets are not quite as decoupled from the US markets as everyone wanted to believe. Yes Virginia, when the US sneezes the rest of the world really does catch a cold.

And now, an hour after the market open, the indices have recovered a lot of ground – but the real test will be where everyone is when the market closes at the end of the trading day.