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It was sobering to emerge from my newspaper cocoon and find all the skills I developed there were worth precisely zilch. I got my new job because of my hobbies, not because of my chosen craft.

My last day at the Mercury News concluded much like the first — same job, same desk, same daily dose of depravity. In the good old days of, say, 2004, a job at the Merc was resume gold; folks were always leaving for sexier gigs at the L.A. and New York Times. Five years later everybody I knew at every talent level was in the same bind: eminently qualified for a job at at somebody else’s dying newspaper. Heck, I got passed over for a job at a paper I’d have never considered applying to except as an alternative to unemployment (I gave this away when I got the paper’s name wrong during a conversation with an editor; I think it was my future talking).

I don’t have any regrets for my lost decade at the Merc. It was a good job; we had more joy than grief. For the last couple years I felt like Rhett Butler finally reporting for duty after the war was lost. I tried my damnedest to suck it up and take one for the team, doing work somebody had to do even when it was doing nothing to freshen up my moldy CV.

Didn’t matter, in the end: I was “on the bubble” to be bounced in the latest reduction in force. Ten years without a merit raise (much less a promotion) should’ve clued me in as to where I stood with my so-called superiors, but I was having such a fine time with my non-working life that it didn’t really matter.

What did matter was filling the hours of my non-working life with stuff I enjoyed doing. I was never a shirker at the Merc, but I made no sacrifices to get ahead in the newspaper biz. Turns out it was wiser to twin up my obsessions with hiking and blogging.

My new job is still a job — I wouldn’t do it for free, any more than I would slap headlines on stories about dead babies for free — but it has a future, unlike my previous one. We live in an unremarkable apartment complex in an unremarkable mid-size U.S. metropolitan area, but it’s cheap to live here and we’re near Melissa’s family and only a day’s drive from mine.

If you’ve been reading along at my hiking blog, you’ll have noticed the remarkable natural beauty in the state of North Carolina. It not a 365-day vacation like living in the Bay Area; weekends are fine, though.

For now I’m liking the way things have shaped up. My Mercury News years were were good while they lasted, and things got better after they were over. Hard to get too worked up over that.

The radio show “This American Life” profiles what’s happening on Wall Street with “Another Frightening Episode About the Economy.”

This is must listening for figuring out what’s behind the current stock market sell-off. It describes the workings of “credit default swaps,” which financiers used originally to insure their investments in corporate bonds and make sure they were covered in case the bonds ever defaulted.

Because corporations are highly motivated not to default on their bonds — their bond ratings determine whether they can borrow money to keep their doors open and the lights on — buying insurance against bond default seemed like taking out fire insurance on something that had no reasonable expectation of ever burning down. You know, risk-free.

It works like this: The bonds exist in a world of their own and anybody can buy CDS (credit default swap) as an insurance policy against these bonds never being repaid. In the regulated insurance business, the only person who can insure your house is you. Now imagine if it were possible for all your neighbors to buy fire insurance on your house as well: this is how the unregulated CDS market works.

Why on earth would your neighbors want to buy fire insurance on your house that allowed them to be paid the house’s value if it burned down? Well, say your next-door neighbor saw your toddler playing with fire in the backyard and all the sudden he knows there’s a firebug living on the premises and the fire risk is much higher than anybody else believes. He’d love to go to your insurance agent and say “I’ll pay you a thousand bucks right now if you write me a fire insurance policy so I get paid if the house burns down.”

Your insurance agent knows nothing about the firebug toddler and figures this is the easiest thousand bucks he’ll ever make. It’s so easy that he might sell the premium to somebody else down the line and pocket a commission, or just to make sure he doesn’t get burned, he buys an insurance policy from another agent agreeing to pay him if your house burns down.

This set-up would work fine — all your neighbors and their insurance agents could take out policies on the homes in your neighborhood based on their perceptions of how likely it is that your house will burn down. But imagine what happens if your home actually burns down: now all these insurance agents who’ve taken their easy thousand bucks owe all the neighbors the full value of your home. (Won’t your neighbors cash in big time? Not necessarily: they were buying and selling policies on other homes and now that a house has actually burned, nobody know what those investments are worth anymore).

Remember when Lehman Brothers, the giant investment bank, failed a few weeks back? Well, its bonds were insured by something like $400 billion worth of credit default swaps. When Lehman went bankrupt, its bonds went into default. And now, all the big banks on Wall Street and a bunch of big hedge funds are on the hook for most of that $400 billion, and that’s why they’re not lending to anybody: they’re hoarding cash because they own CDS contracts obliging them to pay anybody who bought insurance on Lehman bonds. An auction will be set up later this week to figure out who gets paid.

Later this month, another auction will settle CDS contracts on Washington Mutual’s defaulted bonds.

How did all these Wall Street wizards get themselves into this jam? Well, they wanted to hedge their risk: if they had one CDS contract requiring them to pay a million dollars if a bond defaulted, they made sure they had another CDS contract paying them the same amount if a default happened. All the Wall Street CDS players traded these CDS contracts back and forth and earned a profit or booked a loss depending on what the market thought the CDS contracts were worth.

Everybody partied like mad till the unthinkable happened: actual defaults on actual bonds. Then it was game over because all these CDS contracts were connected in a chain no stronger than its weakest link. A small number of defaults set off a chain reaction that is spreading havoc on Wall Street as people confront the obligations they’ve taken on in these CDS contracts. If you owe billions you don’t have — and can’t raise — you are insolvent.

It’s going to be a messy few months while all this gets sorted out. Hopefully there won’t be any more massive bank failures to pour gasoline on the blaze before the Fed throws enough money at the financial system to put the fire out.

We’re just about done with one of most hair-raising weeks in Wall Street history. Last night, Melissa and I joked darkly that if the House of Representatives fails to pass the credit-crisis rescue plan, something far, far worse than “black” Friday would emerge. More like: Void Friday, or Black Hole that Sucks Up Everything Friday. Fittingly, the Dow Jones Industrial Average nose-dived immediately after the Successful Vote to Prevent Financial Catastrophe.  Could be they suspect the cure will be worse than the disease — and they would know, because it’s their disease. 

The saying goes that the United States of America can be trusted to do the right thing only after all other options have been attempted. Given that the proposed bailout went from three pages and a $700 billion blank check to 400-plus pages of Congressional wish fulfillment, I’m guessing we’re still in “other options” territory. 

At a doctor’s appointment the other day, Melissa found herself explaining to the doc what the crisis is all about. The doctor said she talked to CEOs, economics professors and all sorts of educated types who were simply flummoxed on what the hell’s going on — this within a mile of Stanford University, Big Brain Central of the Bay Area. 

Melissa used to work in banking, where Doing Things Smart was carved into the industry’s granite columns and pounded into the heads of the little people who did all the grunt work. She has a hard time believing what happened, happened. People with no credit history granted mortgages on homes they could not afford. Financial wiz kids packaging these junk loans into A-graded “collateralized debt obligations” and selling them to greater fools the world over. Investment banks going under when their risky bets with borrowed money went south.

The keys to understanding what the hell’s going on are leverage and liquidity. I’ll start with leverage:

Everybody with a mortgage is already using leverage and not even realizing it: exploiting the advantages of investing with borrowed money. Say you want to buy a house that cost $200,000. Even if you had 200k lying around you wouldn’t want that much cash tied up in a single investment, so you’d take out a mortgage and put up only a small stake of your own cash: the down payment. If you put $20,000 down and sell the house later at a $20,000 profit, you’ve made a 100 percent profit on your 20k investment. If you put up your whole 200k and earn 20k, it’s only a 10 percent profit. You don’t need an MBA to see which is the smarter way to a) invest 20k and b) protect the other 180k from market risk.

Buying a 200k house on 20k is a 10-to-1 leverage ratio. Big-money investors have found that with clever computer models they can take on extravagant leverage ratios like 30-to-1 and enjoy extravagant profits by buying and selling intricate investment vehicles most commonly called derivatives. As long as they properly assessed the risks against their bets going south, they could rake in the cash. The great thing about massive leverage is how a small amount of your own money can reap a small fortune; the bad thing is that when you bet wrong, you lose money at a 30-to-1 clip and here’s the catch: even if you decide to sell to get out from under these bad bets, there are no buyers — this is where liquidity comes in.

Liquidity merely represents how easy it is to turn an asset into cash. You’ll never have any trouble cashing in your GE stock because millions of its shares trade every day. The big investment banks, meanwhile, had all these highly leveraged bets tied up in obscure financial assets with a very small pool of prospective buyers and sellers. When their bets on these assets started losing money, they couldn’t sell them even if they wanted to: there simply weren’t any buyers.

The federal rescue plan creates a buyer for these securities so financial firms can get them off their books. The securities — tied to home loans, bonds and other kinds of debt that have intrinsic value — can’t sell right now because the financial firms are in a panic spiral: they need free cash to stay alive, but selling off these assets at fire-sale prices obliges them to book huge losses that force them to put up even more cash.

The only way out of the panic spiral is to create a separate market for these securities. They’re worth plenty most of the time (bonds, loans and other stuff folks are highly motivated to pay off); right now everybody’s so focused on keeping the lights on that they can’t or won’t take on the risk. But there’s a decent chance that the feds can buy these securities cheap and sell at a tidy profit down the road.

So that’s a kinda/sorta explanation of what got us to this point. I’m hopeful because all previous predictions of the apocalypse have proved premature.

Doctor King mastered the art of using non-violence as a weapon to get what he wanted (and, more critically, what our country needed). A more conventional weapon killed him in Memphis 40 years ago today. It wasn’t the rifle, or the slug, or even the presumably racist motivation of the man who shot him dead on that motel walkway, that cost King’s life.

I think it was the truth — a truth self-evident and yet fundamentally counterintuitive to human nature. Which was: violence is unnecessary and even counterproductive. We’re so captive of our violent nature that the idea of being willfully non-violent — particularly for political means — doesn’t compute.

King wasn’t the first to come up with this idea: Gandhi used it to kick the British out of India; today Indian companies are buying up British carmakers. Gandhi was murdered, too, which might’ve been on King’s mind when he said he’d seen the promised land but didn’t think he’d make it there with his people.

The genius of King and Gandhi was to use non-violent civil disobedience to provoke the inner violence of so-called civilized people. It worked because it created a “shooting an unarmed man” image that exposed how unjust these supposedly just people could be.

I’ve often wondered if the Palestinians would’ve had better luck following King’s model. Can’t say because it’s never been tried (at least not explicitly), but it sure seems to me that every act of Palestinian violence against Israel convinces the Israelis they’re justified in continuing to make life miserable for the Palestinians. Strikes me that if the Palestinians tweaked the conscience of the Israeli nation without killing and maiming its children, they might have a shot at ending the oppression (though that would render the fire-eating fanatics who run things irrelevant, and who wants to be irrelevant?)

Imagine what would’ve happened to King’s followers in Alabama and Mississippi if they’d have fought back at the bigots with baseball bats and firebombs. The lynchings would probably still be going on to this day.

King’s truth exposed the lie that America was a free country in the middle of the 20th century, when skin tone determined which schools people could send their kids to, which fountains they could get a drink from.

The truth got King killed, but he breathed life into an ideal that made America a more truthful country. We all owe him a thank-you for that.

From this morning’s AP:

BAKERSFIELD - While authorities in two states searched for a young boy they thought had been abducted, 9-year-old Zane Newton was buried under an accidental collapse of dirt near his home. His body was found “completely covered” in dirt in a lot hours after the reported kidnapping, police said.

Newton’s playmate told police that the 9-year-old was abducted midmorning Wednesday as the two were playing outside. A masked man pulled up in a black car and opened fire on them, the boy said, adding Newton might have been wounded before the man took him.

In reality, police said, the boys were playing in a lot when Newton fell into a hole and was buried when it collapsed around him.

I guess it just made a better story.

The New York Times tries to explain the credit crisis, but can’t really, but can at least give an idea of what went wrong. This alludes to the post about leverage and hedge funds I mentioned the other day:

Investors then goosed their returns through leverage, the oldest strategy around. They made $100 million bets with only $1 million of their own money and $99 million in debt. If the value of the investment rose to just $101 million, the investors would double their money. Home buyers did the same thing, by putting little money down on new houses, notes Mark Zandi of Moody’s Economy.com. The Fed under Alan Greenspan helped make it all possible, sharply reducing interest rates, to prevent a double-dip recession after the technology bust of 2000, and then keeping them low for several years.

Joe Sixpack got into the act by borrowing more than he could afford against his house, figuring the price would go up forever. Bad idea:

The American home seemed like such a sure bet that a huge portion of the global financial system ended up owning a piece of it. Last summer, many policy makers were hoping that the crisis wouldn’t spread to traditional banks, like Citibank, because they had sold off the underlying mortgages to investors. But it turned out that many banks had also sold complex insurance policies on the mortgage debt. That left them on the hook when homeowners who had taken out a wishful-thinking mortgage could no longer get out of it by flipping their house for a profit.

Many of these bets were not huge, but were so highly leveraged that any losses became magnified. If that $100 million investment I described above were to lose just $1 million of its value, the investor who put up only $1 million would lose everything.

Hello, Bear Stearns. Well, goodbye. Read the whole thing to fill in more of the blanks.

Remember how Barack Obama said essentially from the get-go that he smoked pot as a teen-ager? Well, the new governor of New York is saying up front that he and his wife both had extra-marital affairs a few years back, but they sorted things out.

In a stunning revelation, both Paterson, 53, and his wife, Michelle, 46, acknowledged in a joint interview they each had intimate relationships with others during a rocky period in their marriage several years ago.

In the course of several interviews in the past few days, Paterson said he maintained a relationship for two or three years with “a woman other than my wife,” beginning in 1999.

The New York Daily News, recipient of this priceless scoop, thoughtfully placed the story above the one about the meltdown of one of Wall Street’s most important investment banks.  Priorities in order, I like that in a newspaper.

The big investment bank folded over the weekend and got sold for pennies on the dollar. Basically, Bear was heavily involved in securities tied to the mortgage meltdown, and last week there was essentially a run on the bank. By Friday all of Wall Street was avoiding it like Superman avoids kryptonite.

To understand what killed the Bear, you have to understand — to the extent that this is possible for non-financial types — how hedge funds and derivatives speculators make money. The book about the failure of the hedge fund Long Term Capital Management explains that hedge funds make money by borrowing against securities with a leverage ratio far, far beyond anything the rest of us would ever dare to try.

To wit: if your house is worth 100,000 and you owe 100,000, that’s a 1-to-1 leverage ratio. But the assurance that you’ll pay it off — because you have a strong motivation not to default — means you could, in theory, borrow against the assurance of payback on the note, because that assurance is in essence a kind of collateral. You know, something with market value. Say you talked your bank into loaning you another $100,000, then you’d have a 2-to-1 leverage ratio.

Hedge fund managers, who have billions to play with and the best brains and computers in the business, can find ways to make money off that assurance of payback in ways that would make your head spin. A single security could have a 15-to-1 or even 30-to-1 leverage ratio. These seem like stupendously risky bets when a measly million dollars, say, has 15 million dollars borrowed against it. Thing is, in ordinary circumstances, there’s no realistic risk of having to pay back all these loans at the same time.

To visualize this, imagine the Flying Wallendas with their Human Pyramid: it had four guys on the base, two people in the middle and one on top. Now, imagine the pyramid upside down, with one very strong beefy guy on the bottom and everybody else balanced on his shoulders. Theoretically, such a balance is possible, but it’d probably take a computer and the world’s greatest acrobats to pull it off. A long as everybody keeps their balance, everything’s fine. But if anything highly unusual happens — like, perhaps, one of the biggest investment banks in the world collapsing — the pyramid falls and there’s blood under the Big Top.

Bear Stearns wasn’t a hedge fund, but it was in the hedge fund business, and it had billions in borrowings out there that it couldn’t pay off with cash on hand. Late last week, Wall Street turned on Bear with a vengeance, and everybody wanted what Bear owed them, and they wanted it now.

A bank or hedge fund can survive if it can get its hands on enough cash to survive till the panic subsides. That’s where the Fed came in, offering to stand behind $30 billion worth of Bear securities till Wall Street stops acting like cattle in full stampede mode.

Long-Term Capital Management was rescued by a deal in which the biggest investment Wall Street Banks chipped in a few billion apiece to provide a cash life line to the fund until the run on its securities ended. Bear Stearns refused to participate. Cosmic payback arrived over the weekend.

I can’t help wondering how many leveraged-to-the-hilt securities out there presume the continued existence of Bear Stearns, and what happens to them when it disappears. Then again, I’m not too sure I want to think about that.

Washington Post has the scoop:

In one of the most comprehensive explorations of cats’ origins to date, Lyons and her colleagues spent about five years collecting feline DNA, poking behind the whiskers of more than 1,100 Persians, Siamese, street cats and household tabbies around the world to swab inside their mouths. The genetic samples came from 22 breeds of fancy cats, mostly in the United States, along with an assortment of feral and pet cats in Korea, China, Kenya, Israel, Turkey, Vietnam, Singapore, Sri Lanka, Tunisia, Egypt, Italy, Finland, Germany, the United States and Brazil.

By analyzing 39 genetic signposts in the samples, the researchers were able to investigate a variety of questions, including which breeds are most closely related and where they most likely originated.

The first thing the group did was confirm a report published last June in the journal Science that the domestication of cats about 10,000 years ago appeared to have occurred in an area known as the Fertile Crescent, which stretches from Turkey to northern Africa and to modern-day Iraq and Iran.

Speaking of Iran, Persians don’t seem to be from Persia, the researchers found. So how come people and cats seem to get along so well (mostly)?

Cats probably started living close to humans when people evolved from nomadic herding to raising livestock and crops and started storing food, which attracted mice and other rodents. Cats found good hunting there, and humans surely appreciated the sly little predators’ help protecting their stocks.

“There was a mutual benefit,” Lyons said. “There was a food source of mice and rats all around the grain. So it was beneficial for both cats and humans as the cats came closer to human populations and kind of domesticated themselves.”

That is to say, the cats domesticated the people.

Remember how some folks thought we could use Iraqi oil profits to fund the war? Must’ve been a swell proposition because that’s how it’s being funded — by crooks funneling profits to the insurgents. From this morning’s New York Times:

The sea of oil under Iraq is supposed to rebuild the nation, then make it prosper. But at least one-third, and possibly much more, of the fuel from Iraq’s largest refinery here is diverted to the black market, according to American military officials. Tankers are hijacked, drivers are bribed, papers are forged and meters are manipulated — and some of the earnings go to insurgents who are still killing more than 100 Iraqis a week.

“It’s the money pit of the insurgency,” said Capt. Joe Da Silva, who commands several platoons stationed at the refinery.

You know how the saying goes, there’s no power on earth stronger than a bad idea whose time has come.

It’s the kind of town that’s so upright that it can’t even muster a decent corrupt politician. Yesterday we heard that San Jose’s former mayor, Ron Gonzales, will have all criminal charges against him dropped. Gonzales had all these charges against him because he cut a secret deal with a local garbage-hauling outfit — not to line his pocket, but to ensure he’d never get tagged with the blame for a garbage strike. Mind you this secret deal ended up costing the city an extra $11-plus million and Gonzales didn’t precisely have the authority to make this “labor peace” agreement without consulting his colleagues on the City Council. An ambitious prosecutor had it in his head that because Gonzales benefited politically from the deal, he could be charged with bribery and sundry other crimes.

Yesterday a judge said the indictments against Gonzales were bunk. So, game over. (Gonzales had been out of office for months because his term ended, so not much was really at stake anyway.)

I worked on the editorial page when this controversy came to a head — we called for him to resign; he declined, probably because he figured he’d done nothing wrong. Well, committed no crimes.

But what happened to the dear ex-mayor is instructive: He ruled like an emperor, ran roughshod over everybody at City Hall, and tried as he might to do as he damned well pleased and didn’t care who he pissed off. When the City Council got word that he’d cut this garbage deal behind their backs, the mayor’s comeuppance arrived: They couldn’t force him out of office so they did the next best thing: ruined his political career, guaranteeing he’d never, say, run for Congress or Governor or something.

Gonzales was a career local politico who, as far as I know, had no money beyond his paycheck. It had to have cost him a fortune in legal fees to make these charges go away, money he probably didn’t have and furthermore, probably can’t raise from supporters because he doesn’t have any. So, add major legal debts to his bill of woes.

Gonzales wasn’t really a bad mayor — he had a decent vision for where the city ought to be going, as far as I could tell — but he was terrible politician. When he found himself in a jam he had nobody watching his back, so a minor controversy caused by a proper urge to spare the citizens of San Jose from the perils of a garbage-worker strike ended up forcing him to serve out his last few months in office friendless, powerless and disgraced.

Sort of a lesson there about how being nice to people is actually in your self-interest.

When we were leaving for Lassen last week, one of the last news items I noticed
was that the levees keeping water out of New Orleans were starting to give way.
While we were camping the city of New Orleans filled up with water, turning something
nasty but containable into a certified national disaster the likes of which the
country has never seen, not even on the morning of Sept. 11, 2001.

As the Led Zeppelin song went, “when the levee breaks, got noplace to stay.”

Or hide, in the case of the Bush administration, which is looking like the
gang that couldn’t shoot straight. But you know what? The Bush gang did a fine
job of cleaning up Florida — you know, that key state full of swing voters
– in an election year when three hurricanes struck in a single summer.

But no levees gave way, leaving, say, Miami or Tampa under water.

Since Bush is the boss of the whole country, he’s got to take his lumps on
this one. Disaster happens on your watch, the response is a national shame,
you have to face up.

Truth is, though, that the your everyday cynical political calculation is the
real culprit here. What happened last week was that Bush & Co. knew from the
get-go that they had few friends in a 60-percent-black city like New Orleans.
They were in no hurry to help because they had no votes to gain, and they gambled
that Katrina would be a three-day story that disappeared once the waters began
to recede.

Only the waters didn’t recede after three days. They kept rising. Once the
Bush gang knew they had a genuine 9/11-style catastrophe on their hands, they
had to do something about it. But by then the city and all its infrastructure
was ruined. So it took a few more days to get military boots on the ground to
restore order and usher in relief supplies. Add it up and you’ve got thousands
of people suffering for a week with no electricity, no fresh water and only
whatever food they could scrounge or steal.

The Bush people made a similar calculation during the California energy crisis
of a few years ago. Nothing was done to intervene when canny energy speculators
were manipulating the state’s energy market and costing its taxpayers billions
of dollars and forcing rolling blackouts during the hottest days of the summer.

Why didn’t Bush act? Because he had nothing to gain in helping a state that
didn’t help him get elected. If the California equivalent of the levees giving
way — a devastating earthquake — had happened during the electricity crisis,
Bush would’ve been in the same jam he’s in today. He and his people rolled the
dice and lucked out. And guess what: California voted for a Democrat in the
next election, just as his people predicted.

You hate to think of politicians making these “what’s-in-it-for-me” calculations
when thousands of lives are at stake, when a jewel of a city has been turned
into a steaming toilet bowl. You hate to see people pointing fingers when they
oughta be lending a hand.

But this is how the world works and, I suspect, always has.

And with that thought, I’m leaving for Yosemite National Park, to walk in the
woods and gawk at big trees and amazing rocks, which always seem to avoid getting
themselves into these predicaments.

… but the People have spoken and they prefer the go-it-alone fraternity president to the lets-take-some-friends-along Eagle Scout.

Kerry’ll have to face the music in the next couple days and admit he needed more than an Electoral College strategy. He needed a way to win Kansas, Nebraska, the Dakotas, the Carolinas.

Now the spectre of Republicans running virtually everything has come to pass. They own the White House, the Congress, the Courts, the boardrooms of every American corporation, and, oddly enough, the loyalty of the most devoted Christians.

One thing they don’t own is me.

To vote Republican I would have to believe that the rich white guys who already control 90 percent of the cash and influence in America need little ol’ me to help ‘em get a fix on that last 10 percent. Sorry guys — mind you I’d trade places in a heartbeat — but you’ve got all the help you need.

And stop telling me that the gays, the minorities, the poor, the intellectuals are the enemy. They’re my neighbors and they’re fine folks, for the most part. It’s annoying to be told they’re dragging the country into the gutter. It’s just a dirty old lie designed to trigger the basic human fear of anybody who’s different.

I don’t need that, and neither does the country. But you’ll never go broke telling people what they want to hear and keeping ‘em scared of people they’ve never met. And you’ll certainly keep on winning elections.

Till the People wise up. Funny thing is, they always do.

Gotta say something about the latest turn of events in this Iraqi adventure of
ours.

I wasn’t particularly surprised by the prison abuse photos; I was more surprised
that people who raised no objections to invading a sovereign country and killing
God knows how many innocents along with the guilty few got themselves tied in
knots of indignation over terrible ordeals that many hardy Iraqis managed to
survive.

So far the atrocity-hardened folks in Iraq have given us a bit of a pass –
they too must be privately thinking “Saddam never would’ve let ‘em come
home.” Things quieted down a bit in Fallujah after both sides tired of hospitals
overflowing with non-combatants and somebody got the bright idea to let Iraqis
solve their security issues.

I suspect things were beginning to cool down in far too many quarters in Iraq.
Some Iraqis may have concluded there are two ways the Americans can leave: peacefully
and filled with kind thoughts of their nation (in which most Iraqis save their
skin), or blasting everything that moves in the midst of a forced retreat (in
which thousands more die needlessly).

There were even reports that some of the young hotheads intent on chasing us
out of their country might be on the run themselves, from our guns and the wrath
of their own neighbors.

Then word came out that a small band of lunatics had killed an American –
beheaded him with the video camera running. The video’s probably still online
somewhere — if you’re not angry and disgusted enough already, be sure to track
it down and watch it till you can take no more.

Then take about a dozen deep breaths and try to get your brain working again.
It worked for me. (I didn’t actually see it but I read comments of many who
did; I took them at their word).

The point of the video was to drive us into a blinding rage that would provoke
us to do something stupid. The best public response is silence. No rage, no
promises of revenge, nothing that would give the terrorists what they need the
most: violent retribution that justifies further terrorism.

Lust for revenge is the nuclear fuel of terrorists. The more we unleash ours,
the more shit they blow up. Remember how we felt on the morning of 9/11? None
of us remembered what provoked them to attack us; all we remembered was the
attack — who did it and who had to pay.

I’m no counterterrorism expert but it seems fairly obvious that the best bet
for defeating a secret network is to infiltrate it and paralyze it with distrust.
I don’t see how invading a whole country with over a hundred thousand troops
does that — unless the goal is for our Army to be a fanatic magnet that brings
‘em out of their holes so we can shoot ‘em. If so, though, I suspect the decoy
business will be left out of the “Army of One” ads.

The retribution I prefer is the Hollywood-vigilante variety, in which the evildoers
are hunted down and dispatched in the dark of night, not by a smartbomb but
by a smart person armed only with a sharp knife. For kickers we make it look
like their own people did it.

A lot of people noted that Osama’s network moves along the corridors of commerce
and that the global economy makes his work a lot easier. Less obvious to the
professional worrywarts in the American press is that our war against him can
be outsourced to exploit similar cubbyholes and hiding places.

Who knows how many former Seals and Delta Force dudes in the employ of private
security firms are doing this work already?

I’ve probably read too many Robert Ludlum novels, but I can’t help thinking
the war in Iraq is a diversion that allows the secret warriors to go about
their business behind a smokescreen of media controversy.

That sorta makes us newsies out to be useful idiots in the war on terror. Well,
it’s nice to be useful.

(OK, no more war talk till next year — I promise).

No need to link to any of the latest horrors from Iraq. Three clicks in any direction will find you all the fresh hell you require.

I was against this war from the start but I’ve kept my opinions off this blog, for the most part, to avoid getting into arguments that soak up too much time and solve nothing.

Thing is, everybody I work with, almost without exception, is against the war. And this true of just about every American newsroom not owned by Rupert Murdoch or the Moonies. And it won’t be long before they turn, too, the way things are going.

So what I’m wondering is, how did the White House and the Pentagon think they’d get this story past all us limp-wristed, bleeding-heart, pacifist, war-hating journalists? They can spin themselves till they’re blue in the face but it won’t change the fact that when scandals like this prison-abuse thing break, we’re gonna hammer them. Obvious as the fingers on my keyboard.

I’m grown up enough to understand that the point of this war is to keep George W. Bush in the White House for the full eight years, to keep the halls of Congress packed with Republicans, and to make it as easily as possible to lather-rinse-repeat this cycle in perpetuity. That’s how politics works. The thing about using wars to do this is, you’ve gotta have a plan that makes sense, that has a chance of succeeding, and is flexible enough to adapt to outrage outbreaks. Qualities of decency, mercy and humanity would be nice, but are not required; after all, it is a war.

I’m not seeing many hints that the White House or the Pentagon has a sensible plan to win the political war, much less the blood-and-guts one. But they’d better get one soon if they expect all us newsies to stick with the program.

Whole bunch of it at this blog.

Naturally, I’m skeptical about the the company and its founders, who stand to make oodles of extra free money if the IPO price is suitably high. Yet I’m also skeptical of the skeptics: If I were hoping to buy a block of Google shares in the IPO, I might trash their prospects to cool demand for the stock so I get mine at Costco prices.

This is one of the reasons wise people are saying “give the market a while to make sense of the Google IPO.”

For context, consider the case of United Parcel Service, whose shares were traded publicly for the first time on Nov. 11, 1999. The stock opened at $65, rose to $75 in the next two days and plunged, falling to as a low as $50 in the next few months. It didn’t resume trading regularly above $65 until last fall.

So here’s one of the most recognizable brands on earth, “the tightest ship in the shipping business,” with a proven track record whose stock goes on the market at high price by IPO standards. A bet on UPS’s service is a no-brainer: pay the next-day fee and you get your goods tomorrow. But a bet on UPS’s stock — if you bought at the overhyped IPO prices — could’ve taken four years to pay off. Savvy investors who knew UPS was a good company whose stock would inevitably go out of fashion waited their turn, bought UPS at $50 and are happy as clams with it trading at $70.

A lot of folks are apt to make the incorrect comparison to Ebay, whose stock has defied gravity and made tons of money for its early investors. Ebay has always been a hot stock: the company’s sales and earnings growth have been so powerful in the past couple years that people who hated all tech stocks were still buying Ebay — its business performance and its stock performances made it a rock-solid bullish bet. It’s easy to forget that Ebay was popular but untested when it went public in the fall of ‘98. It seemed like a cool company with a wonderful service, but it was still a risky bet: who knew people auctioning their junk online would become a global phenomenon?

Google is more like UPS: established, solid, recognized, respected. Its stock probably will repay investors over time — but the wise money will be waiting to buy it at a discount. All who get in on the IPO are guaranteed of paying full retail.

U.S. general, quoted in the New York Times.

“Clearly we will not tolerate the presence of foreign fighters,” Abizaid said.

Appropriately enough, check out the Google News roundup of stories about Google’s plan to auction its shares rather than hire investment bankers to allocate them to their fatcat buddies.

My understanding of how the auction works is that a pair of large brokerage houses, Morgan Stanley and Credit Suisse First Boston, will create online auctions allowing everybody who wants a slice of Google to enter a bid saying how many shares they want at a specific price. Numbers crunchers will dump all the bid data into a computer that’ll reveal an optimum price that’ll get the most shares sold at the highest price. Everybody whose bid exceeds the offering price could conceivably get the shares they bid for.

W.R. Hambrecht already does IPOs this way in a “Dutch Auction.” You’ll be hearing a lot about this in months to come, so you may as well go over to their Web site and click on “Sample auction” to get an idea of how Google’s auction might work.

This setup maximizes Google’s return on its share offering and helps ensure that the widest range of investors gets a crack at their stock at the offering price. You may as well forget the good old bubble times, when IPOs doubled or tripled in value on opening day, when thinking of Google’s IPO. Everybody who wants the stock the most desperately — in other words, the highest bidders — will own their shares before the first day of trading.

And while large investment houses may have oodles of IPO-acquired shares they want to sell to the public, they won’t want to sell them at a loss, so they’ll presumably sit on their shares for a few days or weeks, hoping that hoarding them will create an artificial shortage which will drive prices higher.

As I mentioned the other day, investment bankers used to offer a small number of shares at ridiculously low prices, counting on the forces of supply and demand (and their well-honed market-manipulating shenanigans) to drive shares sky high. If Google’s auction goes as planned, it’s harder for that to happen because supply and demand are balanced before trading even begins on the open market.

It’s not that Google won’t be a smart investment. The company’s immensely profitable and profits always drive stock prices higher. But as this story at CBS Marketwatch notes, most IPOs take years to pay off, and Google’s a one-note business: somebody else could come along and steal all their business with a better search algorithm.

It’ll be fun to watch all this unfold, in any case.

If you’re hoping to make a killing on the Google IPO, consider these thoughts from a trader pal of mine:

My concern with this IPO is that it’s over-hyped and the little guy will be left holding the bag. No doubt those who get in at the offer price (the price set by the underwriters before the stock trades publicly) will do very well once the shares hit the open market. But my fear would be that the stock opens at a huge premium to the offer price and drops like a rock from there. (Remember what happened to the PALM IPO?) I doubt that Google will be as spectacular as that on the upside or the downside. My guess is that the underwriters will do a much better job of pricing the offering realistically and thus there will be no huge profit that people are panicking to take.

As with any IPO, I wouldn’t recommend buying shares until after the stock’s traded for a while — like a month or so. The underwriters usually initiate coverage on IPOs after 22 days (I think) of trading, so I’d like to see how the stock reacts to their obligatory bullish hype and aggressive price targets. And certainly the first 2 or 3 days are only for daytraders who have the quickest of execution systems and/or those with strong stomachs.

Back during the bubble, companies with no profits and few prospects beyond a bright marketing idea were able to launch IPOs because investment bankers knew that foolish investors would bid the shares up to ridiculous heights, and all who bought at an insanely low offering price would make scads of money. These companies had little say over the offering price because the investment bankers held all the cards; stock IPO prices were way too low, costing companies millions while the bankers & brokers got fabulously wealthy.

Google, however, is a profitable company with a proven business and a global brand. No investment bank is going to force Google to put $60 shares on the market at $20, which means, as my trader buddy noted, that Google’s IPO price should realistically represent the stock’s market value. Day-trading induced temporary insanity will last right up till the moment when the little people like you, me and your mom buy their shares, then they’ll tank.

Google’s a good company and there’s money to be made in its shares; just don’t get it into your head you’ll make back three years of losses in three hours on the first day of trading.

A site called google-ipo.com has news links and a message board with more details.

Fred Kaplan in Slate says the Cold War never ended for U.S. nuclear weapons spending, which is as high as it’s ever been, in constant dollars.

The report raises anew a question that always springs to mind after a close look at the U.S. military budget: What the hell is going on here? Specifically: Do we really need to be spending this kind of money on nuclear weapons? What role do nuclear weapons play in 21st-century military policy? How many weapons do we need, to deter what sort of attack or to hit what sorts of targets, with what level of confidence, for what strategic and tactical purposes?

This link pokes a toe under the tent of a reality that no American wants to admit: The Pentagon is the world’s most powerful make-work program — a welfare scheme that spreads U.S. taxpayer wealth across every layer of society, from high-tech billionaires to high school grads. It certainly does more good than harm, with the small exception that spending all this money on warmaking obliges you to fight some wars to justify it.

(Link via kuro5hin).