I'm Proud to be an Okie Who Is Brokie..

It was a tossup this morning between this story and the one about how J.P. Morgan has virtually destroyed the New Castle school district through dodgy swaps with enormous undisclosed fees, now being investigated by the fraud unit of the FBI. New Castle is in western Pennsylvania near the Ohio border. McCain country. We'uns don't want any of that commie socialism here, unless it is for the good of the Republican party and the banks what ripped us off.

This one about Oklahoma State seems to have more pathos since at one point they were actually ahead 70%, borrowed against ti all and spent it, and then went bust on margin calls that wiped out the gains and principal, leaving them holding the debt.

And they were not really defrauded directly it appears, just recklessly foolish and badly used by an egotistical windbag.

Maybe they can get a co-signer loan from the Aggies or the Sooners.


FanIQ
Oklahoma State Is Officially Screwed

You probably heard a few years ago that T. Boone Pickens, who chairs the hedge fund BP Capital Management, gave Oklahoma State a $165 million donation to be used all for helping the school's athletic program. And the largest portion of it was going to be used to beef up the school's football stadium and football facilities.

Well, there was one problem with Boone's donation. He left the donation in the hedge fund, which initially seemed to be a good idea as oil prices soared in a post Katrina economic climate, swelling the initial gift to over $300 million. That was before things began to turn in 2007, as international demand for oil failed to meet projections, causing the fund to come to a sudden standstill, and then dropping on mistakes made by fund managers, who were managed by Pickens.

Anyway, Pickens resisted pleas by some OSU Regents to bank a good deal of the balance out of the fund when it exceeded $300 million, which was only 14 months ago. Instead Pickens decided on borrowing almost $200 million needed to expand and renovate Boone Pickens Stadium on the Stillwater campus, despite the fact that the donation was dropping in value.

Now, here's the bad news. Yesterday all indications were that OSU Regents had been told last Friday afternoon that a large portion of the Pickens donation in the BP Capital hedge fund was virtually wiped out by margin calls on the funds investments in the third quarter.

Well, that's not actually the case. It seems that ALL of the money is gone (the link provided is for a members site, but you can read the full article here).

Officials were told that actually, the entire $ 165 million donation, and the earnings, which once inflated the gift to over $300 million, had recently been eliminated by margin calls due to drastically falling oil prices.

As of Monday OSU's gift had flat-lined completely and was declared 'gone.'

And just so you know, the school has already made a lot of those improvements to the football field . That's because the school borrowed almost all funds used in the stadium expansion plans using the $300 million balance in BP Capital as collateral.

Yikes. So, um, Oklahoma State is now in debt of close to $300 million dollars.

I have no idea how in God's name they're going to get out of this. State schools don't exactly have an extra $300 million sitting around.

Has a college ever actually declared bankruptcy? I'm not sure, but we're probably about to find out.

It can only get better, it can't get any worse...

Escape Velocity: Take it to the Limit One More Time Like Its 1933

Escape velocity: in physics, the speed where the kinetic energy of an object is equal to the magnitude of its gravitational potential energy. It is commonly described as the speed needed to "break free" from a gravitational field without any additional impulse.

In economics, the growth rate at which the energy of monetary expansion exceeds the magnitude of deflationary forces generated by deleveraging of a prior monetary overexpansion.

In both cases, something gets put into orbit.

On 26 September 2008 Adjusted Monetary Base Rises to Record Levels we noted that the Fed was putting pedal to the metal, boosting the monetary base to levels higher than 911.

Here's an update.



When this reaches escape velocity it could be something to see. The last two times the Fed hit the afterburners we had stock market rallies leading to impressive highs.

Here is an interesting look at the history of the monetary base.



Hopefully the Fed has learned to allow the liquidity to percolate a little to trickle down to the real economy before yanking it back. We believe that this was the hypothesis of Friedman and Schwarz.

When the Fed does put on the brakes to stop the growing inflation, it might be even more impressive for those of you who were not around when Paul Volcker did his interest rate exercise in monetary restraint. Hint: zero coupons were a great buy at the top.

Europe and Asia Seek a Consensus Ahead of Washington Meeting

Sounds as though a consensus is forming, without the United States, to set the agenda for the upcoming meeting in Washington on November 15.

One step closer to a world currency, and a world government.
Tonight I am sick at heart for the damage that has been done to the world over the last eight years. We have squandered the sacrifice of a generation.

ἐδάκρυσεν ὁ Ἰησοῦς


The Economic Times
Leaders call for new rules for financial system
25 Oct, 2008, 0644 hrs IST

BEIJING: Asian and European leaders agreed that the rules guiding the global economy should be rewritten and the International Monetary Fund should be given a lead role in aiding countries hit hardest by the financial crisis.

On a day when stock markets plunged around the world, leaders from nations including China, France, Germany and Japan said Friday that they were moving toward consensus ahead of next month's meeting of the 20 largest economies in Washington.

``Europe would like Asia to support our efforts and would like to make sure that on the 15th of November we can face the world together and say that the causes of this unprecedented crisis will never be able to happen again,'' French President Nicolas Sarkozy said in remarks to the opening ceremony of the Asia-Europe Meeting in Beijing.

A draft of a meeting statement on the crisis seen by The Associated Press called on the IMF and similar institutions to act immediately to help stabilize struggling banks and staunch the flood of red ink on regional stock bourses.

``Leaders agreed that the IMF should play a critical role in assisting countries seriously affected by the crisis, upon their request,'' the draft said.

If adopted, the statement would be among the strongest calls yet for a leading role in the crisis for the Washington-based fund, long known as the international lender of last resort.

Countries as varied as Hungary, Ukraine, Iceland and Pakistan have already turned to the IMF for help bridging their liquidity crunches.

The draft statement also states that leaders agreed to ``undertake effective and comprehensive reform of the international monetary and financial systems.''

Among the first to publicly endorse the proposal was Japanese Prime Minister Taro Aso, head of the world's second-largest economy. Aso ``strongly supports'' a critical role for the IMF, Japanese Foreign Ministry spokesman Kazuo Kodama said.

The biennial gathering, known as ASEM, has no mandate to issue decisions and participants differ widely on their views toward international cooperation and intervention by global bodies. Free-trading Singapore and economic powerhouse Germany are attending, along with isolated, impoverished Myanmar and landlocked, authoritarian Laos.

Responses to the crisis have varied widely so far. Europe has already approved a plan under which the 15 euro countries and Britain put up a total of $2.3 trillion in guarantees and emergency aid to help banks.

Asian financial systems are less shaky, having had less direct exposure to the toxic sub-prime mortgages that are wreaking havoc on US and European markets. Showing a notable lack of urgency, South Korea, China, Japan and the 10-country Association of Southeast Asian Nations recommitted themselves to an $80 billion emergency fund to help those facing liquidity problems - to be established by next June.

China and other Asian economies are, however, expected to take a major hit from a drop in exports and foreign investment.

Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed,
and everywhere the ceremony of innocence is drowned...

Charts in the Babson Style for the Week Ending 24 October 2008

A rough week indeed, with the US equity markets opening this morning with the SP futures down limits. We thought there might be a plunge to retest the lows, and set up a rebound rally, but that was not to be the case.

Is this the first weekend in some time we will not be waiting on some Fed and Treasury action on Sunday night before the Asian markets open? Seems like it. Treasury said they might start buying chunks of insurance companies and other financial firms. That failed to buoy the markets, but as they say, it could have been worse.

Do you remember when watching the market was 'like watching paint dry on a house' intraday? Now it feels like we're watching a tornado rip that house apart every day.

It looke like we'll be retesting the lows, perhaps next week, and continue to bleed on the downside, perhaps another ten percent or so until the market reaches value.

Try to pay the good things you receive forward, payez au suivant, which are the terms of this house. It is ironic indeed but well known that the help that those in need receive so often comes from those who have suffered themselves, and realize that it is by the grace and mercy of God that we are blessed. To learn to love we must first yearn to be comforted.

Have a pleasant weekend.