*michael parekh on IT*

ON DUAL-SCREEN LAPTOPS

DOUBLE TROUBLE

It was only a matter of time, when computer makers tried to build something like this.  ComputerWorld reports:

"Lenovo Group Ltd. today announced the release of a ThinkPad laptop that takes the "desktop replacement" category of notebook PCs to a new level.

The ThinkPad W700ds appears to be the first laptop ever to sport two LCD screens -- a 17-in. primary and a 10.6-in. secondary screen..."

Why two screens, you ask?

"Most people are using two monitors at their desktop. So we wanted to give them all the things they are used to on their desk," said Wes Williams, worldwide product marketing manager for ThinkPads. "

This 11-lb "desktop replacement" also has another unusual touch:

"The W700ds also includes a built-in WACOM digitizer, also called an electronic drawing pad, and color calibration software."

Glad to see dual screens in such a large, capable "laptop".

Now if they only got to building a 5 lb notebook with that feature.

ON MADOFF THE EARLY YEARS

LOOKING BACK

Barron's this weekend takes on a trip down memory lane, highlighting a 2001 article the magazine did on Bernie Madoff, the now infamous money manager who took $17 billion in assets and made it more or less disappear (the larger $50 billion number has yet to be explained in detail).  Here's how Barron's start of the trip*:

"Seven years ago, well before Bernie Madoff had been accused of fleecing investors of $50 billion in a massive Ponzi scheme, Barron's questioned his remarkable investment performance. One of our staff writers, Erin E. Arvedlund, talked with experts who were highly skeptical about Madoff's claimed results. One financial adviser that she quoted had pulled his clients' funds out of Madoff's shop for exactly that reason. Here's the story, excerpted in almost its entirety. (Erin was recently interviewed on National Public Radio about her story. Here is a link to the interview.)

TWO YEARS AGO, AT A HEDGE-FUND CONFERENCE in New York, attendees were asked to name some of their favorite and most-respected hedge-fund managers. Neither George Soros nor Julian Robertson merited a single mention. But one manager received lavish praise: Bernard Madoff. Folks on Wall Street know Bernie Madoff well. His brokerage firm, Madoff Securities, helped kick-start the Nasdaq Stock Market in the early 1970s and is now one of the top three market-makers in Nasdaq stocks. Madoff Securities is also the third-largest firm matching buyers and sellers of New York Stock Exchange-listed securities.

But what few on the Street know is that Bernie Madoff also manages more than $6 billion for wealthy individuals. That's enough to rank Madoff's operation among the world's five largest hedge funds. What's more, these private accounts have produced compound average annual returns of 15% for more than a decade. Remarkably, some of the larger, billion-dollar Madoff-run funds have never had a down year.

When Barron's asked Madoff how he accomplishes this, he says, "It's a proprietary strategy. I can't go into it in great detail." Nor were the firms that market Madoff's funds forthcoming. "It's a private fund. And so our inclination has been not to discuss its returns," says Jeffrey Tucker, partner and co-founder of Fairfield Greenwich, a New York City-based hedge-fund marketer. "Why Barron's would have any interest in this fund, I don't know." One of Fairfield Greenwich's most sought-after funds is Fairfield Sentry Limited. Managed by Bernie Madoff, Fairfield Sentry has assets of $3.3 billion."

The whole piece makes fascinating reading, along with the original interview.  Definitely worth a weekend read.

* Cartoon source.

ON SLIP-SLIDING AWAY

NOW THEY TELL US

It's fascinating to watch the ratings agencies be so vigilant on the way down for banks when they seemed to be so care-free on the way up.  The WSJ reports:

Credit-quality watchman Standard & Poor's slashed the credit ratings of 11 global banks Friday, but the moves were largely ignored by the bond market, which has begun to look positively on the governments' efforts to save these institutions.

The agency reduced the debt ratings [7D1 -]on Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley, Wells Fargo & Co., J.P. Morgan Chase & Co., and on European banks Barclays PLC, UBS AG, Credit Suisse Group, Royal Bank of Scotland Group PLC and Deutsche Bank AG.

S&P left HSBC Holdings PLC's rating pat, but gave the bank a negative outlook. The agency also warned that investors in the hybrid debt offerings sold by several banks may find their payouts cut if the economy and the financial markets remain tumultuous.

While the bond market is taking these ratings cuts in strides, the stock market remains a bit more apprehensive, judging from the moderate weakness in bank stocks following the news. 

But both markets are of course taking a lot of comfort from the government's commitment to be there for liquidity and inexpensive funding.  Let's see how long that lasts.

ON A DIFFERENT SHOT AT BONUSES

GOOD FOR THE GOOSE...

It's good to see a bank come up with an out-of-the-box to pay bonuses to it's employees that better balances the the long-term interests of it's shareholders with it's employees.  I'm referring to this story titled "Credit Suisse to use Illiquid Investments to pay bonuses" in the WSJ today:

"Credit Suisse Group said Thursday it will use up to $5 billion of its own illiquid assets such as mortgage securities to pay senior staff year-end bonuses at its investment bank, a move meant to spread risk more evenly between the bank and its employees.

The Zurich-based bank plans to pool commercial mortgage-backed securities and leveraged loans it can't sell because demand has seized up, then dole out units in the entity to managing directors and directors as part of this year's pay, according to a memo made available by a spokesman..."

"...The memo said that, with the introduction of PAF units, "a material block of legacy-risk positions will be removed from Credit Suisse's risk-weighted assets and this will also lead to a reduction in capital usage. This new compensation structure, therefore, helps to advance our strategy of reducing risk."

"The plan, the first of its kind among major Wall Street houses, puts focus squarely back to Credit Suisse's investment bankers, for whom the new system could potentially become lucrative.

However, some employees were said to be enraged at the idea, saying they could potentially incur losses if tax is levied on the book value of the assets."

There will undoubtedly be issues to be resolved with employees on how these could be made more palatable in some of the details.  At first glance, it does bring up Dickensian images of the kids being fed gruel.

But the logic behind them is pretty good especially since banks and investments banks have long paid half of more of an employee's bonus in the stock of the employer, to be held for a period of years before they vest.  And these securities have as good a shot to be a good investment as the stock of the bank.

As the article goes on to point out:

"The pool is seen by analysts as a savvy move to offload some risk to its employees, Bernstein Research analyst Dirk Hoffmann-Becking said.

"It's a clever move in my opinion because Credit Suisse gets a risk buffer, but the employees also have significant upside because the securities are massively undervalued," Hoffman-Becking said."

This is something that our banks here should probably take a look at, and perhaps start implementing as early as this year.

ON WELL-ROUNDED HOLIDAY CHEER

THE WORLD DANCES WITH YOU

My friends Josh, Howard, Chris and the gang at First Round Capital put together a simply awesome Holiday video card featuring 70 of their portfolio company managements and employees dancing.  Why, because as they remind us,

"In the immortal words of James Brown, any problem in the world can be solved by...Dancing!"

Here's the 5 minute video, which is worth watching in it's entirety.  It did put a smile on my face:

The whole thing of course is inspired by "Where in the hell is Matt".  Paraphrasing OTSOG, on the shoulders of gyrating dancers , greater fun is achieved.

Happy Holidays, First Rounders, and thanks for all the smiles.

ON A SMILE FOR THE TIMES

HUMOR IN CUNEIFORM

I've been a long time fan of blogger Hugh MacLeod's "back of a business card" cartoons.  It's good to see him publish 21 new ones on his blog Gaping Void today.  Collectively they seem to reflect the mood of the times, a good bit of group angst.

My three favorites are show below.

I'll start with the one that's been on all our minds for a few years now.

The next one resonates for me in these economic times.

And the last one tickles my eternal optimism. 

See which other ones strike your fancy.

ON DRINKING CYCLES

MEAN REVERSION

This piece titled "Drunkenfreude" got my attention with it's anecdotal observation that folks in recent years don't seem to be drinking as much*:

If alcoholism is an addiction — which it is — how can people control their drinking just because it is no longer acceptable to get drunk? What about smoking, another addiction? Addicts are supposed to be powerless; is a little social disapproval more powerful than all the rehabilitation centers and 12-step programs and fancy new drugs?

Does fashion trump addiction?

Addiction specialists and scientists have identified three causes of most addictions: early trauma, genes, and environment. Still, addiction has eluded all attempts at a precise definition or a complete understanding. In most models, environment is thought to be the least of the three so-called causes. But maybe environment is the elephant in the room. In an environment where it is not attractive to get drunk, no one gets drunk.

In his brilliant book about addiction, “America Anonymous,” Benoit Denizet-Lewis describes an experiment done by Vancouver professor Bruce Alexander in which rats in small cages were compared to rats in a specially designed Rat Heaven, a room where lab rats had everything that lab rats like. The rats in cages drank 16 times as much of the sugary morphine solution offered than the rats in Rat Heaven. Can addictions be controlled just by circumstances? Are parties and vacations an overlooked way to treat alcoholism?

If the economic good times of recent years was a driver of lower drinking, then what happens as the cycle turns?  What happens when the rats lose their rat heavens?
* Image source.

ON DYSFUNCTIONAL CREDIT MARKETS

STUCK IN A RUT

As many have pointed out in recent weeks, as volatile and depressed the stock markets have been the last few months, they're really the side show to the main event, the on-going seizing of the global credit markets.  This Bloomberg piece from Sunday makes the point in stark terms*:

"The lowest yields on Treasuries are providing no solace to U.S. companies paying the highest borrowing costs on record.

While rates on everything from four-week Treasury bills to 30-year bonds fall to all-time lows, companies are paying an average 10.8 percent on their debt, up from 6.53 percent in January, according to Merrill Lynch & Co.’s U.S. Corporate & High Yield Master Index. The premium investors demand for lending to companies instead of the government rose to 8.85 percentage points yesterday, compared with 2.96 percentage points at the start of the year, the index shows..."

"The $8.5 trillion committed by the U.S. to rescue the financial system hasn’t succeeded in unlocking credit markets that seized up with the collapse of the subprime mortgage market in August 2007.

AT&T Inc., the largest U.S. telephone company and a benchmark borrower in the corporate bond market, sold $1.5 billion of 6.7 percent notes last month that yielded 4.38 percentage points more than Treasuries, compared with 1.68 percentage points in an offering a year ago."

Tomorrow will be three months since the demise of Lehman Brothers, the event that many attribute as the point when the credit markets went from bad to really, really bad. 

A quarter of the year has gone by with some historically extraordinary efforts by central bankers around the world to get credit flowing again at "normal" market rates.  Looks like it may take a bit longer than we'd all like. 

*Image source.

ON ECONOMIC FOOD FOR THOUGHT

"...THE REASON WHY"

Barron's this weekend has a timely list of recent Economics books for end-of-year reading.  Here's how they introduce it*:

"'TIS THE SEASON FOR MY ANNUAL LIST OF ECONOMICS-related books worth giving -- or better yet, getting -- as gifts. Works on the economic crisis are of special interest this year. Unfortunately, my inner Grinch won't let me recommend any from the raft of those recently published -- because all deal with economic crises superficially.

But I can recommend seven books -- two titles I've cited previously that are indispensable for understanding 2008's dismal economy -- plus five others, including a highly topical critique of democracy from an economic perspective, and even a novel written by an economist."

The one that stood out the most for me in these extraordinary politically-driven economic times was this one:

THE PRESIDENTIAL ELECTION makes George Mason economics professor Bryan Caplan's scintillating The Myth of the Rational Voter (2007) especially topical. It's subtitled Why Democracies Choose Bad Policies, but actually focuses on why democracies choose bad economic policies.

Caplan's explanation is mainly that the mass of voters are economic illiterates. He does grant that special interest groups can wield anti-democratic power that leads to bad decisions. But even this cannot happen without tacit approval of the voters. For example, businesses enjoy tariffs that protect them from foreign competition, which harms the domestic economy. But tariffs wouldn't get very far if the public didn't already suffer from an "antiforeign bias" that views tariffs as relatively benign.

In a chapter wittily and appropriately called "Rational Irrationality," Caplan explains why people tend to behave irrationally as voters, but far more rationally as consumers. Consumers feel the direct material consequences of making bad decisions with their dollars. But their chances of affecting the outcome of an election or referendum with their votes is effectively nil. So they can enjoy the psychological benefits of voting their biases, while ignoring consequences that would, in any case, require a rational grasp of economics to fully appreciate.

"Democracy lets the individual enjoy the psychological benefits of irrational beliefs at no cost to himself," Caplan declares on page 206. "This of course does not deny the value of psychological benefits. But the trade-off is not socially optimal; democracy overemphasizes citizens' psychological payoffs at the expense of their material standard of living." Caplan therefore proposes more laissez-faire and less democracy to determine economic outcomes."

Understanding the process may not make the end result of what we're going through much better, but it sure makes for one well-informed journey.

* Image source.

ON COOL AND THRIFTY GIFT LISTS

HAVE IT ALL

It's that time of year again, when most of us are rapidly realizing how soon the holidays are going to be upon us, and that we really need to execute on our gift lists.  So lists for gift ideas of course abound in media all around us. 

The one that caught my eye today was this "10 Cool Ideas under $50" from PC Magazine, which of course really means some cool geek gift ideas. 

There are some whimsical, off-the-beaten path items on here even for the most jaded gadget lover. 

Two that stood out for me were this Groovetoons alarm clock system for any iPod Nano and this digital thermometer pan.

I also liked these customizable headphones for the "stylish teen", from EarPollution, that apparently comes in 200,000 configurations of colors and patterns.

Oh, and you can apparently get it in a couple of days.  Now that's a last-minute bespoke gadget.

Here's to more creative, budget-oriented gift lists like this to bring some fun into an otherwise sobering year.