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What kind of a superhero am I?

You are Spider-Man

Click here to take the Superhero Personality Test

I’ve just moved to Wordpress… Pardon the dust.

I’ve had a Web host for over 10 years now and until now what they’ve offered has been sufficient: they hosted my web address and offered static HTML and handled my email for me. While they certainly didn’t offer a rich set of services,Pair.com charged me about $15 a month for this service, and that was that.

I’ve just recently started playing with Groovy and Grails and actually wanted to host a Grails App that would send a tweet broadcasting the ferry schedule, which I take daily.   We’re not talking rocket science, but I thought this would be a quick task that would get me to learn Grails.    Now, of course, I needed to find a host.   Enter slicehost.

Yes, the service will now cost me closer to $40 a month, but I get to run my own box.  I pwn root!   Anyway, long story short I’ve set up Apache, MySQL, my own e-mail server, and I figured I might as well migrate to Wordpress since I now can run whatever I want on this box.

Anyway, I’ve imported all my old posts from Blogger, but I need to fix the format and all, so… errr… pardon my dust!

When I started using the Internet…

I actually got my first email address in 1989 when I was an EECS Freshman at Cal. Before that, I would interact with others via BBS’s. So yeah, I was using the Internet regularly in the early 90s, actually, and at the time it was lots of usenet, gopher, and ftp.

What a trip when Mosaic finally came out and brought along a graphical browser for data stored on the Web… In fact, it’s amazing how little innovation there’s been in how we interact with data online. It’s still HTTP silos with HTML either in static form or generated on the fly by processes collating the data based on cookies and stuff in their relational databases….

I think in 10 to 15 years our kids will laugh at our primitive our way of interacting with the Internet is… Ask a 15 year old kid on Facebook if she knows about Gopher, Finger, and Ping… Quite frankly she couldn’t give a shit… In 15 years, I figure URLs, IP addresses, and even the whole concept of HTML and databases will have been abstracted out… It’ll all be in the cloud. Sun didn’t execute well but their motto was dead on: The network *is* the computer.

Do you tweet?

By the way, do you use Twitter?

I do
.

Buying Real Estate 101

Dude I *so* rock..

After hesitating for several years, I finally decided to buy a house at the beginning of 2005, pretty darn close to the peak of the housing bubble. Still, I was savvy enough to buy something I could afford without getting some psycho-crazy negative amortization loan. In order to do that and not feel like I was getting royally screwed by paying $500+ square/foot, I decided to buy in Vallejo, a nice city with some 120,000 people, a cute albeit underdeveloped downtown, and an insane amount of potential since the Vallejo Ferry brings you right to the San Francisco Ferry building in 55 minutes. Still depressed from the withdrawal of the Navy from Mare Island in the early 90s, I was able to buy a townhouse at $238 sq/ft, not counting an additional private 400 square foot backyard, a private garage, and a deeded parking spot.

Since then, of course, it turns out a lot of imbeciles bought more house than they could chew, and Vallejo’s been hit pretty hard with foreclosures and repos. No biggie, right… My wife and I are in this for the long run, even planning to rent the place out once we move to a larger house…

And now this… Go ahead, click it

I think a big loud D’OH!!! is appropriate here.

Books that make you dumb…

Check this out!

Basically this guy went through Facebook and searched per college, what were the favorite books… He correlated that with SAT scores per college…Hence you have the books that make you dumb… Or, alternatively, what books dumb people read.

I’m guessing that Zora Neale Hurston’s Their Eyes were watching God is not a dumb book, but because it’s pretty much on every high school curriculum it has a very wide audience. And if that’s the best you can do as far as your favorite book, you’re probably not reading much…

Also check out the Holy Bible. Ouch!

Voting in the 21st Century

So I finally become a citizen and I get to vote in the Vallejo elections for mayor back on November 4th. I took the time to read the issues and how each candidate positioned themselves in relation to economic development, taxes, unions, etc.

So I cast my vote for Gary Cloutier, whom I thought was the best candidate to move Vallejo forward. He’s against letting Wal-Mart in but prefers to promote small upscale businesses and restaurants to flourish downtown. That city’s got so much potential it’s not even funny… Unfortunately it’s been run by a bunch of bozos, it seems. It’s understandable that the city would suffer some setbacks with the closing of Mare Island in the early 90s. But now? Some 15 years later? While even Napa, Fairfield, and Vacaville are experiencing revival, Vallejo struggles on…

Anyway, so it turns out my vote didn’t really count after all. It ended up in the trash! And a judge, in a typical repeat of Florida 2000, just took the law into her own hands and made a lot of us Vallejoans lose faith in the ability of Solano County to fairly and accurately count our votes. Good going, Judge!

Is this why I became a US citizen? Mandatory jury duty and votes that end up being trashed?!?!

Back in San Francisco!

I’m baaaack! This is an aerial view of the Carquinez bridge, near our home.

Actually we’ve been back for a few weeks now, but it’s been so crazy busy I haven’t had time to blog about it until now. My wife and I had talked about moving back up here for a few months but the idea became concrete when I received an offer from Calypso, my former employer. So here I am now, development manager for the FX and Treasury group. Simply put, I’m totally psyched!

As far as timing is concerned, it truly was impeccable. Within a month of my giving notice at Countrywide, the bad news started rolling in. I’m not too concerned for the team I worked with there, though, since they’re pretty well insulated from the layoffs. It’s a very small and solid team of IT professionals that are supporting the Calypso implementation for the whole organization. Countrywide Securities is actually one of the few subsidiaries that’s making serious money, and as they’re moving more and more financial products onto Calypso, I can’t imagine them getting rid of the IT team that keeps this all going!

We’re back in our house… You have no idea how happy we are!

And the housing bubble goes KABOOM!!!!!

Why is everyone apparently so surprised with the current housing crisis in the United States, and what brought it about? The short answer is collective stupidity, but I suppose that’s not nearly as entertaining as understanding the pieces of the puzzle.

One important catalyst is securitization. Securitization, as defined in wikipedia, is the process of homogenizing and packaging financial instruments into a new fungible one. Acquisition, classification, collateralization, composition, pooling and distribution are functions within this process. Simply put, some financial alchemists found a way to sell stuff on Wall Street that couldn’t easily be sold there before.

The way mortgages used to work was Joe Blow would walk into his local bank and talk with his banker, with whom he’d had a relationship since he first opened his savings account at age 12. Joe would explain to Mr. Banker that he needed a loan for his house. Mr. Banker could borrow the money at 6% so, taking in his cut (the spread), he loaned the money to Joe Blow at 7%. Everybody happy. The problem was that traders couldn’t really get in on the action. The overhead to handle such petty loans made it unmanageable. BSDs don’t care about Joe Blow’s pathetic $125,000 30-year 7% loan. In order to make their fat bonuses to buy a new yacht, they need to handle lots and lots of loans but they don’t want to deal with individual accounts. They trade stuff. That’s what they do. So how can they get in on the action?

Well, in the US we have the perfect tool for this job… the FICO score! This magic number tells you all about a person’s credit worthiness. So you can bucket mortgages by FICO score, mortgage type and maturity… 750+ 30-year fixed maturing August 2035 all go into one bucket. That’s a whole bunch of assets right there… Now the mortgage lender creates a subsidiary, probably offshore, that becomes the rightful “owner” of all these assets. This subsidiary issues some bonds based on expected cashflows coming in every month from all the people in that bucket. Let’s say, for simplicity, that there’s 10,000 mortgages in that bucket bringing in an expected $2.5 million a month in payments. Now, statistically, you’re dealing with 750+ FICO scores, so these people are extremely creditworthy… Still, assume that $100K won’t get paid every month… that leaves $2.4M. Of course, there’s operational costs, vacations, hookers,… so that leaves maybe $1.5 million per month. Now whatever bonds you issued pays $1.5 million per month over 30 years… Voila! Bonds is the kind of thing traders understand.

So that’s the first piece of the puzzle. The geeks on Wall Street found a way to let traders in on the game of mortgage. So far, so good.

Let’s go back to FICO scores… It’s easy enough to bucket 750+, 700-750, 650-700 mortgages. Those are some pretty solid credit scores. The odds are pretty good that those homeowners will make sure to pay their mortgage every month. But what about some poor shmuck with no income and a credit score of 525? How can you get him to play the housing bubble game? The geeks on Wall Street thought long and hard and decided that maybe you could slice the buckets horizontally.

They call it tranching in structured finance. The idea in so doing is to provide more reward for more risk taken. So the lower tranches will still get securitized and make their way onto the Street… but those are serious junk bonds. They may bring in 18% annually but they’re backed by a bunch of mortgages that were handed out to homeless trolls living in shopping carts in Berkeley. Let’s say that the risk of default is high… Aha! But not quite… because a shopping cart in Berkeley will cost you $500,000 and you can probably sell it tomorrow for $600,000, so at that point in time you’ll have built up some equity and you can refinance… No no…you don’t need any income. In fact, you don’t even need to give us any money at all. We’ll just tack on the interest at the end of your loan. Actually I diverge… we’ll discuss mortgages further below. For now, back to tranching. So basically, the top tranche is given a grade of AAA because, despite the fact that it only pays 5% annually, it is the first tranche to get paid. So the top tranche of the 500-550 bucket (read: serious subprime) still manages to get a AAA rating… As long as it’s BBB+ or above, it’s investment grade so the traders can happily tap into it… Ok, look let me get graphic for a minute… Yo, Einstein…If you fill a bucket with shit, does the cream rise to the top? Investment grade? Sheesssh

So now you have the big mortgage lenders who have a way to offload their mortgages onto Wall Street…. Sah-weet! The way to make a lot of money is to take in as many loans as you can, grab your cut, “securitize” them, and send them off to Wall Street. Thus, the creative mortgages were born: No points. No fees. 3/1 ARM. Negative Amortization. Hybrid Interest Only. HELOCs… “Come one, come all!!! Get your loan right here!!! Get ‘em now while they’re hot!”

So now we have it… Wall Street and large mortgage lenders have created a very large need for lots and lots of loans, which means we need lots and lots of new houses for people to buy. No income? No problem… Come and get your house and you can ‘flip it’ in a year or two and make $200K. See? Now you got income!

In places like Vegas, build houses they did like there was no tomorrow. Here in California, they pushed well into the central valley and, of course, prices in large metropolitan areas skyrocketed. “Build it, and they will come?” Damn straight they did!!!! Everybody was buying and demand was far outpacing supply.

Interest rates were low, too, making it much easier to borrow money for cheap. Traders, too, borrowed money to trade these bonds… They borrowed Yen at 0% and traded them into dollars so they could buy these bonds. They even have a name for this, the Carry Trade.

Well, we’re now in the days of reckoning… Ultimately the people who are paying today are those greedy bastards on Wall Street and those who bought a house without following the fundamentals. I’m fairly certain that those of us who bought in the last 3 or 4 years at 3 times annual income, like the rule-of-thumb suggests, aren’t really sweating it right now. Those with a $75,000 household income who bought a place in SF for $850,000? Well, good luck to you. I hope you make it out of this mess unscathed, but I wouldn’t hold your breath.

Pavarotti RIP

It’s a sad day…

Rest in Peace, Luciano!