How's your week so far? Is the economy giving you the blues? Some smooth soul music to help you relax into the weekend.

This is All the Things by Joe. For me at least, this is one of the best soul tracks around. He sings the song with such emotion. Love the acoustic guitar and background vocals as well.

This is another one of my faves. This is Cab Driver by Darryl Hall. Very cool and beautiful videography! The video isn't embedable so just pls click on the graphic to view. I promise you won't regret it.

Finally this is But Alive by by Workshy. They're a UK band with a style along the lines of Shakatak or Jazzmasters(for all you Jazz enthusiasts). If you ever see a CD of theirs definitely buy it. Lots of great soul/jazz music but the CDs are kind of hard to find.

Great article from the NYT. It talks about the comeback of the interview suit.

The Return of the Interview Suit
But with the unemployment rate in America at a 14-year high and more than half a million jobs lost in the last three months alone, there has been a detectable shift in the way people are dressing for work. In the financial sector, certainly, the tone has become more serious, and as a predictable result, somber suits are making a comeback. Companies like Men’s Wearhouse and Tahari are reporting an upswing in suit sales, particularly for those classic navy or gray pinstripe styles they classify as “interview suits.”

Nice picture huh? After reading the article I got the sense that corporate is becoming more conservative stylewise at least. I think it's great though that wearing a suit to an interview is becoming a standard again. Even if the times dictate otherwise, it is always professional to do so in my opinion. Of course this also depends on the kind of job you are interviewing for. For guys I'd say the minimum should be at least a necktie. In terms of women's styles the article has an interesting debate between pants vs skirts. I'd say go for the skirt. The pants craze has been going on for too long imho. A financial recruiter says that the firms "are looking for a sharper style" and recommends "a strong suit that says you are collected and ready to work." Hence here are a couple of styles from Ann Taylor that you might like.

What about the interview style for guys? Whenever I watch CNBC for instance the trend (in Wall Street) seems to be a dark suit and some sort of shiny solid necktie. Check out this Vanity Fair video and you'll see what I mean.

As you can see there's a definite style trend. Some of the suits are sleek yet classic. A dark suit is definitely the way to go. But I'd opt for a different necktie maybe a navy mini dot for instance.Anyway do you watch Charlie Rose? I think his style epitomises what the modern preppy finance look is all about.

Another busy week in terms of news. The latest jobs report certainly caught my attention. A whopping -240,000 jobs for October. The September number was revised downward to -284,000. The unemployment rate is now 6.5% and some are predicting 8% at some point next year. I'm always interested in how the industries are doing and there were losses across the board. The only industries that seem to be holding are health care, hospitality, mining, government, and education.

Like me, some of you may also be wondering when will the economic gloom end or bottom out. According to ex American Express CEO Harvey Gould it is important that we understand the nature of the problem first. In I Vote No Confidence in Congress he writes

"The most fundamental economic problem we face as a nation is overleveraging -- by our financial institutions, yes, but also by individual consumers and homeowners. In effect, we owe more than we can either repay or what is supported by the assets underlying our debt."

As a result we are currently undergoing a process of deleveraging which means reducing risk by selling assets and/or raising capital. Some say the deleveraging process is in the advanced stage for the finance industry but is only just beginning for the consumer. We've seen the selling part of deleveraging but what about raising capital? For the (highly leveraged) consumer is it safe to assume that much of this depends on the labor market ie income? I've also surmised before that, because of deleveraging, there probably won't be much in the way of consumer spending (which drives 70% of the economy). I believe consumer spending hit a record low recently? Anyway here's a video by Yale economist Robert Shiller on the rough road ahead for the economy.

Here are more signs of consumer weakness. The NYT reports that retailers noted a collapse in sales in the month October. Another report says that hospitals are seeing a drop in paying patients. The RGEMonitor's Dr. Roubini likes to say this isn't a subprime crisis but near prime, prime, muni bonds, auto loans, credit card and etc. Add to that defaults or late payments in cable bills, internet bills, utility bills and etc. which has been mentioned in the media as well. Finally, Forbes had a rather dire article in their issue last month. Titled "Not This Time" it basically says the consumer will not be able to save the economy this time around. How can it when, in the abscense of jobs, the only thing it looks like it'll be able to do (to end its deleveraging) is to either sell or default?

 

Apologies for the lack of post this week. I've been busy with other things plus I was also feeling rather ill with the changing season and all. Anyway here are some New Wave music videos to liven up what looks like a great Sunday.

This is Stand and Fall from the Fixx. There's something deep about their lyrics. Truly one of the best 80's New Wave bands.

The best Madonna song ever IMHO. This is Physical Attraction. Actually, Lucky Star was also very good. Her first album was really the best.

And what would the 80's be without Boy George and Culture Club. This is a great version of their classic Mistake #3.

Something on the tech side for you...

"How can it even be possible that we wake up on a Monday morning to discover that Lehman Brothers, a firm founded in 1850, a firm that has survived the Great Depression and every market trauma before and since, is suddenly bankrupt? That Merrill Lynch, the “Thundering Herd,” is sold to Bank of America the same weekend?" asks the NYT. Actually is it possible to wake up one morning and find not only your investment banks gone but also other similar banks all over the world? Not to mention Iceland going under, global stock markets plunging and etc. It all seems unbelievable but it happened nonetheless.

The crisis had implications all over the world because we have a globalized financial system. I've also asked the question before - will central banks  unite as a single specialist to keep the global financial system moving again? That is indeed what happened during the last few weeks and there were meetings with the G7 with the goal of having a coordinated response to the crisis. A global economic summit is also being planned next to be hosted by the US.

But more than a year has passed since the crisis started last August 07. Naturally there were also criticisms with regards to the speed of the response but the  delay was probably due to the speed, scale, complexity, and magnitude of the crisis which stunned even the most seasoned of financial veterans. There are also those who say  that a crisis like this occurs every 50-100 years. Hopefully that is indeed the case and hopefully there will be a quicker response in the future which is really the reason why I'm writing this blog.

If you've seen the movie War Games it features a nuclear warfighting computer called the WOPR(War Operation Plan Response). Or if you've seen the movie Terminator it had a similar computer called Skynet. Both were essentially computerized versions of the nuclear SIOP and one of their design goals was to be able react quickly in the event of a nuclear war. Both systems were kept in a high and constant state of alert and readiness(a hair trigger posture). There are actually similar systems that exist in the real world and I believe  the tech term "control system" is used to describe them. For example there are computers that monitor nuclear reactors to prevent them from experiencing a Three Mile Island event. Another system would be the flight control computers aboard the space shuttle. These are four onboard computers that simultaneously cross check each other and manage the shuttle's avionics among others. I'm also guessing that the NYSE has a similar system which is designed to act as a circuit breaker in case of a 1987 style panic in the stock market.

But what kind of control system does the global financial system have? As far as I can tell there isn't any. It looks like the best we have is a phone call from one central bank to another in the event of an emergency. But as you've already seen the crisis struck like a bolt of lightning and despite heroic efforts to save the system, considerable damage has been done already. If the global financial system were a patient it had already gone into cardiac arrest according to the RGEMonitor. The ambulance arrived too late and fingers are now crossed that the global paramedics will be able to resuscitate it. Even if they are successful there could be some residual damage and it might take years of rehabilitation before the patient can return back to normal again. In the US for example, some have estimated that about $7 trillion worth of stock market value has been lost already. I hate to think what the total losses are for the entire world but I think it is safe to say that the number is scary. Losses so large that the global credit market has shut down. Losses so large that it took out  major investment and commercial banks, hedge funds, and etc.

Anyway here's a simplified description of what the system would look like. It will have the following components.

1) Investor1 - A super computer where investors all over the world connect to trade in the global stock market.
2) Exchange1 - A super computer that routes all the orders from Investor 1 into exchanges all over the world. You can trade at any exchange all over the world 24x7. I believe there's a similar system already but it is private and probably limited ie Archipelago.
3) Specialist1 - A computer that links all investment banks together and keeps all assets and markets liquid.
4) Central Bank1 - A computer that links all central banks together.

Finally there's the Global Financial Stability Computer(GFSC). It would be like the WOPR or Skynet for the global financial system. It's primary purpose is to monitor, manage and control Investor1, Exchange1, Specialist1 and Central Bank1. It would know in real time if there was a dangerous credit bubble forming in some part of the world. It could be smart enough to pull funds from one central bank to stabilize a group of banks or maybe even an insolvent country (like Iceland). It could block an investment bank that has been compromised by a roque trader(seems to be happening a lot lately) which could destabilize the system. It would standardize all securities and derivatives in the system so that there is no hidden excessive leverage or one which only the in house math whiz can understand. It would enforce non proliferation of financial WMDs. It could ban short selling in the entire world if it had to. It would have state of the art risk management capabilities, security, and so on and so forth.

Like Skynet or the WOPR, the GFSC would be in a constant state of readiness and alert. It would maintain equilibrium and stability in the global financial system at all times. It would be a global financial Armageddon prevention computer. And given a set of rules(financial SIOP) that is acceptable to all countries, it would be able to act quickly. It would take seconds rather than days,months, weeks or years to mount a rescue. Now, given the degree to which it can control things, I am sure there will be some controversy. Fielding a system like this might mean ceeding some form of national financial sovereignty or sensitive data for example.

There's also a scenario that needs exploring. Let's assume that one country was irresponsible and ruined their economy but is considered too big to fail in the global financial scheme of things. The GFSC has already figured this out and is prepared to pull funds from central banks all over the world in order to mount a rescue. Would countries all over agree to share in the losses to keep that country afloat? Is there really a choice if the global financial system is at risk? Would a scenario exist where we have national gains and globalized losses?

Boy I tell you the stock market is getting kinda strange. As you know the Dow has been plummeting since last Monday. When I woke up this morning it looked like it was going to plummet again after the first couple of hours or so. Instead a rally occurred even amidst a flurry of bad business and economic news.

Anyway it has been a difficult year for everyone including hedge funds. Trefelet, a hedge fund founded by Exeter grad Remy Trafelet, is having their share of problems.

High-Flying Hedge Fund Falls Back to Earth
Perhaps the most remarkable thing about Mr. Trafelet is that he is not so remarkable at all. Thousands of hedge fund managers like him — mostly young, mostly male and virtually all unknown outside financial circles — confront a sober reality: for now, the days of easy money are over.

Being in the stock market these days can be very risky. The credit crisis has caused so much volatility and there's uncertainty in the markets going forward. For instance there are debates as to whether the Dow has bottomed out already. In light of the uncertainty some hedge funds are moving away from the stock market and into safer instruments like cash in the meantime. 

In the 90's hedge funds used to beat the S&P 500 with returns as high as 20%. The returns have been declining since because the number of hedge funds have grown. Within the past year some reports have indicated that hedge fund returns are now down to a negative 10%-17% no doubt due to the crisis. Bloomberg reported today the one of Citadel's own funds has been down -30%. If you've never heard of the name Citadel is a large hedge fund. There was an article on them in Fortune last year. One of the things it mentioned was  that 10% of the volume being traded at the NYSE is by Citadel alone. Anyway besides declining returns other hedge funds have also had their assets frozen when their dealers (ie Lehman) went down.

Besides managers, these are also worrisome times for hedge fund investors. The funds have their lock-up periods(usually 1-2 years) which is the required length of time before an investor can redeem his or her investment. Anyway from the WSJ here's SAC Capital, another large hedge fund who is also trying to play it safe.

Smart Money Stays on the Sides
In recent days, Steven Cohen, the hedge-fund manager who runs the $14 billion SAC Capital Advisors, moved about half his funds, or about $7 billion, into money-market and other short-term securities, eliminating much of his fund's exposure to the stock market, says a person close to the fund.

Steve Cohen is the principal behind SAC and I've mentioned him before in the blog Old Money vs New Money.

I had written about the golden age of commercial flight in Flying The Preppy Skies. The Telegraph is now featuring a very cool slideshow of ads and posters from the airlines of that era. One caption states "Flying used to be such fun. People once had a sense of wonder at powered flight, and air travel was seen as utterly glamorous, a perception that was readily seized upon by the airlines' advertising executives. "

 

I dropped by the Newsweek website and noticed this photo of John Kerry. He's looking very preppy with what looks like barn jacket? Together with a knit sweater and jeans the look is straight out of an LLBean or J. Crew catalog. You can buy the (longer) coat at LLBean and I believe they always have them every season. J. Crew used to have them regularly but it may now be an off and on thing. Remember the classic J. Crew look with their barn coat and signature roll neck sweater? The look is great with duck shoes or the LLBean Ranger Moc.

This really is one of my favorite clothing items for Fall. I do own a barn coat myself (J Crew) and it is about 10 yrs old. It comes in a pumpkin color and when it wears out I think I will get myself another one maybe in forest green. What's your favorite barn jacket/coat color?

PS. There were times in the past when I've used the term "barn jacket" here in the site. I'm really referring to the barn coat. J. Crew I believe  uses the term "barn jacket" for their coat but LLBean uses "barn coat"(above). Most people I know use the term "barn jacket"   regardless of  the length.This formal definition for the barn jacket says the length is typically up to the mid hip. Anyway...

If you had to pick the most exclusive school in the world who would it be? Would it be Eton? Interesting article from Vanity Fair on the British school whose alumni include royals, ministers, famous writers, and governors.

The Eton Empire
There are a number of reasons why America does not have an Eton. In order to evolve such a school, you have to start with a monarchical foundation in the mid-15th century. (King Henry VI simultaneously founded King’s College, Cambridge.) A few hundred years of feudalism and empire are then required, during which time 18 of the country’s prime ministers attend the school, as do countless generals, ambassadors, and colonial governors.

Does America really not have a school comparable to Eton? This old VF article says it is Saint Paul's. Do you agree?

For the past 150 years St. Paul's School, the "exclusive" (as it is invariably called) boarding school in Concord, New Hampshire, has been the Eton of America's upper crust. Or perhaps it is its Hogwarts; as Harry Potter's fictional academy is called, providing the country with many of its most accomplished wizards-not just at making money, although that is what its graduates have tended to do, but in practically every endeavor. Its main constituency has traditionally been the conservative old Wasp families of New York, Boston, and Philadelphia-the plutocracy that has been running the country for generations.

By the way what would you say tops your list for exclusivity? Is it the prominence of the school's alumni? Would you say that a small and very private school is more exclusive than a larger and well known institution? What about military schools with all their traditions etc.? 

Within the past years I've taken a liking to half zip sweaters. During the 90's I barely saw them in the racks. But towards the latter part of that decade there was a retro craze and these sweaters became really popular. Some of you may also remember items like Hush Puppies and Adidas soccer sneakers also staged a comeback. But the sweater is a classic and this model from Polo looks sooo comfortable and very preppy. This is actually fleece but I also remember seeing the wool kind last year. Nice red color huh? I'd pair this half zip with a white chino and dark brown driving mocs. I also love zip cardigans. What is your favorite Fall wool sweater?