Chad Things

As mentioned in my previous post, I upgraded wordpress and am using the Inove theme. I chose it because it looks clean and has basic functionality (most wordpress themes do not). When I say clean, I mean I like the use of black, white, and grey colors, I like the fonts, I like having posts be black on white with the background of the page being grey (anything but white, helps focus attention to the posts). I also like the simple search box in the header, I like the small simple icons like green dots for lists, calendar icon, categories icon, tags icon, comments icon, etc. I like how how tables are done, pre format is done, and a few other things.  However, it is not perfect for me.  So …

Things I changed included

1. Fixing bug where tag icon appears even if a post has no tag
2. Moving categories and tags to the top of posts – I prefer having all the meta information in one place.
3. Moving RSS code from top of sidebar.php to bottom
4. Removing non-widget code from sidebar.php – If a widget is not chosen for N, S, E, W, defaults are shown like archives and categories.  I don’t want 2 categories, as esserd said. If I want something, I will use widgets.
5. Tweaked styles.css to add padding to bottom of lists (.post .content ul,   .post .content ol)
6. Changed header on search results and archive (tags, categories) from 2 lines to 1 line.

Overall great theme.  Thanks mg12!!!  Also, check inove forum for other issues.
UPDATE: You can find my changes in inove-1.0.5.diff.tgz, preview the readme or diff.

Geek Warning…

I’ve been wanting to update chadnorwood.com for a while, so over the weekend I upgraded wordpress from version 2.3.x to 2.6.3 and picked out a new theme.  First I did a wordpress export of my blog as a backup.  Then the upgrade was done using hostmonster’s fantastico deluxe, an automated installing system in cpanel.  Some don’t like fantastico, but it took me 10 seconds to do the upgrade with no problems.  Success.

After the upgrade it took me almost 4 hours to figure out why my category links were broken.  WTF? Basically under 2.3 I had my permalinks setup so if the URL was http://chadnorwood.com/tag/travel/ wordpress would show posts under the tech category.  So I upgrade to 2.6, and Settings-Permalinks show “tag” as the “Category Base” but /tag/travel is broken – no longer works in 2.6.  Of course I didn’t think about changing this till I examined the mysql database tables, dug through thousands of lines of terrible wordpress code, and googled every phrase combination related to this I could think of.  In the end, I reverted back to the basics and it all worked.  I still had to resolve the 404 issue of the old tag links, which I did using template_redirect.

Picking the theme took even longer – but that was more fun.  I basically viewed about 50 of the most popular wordpress themes, downloaded and installed 10 of them, activating one at a time and testing them for functionality and style.  Only 4 seem to have all the basic functionality working correctly, and even tho I liked the wood in State of Mind, I went with the Inove theme. Inove is more clean and shayna thought the wood one was too academic.  I also tweaked Inove .. but thats in the next post.

Overall the wordpress 2.6 is not much different.  The admin pages look cleaner and are better organized for the most part, but the db has changed and some stuff is broken so I would only recommend upgrading if there was a specific theme or plugin that needs 2.6.  I really love the plugins and themes – the number of great choices makes wordpress much better than all the other blogging platforms. It’s not perfect, and the documentation could improve alot, but these wordpress guys are still actively working on making a better blogging software which is a very good thing.

Before I upgraded to wordpress 2.6, I had URLs using tags like this:
http://chadnorwood.com/tag/travel/

After I upgraded I realized I liked categories better (they can have parent categories).  So no more tags, all categories, but the problem was that google (and others) still link to /tag/travel/ which ended on a 404 page. Since I had no tags, I decided to redirect all my  /tag/xxxx to /cat/xxxx – I also prefer /cat/xxx to /category/xxx, which I changed in Settings-Permalinks.  Here’s how I did the redirect exactly:

Add the following to the end of ../wp-content/themes/<current_theme>/functions.php file

// added at the end of functions.php file, in my current theme's directory
add_action ('template_redirect', 'check_for_tag_404');

// custom function to redirect old tag links to new cat links
function check_for_tag_404()
{
$pat = '/^\/tag\/(.*)$/';

// return if this URL does not begin with "/tag/"
if (!preg_match( $pat, $_SERVER["REQUEST_URI"])) return;

$uri = $_SERVER["REQUEST_URI"];
$uri = preg_replace( $pat, '/cat/$1', $uri);
$location = "http://" . $_SERVER["HTTP_HOST"] .  $uri;
header("Location: $location");
exit;
}

Big Ups to this template_redirect dude for giving me a clue.

As a recent transplant to Chicago, I need to update my auto insurance.  My current insurance is with AAA, which provides decent rates for San Francisco, but I’ve had terrible experiences with them when filing claims – I have a $500 deductible and have had my stereo stolen 3 times over the last 3 years, each time costing me around $1,000 from broken windows and other stolen goods.

When shopping for auto insurance anywhere, here are some good questions to ask insurer. But who wants to spend the time talking calling insurance companies to ask them lots of questions?  I don’t, but I wish there was some organization that did and listed the results. Ideally somebody would make a site like kayak.com but for insurance, having sliding scales for variables.

• insurance.com – claims to check 12 insurance companies, 10 mins on site yielded 4 quotes from esurance, hartford, electric insurance, and AIG direct.  quotes were about the same as Geico (see below).
• insureme – less than 10 mins to fill out forms, resulting in 4 emails, 3 calls, and a web page listing 12 insurance companies … but only GEICO gave a partial quote (had to fill out some more info to get quote), the rest were basically advertisements.  Waste of time.
• netquote – less than 10 mins to fill out form, similar to insureme.  No quotes resulted from this, just more annoying ads.
• State Farm agent emailed, called, and sent me a text.  A bit too aggressive.
• Geico – easy, fast online application, almost half what I paid AAA in San Francisco, and above average reviews on epinions (I only considered companies with 40 or more reviews).

Geico it is.   If you or a family member is in the military, USAA looks good, too.  I found alot of crap advertising and useless sites on my search, but kirtok reviews, squidoo are worth mentioning.

UPDATE 2011-6-5

I sold my previous car, the chadilac jetta, about a year ago and cancelled geico at that time.  Cancelling was super easy – I called and asked to cancel, they asked why, I said i sold my only car, they said fine – we’ll mail you a check.  Done.

Over the last year we were using zipcar, but this week caved in and bought a car again – a 2009 Jetta TDI.  I researched insurance companies again and Geico was one of the cheapest and best around, so we went with it. I”m also really impressed by how good their website is – once you join you can find all the info you need.  Props to Geico !!

This has been a big year for me.  First, I decided to move to Chicago after living in California for about 13 years.  Second, I ran a marathon, one of those life long goals that I’m happy to have completed.  And yesterday I took the GMAT, the first (and some say the hardest) step towards getting a MBA and a new career.

Not only did I take the GMAT, I took it by the horns, wrestled it to the ground, and said “Who’s your daddy?”  Ok, not really, but i did do much better than I expected.  I could have done worse – I was low on sleep and low on practice (practice CAT exams). I also know I did not do my best, and I firmly believe with more practice I could have done better.  In fact, practice is the most important thing.  Here’s all the tips I have learned.

• Practice – The most important thing by far.  I recommend taking a few practice tests at first (or just answer tons of questions) so you get a feel of where your natural strengths and weaknesses are.  Then study (more below on that), ending by practicing again and again.  During this latter phase of practicing, make sure you do CAT tests, not just non-computer paper tests. This is important if you’re targeting a high score, since most of the CAT questions will be very difficult and time consuming, as compared to non-CAT exam questions which you might be able to finish with time to spare.
  • Download sample test from MBA.com (windows required)
  • Take MGMAT tests online (see Manhattan GMAT below).
• Study –  This depends on how much time you have to prepare, but try to spend 1-4 hours at a time at least 3 times a week.  I studied for about 8 weeks, 80 hours total, logging 30 of those hours during the 9 days prior to my exam. I would not have studied that much if I had a full time job.  Lucky me?
• Class – Unless you’re rich, don’t take a class. If you are rich, get a tutor for custom help.
• Books – You can learn almost everything you need from these, strategy and practice questions. Amazon comments compare books better than I do, but here’s my nuggets:
  • The Official Guide for GMAT Review, 11th Edition – the bible.  Authored by GMAC, the guys who do the test.  The most practice questions. Good place to start to identify your weaknesses.  There’s also 2 other versions, verbal and quatitative (math), that I bought but don’t think were needed.
  • Manhattan GMAT 2007 – I bought 3 of the 8 books in this series, they were good but not great (I liked the sentence correction the best).  Get at least one new one so you have access to their online tests – one book gets you one year access and 5 complete practice MGMAT exams with hard questions and solid answer explanations.  My favorite practice tests.
  • Barrons’s 14th ed, 2008-2008 – I thought this book was a good overview, nice to get the same basic information in a slightly different way.  However, I found some errors in the answers to this book, making it a bit frustrating since I felt I could no longer trust all the answers.  I don’t recommend it.
  • Kaplan’s or Princeton review – I chose not to buy based on a few reviews, but never read them myself.  In hindsight I would recommend Kaplan’s over Barron’s.
  • McGraw-Hill’s 2008 -first book i got, from public library.  Not a bad book, but if you’re buying there are better ones.
• Online – You will have some questions that books won’t answer.  Or you might want to join or start a MBA study group in your area. I found the beat-the-gmat forums useful.

Got any more suggestions?  Leave me a comment!!

Now the next step is researching MBA programs. You can send 5 copies of you GMAT scores to business schools for free the day of the exam, normally it costs $28 per copy per school.  So it makes sense to figure out which programs you might attend.  On test day you have to pick the schools before you get your score – I sure wish you got your score first. I’ll still in the middle of this research, although I love sustainable and socially conscious programs (yay for Beyond Pinstripes Top 100). Stay tuned for a future blog on this one.

I’m still working on finding a job, so if you know anybody who wants someone who is great at problem solving and is a very effective communicator, point them to my resume.

This summer the 2.0 version of iPhone software came out, and lots more apps with it. It had some problems, so I waited till 2.1 was released. Overall the OS doesn’t seem much different (some new features, but also new bugs and a bit slower running things, at least on my non-3G non-GPS original 16GB iphone). However, there are ton more apps in 2.x, which is why you should get it. None are as cool as the basic features of the iPhone – phone, internet, ipod, and maps – but the apps are definitely worth checking out. I tried to make my list practical and useful for today, avoiding apps that would be great if only something somewhere did something also as well.

2008/12 UPDATE:  I upgraded to 2.2 and its not much difference.  I do love the new voice search on the google app – best ever – including easter eggs. I’ve also slightly changed the list below from the original post.

So forget my old list of free iphone applications, here’s my new favorites, best ones first:

1. Shazaam (MUSIC) – AWESOME. Ever heard music and wish you knew then name or artist? This app can listen and identify most any song in less than 20 seconds – from radio, your friend’s CD, or that one track on that hour dance mix you downloaded. Midomi is a similar app that tries to do more but needs to work on errors.
2. Nuevasync (CALENDAR) – OK, Not an app, just awesome for those who use Google calendar. Using iPhone’s Microsoft Exchange support and the default calendar app, setup a instant 2-way auto sync with Google calendar. Changes made to Google calendar can be seen minutes or seconds later on the iPhone calendar app, no manual synchronizing required. Likewise, edits in iPhone calendar show up seconds later on your google calendar. How to setup Nuevasync.
3. Google Mobile (SEARCH) – At first, I had mixed feelings with this one, mainly because its slow (you type 5 characters but it can take 3-10 seconds for them to appear, since the app starts to search for matches after 1 or 2 characters). However, it definitely saves time. In addition to being a shortcut to google results page on safari, its a shortcut to google maps, remembers previous searches, suggestions, and you can search iphone contacts. Google made a nice overview video. I love voice search in newer version.
4. Movies (ENTERTAINMENT) – If you like the box office, going to theaters, or just getting info on movies, Get This. This would be my favorite app if I still went to the movies – they are just too expensive. Best feature is finding showtimes for theaters near you using iPhone’s location, as well as remembering your favorite theater.  But I also love watching the trailers, finding out the biggest box office hit, and connecting to IMDB. Showtimes is a similar app.
5. Evernote (PRODUCTIVITY) – Ever wanted to record a voice memo? you know by talking not typing? Get this. Not only is this great for audio notes (up to 5 mins), but it also does picture (with text recognition ability) and text notes, rounding it off with a very advanced search. Picture notes are perfect for receipts, wine labels, or anything else with text that you’ll want to have later. Major problem is that it does not cache notes on the iphone – so if you are on an airplane or in a dead zone, you’re screwed. review.
6. reQall (PRODUCTIVITY) – Similar to Evernote, it lets you write text notes and record audio notes (up to 30 secs), no pictures, but will translate audio to text (can take a few mins). ReQall focuses on organizing notes (almost to the point of confusion), but – here comes the best part – it stores notes on both iphone and the web! (it appears to have 2k limit on text note, about 30-40 lines). No more worries about dead zones, which makes this app better for me. Still, took me a few tries to figure out how to use it. Also see Zenbe below. review and quick-start guide.
7. Facebook (SOCIAL) – Best interface to Facebook, I especially love the simple list of friends, news feeds, inbox, and update status.  Get this is you wanna give great facebook.
8. UrbanSpoon (MAPS/FOOD) – Find restaurant near you. Very fun, fast, and easy (cities covered)
9. Where (MAPS) – Brings up a map of where you are, then plots the closest starbucks, places from eventful, places with yelp ratings, gas stations, zipcar, local search, buddy beacon (like loopt) and more. I just wished their map zoom in/out/drag was as fast as google maps.  It also times out alot.
10. Loopt (MAPS/SOCIAL) – If you have friends with iPhones and want to share your location with them, get this. It’s great when you’re out on the town. works with GPS and non-GPS iPhones
11. Weatherbug (WEATHER) – More details than the default Weather app, including wind, chance of rain, and the ability to have more than one source for a city. For example, find highs/lows for SF downtown and the airport (which can vary by ten degrees).
12. Stanza/eReader (BOOKS) – Both are good if you want to read books on your iPhone, nailing down the basics like easy access to books you’ve downloaded, turning pages while you’re reading, jumping to a certain chapter or page, searching for text, tweaking color/font. Both have tons of books, all the classics, but could impove ways to search for books. I like Stanza slightly better because… you don’t need a login, a few more settings to tweak, more books available even tho eReader has DRM (copy-protected) books and stanza does not. Check out stanza – review1, review2.
13. ESPN Cameraman (FUN) – Picture game – find 5 differences between 2 similar pics, like that bar game “Photo Hunt”
14. Brain Toot (FUN) – Simple but fun game that tests memory, eye coordination, thinking, etc.  Also check out Brain Blaze for more brain exercises.
15. Aurora Feint (FUN) – Game similar to tetris or jewel quest.
16. Klick (PICS) – Flickr app. Does a good job of allowing you to upload a new or old photo to flickr, giving it title, description, tags, and location/geocode info.  In addition to upload, you can view your recent sets, tags, recents from contacts, search, etc.

Below are ones I tried and kept, but don’t use very much

1. Remote (MUSIC) – Apple’s way of controlling your computer’s iTunes from your iPhone. It’s great if your computer’s iTunes is less accessible than your iPhone, but when i’m listening to iTunes on my computer, my computer is more accessible.
2. Banner Free (FUN) -Scroll a message LED style across your iPhone.
3. Scribble (FUN) – Turn iPhone into a blank canvas and your finger into a pen and scribble. Or, instead of a blank canvas, scribble on top of a picture from your photo album. Kid Friendly.
4. Tap Tap Revenge (FUN) – Simple game where you tap to the music, kinda fun with two players, but gets old.
5. MazeFinger (FUN) – arcade style game, cool sounds and graphics, but simple and kinda boring.
6. RJDJ Single (FUN) – plug in headphones, and RjDj will tweak what it hears for you. Make it fun to walk down the street. faq. The free version comes with only one scene, and it sux – it basically echos then environment, but even with headphones at full volume you can’t hear much. Paid version seems more interesting. youtube.
7. NYTimes (NEWS) – read NY Times articles. Nice UI, I like browsing news categories, but crashes alot
8. NetNewsWire (NEWS) – read RSS feeds on iPhone, including blogs and major news feeds. I prefer Google Reader on the PC.
9. WritingPad (PRODUCTIVITY) – new way of typing. Instead of tapping each letter, you draw words, going from the first letter of the word on the key layout to the second to … the last. It works pretty well, but you can only use this interface to take notes, you can’t use it anywhere else. Why learn a new way to write when most of the time you have to write the old way?
10. Jott (PRODUCTIVITY) – Once setup, it will turn 1 to 15 second audio memo into text and email it to you. Not always accurate, but accurate enough to make it great when you need to quickly jott stuff down when you’re driving or don’t want to type. I will prolly remove Jott since ReQall also translates audio to text, but reQall is also not always accurate (and slower at translating than jott), so I’m holding on to this for now.
11. nxtb.us (MAPS/TRANSPORTATION) – bart/muni arrival predictions in SF, check out flash video on http://nxtb.us/
12. Trapster (MAPS/DRIVING) – alerts you to speed traps. Useful to locate speed traps on regular driving routes like a commute, but not something you would leave on while just driving around.
13. Twinkle – Twitter for iPhone but with location – find out what people are doing within 5 miles of you. Cool in theory, but i barely twitter and know nobody in chicago. setup could improve.
14. Shozu (PICS/SOCIAL) – shozu is the uber social app – talks to 50+ sites, sharing info back and forth.   If you spend lots of time updating various social sites, definitely check it out.  review. I don’t use it cuz it often has errors talking to flickr or facebook, my two most used apps.

Below are ones I tried and uninstalled.

1. VoiceNotes (PRODUCTIVITY) – Just records audio notes, but had no timestamp. Evernote does and offers much more.
2. Zenbe (PRODUCTIVITY) – Simple list manager – sync’s with web, which i love, but reQall does everything Zenbe does plus has voice to text translation. Sorry, you get the boot!
3. Rember The Milk RTM (PRODUCTIVITY) – Another list manager, similar to reQall, and tho its free to download you got to pay to use some web service. You get the boot!
4. YouNote (PRODUCTIVITY) – Similar to Evernote, but its not easy to backup notes or sync with the web. Dealbreaker for me. However, if you use notepad alot, this is a nice upgrade. review.
5. Exposure (PICS) – another flickr app, Similar to Klick but no uploading. Free version has ads (Boo).  Latest version (November 2008) crashes alot when i try to login to flickr (I login to yahoo, authorize app on flickr.com, then tap ‘done’ on iphone and Exposure crashes).

Need To Spend TIme On These

• Pandora (MUSIC) – stream music
• last.fm (MUSIC) – stream music
• Fring (SOCIAL) – chat with friends on Google Talk, AIM, Skype, MSN, Twitter, etc. And make phonecalls for free using wifi/VOIP (prolly great if you travel internationally).
• IM+ (SOCIAL) – another IM client
• linkedin (SOCIAL) –

NON-FREE Noteworthy Apps

• Air Sharing $5 (UTILITY) – Turn your iPhone into a wireless USB drive using wifi. Also a image/document viewer. I have this and have geek friends who love this.
• Things $10 (PRODUCTIVITY) – list manager (Todo, etc)
• Notebook $5 (PRODUCTIVITY) – todo list manager
• Syncbook $4 (PRODUCTIVITY) – another note sync manager
• Byline $4 – RSS Reader, syncs with Google Reader, better than NetNewsWire.

References

• http://itmanagement.earthweb.com/mowi/article.php/3773366/Top+Ten+Free+iPhone+Apps.htm
• http://www.techcrunch.com/2008/07/10/iphone-application-overview-and-demo-videos/
• http://mashable.com/2008/10/24/iphone-apps-revisited/
• http://www.didigetthingsdone.com/2008/10/21/top-5-iphone-applications-for-productivity/
• http://www.lifehacker.com.au/tips/2008/11/07/battle_of_the_iphone_task_managers-2.html

I like making a voting guide (cheat sheet) for myself.  The process forces me to spend time researching the issues and the candidates, which is almost as important as voting.

This will be the first time I voted outside of California in 13 years, and Illinois is a bit different – each name has a unique number in parenthesis (great for cheat sheets), and no state or city propositions on the ballot, just elected officials (mostly judges). Voting on Election Day goes from 6am to 7pm in Chicagoland.

USA
President: (1) Obama/Biden, Democrat
US Senator: (10) Kathy Cummings, Green
US Representative, 4th District: (13) Luis V Gutierrez, Democrat

ILLINOIS
Constitutional Convention: No
State Senator, 20th District: (17) Iris Y Martinez, Democrat
State Representative, 39th District: (21) Jeremy Karpen, Green
Metro. Water Recl. District Comm. choose 3 of 9: (29,30,31) Picking all 3 Green candidates
State’s Attorney: (32) Anita Alvirez
Clerk of Circuit Court: (35) Dorothy A Brown
Recorder of Deeds: (38) Eugene Moore
Board of Review, 2nd District: (41) Joseph Berrios
Judges:  Only one choice, skipping this section.

Basically I am voting either democrat or green.  It was difficult to find details on local candidates, I would often have to google for a specific name and the office they were running for to get information.  However I did like this Chicago Voting How-To Guide and thevoterguide.org.  Also check out a sample ballot for my neighborhood.

This is also the first time Illinois is offering early voting for a presidential election – 18 days (?) ending October 30, 2008.  260k people voted early, which is about 5% of the total Illinois votes cast for president in 2004.

If you use Firefox and Google (which should be everybody reading this), then here’s your chance to geek up yo google search.  Install greasemonkey and my “Google Search: Keep Date Dropdown” script.   If you’ve used advanced search on google, you know you can search for stuff based on date – like show healthcare results only from the last week/month/year.  It takes several steps to get to that advanced page, but then you get a nice date dropdown box. However, if you pick “anytime” on that date dropdown box, the box disappears.  Then you gotta go do a bunch of steps to bring it back. That’s where my script comes in – that date dropdown box is always there. Here’s a picture of the dropdown box followed by my official description.

On Google Search, you can search the last week/month/year from advanced search, which creates a date dropdown box on the search results page. Once you search “anytime”, the dropdown box goes away. This script keeps that dropdown from disappearing (when as_qdr=all)

I know, I’m a geek.  I save so much time with little shortcuts like this.  Enough time to write a blog about it. Weeee!!!  Here’s more cool greasemonkey scripts.

This is the hot topic of the year, if not the decade, so I might as well comment on it. First let me summarize some well known facts, than I’ll point out a few things I learned after some digging in Wha? below.

As you may know, last Friday October 3 the 451 page “Emergency Economic Stabilization Act of 2008” was passed – $700 billion bailout of the financial markets by US Government – $250 billion now, $100 billion later with president approval, $350 billion later with congressional approval.  Money comes with an oversight board, new office of financial stability, and a few other good moves.   It also contained an estimated $150 billion in earmarks or pork spending.  “Thats just the way things are done in Washington DC” – Senator McCain. Some of these are not bad, but they have nothing to do with the financial bailout. US Government must end this “bill rider” practice (earmarks, most importantly).

Here are top 10 sweeteners (all are basically federal tax breaks)

1. Wooden Arrows .. worth $200,000 to Rose City Archery in Oregon
2. Motorsports Racing Tracks .. worth $100 million
3. Rum imported from Puerto Rico and the Virgin Islands .. $192 million
4. Research in US .. $19 billion (Microsoft, Boeing, EDS, etc)
5. Exxon Valdez plaintiffs ..$49 million
6. Subsidize Rural Schools .. $3.3 billion (OR, ID)
7. Deduct sales tax from federal income tax .. $3.3 billion (TX, NV, FL, W,A, WY)
8. Keep Film/TV production in US.. $478 million (CA)
9. Wool Fabrics .. $148 million
10. American Samoa .. $33 million
11. BONUS – Employers paying employees commuting on bikes .. $10 million (OR)

WHA?

Getting back to the bailout – What caused this problem? That’s the hard question, and nobody knows the answer, but there are several contributing factors – Banks should not have given loans to people who could not pay them back.  Financial markets should not have blended and repackaged these riskier loans into things that were considered “safe”.  Government should not have left the CDS market unregulated.

What is CDS?  Credit Default Swaps.  This is a relatively new market that is entirely unregulated and limited to huge financial institutions.  When i say huge, i mean those that afford to pay billions.  For example, a hedge fund might want $1 billion insurance on Risky Corp. So they pay morgan stanley $20 million a year, and in return, Morgan Stanely would pay the hedge fund $1 billion if Risky Corp went bankrupt. Sounds like insurance, right? Well, if it was, insurance laws would require Morgan Stanley to keep cash reserves to cover the $1 billion, making it safer. So it is not called insurance .. keeping all that cash around to cover your promises limits how much you can promise, limiting the amount of profit you can make on these promises. In fact, in 2000, Everybody (president, senate, house, sec. treasurer, SEC, greenspan) agreed to keep the CDS unregulated.

How bad did it get in the CDS markets? First you have to understand hedging. In the example above, we have Morgan Stanley promising a hedge fund $1 billion if Risky Corp goes bankrupt, in return hedge fund pays 2%/year to Morgan Stanley. This is the CDS Contract. Now Morgan Stanley might turn around and buy $1 billion insurance on Risky from Lehman. Therefore if Risky goes bankrupt, Morgan can pay the hedge fund $1 billion using the $1 billion they get from Lehman. That is hedging – covering one position with an opposite position. Now understand speculation. If Risky looks like it is more likely to go bankrupt, more hedge funds buy $1 billion CDS contracts on it – they wanna get paid big if Risky goes under. Of course, they will be charged a higher fee per year, maybe 5% or 10%. But a smart hedge fund speculating on dozens of companies going bankrupt will bring in far more cash on bankrupt payouts than cash spent on those fees. That is speculation – betting on an asset going up or down. So lets say in the end, there are 10 CDS contracts on Risky Corp, $1 billion each, totalling $10 billion on the CDS market on a $1 billion company. Risky goes bankrupt, only able to pay off half its debt to its investors. Investors lose $500 million. However, $5 billion is lost on the CDS market. OUCH. One of the key things here is that you can buy/sell CDS contracts on any company at any time. This speculative nature in CDS markets is bad. In 2008, CDS maket was $60 trillion in contracts on $5 trillion in assets.

Let me repeat.  In 2008, there was $60 trillion in an unregulated CDS market – that’s more than all the money in all the stock markets in the world.  Thats insane. This is why Warren Buffet famously described derivatives bought speculatively as “financial weapons of mass destruction.”

Mortgage Backed Securities (MBS) are also problematic.  When you get a home loan from your bank, the bank packages up various loans and they turn into MBS.  These are regulated, unlike CDS, but the risk was not accurately rated.  No need to dissect this one – you’ve heard it all before – banks should not have been giving loans to people who couldn’t pay, markets should not have been buying these risky things and trading them like they were not risky, and these big banks should not have put all their eggs in one risky MBS basket.

A bit confusing, a bit interesting.  So what does that tell you?

I’ve learned that at least one area needs work – Assigning risk accurately.  Also, debt in the financial system is made extremely complicated by very smart people, so nobody really knows how big the problem is.

What’s the solution?  I’m not sure regulation helps, but transparency does.  Create rules that require transparency, and fine heavily (millions) when people do not abide.   For time-sensitive things, force transparency to a neutral agency that will hold information for a short time, fining heavily those whose actions don’t match what they said they did. Transparency helps math geniuses at the financial institutions assess risk more accurately, and leaves a trail for CEO accountability.

CEO’s who move debt around for years while they pay themselves millions should be forced to return cash when debt is revealed. If a bank robber steals $100 million, the bank and the feds go after the robber and the $100 million, even if the robber gives the $100 million to his mom as a bonus.  So if a corporation goes bankrupt, why do the CEO’s get to keep the millions they received?

Thats all for now .. if i missed any big points, please leave a comment.

Did you know Caller ID can be faked, legally?  For example, Annoying dude can call your mom and fake it so your mom thinks the call is coming from you.   There are even businesses that exist to serve this annoyingly evil purpose.  Relief is in sight – there are bills (not yet laws) outlawing “any caller identification service to transmit misleading or inaccurate caller identification information” – more at wikipedia.

My iPhone has recently been receiving harassing calls from one number – 904-954-3072 – up to 4 times a day, for like 10 days now.  I’ve only answered a couple times and I hear nobody on the other side.  I’m not the only one – some say it’s Citicards debt collectors but most think it’s a scam. My guess is caller id spoofing.

UPDATE 10/14/2008 – It probably was Citicards.  I recently moved, and didn’t update one of my credit cards with my new address.  I talked to citibank and she said they do have a service that automatically calls if bills are not payed.  I asked why they don’t talk when you answer the phone or leave voicemail messages.  She said they don’t leave messages in case phone number was changed, and as far as not talking when you actually answer and say hello .. well, she said there’s a problem with the system.  I told her it was annoying to get the calls and she agreed, but they would stop in the next few days.  CITIBANK IS LAME.