Market Turmoil

First let’s agree that the acquisition of Merrill Lynch by Bank of America was a horrible move by one or the other. If Merrill doesn’t understand its exposure, then BoA now has an open exposure. Otherwise, why would they go running into the arms of BofA at such a turbulent point? It doesn’t bode particularly well for the industry either, when you have a maniac whacko at the top of BofA.

While President Bush sought to reassure investors that the market would recover, why would anyone believe that he has any understanding of what the market dynamics are at this point? Ben Bernanke clearly has misread the state of the economy from the outset of his stint as the Fed chairman, and he was the President’s best choice. The only person who seems to have made any sense of this at all is Secretary Paulson, who made it clear to Wall Street that the taxpayers cannot be expected to underwrite every company that would otherwise fail. But he has made no claims about understanding when and where the market will turn around. Good for him.

All of this having been said, clearly the president had to say something, and what he said was the least offensive. Had he real credibility he perhaps could have had more of an impact on prices, but that day is long past (if it ever was).

Tax & Spend Administration?

Last night Secretary Paulson announced that the U.S. would seize control of Fanny & Freddy Mae, the two largest loan corporations in America. Those two are so large that they could not fail, and yet there was the distinct possibility. And so the government stepped in. The terms of the seizure are not yet clear, but it’s sure to cost tax payers a bundle, although it will surely be less than if the loan system failed.

The administration probably did the responsible thing at this point in the game, by acting to see that chaos didn’t prevail in the loan market. However, all of their protestations of keeping government small should be taken with a very very very small grain of salt, given that this administration will have spent more money and placed America in more debt than the previous two administrations combined (and perhaps the 2nd Reagan administration). Also, stricter regulation of the loan market would have prevented such silliness in the first place, proving that some regulation actually saves us money.

So when Republicans say they’re for smaller government, be sure to ask who’s paying the bill for Fanny and Freddy.

Oops! McCain loses one point

He was doing just fine at his lovefest in the Twin Cities, but then Senator John McCain started talking about cutting taxes. As I wrote earlier, he was palatable because he was talking about the least offensive tax, a corporate tax cut. As he takes a more offensive position by generalzing cuts, especially in light of news like the Federal Highway Fund running out of money, now I’m giving Obama the win for the economy, and McCain loses personality points for pandering.

Social Contracts on Internet Security

Everyone and I mean EVERYONE tells you that the best thing you can do for yourself and others if you have a Windows system on the Internet is to run anti-virus software, and keep your patches current. Otherwise your system can be a nuisance to others, as it is broken into and used as a bot to attack others.

That doesn’t work so well when the anti-virus software causes the user problems. These systems take a performance hit, that is for sure. But they can have bugs as well, as this page from McAfee demonstrates. What has happened here is that a program called “McScript_InUse.exe” has gone crazy, pegging the system’s CPU. Not only does this kill performance of every other application on a system, but it can have an impact on your energy bill, because a 100% used CPU means that it will run faster with more fans on and more cooling required.

McAfee cannot be condemned for having bugs in their software, even though it is ironic that they exist in large part because Microsoft Windows has bugs that are taken advantage of. It never-the-less brings up the question of whether such active scanning technology is the right approach, or whether we have to do better at providing better underlying security. The extreme version of this would be provably secure programming, a field in which Dr. Gene Spafford (a network legend) has devoted his career.

In the meantime, however, we have to hold McAfee to a higher standard, just as we should Microsoft. When people believe that they will be harmed by the very software that is meant to protect them and others, especially when the more negative consequences impact others, they will not upgrade. We discussed this with the ETH Study, some time ago, and now we can expect additional consequences.

Georgia: In the “Better Late than Never” Category…

Seven years and six months into his administration, President Bush seems to have realized that Vladamir Putin isn’t always such a nice guy. The Wall Street Journal reported today that the administration is putting all bilateral contacts with Russia under review. This occurred after a near face-off between a Coast Guard cutter and the Russian navy. As I have written previously, we are at least in part to blame for the fiasco in Georgia, and so this can be seen as corrective at best, and palliative at worst. Just like his father, had President Bush sent strong messages (perhaps with soldiers) before the invasion, perhaps there never would have been one to begin with.

This was a win/win/win for Russia. They managed to demonstrate to the west and elsewhere that they will have their views taken seriously, they invaded the portion of a neighbor that has many Russians, and they may well have destabilized alternative energy transmission paths that the U.S. proposed, demonstrating the old axiom that all war is over wealth.

President Clinton reminded us at the Democratic National Convention this week that we as a nation cannot go it alone, that it is not in our best interest to go it alone, and that cooperation amongst nations is best for the United States. I am glad we are standing by Georgia, even if it is very late, and I hope that other countries will send stronger messages than they have until now. I am referring in particular to Germany and France.