Again, I am not an economist, but these days, due to the scary economical situation I am even more curious to understand what is happening. Here is an interesting 1 hour podcast explaining in a really simple way what it is happening to the banking system. One interesting detail is represented by the difference between the equity seen in financial statements end the stock valuation of the business. According to wikipedia: In the stock market, market price per share does not correspond to the equity per share calculated in the accounting statements. Stock valuations, often much higher, are based on other considerations related to the business’ operating cashflow, profits and future prospects; some factors are derived from the accounting statements. Right “stock valuations are often much higher”. Now search for the letter “c” in google. The first result is related to the Citigroup Inc. You can easily find on the top of the page that the Market Capital (Mkt Cap) is 5.64 billions. And almost at the bottom of the page, in the balance sheet, that the total equity for 2008 is 115 billions.

A similar example comes from the Commerzbank website:

This shows clearly a counter trend in 2008.The question is: what is the effect of this big gap?

It is always nice to spend some time at the Boston MFA (Museum of Fine Arts).

This morning I was having breakfast while watching this interesting documentary about wild life in the Chernobyl area. I still remember those days of the Chernobyl disaster in 1986. The fear for clouds that could spread radioactivity across Europe. I remember, years later, the news about malformed children and animals and so on. The documentary has been played by Discovery HD Theater channel:

Chernobyl: Life In The Dead Zone: The site of the world’s worst nuclear accident was hastily abandoned by panic-stricken humans over 20 years ago. Only a number of house pets and indigenous wild animals remained. To the surprise of scientists, they not have not only survived, but thrived.

In the documentary they where showing how nature was getting back that area that cannot be populated by humans anymore. Surprisingly, it seems that the suspected genetic mutations have been really rare and many species are not only surviving but increasing in numbers. It seems that the complete food chain has been reestablished. Dears, wolfs, bears and all sort of wild animals of all dimensions are proliferating and taking control of the area, visiting the ruins of houses, schools and so on. I found interesting the story of a cat that was still living by the ruins of a house (where probably its ancestors where living). The cat is now acting as a wild animal, hunting for feeding the kittens. Fighting and strategizing for protecting the kittens from the wolfes. In summary, it seems that mother nature can reestablish life where humans have been able to take life away.

Talking about this with a friend he pointed me to this website by Elena Filatova. The website collects pictures of the Chernobyl area taken in the last years. Elena wrote: If I had to express what I do in Chernobyl in a few words, I’d say, from year to year I only observe how world of materials objects dissolve into nothingness.

Recently I read an article claiming that the ice in the Artic sea has grown really fast this year going back to the level of 1979. And honestly, I felt happy for those poor polar bears that are obliged to swim for many miles for moving from one site to another (with the inevitable lost of many cubs).

Then I discovered this website and thing became a little more clear. In fact after a rapid initial increase, January extent remained well below normal. I would suggest to take a look of the last 30 years trend.

Some weeks ago I was puzzled by the weird behavior of oil prices. The crazy increase and the following fast drop captured my attention (I guess not only mine…). After weeks a friend pointed me to this interesting report by CBS: The historic swings in oil prices last year were the result of financial speculation from Wall Street and not supply and demand. Steve Kroft investigates.

This was a really nice break from the Boston winter…

I am observing on the Dow Jones Indexes website the trend of the Industrial Average that at this very moment is 7516 points with a loss of 481 points. I recall some of the discussions I had in the last weeks and I remember a friend talking about the psychological barrier of the 8000 points. Well, I guess Dow Jones now plummetted below that barrier.

In the last days plenty of words have been said about the American cars crisis. People supporting the bailout idea and people that want the companies that are considered with “bad management” to go bankrupt. And an article on cnn.com captured my attention. I don’t want to replicate the article here, thus I will report only one paragraph:

“I don’t think they should bail them out because … obviously something’s not right in the way they’re running their business, and why should the American people have to bail them out if they can’t figure out how to do it right?” September Quinn, the busy waitress, said after the lunch rush at the Inn Between.

Right, it doesn’t seem the managers of those companies have been wise enough. And probably those companies, even with a money injection, are not prepared to change in a really short time. But then what? I was reading yesterday (or the day before) that the number of people directly or indirectly employed by the car companies that are in trouble are up to 1 million. And I am not an expert of how the American system works but it seems that there are also people risking to lose their pension.

I don’t know much about the behavior of the managers of these companies, besides that, according to Jay Leno, they arrived in Washington D.C. via their $25,000 round-trip lavish private jets. But I recall something I read a couple of weeks ago about salaries of presidents of banks. If I am remembering correctly the average salary was 32 millions of dollars a year (I remember a case of 84 millions). And maybe I should mention also Hedge Funds managers that gained in one year far more than 100 millions. Thirty-two millions of dollars a year. I guess this money are not only paying the time these people are working (and I am sure they are super clever…uh? let’s skip the fact that the market blew up) but they also are the counter part for the big risk of directing big financial institutions. Right, RISK.

And now I wonder, is it fair that when troubles come, their companies are bailed out, the community is paying and the “wise” managers keep getting incentives? All this probably firing a bunch of people too (otherwise how can you call it renovation?). And here I am not bringing up the moral issue (it is a shame that one person can gain 84 millions in one year, a big distortion as they are about $234,000 per day). I am talking about justice here, and it goes back to the age-old expression, the captain must go down with the ship. It would be so simple to start cutting costs of a financial institution: cut those salaries (safe millions of dollars saved).

In fact, if you own a business and you don’t sell, there’s no other options than making sacrifices (gain less or working more to reduce the paid workforce). Well “it seems” that in banks, if it doesn’t go well, employees lower down in the hierarchy are fired while the salaries and incentives of those reigning on top are maintained.

Wish I could hide my money in the mattress.

It is 10 months that I moved full time to United States. Today, in Boston, was nice and sunny. But it is probably going to be one of the last pleasant days before the winter. And the winter can be really long (I still can’t get over the infinite last winter…). It was good to be in the park sitting on a bench. Even if for only 15 minutes, the feeling of the sun on the skin was terrific.

And I am happy that one of my closest university mates and friends Fabio just became dad. Also, I am happy that I am finding some other really old friends through facebook. It is a nice way to compress distances, especially in those moments when I really miss Italy, Europe and all those special people that I left there.