20-2, but 0-1

A mid-December NBA game does not usually remind a viewer of a playoff atmosphere but that was not the case tonight in Boston as the new-look Celtics put their best-ever(*) 20-2 start on the line against the Detroit Pistons. After an exciting, back-and-forth fourth quarter, the Celtics dug back from a 6-point deficit with 1:19 left (and with Pistons having the ball), only to lose with poor clock management in the last 30 seconds.

A few things we learned:

* Ray Allen still has plenty in the tank, especially after having a couple of games off to rest his legs. His turn-the-corner-and-dunk-in-traffic off a timeout with 6 minutes left turned the game around when the Cs were in danger of losing touch (down 7). And his pair of three-pointers (one from the corner off the dribble, the other from the top of the key with 18 seconds left, led the comeback.

Update: Here's the video, now up on YouTube:


* The Cs have no defensive answer for Chauncy Billups (28 pts, 8 assists in 37 minutes), especially in the fourth quarter, when he took Rajon Rondo down to the proverbial "Men's Room" on the low block. Doc Rivers tried Eddie House and Tony Allen in crunch time, but neither proved to be enough. Allen ended up effectively ending the game when he left his feet on a Billups shot-fake on the last possession, sending Billups to the line with 0.1 seconds left.

* The Pistons were able to dictate game tempo, especially in second half. The Celtics have been able to separate themselves from (mostly inferior) opponents over the first quarter of the season with a transition game based on good defense. The defense was there against the Pistons -- Detroit shot just 40.3% -- but the C's were unable to turn missed shots into easy baskets.

* Don't book the Cs for the NBA Finals quite yet. The Cs have fattened up on an easy schedule: most of their games have been against the weak East, and have only played a few games against weak West teams (Sac, Den, LAL). Boston is now 1-3 against elite East teams (0-1 against Orlando and Detroit; 1-1 against Cleveland), and has yet to travel west of Chicago. The next stretch of the season,, with a trip to the Pacific upcoming next week -- and the Celtics trip to the "Texas triangle" in March -- should be very interesting.

* All that being said, the Cs are clearly a challenge for the Pistons, and Boston fans are ready for this rejuvinated franchise. The road to the East will probably go through Detroit, and a Pistons/Celtics series could be very interesting.

(*) - Actually, equalling the best-ever start of 20-2 in 1963-4. Both teams lost their 23rd game, to go 20-3.

Welcome to the NFL, Kid

After a spring and summer where he mostly stayed above the fray of his wife's presidential campaign, President Bill Clinton injected himself into primary politics when he criticized Barack Obama's experience Friday night on the Charlie Rose PBS-TV show, saying that the country should not 'roll the dice' on an individual who had just "one year" of experience in national politics at the time he began running for President.

Nevermind the fact that then-Governor Clinton had zero years of experience in national politics at the time he began running for President in 1991; Clinton attempted to draw a distinction between his 'vision' of the role of the United States in the post-Cold War era:


We are now into unchartered waters, with a former two-term Democratic President taking sides in the primary, and the current front-runner (by all polling) trying to deflect criticism, while not directly criticizing a potent Democratic symbol. Obama has proved himself a very effective counter-puncher against Hillary directly:



However, he is now sparring with the political equivalent of (an early 1970s) George Foreman, and the next days will determine whether he can continue to counter-punch effectively:

Hillary and the Expectations Game

Could not agree more with Seth Gitell's recent post about the 'Hillary-in-free-fall' stories that are now rampant in the press. For instance, Howard Fineman's piece earlier in the week (clearly written pre-debate, although the dynamics did not change yesterday) is featured prominently on Drudge this afternoon. Billy Shaheen's comments over the past few days resulted in his resignation from the NH campaign yesterday, giving rise to a series of stories about a 'campaign-in-disarray'. And the New York Times' Adam Nagourney earlier in the week wrote a story emphasizing how the Clintons have never really campaigned in Iowa (the 1992 caucuses were ceded to favorite son Tom Harkin) and that there was tension between the President's advisors and the campaign's staff.

The reality is that as a former First Lady, with extremely high name-recognition, and a national front runner for months on end, expectations should be -- fairly -- for convincing wins everywhere. Moreover, the 'inevitability' argument that the Clinton campaign has been touting for months should be making a loss anywhere -- Iowa, New Hampshire, Nevada, or South Carolina -- a mortal wound.

(Just as a point of comparision -- and yes, it was a different era and before the Iowa caucuses took on their current importance -- but, LBJ 'lost' the New Hampshire primary in 1968, even though he received a majority (49%) of the votes, to Gene McCarthy's 42%.)

Yes, Hillary has had a bad month. Yes, Obama has proved to be an effective counter-puncher. And yes, there's still a lot of time left (although less time than the calendar would indicate, when one takes into account the days lost to Christmas and the holiday week.)

But right now, a win in Iowa for Hillary would effectively end the race. And even a convincing win by Obama there may not end the talk of a Clinton 'firewall' in New Hampshire, Nevada, or
South Carolina. Moreover, with the Democratic delegates reflecting proportional representation (see, e.g., 2004 NH Democratic results) -- rather than the closer-to-winner-take-all primaries on the GOP side (see 2000 Michigan results) -- meaning that a wounded Clinton campaign could continue on past Super Tuesday and into the Spring.

The Clinton campaign has one other advantage: a base level of support that is the flip side to her high negative ratings. While some voters will not vote for her under any circumstances, others -- and especially women -- want to vote in favor of the first truly viable woman candidate. It should surprise no one that Clinton's new ad is focused on three generation of "Rodham" women, all of who think Hillary should be president.

New Op-Ed in Mass High Tech

A new op-ed in this week's Mass High Tech, co-written with HPVPC partner (and fellow-blogger) Terry Klein.

WWWD?

The late Will McDonough, former Globe reporter and columnist, had a long memory, and a sharp wit. For years he referred to Roger Clemens, as the "Texas Con Man." Wonder what Ol' Will would say about the news yesterday in the Mitchell Report that Clemens was apparently a steroid user, beginning shortly after he left Boston?

For that matter, wonder what Dan Duquette is feeling this morning? He famously declared that Clemens was in the "twilight of his career" in Clemens left for Toronto in 1996.

For the record, here are Clemens' key stats from the period 1995-1998:

1995 (Age 32): 10-5 W-L, 4.18 ERA, 140 IP, 132 K

1996 (Age 33): 10-13, 3.63 ERA, 242.2 IP, 257 K

1997 (Age 34): 21-7, 2.05 ERA, 264 IP, 292 K

1998 (Age 35): 20-6, 2.65 ERA, 234.2 IP, 271 K

Gitell on Klein

Quick shout-out to Seth Gitell, who attend the HPVPC event yesterday (before the snow) at the Downtown Harvard Club featuring Joe Klein. Seth's summary is here.

A Final Topsy-Turvy Ending

Winston Churchill famously noted that democracy was the worst form of government, except for all others that have been tried from time-to-time.

The BCS may put that dictum to rest. After a topsy-turvy regular season, the bowl pairings were announced this afternoon, with the headliner -- Ohio State playing LSU in the Sugar Bowl -- surprising no one but leaving fans (except for those of OSU, and of LSU) feeling less than excited. (The Tigers have already been installed as 5-point favorites, and OSU apparently has never beaten an SEC team in a bowl game; last year, OSU was embarrassed by a more athletic Florida, 41-14.)

Ohio State's greatest attribute was its schedule: their out-of-conference schedule was lighter than a bowl of Cool Whip, including Youngstown State, Kent State, Washington, and Akron. The Buckeyes also benefited from the Big Ten -- the conference itself is not particularly strong, and without a conference championship game, the Buckeyes did not have to risk a season-ending loss after Thanksgiving.

(LSU's schedule includes the SEC and the SEC Championship Game -- no complaints about 'strength-of-schedule' at all.)

Virginia Tech Coach Frank Beamer should learn something from OSU's Jim Tressel. Had the Hokies substitutued a "manageable" MAC or Sun Belt team for LSU (on Saturday night in Baton Rouge, no less) on Week #2, they may have had the opportunity (even with a home loss to BC) to play for the BCS title. Contrast Tech's schedule with that of ACC rival Boston College (who lost to Tech in the ACC title game): BC played Army, UMass (I-AA), Bowling Green, and Notre Dame out of conference.

What also is lost are the bowl matchups that might have been. Under the old system, OSU would have played a white-hot USC in the Rose Bowl, and the winner of that game would have had a legitimate claim for a mythical (pre-BCS) national championship. Another erstwhile matchup might have been VA Tech/OU in the Orange Bowl, and West Virginia/Georgia in a Fiesta Bowl.

Ummmmm...

The Globe reports on Page B3 (B3?) that the Commonwealth has borrowed $1B to cover a revenue shortfall, well in excess of the "normal" borrowing that apparently occurs in the last quarter of the year.

Revenues are down about 2.8%, which seems to be inconsistent with an economy that is growing (albeit at a low rate.) Or perhaps the low tax revenues are the proverbial canary in the colemine.

Or it is time to say "Look out below..."?

Can't Wait Until 2008

Despite the massive rally in the equity markets over the past two days (rate cut anyone?), the money markets are foretelling a huge liquidity crunch over year-end that is reminiscent of another "crisis".

Today was the first day that 1-month LIBOR extended over year-end, meaning that borrowings based on that index do not need to be repaid until the first business day of 2008. So what happened? EURIBOR jumped 64 basis points and LIBOR rose 40 bps, implying an overnight rate well into the double digits on the last day of 2007.

Not surprising given the liquidity pressures that have rocked the money markets since August, but this move actually pales in comparison to what happened the last time the markets thought the world was coming to an end: the Y2K "crisis".

On November 29, 1999, 1-month LIBOR jumped 87 bps, as there was widespread fear of systematic failure that would make any type of refinancing problematic from a technical perspective. Of course, that fear proved to be unfounded thanks to what turned out to be a sufficient level of preparedness.

Is the same thing going to happen this time? Well, our favorite indicator of market fear/greed has spiked again. but as stated before, the "forward" TED spread is still a lot narrower than the spot spread.

All of which argues that central bank intervention to relieve short-term pressure will (a) be effective and (b) isn't a "bailout" that creates moral hazard. So recent statements (reported by Bloomberg) by the ECB to supply cash "for as long as needed" and by the Fed to "provide sufficient reserves to resist upward pressure" on borrowing costs are on the up and up.

Should be a sober New Year's celebration in Washington and Frankfurt....

January 8th: Bad News for NH

Shortly before Thanksgiving, New Hampshire Secretary of State Bill Gardner did the expected: he set the date for the New Hampshire Primary to be January 8, 2008. And the big winner with that decision: The Iowa Caucuses.

Gardner, to his credit, felt that he was hamstrung by the NH statute that required the primary to be set at least seven days before any 'similar' event -- in this case, the Michigan primary, scheduled for January 15th. While most Democrats (all except Hillary and Mike Gravel) have eschewed the Michigan contest (to support to the DNC-mandated protection of the 'early' states), the Republicans expect to have a full-throated contest, which forced Gardner's hand.

While everyone has been focusing on the scant five-day period between Iowa and New Hampshire, it also matters which five days. Iowa itself is just two days after New Year's Day; and occurs on a Thursday. Coverage of Iowa will dominate the Friday (1/4) papers and broadcasts, and the "winners"(*) will also get the benefit of an additional day of bounce because Saturday (1/5) is a traditionally slow-news-day.

The battle to be on the Sunday (1/6) talk shows will pit Democrat against Republican, especially among those top-tier candidates who did not perform well in Iowa, and who need a New Hampshire bounce to stop the bleeding. Monday's (1/7) coverage will be about the
various candidates racing around the state, followed by 'soft' news stories about the early voting at Hart's Location and Dixville Notch.

The bottom line is that whomever "wins"(*) Iowa will have a huge leg up on New Hampshire, and that the cycle of press coverage is likely to make a double-winner -- like John Kerry did in 2004.

Meanwhile, somewhere in the US Capitol, Senator Lamar Alexander shakes his head and thinks of what might have been in 1996, a primary that was held on February 20th. (Alexander finished a strong third in Iowa, behind Senator Bob Dole and TV commentator Pat Buchanan; Buchanan then won New Hampshire, but Dole held off Alexander by a mere 6,000 votes, meaning that Dole became the 'insider' hope to prevent a Buchanan nomination.)

(*) - "win" means to perform above press expectations, and/or win outright.

Patriots fall to 9-2 (Against the Spread)

While there's no question that the New England Patriots are still far-and-away the best team in the NFL, there's also no doubt that the rest of the league has a glimmer of hope after last night's game with Philadephia. The Eagles played with abandon, and emptied out their bag of trickeration against the Pats -- flea-flickers, flanker options, even an on-side kick (that may or may not have travelled 10 yards, but which was not challenged by the Patriots in any event.) Moreover they took Randy Moss out of the game and put the heat on Tom Brady, including one of the most vicious sacks (on the Pats' first offensive possession) of the year.

But what the Eagles game also showed is that the pressure is on the Patriots. In successive series in the second half -- with game on the line -- the Patriots (specifically Faulk, Welker, and Maroney) dropped a series of indifferently-thrown balls by Tom Brady. The defense, meanwhile was unable to get any sort of push on Eagles' QB AJ Feeley, and the journeyman was able to exploit the middle of the field. When Asante Samuel ran down Feeley's ill-advised pass with 4:30 left, all of Patriot Nation -- and the Patriots themselves -- let out a giant sigh of relief.

The Patriots may yet go undefeated, but it looks like the weight of history -- if not that of the 1972 Dolphins -- will be with them the rest of the way.

"Inevitability" Moves Closer

The reality of 'inevitability' moved a little closer last night, as Hillary Clinton did 'what she had to do' -- she stopped the bleeding that began two weeks ago in the Philadelphia debate. She deftly played the 'gender card' while claiming not to. She did what front-runners from time immemorial have done -- agreed with her opponents as much as possible, while praising their 'courage' and 'knowledge'. Thanks for coming out.

Ironically, it was Obama and Edwards who spent much of the night on the defensive: Obama for his position on Yucca Mountain, which was hammered by Wolf Blitzer; and Edwards for both his earlier attacks ('mud slinging', as Hillary characterized it) and his votes on free trade with China and the Patriot Act (raised by Dennis Kucinich).

How did Clinton get her 'mojo' back? First, she had a better debate performance. But more important was the work done before the kleig lights came on.

Clinton's campaign has seized control of the new new media, with selective and carefuly-timed leaks to the Drudge Report(*). For instance, yesterday's Drudge featured a link to a "The Hill" story, with the breathless headline, "Hillary Landslide if Election Held Tomorrow,"trying to inoculate her against an argument (not effectively pursued in the debate, as it turned out) that she would be a weak general election candidate.

Second, in the days after the Philadelphia debate, then-moderator Tim Russert came under withering criticism from the Clinton camp, also played prominently on Drudge: "CLINTON: Russert Question 'Breathlessly Misleading'" In contrast, Wolf Blitzer's performance as moderator last night met with Clinton-camp approval (as featured on Drudge):

CNN debate moderator Wolf Blitzer did an 'outstanding' job in Vegas, a senior adviser to the Hillary campaign said early Friday. 'He was outstanding, and did not gang up like Russert did in Philadelphia. He avoided the personal attacks, remained professional and ran the best debate so far. Voters were the big winners last night.'

Rival campaigns had a slightly different view:

A rival campaign insider charges: 'Wolf turned into a lamb. No follow-up question on Clinton's huge flip on drivers licenses?'

Or, for that matter, her dodge on Iran-special-forces-as-terrorists vote.


(*-The irony of the Clinton campaign utilizing Drudge is not lost.)

"It's a free ride when you've already paid..."

Back to the world of irony on Sunday night: less than a month after being featured in a Michael Lewis piece in the NYTimes Magazine on the vagaries of making a career as an NFL kicker, Adam Vinatieri missed two field goals -- including a 29-yarder with less than two minutes remaining in regulation -- that might have given the Colts the win, despite an atrocious effort by Peyton Manning (6 INTs).

As Lewis points out, Vinatieri is not statistically more accurate than other kickers in clutch situations:

The actual number [Vinatieri has made] is 20 out of 25 with the game on the line and a minute or less on the clock (or in overtime). Adam Vinatieri, in other words, is about as likely to make a clutch kick as he is to make an ordinary kick. And he is not all that more likely to make the clutch kick than the ordinarily good N.F.L. kicker. There are virtual unknowns who have a better clutch record: former Bears kicker Paul Edinger went 9 for 9, for instance. There are kickers famous for choking who were roughly as accurate in clutch situations as Vinatieri. (See Mike Vanderjagt.) As Aaron Schatz at Football Outsiders, who calculated the figures for me, says: "The sample sizes are too small to make a lot out of them. It's not really an analysis of clutch ability as it is an analysis of clutch history. And what separates Vinatieri is that he has almost half again as many attempts as any other kicker. That, and his clutch kicks are so memorable."

But for any fan of the New England Patriots, Vinatieri will always be identified with the greatest years in Pats history -- the Snow Kick, the 48-yarder to end the Rams' dynastic dreams, and the FGs to win the Carolina and Eagles Super Bowls.

On Sunday night, Vinatieri had no answers, although he took the heat by attempting to answer the reporters' questions. Life for an NFL kicker is painful, as Lewis pointed out. Even for Adam Vinatieri.

News from Pro Wrestling

Pro wrestling has taken a few hits in the last months, but perhaps none more telling than this expose:

The Next (Disappearing) Soda Counter

Over time, as the US economy changes, businesses go in and out of style. With those changes, individual landmark shops give way to new entities, and within a few years, it's hard to even remember where the old Woolworth's (in downtown Princeton, NJ), or Bailey's (in Harvard Square), or even the Tasty (also in Harvard Square, and immortalized -- along with the late Bow & Arrow Pub -- in Good Will Hunting)




But one element of the cityscape for the last hundred years -- the independent photo shop -- is disappearing before our eyes. Moreover, while undoubtedly it will be replaced by an iPod repair shop, or a printer-cartridge refurbishing store, in the meantime a bunch of photo shops around Boston sit empty and 'for lease'.

Here's one on the corner of Washington and State Streets in Boston:














Here's one on Bromfield Street, just off Washington:
















And here's one from a recent trip to Atlanta, on Ponce de Leon, across the street from the original Krispie Kreme in Atlanta:

2004 vs. 2007

On the eve of the 2nd Red Sox parade in four years (and the 5th New England sports parade in since 2002, not including Ray Bourque's return trip home with the Stanley Cup that he had to go to Colorado to win), many in the media have been asking: which championship team was better: 2004 or 2007?

One thing that seems clear: without 2004, this year's team would have had a much more difficult time managing expectations both during the year, and especially in the post-season.

There are the obvious similarities between '04 and '07: the core of the lineup for both teams is and was -- in John Kerry's immortal words -- "Manny Ortiz"; the back-to-back power and on-base percentage has been duplicated very rarely in baseball history, most famously by Ruth and Gehrig in the late 1920s. Curt Schilling anchored both pitching staffs, although in 2004 (his first year in Boston, at age 37) he was still a power pitcher, with 8.05 Ks per 9 innings, while in 2007 he was down to just 6.02 K/9IP. Behind the plate, Jason Varitek remains the same, although his productivity has dropped (OPS down to .788 from a career high .872 in 2004), as would be expected from a catcher now 35 years old and with plenty of miles on the odometer.

But the entire infield has been turned over, and the 2007 team is clearly younger than the 2004 team (although less than one might think, with average age of 30.5 in 2004, and 30.1 years in 2007). More important, the 2007 team has young, home-grown talent in key positions: CF Jacoby Ellsbury, 2B Dustin Pedroia, closer Jonathan Papelbon, and 1B Kevin Youkilis, as well as pitchers Jon Lester, Clay Buchholz, and Manny Delcarmen. In contrast, the most prominent product of the Sox farm system on the 2004 team was Trot Nixon, although he was already a grizzled dirt dog by that time.

In the years since 2004, it has become clear that some players -- Edgar Renteria and Matt Clement leap immediately to mind, although the jury is still out on Coco Crisp, Julio Lugo, and J.D. Drew -- have trouble making the leap to playing in (i) the American League; and/or (ii) the fishbowl of Boston.

What's missing from this year's team are the "Idiots" -- most prominently, Johnny Damon and Kevin Millar -- who were both outspoken veterans who kept the media on its toes and the clubhouse loose. Millar, in particular, apparently rubbed some on the team the wrong way, but there's no question that for a team with high expectations (the 2003 team was 5 outs away from the World Series), the veterans were important. Manny, interestingly, seemed to try to take on the "Idiot" role with his we'll-win-next-year comments (on the off-day) after Game 4 of this year's 2007 ALCS.

Finally, although it's difficult to remember today, there was an ongoing debate in 2004 about whether a World Series victory without an ALCS championship over the hated Yankees would still 'count':

That's what is so disappointing about this situation. In the aftermath of the brainlock by He Who Must Not Be Named, which kept the Red Sox out of the 2003 World Series, the 2004 Boston baseball season was viewed by all as a go-for-broke endeavor. Acquire a stopper and a closer, spend money, let the free agents play hard in their walk years, and trade Nomar if you have to. Go for it.

And just about everyone bought into it. The Nation wanted the Yankees. Merely winning a World Series wasn't enough. The road had to go through the Bronx.

No one seemed to worry too much about the Yankees this year.

"It's like rain on your wedding day..."

A few years ago, Alanis Morrisette burst on to the pop music stage with a catchy tune entitled "Ironic." The lyrics purported to describe a series of events that displayed irony:

A traffic jam when you're already late
A no-smoking sign on your cigarette break
It's like ten thousand spoons when all you need is a knife
It's meeting the man of my dreams
And then meeting his beautiful wife

Of course, as any 10th-grade English teacher will tell you, most of the examples in the song were not 'irony' -- defined as incongruity between the actual result of a sequence of events and the normal or expected result -- as much examples of "a-kick-in-the-ass." (But of course, the lyrics would have been more difficult in such case.)

So what does Alanis Morrisette have to do with the present-day Red Sox?

In 2003, the Red Sox experimented (for a few short weeks at least) with the Bill-James-inspired idea of 'closer-by-committee,' which was a concept that was based on two main ideas: first, that a team's best relief pitcher (aka the 'closer') was often utilized in games that would be won anyways; and second, that almost anyone could close. The rational extension of James' philosophy was that a team's best reliever ('closer') should often be used in the 6th, 7th, or 8th inning, when the game hung in the balance; and that any relief pitcher could be used in almost any circumstance.

As chronicled in the Baseball Prospectus book, Mind Game, the plan might have worked. But with a bullpen that suffered through injuries and ineffectiveness, and a manager (Grady Little) who was not enamored with James-ian philosophy, then-rookie GM Theo Epstein pulled the plug on the experiment after two months, and traded for Byung-Hyum Kim, who led the Sox in 2003 with 16 saves.

Fast forward 4 years to the ALCS. The Indians (although it has not been widely reported) have clearly adopted some elements of James' philosophy: their 'closer' -- Joe Borowski -- is not their best relief pitcher (as evidenced by his 5.07 ERA, and 1.43 WHIP), although he did record 45 saves during the course of the season.

But in the three games the Indians have won so far, it has been the Indians' middle relief (especially in comparison to the Sox' ineptitude in Games Two (Gagne, Lopez, and Lester) and Four (Delcarmen)) that has been a large part of the difference. In particular, Rafael Betancourt has been very effective (Games Two and Four). (Zero production out of the #1, #6-9 spots in the Sox order has not helped.)

Borowski has pitched in three games for the Indians so far in the ALCS, but only once (in Game Three) in a save situation. The Sox closer (and second-best pitcher, after Josh Beckett), Jonathan Papelbon, has pitched only once (2 effective innings in Game 2.)

Losing the ALCS because you get nothing out of your major post-season acquisitions (Julio Lugo and JD Drew)? That's a kick-in-the-ass.

Losing the ALCS because Cleveland (and, presumably, its GM Mark Shapiro) does a better job applying James-ian analysis to a baseball situation than the very team that employs James? That, friends, is irony.

Forecast for Jacobs Field: Scattered Angst

MLB's staggered postseason schedule has added a new dimension to pitching staff strategy this year. With at least three planned off days in the LCS, it is very reasonable to try and let your best starting pitcher go three times since rest is much less of an issue.

So since the Red Sox have one great starter (Beckett) and three others (Schilling, Dice-K, Wakefield) who all have some questionable aspect to their potential performance, they seem like the perfect candidate to bring back Game 1 winner Beckett for tonight's Game 4.

Even though pitching on three days rest has been spotty in the postseason for even great pitchers since the Division Series was added in 1995 (team record 39-54, starters ERA 4.37, 5.4 IP, 90 pitches), the Red Sox have a seemingly sure thing in Beckett.

But that is where all the statistical forecasting gets pushed aside for the meteorological forecasting. Rain is expected tonight and is expected to intensify by the start of Game 5. What if Beckett starts tonight and the game is delayed, forcing him to cut his outing short? But then what if they play an uninterrupted game tonight and Game 5 is disrupted by Mother Nature.

Red Sox Nation favors throwing the Cy Young favorite tonight. I agree, unless Chief Wahoo has been sighted doing his rain dance....

The Wrong Brother

The Red Sox have a long history of acquiring the 'wrong' one among baseball-playing brothers:

* Dom DiMaggio rather than Joe (although Dom was, by all accounts, more admirable than Joe off the field, and a better baseball player (7-time All Star) than Vince (2-time All-Star))

* Jeremy Giambi was supposed to be the answer at designated hitter in 2003, with David Ortiz signed that same winter as back-up insurance. Jeremy was certainly no Big Papi, and has been no Jason Giambi either.

* Which brings us to the news that J.D. ($70M) Drew will likely sit tonight against Cleveland's C.C. Sabathia in favor of Bobby Kielty, who is the very definition of a replacement-level player. (Kielty was signed in August when he was literally out of baseball, having been released by the A's.) Meanwhile, over in the NLCS, Arizona relies on 24-year-old Stephen Drew at shortstop; S. Drew went 7-14 in the NLDS with 4 RBIs (albeit 1-for-4 last night), but also led the Drew family with career-smiles-on-camera (with at least 1, during Game Three in Chicago).

Which is not to say the Sox always get the wrong brother: in 1992, the Dodgers had both Pedro and Ramon Martinez on their roster, and elected to keep Ramon. The Sox signed Ramon in 1999 (to team with brother Pedro), but let Ramon walk after 2001, and stuck with Pedro until 2004.

Washington Heights' Finest

The George Washington High School in the Washington Heights section of Manhattan has a number of notable alumni. Henry Kissinger's diplomacy, Harry Belafonte's creative juices, and Rod Carew's hitting stroke all trace their origins to the school. The two alums, however, who are still grabbing the most headlines in today's world, Alan Greenspan and Manny Ramirez, are seemingly very different, yet share a common opacity to the general public. To wit:

Ramirez: "Forget about the trade man. This is the place I want to be man. It's great man. They love me here man. This is the place to be. 'Manny being Manny', it's great man."

July 31, 2005; just after having delivered a game-winning hit on the trade deadline after fully expecting to leave the Red Sox

Greenspan: "I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said."

1988; shortly after becoming Fed Chairman

You could make the argument that lack of clarity gives a Fed Chairman the freedom and flexibility to react appropriately as the economic conditions and markets ebb and flow. And that eccentricity also gives a baseball player the freedom and flexibility to "be himself" in a high-pressure media market.

But what happens after "the game is over"? Greenspan's The Age of Turbulence offers valuable insight into how he formed his worldview and applied it to his job. I, for one, can't wait until Manny's career is over and he writes his book.

"I Hate You More..."

It was noted a few weeks ago in this space that Mitt Romney (and for that matter Rudy Giuliani), had made a habit of bashing his 'home' state -- Massachusetts -- as part of his campaign's effort to position him as a true conservative who had to trim his sails to be elected in one of the most liberal states in the Union.

But the polls reported above by WBZ yesterday, has to give even the most ardent Romney supporter in Massachusetts pause. Romney does worse in a hypothetical match-up among Bay State voters with Hillary Clinton than Rudy (Romney would lose 65%-31%; Rudy would lose, 59%-34%).

Worse than the raw numbers (and a 2:1 margin is bad in any state, let alone one where you were governor) were the 'man-on-the-street' interviews put together by Jon Keller. (And Keller is no goo-goo liberal; his recent book "The Bluest State" calls Massachusetts, a "Brigadoon of 1960s liberalism.")

Red Sox-Angels

Most prognosticators are looking forward to a victory for the Red Sox over the Angels, in a Divisional Series that starts today. Moreover, the Sox won the regular season series (6-4), the Angels are suffering from injuries (for example, Vlad Guerrero will hit rather than play right field), and #1-starter John Lackey is 1-6 with a 6.27 ERA in 11 career starts against Boston.

It is clear that the Sox were built for the regular season, and they had the best record there (along with Cleveland) in the majors, at 96-66; they play a modern-day version of Earl Weaver-style baseball: pitching, defense, and three-run homers.

Yet the Angels seemingly offer a counterpoint: they are second in the AL in stolen bases (the leader, ironically, is Baltimore), after leading the league the past three seasons; over the past few days, talking heads on the Boston airwaves have repeated incessantly that 121 times the Angels went "first-to-third on a single."

But the Angels scored 822 runs over the course of the year, 4th in the League to the Red Sox's 867 (good for third); the Angels allowed 731 runs (5th), significantly more than the Red Sox's 657 (1st). Playing small ball may have its disadvantages over the course of 162 games, but it can clearly be important in the context of a short series, and especially an elimination game.

While Lackey has struggled against the Sox, Dice-K's second half (5-6, 5.19 ERA) has left everyone wondering about all of the fuss. While it may be possible that the bad second half was the result of wearing down, it also could be the result of hitters seeing Dice-K a second time; by pitching him in Game 2 (rather than Curt Schilling), the Japanese 'rookie' will be seen by the Angels for the second time in a week in a hypothetical Game 5.

A Sox opening round loss will be bitterly disappointing -- and bitterly recounted on talk radio -- but it's not outside the realm of possibility. While the Sox should win, don't bet the (subprime) mortgage on it.

1987: Yes, 1998: No, 2007: ???

Warren Buffett has a wonderful reputation as an investor. His accumulated stakes in Coca-Cola, Gillette, and the Washington Post are all good examples of "sticking to what you know" as an investment philosophy.

But his investment opportunities in the securities and funds industries are certainly not the ones about which he is the most convicted.

In 1987, the Sage of Omaha came in as a white knight to take a stake in Salomon Brothers, who had a hostile bid from corporate raider Ron Perelman on the table. Eleven years later, after a painful government bond scandal among other things, Sandy Weill took him out (of his misery???) with a tidy profit.

Then in 1998, he was asked to help stave off a global liquidity crisis by rescuing Long-Term Capital Management. Perhaps remembering his Solly experience (John Meriwether being a common denominator), he conveniently went on an Alaskan vacation with his new best friend and bungled the mechanics of his bid, which forced a consortium of banks (not including Bear Stearns) to come to the rescue.

Today, there are reports of Buffett taking a stake in Bear Stearns, perhaps to keep it independent as Wachovia and Bank of America are looking to expand their securities businesses through acquisition. Supposedly on vacation, just like in 1998 (what is it with these post-Labor Day retreats?), Buffett may change his tune on derivatives if the price is right.

Liquidity Problems North of the Border

One of the lesser publicized, yet more dramatic, stories of this summer's liquidity crisis has been the literal shutdown of the asset-backed commercial paper market in Canada.

Why Canada? It has very little to do with the underlying asset quality, and almost entirely to do with how the market operates. Dominion (DBRS), the Canadian rating agency, has continued to give most ABCP prime (investment grade) credit ratings, in spite of the fact that there was never any liquidity backstop from banks in the case of market turmoil. Standard & Poor's doesn't have the same policy, and for good reason, as a liquidity backstop for a CP program is an investor's only assurance of timely repayment.

Good thing the Canadian market is only about US$32 billion (as compared with almost US$2 trillion for all of the USCP market), although that has not meant any less angst and anxiety for market participants.

Who's Afraid of the TED spread?

A lot has been written recently about the rise in yield of LIBOR, the short-term rate that banks charge each other, even as rates on other short-term fixed income instruments have fallen. Reasons have ranged from impact of the collapse of the asset-backed commerical market to hoarding of cash (and not lending it out) to broader liquidity issues.

One thing that we learned from our fixed income strategist mentor (for me, the great Curtis Shambaugh) is that if you are looking for a reliable barometer of fear and greed, the TED spread is practically unbeatable.

The "T" in TED is the Treasury bill yields, and the "ED" is Eurodollar futures, the way the market trades future 3-month LIBOR settings. Because of their risk-free nature, Treasuries will always yield less than LIBOR, so the wider the spread between the two, the more fear is apparent in the market.

Therefore the spot TED spread is very wide (at a 20-year high according to some), indicating lots of current fear. But the future TED spreads are much narrower, since the T-bill curve is positively sloped (3-month bill yield = 4.07%; 6-month bill yield = 4.20%) but the Eurodollar curve is massively inverted (Sep '07 =5.56%, Dec '07 = 4.76%).

Maybe things aren't going to be so bad after all...

Night Tennis II

In response to comments:

1. I agree with surprise at the 50% profit margin ($110M out of $220M). Not sure if the number is inclusive of the purse or not, but is a difference of 10% (approximately $20M out of $220M).

2. And what other sport cares about making sure players are adequately rested vs. insuring good television coverage? (The (presumably less popular) men play 5 sets -- not three -- on 24 hours' rest.)

3. "Grinding" works on the PGA Tour, admittedly. But the point is that it has worked a lot better in the post-Tiger Era. In 1996 (the last year before the PGA Tour was "Tiger-ized", 10th place on the money list was worth about $977K (And who was #10? David Duval); for the ATP Tour, the money was about the same: $961K (Wayne Ferreira). As noted earlier, today #10 on the golf list is worth about 4x as much money as #10 on the tennis list.

In 1996, Pete Sampras stood astride the tennis world, but he did nothing to 'raise the tide' for his fellow competitors; Alexander Waske makes $176K at #100 on the tennis list. In contrast, Cliff Kresge (#100 on the golf list, earning a cool $806K so far this year) ought to be thanking Tiger every time he walks by him in the locker room.

One other point: not only to the tennis pros make less, their travel costs have to be more. Take the month of April: the ATP Tour touches down in Houston ($416K total prize money) and Valencia, Spain ($416K) (both the week of 4/9); Monaco ($2.45M) (week of 4/16); Barcelona ($1M) and Casablanca ($416K) (week of 4/23); and Munich ($416K) and Estoril, Portugal ($625K) (week of 4/30).

The PGA Tour's April schedule starts with a Major (The Masters in Georgia), with a purse of $7M (week of 4/8); then to Hilton Head, South Carolina ($5.4M) (4/15); New Orleans ($6.1M) (4/23); and Dallas, TX ($6.3) (4/30).

More on Night Tennis

A few more notes on night tennis at the US Open, which was also featured in Greg Garber's ESPN column today:

1. Television dollars are clearly driving the scheduling, but that doesn't necessarily help the men's tour (ATP) rather than WTA (women's tour) or the US Open/USTA itself.

2. In addition to being the only Grand Slam tournament on US soil, the US Open was the first tournament to move to night tennis, according to Garber (Australia has subsequently followed suit, altough Wimbledon and Paris remain day-only events).

3. If the women are the main draw, why are the women's semis being played during the afternoon? (The mens' SF are also being played in the afternoon, but on a weekend, rather than a Friday.)

4. In response to a comment, if Meghann Shaughnessy had defeated Sybille Bammer in the second round, and Jamea Jackson had defeated Nicole Pratt in the first, bringing the Yanks closer to .500 (31-33, ex. additional results), then...what exactly?

More from Daly City (II)

The strange tale of Norman Hsu, fundraiser and felon, continued yesterday.

After posting $2M bail last week, Hsu was scheduled to appear Wednesday before a California judge to ask that the bail be reduced; instead he skipped town and was arrested (with FBI assistance) in Colorado. He also apparently required medical attention, at the time of the arrest.

More, undoubtedly to follow...

Coach Hubie Brown Visits Flushing Meadows

You are the head of the ATP Tour.

You have seen tennis fall way behind its main competitor (golf) in the hearts and minds of American sports fans since the advent of the Tiger Era.

You know that at comparable spots on the respective money lists, your tennis pros -- whose careers are significantly shorter -- make 1/4th to 1/3rd of the money that the equivalent spot on Tim Finchem's golf pros make. (E.g., tennis #10 Richard Gasquet: $791K; golf #10 Adam Scott: $2.96M; #20 tennis pro Carlos Moya: $676K; #20 golf pro Mark Calcavecchia, $2.29M; #50 tennis pro David Nalbadian, $350K; #50 golf pro Billy Mayfair, $1.38M)

You also know that the PGA has upped the ante with a flawed -- but still widely publicized -- Fedex Cup.

And finally, you get the most dominant player of the era -- Roger Federer, his sport's answer to Tiger Woods (at least according to Gillette) -- playing the highest-ranked, and last-remaining, US player -- Andy Roddick -- in the sole Grand Slam event played in America.

So what do you do?

Naturally, you start the match after 10pm, and for the second night in a row, an Open semifinalist is determined after midnight; the night before, 15th-seeded David Ferrer defeated popular #2-seed Rafa Nadal in four sets, the final point coming at 1:50am.

See, if you want to attract a new generation of fans -- young players who will in 20 years be interested in buying tickets to Grand Slam events -- there's no better way than having the biggest point of the night (Federer's handcuffing block of Roddick's 140-mph serve at 4-4 in the second set tiebreak) be seen by dozens of television viewers.

Lost In Translation

Certainly one of the most difficult challenges in professional sports is performing at the highest level while adjusting to a new culture. The prevalence of Japanese baseball veterans moving to the Major Leagues gives us some interesting data to observe.

Hitters, whether emphasizing speed or power, seem to do okay. Pitchers, on the other hand, have been maddeningly unpredictable (see: $46m disaster and Fat Toad).

Which brings us to the curious case of Hideki Okajima, the much less hyped of Boston's two Japanese pitching acquisitions this offseason, but arguably the more valuable. Okajima's star was born when he surprisingly closed out the first Yankee game of the year, and he went on to go 3-0 with 4 saves, allowing only 6 ER, 32 H and 12 BB, in his first 51 games of the year (55.1 IP).

But since then he is 0-2, allowing 7 ER, 12 H and 5 BB, in his last 10 games (10 IP), including allowing the game-winning HR tonight.

So what to make of the drop off in performance? One explanation could be that he's having trouble adjusting to an increased workload.

Since 2002 in Japan, Okajima never pitched in more than 55 games or logged more than 55.2 IP in any one season. So having busted through those barriers with more than a month left in the regular season, he is sailing into uncharted waters as far as recent history is concerned.

So much like the NBA rookie who "runs into the wall" in February or March as he adjusts to the rigors of his new travel and practice/game schedule, Okajima could be out of gas come October. For the sake and sanity of Red Sox Nation, let's hope that the Wizards of Yawkey Way figure out how to get Clay Buchholz on the postseason roster....

Favorite Sons

In the late 1780s, William Safire reports in his "Safire's New Political Dictionary", George Washington was referred to as "Freedom's Favorite Son." In the 1830s, Martin Van Buren was "New York's favorite son", and a few years later, Henry Clay was the same for Kentucky.

Throughout the succeeding century, it was an American tradition, as Safire explains, for the leading politician of a particular state to go to the national convention as the "favorite son" and control that particular state's delegates; the purpose was not to gain the nomination, necessarily, but to promote his particular state's interest.

The phrase -- and the gambit -- has gone out of style in the last few years, and as almost all state's delegates are elected by direct voting, it seems unlikely to return.

But two GOP candidates have taken the demise of the 'favorite son' gambit to an extreme: Rudy Giuliani and Mitt Romney have made an art of running against their respective home states.

Romney has famously been running against Massachusetts for the last several years.

"Being a conservative Republican in Massachusetts," [Romney] told a GOP audience in South Carolina, "is a bit like being a cattle rancher at a vegetarian convention."

Needless to say, his former constituents (aka, citizens of Massachusetts), are less then enamored with Mr. Romney's current assessment of the state.

Guiliani's indictment of New York City is more nuanced. He does not so much criticize NYC, as (apparently) stand aside while conservative Republicans around him do so:

Speaking before the Alabama legislature this spring, he received a standing ovation, and Governor Bob Riley told him, “One of these days, you have to tell me how you really cleaned up New York.” To conservatives, pre-Giuliani New York was a study in failed liberalism, a city that had surrendered to moral and physical decay, crime, racial hucksterism, and ruinous economic pathologies. Perhaps the most common words that Giuliani heard when he travelled around the country this spring were epithets aimed at his city (“a crime-infested cesspool,” one Southern politician declared), offered without fear of giving offense. Giuliani cheerfully agreed.

Giuliani so far has avoided direct criticism of his city; Romney does not bother so limiting himself.

Candidates' background has already become something of an issue in this election. Barack Obama is a Senator from Illinois, but was born in Hawaii and grew up (for a few years) in Indonesia. Hillary Clinton has made claims to Illinois, Arkansas, and (now) New York, where she serves as a Senator.

The trend towards nationalization of the election means that viable candidates are becoming 'citizens-of-the-world', or at least citizens-of-the-entire-nation. If Romney or Giuliani are ultimately successful, it will accelerate that trend. At the very least, it shows that the 'favorite son' gambit is probably a distant memory.

The Heat is On

If you thought Michigan fans were dissatisfied with Lloyd Carr going into this season, then get ready for a virtual bonfire tonight and the rest of this week after a 34-32 loss to I-AA Appalachian State (while Division I-AA is now known as Football Championship Subdivision (FCS), it is still light-years from BCS/I-A; the phrase "former I-AA school, Appalachian State" implies that the Mountaineers have moved up to the main division, rather than merely a re-naming of the division).

What is amazing about the victory is that the Mountaineers blew a two touchdown lead (28-14, late in the first half), put a two-minute drill together in the fourth quarter to re-take the lead at 34-32, and then blocked a field goal (for the second time in the fourth quarter) to preserve the win.

The last big-time coach to lose to a I-AA school (Jack Crowe of Arkansas, after a loss to The Citadel in 1992). Carr had best defeat Ohio State in November.

Pitchers with 1,000 Appearances

Over at the Fens last night, a big cheer went up with the announcement that Mike Timlin was entering the game, and would be making his 1,000th big league appearance, which is good for 13th on the all-time list. (Of course, the cheers would have been muted if the fans had known that Timlin was headed for a 0.2 IP, 4 H, 4 ER, 1 BB line.)

The all-time list of career games pitched is an intriguing one. A few expected names (Dennis Eckersley (4th all-time, Hall of Famer), Hoyt Wilhelm (5th, HoF), Lee Smith (8th, likely HoF) and Goose Gossage (12th, 1002 G, should-be HoFer), mixed in with Mike Stanton (2nd, active leader), John Franco (3rd), Dan Plesac (6th), Jose Mesa (9th, active), Mike Jackson (10th), and Roberto Hernandez (11th, active).

Two other pitchers of note on the list: Kent Tekulve (7th) is probably not a Hall of Famer, although his resume is not shabby: 1050 G, 2.85 ERA, 184 Saves. Like Sparky Lyle and Mike Marshall (and for that matter, Gossage) he suffers from the lack of clarity about closers' standards in the pre-Eck era.

The all-time leader is Jesse Orosco with 1252 G. Orosco's record is similar to Tekulve's (87-80 for Orosco; 94-90 for Tekulve; 3.16 ERA vs. 2.85; 144 S vs. 184); but Orosco, no matter his numbers, holds a special place in the 'hearts' of Red Sox fans.

Bernanke's Put-etto

In Ben Bernanke's much anticipated speech today in Jackson Hole, he essentially absolved the Fed of responsibility for protecting market participants from bad financial decisions, emphasizing vigilance yet patience and allowing others to make policy decisions that should relieve pressure on the economy's best friend: the US consumer.

Equity markets liked the speech, even though the market expectation for Fed rate cuts this year has been tempered. Unlike his predecessor, who was famous for swiftly cutting rates to ensure liquidity, Bernanke seems to be content biding his time despite some implicit pleading by others.

Of course this positive market action could just be month-end (and quarter-end for some broker-dealers) window dressing....

College Football Preview and Countdown (Final)

With the kickoff to the college football season just hours away, it's time to unveil the projected national champ:

#1 - Virginia Tech (currently #9 in the AP Poll)

The Hokies have been in the news a lot recently, including the tragic shootings this past spring, and of course, the off-the-field 'exploits' of this famous alum:



Key Game: Coach Beamer and the Lunchpailers will know early whether the Hokies can channel their emotions: September 8th @ LSU. Win, and the road to January 7th opens with only a Thursday Night (November 1st) game @ Ga. Tech standing in the way; lose, and the road seems much harder, including visits to Blacksburg by Fla State (Nov. 10th) and Miami (November 17th).

'Wither' the Yankees?

The complaining from long-time Yankee fans is hard to stomach (and by "long-time", we mean as long as Mr. Intangibles has been in the big leagues, the equivalent of the "pink hats" in Boston.) The Yankees have won 9 division titles in a row (Quick Quiz: name the last AL East team other than the Yanks to win), but the dream, as they say, is about to die, notwithstanding the results the past two, er three, nights(*). To put it in perspective, the last time the Red Sox won a division title (1995), the lineup included the following immortals (note: because of the strike, the Sox played just 144 games in 1995):

C - Mike MacFarlane (115 G)
2B - Luis Alicea (132 G)
3B - Tim Naehring (126 G)
SS - John Valentin (135 G)
OF - Mike Greenwell (120 G)
OF - Troy O'Leary (112 G)
OF - Lee Tinsley (100 G)

Add 1B Mo Vaughn and DH Jose Canseco to the mix and you could imagine how the Sox could compete in the tabloids, if not on the field...

As for burning through pitchers, it is a Yankee tradition that precedes Joe Torre (who, by the way, preceded Mr. Jeter by one year in New York). In 1989, for instance, the Yankees had a then-23-year-old Al Leiter throw 174 pitches in a single outing; he then struggled through a total of fewer than 10 major league innings in the next three years -- combined. (Leiter, it should noted, is currently a color analyst on the YES Network; perhaps the Bombers felt guilty about blowing out a young arm.)

What does that mean to Roy Oswalt? The Astro's starter has been a workhorse over the past few years, including leading the league in starts twice (2004, 05) and has been in the Top Ten in Innings Pitched 5 of the past 6 years (including 2007, where he is currently third). Let's hope that the modern pitch count era means that Mr. Oswalt won't be the "victim" of a modern-day Billy Martin next year in Houston.

Quick Quiz Answer: Your Baltimore Orioles in 1997

(* - Sox lost, 5-0, as Yanks completed the sweep.)

Happy Birthday, Roy Oswalt

The pride of Weir, Mississippi, Roy Oswalt, turned 30 today and celebrated by shutting the resurgent Cardinals out on 4 hits over 7 innings, striking out nine. Exactly how good is old Roy?

Well, the list of pitchers who have finished in the top five in Cy Young voting six times during their first seven years in the league has exactly zero entries...until this November when Oswalt (14-6, 3.21) will start the list unless the wheels completely come off the cart. The only year he didn't crack Top 5 was 2003 when he went 10-5, 2.97 in an injury-plagued season.

He is tops in the majors with 112 wins since 2001, already top 15 on the career list in winning percentage and Adjusted ERA+ and has won 53.2% of his career starts. Throw in 19-1, 2.46 in 24 career games just against the Reds and you start to get a sense that he's pretty good.

So the guy whose career was saved by a loose spark plug has quietly amassed the most consistently dominant beginning of a starting pitcher's career in baseball history. Let's just hope that 8-10 years from now he doesn't end up like the pitcher whose career was most like his through age 28.

Daly City Update

As predicted, Hillary's campaign has announced that she will divest herself (by giving to charity) close to $23,000 contributed by Norman Hsu. Others appear ready to follow suit, including Al Franken, a Senate candidate in Minnesota, Reps. Michael Honda and Doris Matsui of California and Rep. Joe Sestak of Pennsylvania.

College Football Preview and Countdown (Part IX)

Back to the college football countdown:

At #2, LSU (currently #2 in the AP poll)

The most recently highlight for LSU was the National Championship under Nick Saban in 2003; the seeds for that championship were planted a year earlier in one of the greatest finishes ever, the so-called "Bluegrass Miracle":



Key game: There are no off-days in the SEC, but LSU has all four ranked (pre-season) opponents at home (Va Tech, Florida, Auburn, and Arkansas). The 'trap' game (although it won't be a surprise) is Nov. 3rd in Alabama, against a Tide team now coached by the aforementioned Mr. Saban.

Taking It In the Shorts

Recent volatility and uncertainty is part of the market's unending pendulum swing between fear and greed, but the specifics around this summer's high drama deserve special mention. Let's lay out the backdrop:

1) New Fed Chairman

Ben (not Benjamin) Shalom Bernanke was sworn in as Fed Chairman on February 1, 2006, but it took the greater part of eighteen months for him to meet a true challenge. Oh, and by the way, good luck following the legendary Alan Greenspan and establishing your own credibility.

2) Single source of market disruption: Credit

The economy seems fine, inflation is relatively contained, and global issues are benign. Far and away the main reason for this disruption is lenders have been doing silly things in the credit markets.

3) "Alpha" dogs

The proliferation of hedge funds and accompanying strategies has led to money flow into some rather strange places. Universa Investments is an example of a fund that seems to pin its investment strategy on short-selling and extreme levels of volatility. Just the latest in the never-ending quest for "alpha".

So what did this cocktail produce? Well the only further background information needed is the characteristics of a credit instrument. Being long credit means that you are short optionality, and therefore volatility. In a steady state world, everyone gets their loans paid back (or doesn't have to pay Par for a defaulted security as a result of a credit derivative contract settlement). But in a more volatile environment, the best case for a creditor is still return of principal, but the likelihood of loss is much greater. Therefore it is not surprising to learn that credit spreads and market-based volatility measures (such as the VIX) are highly correlated.

Fast-forward to the credit contagion that started with the Bear Stearns Asset Management announcement. Soon all the aggressive credit deals that had been originated in the past several months (mortgages, LBOs, CDOs, etc...) were under pressure and liquidity became an issue across the globe. Markets began moving (up and down) in whipsaw fashion and volatility spiked.

Enter the Fed. The Federal Reserve Act states:

The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.

But everyone knows that financial market stability is an "unlegislated" mandate of the Fed as well. The ingenious aspect of the Fed's response to panic in the market was in the timing. To wit:

1) On the third Saturday of every month, index options expire. Those options stop trading at the end of business on Thursday, and the index settlements are determined based off the opening prices on Friday.

2) The equity market hit new lows on the afternoon of August 16th (Thursday), which also coincided with a spike in the VIX to 37.5.

3) The Fed's policy response was released after the index options stopped trading but before the index settlements were determined.

4) The most leveraged way to play any market is through options, and one would imagine that short-sellers (long puts, short calls) and "long vol" plays were very instrumental in driving the market lower and vol higher.

5) By acting between the end of trading and settlement, the Fed "hung the shorts out to dry" as equities rallied over 5% and vol dropped about 30% as a result of the announcement.

The response can therefore be seen as a warning shot to short-sellers, assuming that the Fed believes that "unfettered" short selling drives up volatility and therefore damages the credit market even more.

In addition, the Fed didn't even use the most famous tool in their monetary policy tool chest: the official Fed Funds target. They get to save that for when economic, not just market, conditions warrant it. And it also gives Mr. Bernanke a another notch in his credibility belt, which never hurts.

More from Daly City

As blogged yesterday, the Hillary Clinton campaign (and the John Kerry campaign in 2004) received numerous contributions from one Norman Hsu, together with many from a Paw family that currently resides in a rather modest home once owned by Hsu.

Today, the Los Angeles Times reports that Mr. Hsu previously pled guilty to grand theft in California, agreed to serve three years in jail, and then disappeared.

While it is not expected that Mrs. Clinton (or any other candidate) personally vets campaign contributors, it is undoubtedly true that no campaign wants to accept money from convicted felons, or allow them to 'bundle' funds on behalf of the candidate. Hillary's campaign pushed back yesterday on the WSJ story:

"Norman Hsu is a longtime and generous supporter of the Democratic Party and its candidates, including Sen. Clinton," Howard Wolfson, a spokesman for the campaign, said Tuesday.

"During Mr. Hsu's many years of active participation in the political process, there has been no question about his integrity or his commitment to playing by the rules, and we have absolutely no reason to call his contributions into question or to return them."

But with today's news, it seems likely that Mrs. Clinton will be returning at least the $44,000 that Mr. Hsu personally gave her. Other politicians, including (according to the LA Times), Democratic Sens. Dianne Feinstein of California, Edward M. Kennedy of Massachusetts, Barack Obama of Illinois and Joseph R. Biden Jr. of Delaware, may follow suit.

College Football Preview and Countdown (Part VIII)

Back to the college football countdown:

#3 - University of Florida (currently #3 in the AP poll)

A year removed from the National Championship, the Gators seem to have re-loaded under Coach Urban Meyer. But before Coach Meyer, there was Gator football, Emmitt Smith-style:



Key Game(s): It's a good thing that the Gators reloaded, because the schedule is a killer. Beginning on Sept 15th (Tenn at home), Sept 22nd (@ Ole Miss), Sept 29th (Auburn at home), and finishing October 6th @ LSU. The backhalf of the schedule includes games @ Georgia (Oct. 27th), @ South Carolina (Nov. 10th), and finishing with Fla. State @ home (Nov. 24th). Throw in a likely trip to the SEC Championship game as the representative of the SEC East.

Whence the Yanks...

Despite all current visual evidence to the contrary, the New York Yankees' postseason hopes are still very much intact (man, that sounded weird). But as everyone south of the imaginary Red Sox/Yankees border knows all too well, it's not getting into the playoffs that matters, it's taking home the World Series Trophy that defines a successful season in the Bronx. So let's examine the reasons why or why not the Yankees can be successful in October.

Reason #1 Why: No team has done more to improve their roster since April

Clemens, Hughes, Duncan, Molina, Betemit, Chamberlain, Ramirez. It's incredulous at this point that some were actually counting on Pavano, Cairo, Nieves, Myers, et al to contribute to this team. No major changes to the starting lineup, but 1 through 25 the Yankees have taken huge steps towards improving the roster during the season.

Reason #1 Why Not: They're not forcing the action

No team is better at waiting the pitcher out and getting on base combined with power, but too often there is no attempt to force the action on offense. Other AL contenders (Angels, Tigers, Red Sox, Mariners, Indians) are all better at "manufacturing" runs or making plays than the Yanks, in spite of some statistics to the contrary (NYY's 99 SBs rank 4th in the AL). In the post-steroid era, more aggressive offensive play does seem to matter more.

Reason #2 Why: Who cares how bad Mussina is?

The new postseason schedule will allow teams to get away with a short pitching staff even more than in previous years. Wang, Pettitte and Clemens are going to get almost all the postseason starts and can prepare for six inning stints which will maximize effectiveness.

Reason #2 Why Not: Good pitching beats them

Kazmir, Guthrie, Halladay, Escobar, and Verlander (twice) are all top 20 in the AL ERA and have all beaten the Yanks since the All-Star break. These are the guys you have to face every game in the playoffs.

Reason #3 Why: The Bullpen

Despite Torre's inability to think further than the next out in managing a pitching staff (see: Scott Proctor getting used and thrown away and the strict "Joba Rules" that Cashman and crew have mandated for their prized, yet tenderly young, phenom), there is a lot of reason for optimism this year. Chamberlain to Vizcaino to Rivera is as good a bullpen bridge as the Yanks have had in recent memory, and that allows for high ceiling types such as Ramirez and Farnsworth to work the other situations.

Reason #3 Why Not: The Bullpen

Time has finally caught up with Mo Rivera's ability to shut down teams over multiple innings. I used to think that they should play the outfield at shallow depth behind Rivera since the only way opposing batters got on base was broken-bat bloopers to the outfield. No longer. Mo is letting up a .367 SLG this year, which doesn't sound like much until you realize that his highest previous SLG against is .300. In addition, there is no reliable lefty.

So what does this all add up to? We'll all have to wait and see if it even matters.

By the way, 94 wins (22-9 the rest of the way) is what it's going to take to get in.

Welcome Aboard

A big Allerton hello to guest blogger Matt ("Easty") Eastwick, who joined the discussion today. His first post is here, and we look forward to commentary on topics ranging from the Yankees' playoff roster to changes in the VIX.

Welcome aboard, Easty.

The Clintons' Favorite Daly City Address

The green house you see above is located at 41 Shelbourne Ave., Daly City, California. As the WSJ reported this morning, six residents of that house -- all members of the Paw family, who all apparently received Social Security cards in 1982 -- have given a total of more than $45,000 to Hillary's various campaigns since 2005.

Coincidentally (or not) Norman Hsu, a wealthy New York businessman, who has pledged to raise more than $100,000 for Hillary's presidential campaign, once lived in the same house -- or at least listed the address. Moreover, Mr. Hsu's giving patterns seem to mirror those of the Paw family: in 2004, both Hsu and the Paw wrote a series of checks to John Kerry's campaign on or about the same day.

It is, to be fair, unlikely that neither Hillary nor Kerry are aware of any connection between Mr. Hsu and the Paws. But there's no question that frontrunners -- and their respective staffs -- are held to higher standards on fundraising. Just ask John Edwards in 2004.

College Football Preview and Countdown (Cont VII)

Next on the college football countdown:

#4 University of Southern California (currently ranked #1 in the AP Poll)

Not exactly a highlight, but rather the enduring symbol of the (pumped and jacked) Pete Carroll-era Trojans:



A more USC-friendly video is here (note carefully who the 'blocking back' is ahead of Charles White: a young Marcus Allen):



Key game: January 7th, opponent TBD. BCS title game, but having not been tested all season, USC will not prevail.