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: