The financial system | What went wrong | Economist.com

“A COMPANY for carrying out an undertaking of great advantage, but nobody to know what it is.” This lure for the South Sea Company, published in 1720, has a whiff of the 21st century about it. Modern finance has promised miracles, seduced the brilliant and the greedy—and wrought destruction. Alan Greenspan, formerly chairman of the Federal Reserve, said in 2005 that “increasingly complex financial instruments have contributed to the development of a far more flexible, efficient, and hence resilient financial system than the one that existed just a quarter-century ago.” Tell that to Bear Stearns, Wall Street’s fifth-largest investment bank, the most spectacular corporate casualty so far of the credit crisis.

It seems like whenever there’s a a major disaster in one of the markets, the comparison to the South Sea Bubble inevitably gets trotted out … but rather than bore you all with a history lesson, I’m going to recommend a wonderful novel by David Liss, entitled A Conspiracy of Paper, a historical mystery set during the the world’s first stock market crash, which will give some insight into what happened nearly 300 years ago, wrapped up in a story of pugilism and prostitution.

And then, once you’ve finished A Conspiracy of Paper, you can read The Coffee Trader (the introduction of coffee to the commodities exchanges in Amsterdam in the mid 17th Century) and A Spectacle of Corruption (about the machinations involved in an early 18th Century British national election) … all are timely novels to read in the current political and economic climate … a little history to put current events into perspective.

From the Wall Street Journal (subscription required):

On the Web, Signs of a Click Recession
Google Feels Pinch As Ad Growth Slows; Sweeter Deal for Yahoo?
By KEVIN J. DELANEY
February 27, 2008

Internet advertising may be showing itself more vulnerable to a consumer slowdown than many in the industry had hoped, according to new search-ad data released this week.

The report from research firm comScore Inc. showing a decline in the number of consumer clicks on Google Inc. search ads in January amplified existing concerns about the effect of a broader economic slowdown on the Internet. Many online-ad experts have played down such worries, predicting any economic weakening will be offset by a continued shift in ad spending from traditional media to the Internet. Google Chief Executive Eric Schmidt said the company hadn’t seen any impact from macroeconomic softening when the Internet company reported earnings Jan. 31. But some investors and analysts have grown anxious in recent months that any pullbacks in consumer spending would hurt online ads.

It’s a good thing I’m not planning on retiring anytime soon … with the way the markets have been moving the past few weeks, I’m only $195.00 “richer” than I was on January 1st … pretty much every dime I’ve put in, along with my company match is gone; altogether, about a 16% loss.

On the bright side, I’m now buying my company stock at an annual low … although, I’d rather be buying it at the significantly higher price at which it was trading a couple months ago.

The subprime mess is bad. I’m still surprised I managed to not only qualify for, but close a loan … and a prime loan at that. I’m especially glad I didn’t borrow as much as I qualified for so that I don’t have to worry too much about being able to make the payments.

But I’m guessing I won’t be flipping my place to upgrade anytime soon.

Utah Cyclocross state championships this weekend … I think we know who has last place in Masters 35+ B wrapped up; unless someone out there wants to challenge me for the slot.

So the past couple days, the stock market has been down; including a little mini-crash (or “market correction”) yesterday … what does this mean? Well, for me it means that since Friday, I’ve lost almost $4,000.00.

So what do I do? I take the opportunity to rebalance, shifting some money out of my stable value fund to buy more of my company’s stock. We’ll find out today if this was a good plan, or if I should have waited.

In other news, the Financial Times is reporting:

The rapid expansion of biofuel production may be welcome news for environmentalists but for the world’s beer drinkers it could be a different story.

Strong demand for biofuel feedstocks such as corn, soyabeans and rapeseed is encouraging farmers to plant these crops instead of grains like barley, driving up prices.

Read more

It’s a good thing I’m a vodka drinker, because as we know, vodka can be distilled from damned near anything; even grapes, as evidenced by my current favorite, Ciroc … mmm, yummy.

My company’s holiday party is tonight … and where am I?

At home, in bed, watching TV and typing this blog entry. And for once, it’s not because I’m feeling anxious about showing up … I pretty much just flat-out do not want to go.

Tomorrow is the day that we find out what our annual raises are, and I’m not feeling very optimistic, since I’m already pretty much at the top of the payscale for someone in my position.

So, I’m not feeling very celebratory, and that’s okay. Who knows, maybe tomorrow I’ll feel differently … I could be pleasantly surprised, but for once I think my pessimism is justified.