Paulson Housing Bets Make $2.7 Billion

“Paulson earned an estimated $1.14 billion in performance fees for the nine months ended on Sept. 28. Fees on Paulson’s other eight funds bring his total to $2.69 billion.

Paulson … donated $15 million to the Institute for Foreclosure Legal Assistance, a new nonprofit formed that month by the Center for Responsible Lending, a borrowers’ advocacy organization in Durham, North Carolina.

‘Given the success of our funds, we feel it is important to help those who have suffered the most as a result of predatory subprime lending practices,'’ Paulson wrote to investors after the third quarter.’”

He donated around one half of one percent of this year’s profits, I love it. Is that help or good public relations? You can’t save people from themselves.

The Secret to Raising Smart Kids, by Carol Dweck (rhymes with dreck)

“We found that intelligence praise encouraged a fixed mind-set more often than did pats on the back for effort. Those congratulated for their intelligence, for example, shied away from a challenging assignment—they wanted an easy one instead—far more often than the kids applauded for their effort. (Most of those lauded for their hard work wanted the difficult problem set from which they would learn.) When we gave everyone hard problems anyway, those praised for being smart became discouraged, doubting their ability. And their scores, even on an easier problem set we gave them afterward, declined as compared with their previous results on equivalent problems. In contrast, students praised for their effort did not lose confidence when faced with the harder questions, and their performance improved markedly on the easier problems that followed.”

Yeah, the kids who had their back patted for effort didn’t “lose confidence,” but they still couldn’t solve the difficult problems that followed.

(Aside: Did taxpayers underwrite this “six-module ‘Brainology’ interactive computer program”? You can bet they’ll pay for it!)

There are problems with this besides the awful jargon, “fixed mind-set” and “growth mind-set.” Obviously you want to encourage every kid to work hard to solve problems, but… demonstrating my “fixed mind-set,” I think there are four types of people:

1. Smart & Hard-working
2. Smart & Lazy
3. Dumb & Hard-working
4. Dumb & Lazy

The dumb, hard-working kids can do as well or better than the smart, lazy kids but they’ll never touch the smart, hard-working kids, no matter how much you pat them on the back.

The real question is what motivates a smart person to be hard-working as well? Can you teach somebody to be hard-working?

“… great accomplishment, and even what we call genius, is typically the result of years of passion and dedication and not something that flows naturally from a gift.”

Wrong. Great accomplishment is almost always the result of passion, dedication, and a gift. Just ask Tiger Woods.

My Short March Through China, by Gary Rosen

“It is Hong Kong’s good fortune to possess, in addition to its corporatist elite, a vibrant civil society, the rule of law, and a free press; China has no such safety valves for the discontent of its people, no resilience in its politics. The echo chamber of today’s Chinese regime—with its slogans and show trials, its claims of expertise and openness, its pretense of oversight and accountability—cannot do the work of pluralist democracy. As James Madison knew, an extended republic, even a ‘people’s’ republic, requires institutional checks and balances if it is not to devolve into a tyranny—or to remain one.”

Three questions I ask myself as the pretty boys check me out on the street, staring at my midsection:

1. Is he admiring my fairly flat tummy? or
2. Is he judging the size of my “package”? or
3. Is he enamored of my fabulous farrier’s belt?

MBIA, Ambac Bear Ackman to Donate Profit to Charity

“Ackman said he personally stands to gain about $500 million if MBIA’s holding company failed and that amount would be donated to charity. The fund itself stands to make “multiple billions of dollars'’ if the holding companies of MBIA and Ambac were to fail, he said.”

Good things sometimes come to those who wait and wait and wait and wait.

Click to enlarge (Ambac (ABK), Monthly)

Here’s a flyer for October from Century 21’s branch office in my development here in Beijing. The top section lists apartments for sale and the bottom section lists apartments for rent. You can see that the smallest apartment listed for sale, one room at 59 square meters (635 square feet), is selling for 1,150,000 yuan (US$155,466). That’s 19,491 yuan per square meter (US$244.82 per square foot). The largest apartment listed is four rooms at 206 square meters (2,217 square feet) for 5,150,000 yuan (US$696,218). That’s 25,000 yuan per square meter (US$314.04 per square foot).

The rental prices range from 3,200 yuan (US$432) to 11,000 yuan (US$1,487) per month, with most listings for two to three bedroom apartments falling in the 5,500 to 6,500 yuan (US$743 to US$878) range.

I think the average monthly income in Beijing is around US$300 to US$500, so even renting, let alone owning, one of these apartments is a wild dream for the great vast majority (the “average” person). China’s new middle class gets lost in the averages, but they definitely exist and are anxious to start consuming like Americans — houses, cars, big-screen TVs, private education, winter vacations on the beach, you name it.

Click to enlarge

For the last month or so folks have been looking for the yield on the ten-year note to get down to 3.971% — it flew through there yesterday (Monday). The flight to safety has been pretty dramatic and I expect things to calm down for a bit here. My usual caveat applies: I’m probably wrong.

Click to enlarge (Ten-year US Treasury Note Yield, Daily)

If you prefer to think in terms of price instead of yield (I never do, yield is much more intuitive to me), here’s the daily chart of the 10-year T-note futures (December contract).

Click to enlarge (Ten-year US Treasury Note Futures, December contract, Daily)

Prem Watsa has never been more bearish, by Derek DeCloet

“The Fairfax chairman said [that structured] products were always flawed because they shifted the risk away from the person making the lending decision - which encouraged auto finance or mortgage companies to give loans to almost anyone, since they would not have to bear the losses on defaults.

‘If I’m an investor, why would I ever buy something where the credit decision has been delegated?’ he asked.”

I remember when I took out a student loan (long ago), I asked the banker if they held the loan and she said, no, we sell it immediately to Sallie Mae. I said, so you have no risk and collect an origination fee, that’s a pretty sweet deal, and she said, ain’t life grand!

-via Controlled Greed -

Unlocking the Benefits of Garlic

“… eating garlic appears to boost our natural supply of hydrogen sulfide … which acts as an antioxidant and transmits cellular signals that relax blood vessels and increase blood flow. The concentration of garlic extract used in the latest study was equivalent to an adult eating about two medium-sized cloves per day. In such countries as Italy, Korea and China, where a garlic-rich diet seems to be protective against disease, per capita consumption is as high as eight to 12 cloves per day.”

I eat a bulb of pickled garlic (糖蒜) every day (probably eight to twelve cloves), which is a habit I picked up from living in northern China. Eating raw garlic will give you killer breath and sweat, but the pickled stuff doesn’t. I’m not sure if the pickling reduces or eliminates the benefits of eating garlic, but I’m betting it doesn’t.

(As everyone knows, dairy products are the root of most B.O.)

Here’s a chart that shows the ever-widening spread between the spot market and the 12-month non-deliverable forward contract for the Chinese Yuan. Something’s gotta give.

(CNY NDF vs Spot Spread)

Click to enlarge (CNY 12 month NDF, Weekly)