Thumbs up on the tea-tree oil, dad!

There was a lice outbreak at school this week. I don't want to nit-pick, but I was one of the parents who was called in to take my child home.

On the way home from school, we stopped at the Herbalist, an apothecary in the northeast part of town (I think it's Ravenna, but maybe Wedgewood). Along with Tea Tree shampoo, I picked up a bottle of hair oil - jojoba and almond infused with rosemary, lavender, tea-tree, bay, and sage. It is wonderful stuff.

We did a "treatment" at home, which consisted of soaking her hair in the oil overnight, washing thoroughly in the morning, and then about 1 hour of combing and seeking, seeking and combing. I didn't find anything, and was even wondering (nay, suspecting) that the staff at school had made a mistake.

This morning we went to school, and D. from the office found 6 nits. I didn't remember them being THAT small! They were tiny, but unlike the random other specs in there, these were unmistakeably attached to a hair. I was a little embarrassed that I had not found them myself. D. showed me how to do it, and now I know, and will try to remember this time.

With Apologies to Bremerton

Remember the "new economy"? More importantly, do you remember when that notion of ever-increasing equity prices was kicked in the nuts by reality in the dot-com bust? Yeah, I forgot about that one too.

But I recognize the feeling, the "something doesn't feel quite right" feeling that I had as real-estate prices soared in the first half of this decade. The easy home-equity credit that we landed allowed us to put a new kitchen our 4 bedroom Seattle fixer, rather than move to Bremerton for something equivalent (for those who don't know, Bremerton is the Newark of the Pacific Northwest). It also apparently fueled demand for houses, condos, co-ops, and coops, pushing up prices.

That something ain't quite right feeling is getting some reinforcement today, with the Fed's bailout of AIG, the bankruptcy of Shearson ... er... Lehman, and the sale of Merrill Lynch to BofA. The market down 1000 or so points in two days. Pretty grim. One of the grimmest that I recall.

Several notable recessions were preceded by prolonged periods of easy credit, leading to euphoria in the financial markets, and ended by sudden and sever downturns. The 1873 recession, the great depression, for example. We should have recognized it again this time, but it is soo hard to see the unpleasant truths when everything is going up up up!

Apparently, sub prime mortgages started to have delinquency problems in early 2005, about the same time that home prices started to taper off. Funny, the stock market did not register much of a response to this until 2007, two years later. At that time, a small number of financial institutions halted redemptions in their funds because they were having difficulty valuing the complex fund assets.

These complex assets, or structured finance products, were originally thought to mitigate risk. I remember as an options trader, making markets for counter parties who were seeking to offset some underlying risk in their portfolio with straight-up currency options. It worked for them. However, while options are complex and difficult to value, the "structured" instruments issued against pools of mortgages were way more complicated.

At the time they were issued, they seemed great. So great that their inherent risks seemed nonexistant. So great that having them on your balance sheet was as good as cash or government bonds. So great that Moodys and Standard & Poors might give you a triple-A-plus.

But, once the underlying asset went down (e.g. the steady stream of mortgage payments), so too these asset tanked.

In retrospect now I think that all the inflation we have seen in the last few years - oil, food, concrete - was fueled not by China's insatiable demand, but rather by an excess of money. An excess of money fueled by super-easy credit, and secured by the ability of regular Joes to make mortgages payments on houses with crazy prices.

I hope that all the regular Joes out there are doing OK. It's not their fault. I don't even think its the government's fault, or the banks fault. It's a phenomena.

And, as Einstein said... er, well, read the previous post.

Note: I leaned heavily on the BIS 78th Annual Report for this post.

Great Einstein Quote

No problem can be solved from the same level of consciousness that created it.

Scraponomics

My '91 Jeep Cherokee is stuck in reverse. The clutch has been giving me problems for a while - I really should have brought it in a few weeks ago. But, I didn't, and on Saturday I shifted into reverse, and it never came back out.

Anyway, tonight I called a tow-er, and he came by with his big, noisy diesel rig. With some help from my neighbor, we pushed the jeep up into onto the bed. Then I jumped into the cab and we headed on down to the clutch shop.

On the way there we talked about various things. He works for a scrap yard by day, and by night he tows cars to earn some extra cash. I told him that I had just sold my son's wrecked Lebaron, and was surprised at how many people called who were interested in scrapping it.

"Hell yeah" he said. "Why this jeep of yours would have been worth $700 at the scrap yard a few months ago. That's just for the steel - the catalytic converter and the aluminum hubs would have added another $300"

Wow! I only paid $2000 a few years ago for this jeep. My loss from depreciation is theoretically maxed out at 50%, as long as the market for raw materials holds.

Turns out that the scrap market has plummeted in the last few months. The reason? The recently completed 2008 Olympic Games in Beijing. Japan (maybe he meant China) apparently is the primary purchaser of scrap metal from Washington to Montana, and they stopped all the steel mill activity prior to the Olympics in order to clear the air a bit. With the chief buyer out of the market, prices have plummetted.

Ultralight Backpacking

Some years ago I was attending the closing potluck for my then 10-year-old son's wilderness camp. The camp was put on by Wilderness Awareness school in Duvall, WA. If I understand correctly, this school is an offshoot of the work of Tom Brown, author of The Tracker and other books. If you have read Tom's works, you know that as a youth he was educated by an Apache elder in the ways of the wilderness.

Anyway, on this particular occasion I was picking up my son after a week of learning wilderness skills. There was a potluck, and I took the chance to talk to one of the instructors. We chatted a bit about the camp, the program, the beauty of the wilderness, etc. Wishing to show that I had some experience in the wilderness, I fondly recalled (out loud) my experiences backpacking on the East Coast and British Columbia. After a few moments I paused.

There was a curious look on the counsellors face. He must have been about 15 years younger than me, but his next comment showed who was the wiser. "Yeah, I used to backpack a lot myself" he said. "Eventually I came to realize that all I was doing was carrying the world around in my pack. So I ditched it."

"Oh, so you've stopped camping" I asked?

"Oh no, I still go camping. All the time. But now I leave the backpack at home, where it can't get between me and the wilderness. I build shelter when I need it, and forage for food."

Wow, did I feel like a chump.

Still do, actually. I love the wilderness. I love nature. I have loved it ever since I was a kid, when I used to spend hours in the woods near our house. Huck Finn was my childhood hero - I used to dream of living in caves and makeshift shelters on river banks just like Huck.

In fact, I secretly vowed that some day I would retake my youthful dreams and make a trip to the wilderness with nothing but my clothes, and see how I would survive.

Well, a more practical version of that dream came a little closer to realization tonight, thanks to a story about "Ultralight Backpacking." In this story the author tells how one hike for days on end in the wilderness with nothing but a small pack that weighs a total of 15 pounds. Sounds great - I'll let you know when I do it!