Maison Fleury

We fly down in a private jet for 24 straight hours of Winter Miami Conference partying. I haven't done this in... well never actually, this is a first. So I feel like a kid, we are flying 6 of us. 3 with Chris Klaus, 3 with me. Chris is wearing a tshirt that shows a surfer dude and says "board meeting!". I scream "victory!" pretending I am Johnny Drama from "Entourage" as we land in MIA. We get there by 2PM. Unfortunately we kind of get stuck in the hotel so we decide to go out to catch an early dinner and we don't go out until 9PM. I miss Stacey Pullen and Kevin Saunderson which is no big deal since KS just posted a Resident Advisor podcast. On the plus side, Warren and I run into John Digweed at our hotel. I ask about his tshirt he says "you download, you copy, you steal, you destroy the scene". Really cool how graciously he took the time. At that point we hit the Kaneva party (Chris' company) at the top of the Sony building...

Underworld concert yesterday. For those who remember the early nineties, they were everywhere at the time. Then "born slippy" became the theme song for trainspotting. The show was real good. Melody and hard beats abound. Ableton Live has really enabled a new generation of performers. Energy was high. Today we flying down to MIA for WMC with a bunch of friends and we are going to kick it old-school. More on that when I come back :)

Who is the fairest of them all? Darryl Taft, another one of my favorite peeps, sends me this link this morning where he gives a list of influential people in the business of OSS. Here it is: Linus Torvalds Mitchell Baker Mike Milinkovich Tim Golden Jim Zemlin Peter Fenton and Larry Augustin Jim Jagielski Michael Tiemann Marten Mickos Marc Fleury Rod Johnson Jonathan Schwartz Mark Shuttleworth John Roberts I exchanged a few emails with Darryl and he then pointed out that this was an ordered list! I suspect he is just fishing for traffic but that got my blood boiling... he then denied that it was an ordered list but I will bite nonetheless. I am not going to make a lot of friends: Milink (eclipse). Eclipse is the business of subsidized OSS by corporation. It is a model alright, that of corporate socializing of costs of development and distribution. The polar opposite of professional OSS as far as developers are concerned. Baker of Mozilla? yes and no it is at once a stunning success ...

It was with a bit of a heartache that I was reminded about OSBC (Open Source Business Conference) this year. I remember OSBC london in ...2004? as a 2 bit conference with 3 VCs head-bobbling in the audience wanting to hear what "professional open source" was about and a lawyer loudly snoring in the 3rd row as we passionately discussed "getting paid for free software". I was mad at the organizer for convincing me to come all the way to London for that. It has come a long way since. Long enough to become top news in the press and nostalgic. I received calls from a bunch of old colleagues and friends. Invitations to the parties, the dinners, the conference, the panels, on the spot calls made me realize there are some things I miss. It also made me realize I had moved on. I am running my own personal hedge fund now, have you heard of it?. From the press coverage, I picked the following: Ben Sabrin responding to Zurlocker on the dangers of integration. I do believe ...

Reading RGEMonitor and Fintag this morning the following jumps out at me. Hedgies are still dying like flies, Makes the pop-corn sound in a microwave, pop-pop-pop (This morning: Tisburry, Pentagon, JWM-Meriwhether (of LTCM fame)). Lehman is facing renewed pressure and the short hedges are sweating them (drops 8%) on "rumors" Iceland (via RGE): "Doubts over the health of its highly-leveraged banks... To prevent a confidence run ... Thor Herbertsson said speculation of a crisis is “close to becoming self-fulfilling .” I have hypothesized in the future that the hedgies death rate is probably a sweet spot indicator of the unfolding financial crisis. They are late and early in the sense that they are first in line for margin calls and they in turn impact the markets. The bottom may be within a quarter...

Amid the doom and gloom, a bit of sunshine came from my friends: A key part of Red Hat's revenue growth is now coming from its JBoss middleware division. Whitehurst noted that during the fourth quarter of 2008 the middleware business grew twice as fast as Red Hat's Linux operating system platform business. I am glad the numbers are speaking for themselves. RHT is in the news everywhere, popping 8% in after hours trading, because of a very solid revenue growth. JBoss is contributing healthily to that number and finally the integration is showing some results. I couldn't help but feel a tingle of pride. PS: I am a shareholder

In spite of vigorous denials from the FED regarding the weekend rumor that the FED was going to intervene DIRECTLY in the MBS market to mop up the mess, this morning blog feed is full of such analysis. A lot of legislation, basically inspired by depression-era precedents, is floating around to put a floor on the debt as housing falls. These are desperate times and the "end of free-market capitalism as we know it" according to Martin Wolf of the FT. I will reserve comment on "moral hazard" and legislation as this is full separate blog and really the topic du jour. From RGE monitor this morning: /Barr/Tyson: Saving America's Family Equity (SAFE) loan plan inspired by the successful Home Owner's Loan Corporation introduced in 1933 to deal with wave of foreclosures: Treasury and Fed would run auctions in which GSEs would buy mortgages at discount--> investors take writedown, improve their liquidity--> GSEs work with originators to restructure loans to pr...

The markets are rallying. The trend is up. The crisis is over? But wait... the fundamentals haven't changed. Am I the only one taking crazy pills? The markets are going Zoolander on me, they have only one move! it's "blue steel!" Krugman in the weekend edition of the NYT, warns of "partying like it is 1929", money shot: The financial crisis currently under way is basically an updated version of the wave of bank runs that swept the nation three generations ago. People aren’t pulling cash out of banks to put it in their mattresses — but they’re doing the modern equivalent, pulling their money out of the shadow banking system and putting it into Treasury bills. And the result, now as then, is a vicious circle of financial contraction. Housing is still in free-fall per the latest numbers (8% fall yoy in median price in Feb). Mortgages will reset en masse for the rest of 08. Bank losses due to subprime so far amount to a declared 125B with another 100B minimum ...

And yet again, no one knows. In surveying the weekend press/blogosphere I find myself puzzled at the wide range of opinions. If opinions were placed on a Bell curve, the aforementioned Bell curve would look like a flat line. The distribution seems completely random. At one end you have an article in "Barron's" (usually bearish) that predicts DOW:20,000 on the basis that the FED is setting the stage for the next boom and that everything has been oversold, especially the financial sector. At the other end you find commentary that the current crisis is just the "tip of the iceberg" and that the US economy is really the Titanic and we are just dancing on the deck for now. Evidence is that 1/ the mortgage crisis just getting started and a lot of mortgages will reset this year 2/ that cancer has metastasized and invaded the rest of the financial system, stage 3 style, too late to operate 3/ the doctor FED is increasingly desperate. On the front page of the FT weeke...

I am not talking about Gordon Gecko doing an hostile take-over on the over-hyped "fat tail" phenomena but about real geckos and their real tails. Turns out tails have an evolutionary advantage for Geckos in that it enables them to negotiate difficult terrain and navigate in free-fall. From Science: A flat-tailed house gecko's (Cosymbotus platyurus) tail accounts for about one-tenth of its body weight, a large investment that biologists previously chalked up to fat storage and defense against predators. No one thought the tail was important for climbing or steering, including biomechanical scientist Robert Full, whose lab at the University of California, Berkeley, has studied gecko locomotion for more than a decade. In his early experiments, Full noticed that geckos could run on high-traction surfaces and never use their tails. But when engineers used Full's data to design wall-climbing robots, they had to add tails to keep the machines from falling. Full realized the ...

Am here skiing or, more correctly "avoiding skiing" --one of those activities, like golf, that didn't turn out to be a great marriage enhancer for us, showcasing, as it does, significant differences of ability and inclination. So now, like Bartleby the Scribner, I choose not to. I check the children into ski school from 9-3, and choose to snow-shoe, cross-country ski, but most of all, I just enjoy agenda-free time, to drink coffee, read a newspaper and write. Have lately been amused by the Eliot Spitzer brouhaha. Nothing like that after dinner mint of political scandal, to entertain and distract from the depressing and tedious reality of the economy and the war. What does surprise me is that this sort of activity shocks anybody. Reminds me of my very Catholic, French-raised grandmother who declined to watch some Life-of-Christ inspired movie on the premise that she "knew the story." She did, however, watch "Emmanuelle," a soft-porn of the late seventie...

Today the markets tanked again, losing 2.5% in the day session. The gains from the FED effect are gone. While I believe that the real effect of the FED facilities should start on March 27, meanwhile, I think we are in for the another drop. The FED have one more real bullet or 2 little pills and after that it is printing presses time. The signs I am looking for before I call "fat lady singing" are a slow-down in the rate of hedgies going pop-pop, another bankruptcy like Bear (or a close-call), a dollar stabilization, the commodities burst, one more scary drop in the dow and a final, FED action. Buckle your seat belt Dorothy, because Kansas is going bye bye. Welcome to the 21st century.

While I am skiing with my family in the canyons, I have followed with morbid interest the demise of Bear Stern. From $17B in cash to bankrupt in 3 days. The price paid of $2 per share, down from 70, is merely symbolic, reflecting the "$2 dollar broker" pejorative moniker used on Wall Street to describe the "lowest of the low" in the banking cast. What it really says is that Bear was completely insolvent. Lehman and Goldman post good numbers but the combined exposure of the banks is still unknown and the combined equity of the top 5 is $150B. It is puny compared to the $500B loss to be reckoned with in the market. A 30% share of the exposure would wipe them out. The orders of magnitude are in the same league. Contemplating the insolvency of the banking system, as hinted by the sudden Bear demise, even if temporary and forced by mark to market accounting, is a scary proposition and I read this morning that the banks are shunning the discount window where they co...

Via comments, A Meyer muses about the losses on subprime and the actual numbers. Reading around I have rebuilt some of the numbers and updated my previous prediction. The mortgage market is 11Tr. 8% is being "jingle mailed", I read that number this morning. Assume 2% increase to 10% (maybe more?). At that point the banks own the collateral but the collateral is both illiquid and shitty (house). I read that lately the average price for banks trying to dump those properties has been 50% of loan. Loan cash is gone, no income from the loan (default) and the collateral is 50%. Let's use 60%, why? because it is already a 40% drop in prices :) 11T-> 1.1T-> 440B. THESE ARE REAL LOSSES OF CAPITAL. ALSO THAT IS ASSUMING THEY CAN CASH ALL OF IT WHICH I HIGHLY DOUBT. Currently the balance sheets are showing 440B-1T. That is subprime alone. Since then the cancer has spread and you can see other predictions like Roubinis that land the numbers in 3Tr. Since banks are 10x le...

Caught via Fintag $11.5 BILLION ALTERNATIVE ASSET MANAGER TO GO PUBLIC Halcyon Asset Management announced today that it is taking the hedge fund firm public with the aim of keeping top talent. The New York-headquartered firm is accessing the public equity markets through an acquisition by its affiliate, Alternative Asset Management Acquisition Corp. The transaction values Halcyon at approximately $974 million. Under the terms of the agreement, members of Halcyon entities will receive up to $505 million in cash and notes, and will retain LLC interests in Halcyon exchangeable into shares of AAMAC on a one-for-one basis. The terms also provide for the ownership of the Halcyon exchangeable interests to be adjusted upward contingent upon achieving certain stock price targets. Halcyon members will initially own approximately 43.6% of the fully diluted ownership interest of the new entity. Partners of Halcyon entities will further align their interests with fund investors, reinvesting 75% of ...

Nature's little bytecode manipulation framework caught red-handed! You want to read lines D and E (which are the same in different colors) from left to right. In each picture, at the bottom you have the "source"strand, top left you have the scaffolding (2 strands: F Pilus), and in the middle going to the upper right you have the "weaved DNA" (1 strand and then 2 strands). The fluorescent green dots show the replicated code. From Science: Conjugation allows bacteria to acquire genes for antibiotic resistance, novel virulence attributes, and alternative metabolic pathways. Using a fluorescent protein fusion, SeqA-YFP, we have visualized this process in real time and in single cells of Escherichia coli. We found that the F pilus mediates DNA transfer at considerable cell-to-cell distances. Integration of transferred DNA by recombination occurred in up to 96% of recipients; in the remaining cells, the transferred DNA was fully degraded by the RecBCD helicase/nucl...

From SCIENCE. The chemical composition of protoplanetary disks is expected to hold clues to the physical and chemical processes that influence the formation of planetary systems. However, characterizing the gas composition in the planet formation region of disks has been a challenge to date. We report here that the protoplanetary disk within 3 astronomical units of AA Tauri possesses a rich molecular emission spectrum in the mid-infrared, indicating a high abundance of simple organic molecules (HCN, C2H2, and CO2), water vapor, and OH. These results suggest that water is abundant throughout the inner disk and that the disk supports an active organic chemistry. 1 Remote Sensing Division, Naval Research Laboratory, Code 7210, Washington, DC 20375, USA. 2 National Optical Astronomy Observatory, Tucson, AZ85719, USA. Which in plain english means there is fine primordial stew, supporting "an active organic chemistry", in a a neighboring accretting disk (pre-planet). What you see ...

There is something oddly morbid in watching the hedgies blow up one a day. One blow up a day keeps the FED in the fray... Time via Fintag Several hedge funds with assets of more than $4 billion (£2 billion) were on the brink of collapse last night or had halted withdrawals, despite moves by the US Federal Reserve this week to ease America's deteriorating credit crisis with a $200 billion collateral lending facility. The potential closure of six funds came as a leading private equity executive, who declined to be named, said that such funds were "snapping like twigs", with one failing every day. Yesterday Patti Cook, Freddie Mac's chief business officer, predicted that the Federal Reserve's $200 billion bond lending facility this week would fail to solve the long-term problem of Wall Street's deepening credit crisis. FINTAG SAYS: As a true capitalist I see these events as positive. The strong survive and the weak fall. Unlike Ben "Socialist" Bernank...

Arguing for Deflation: great "view of the day" article in the FT by Albert Edwards. Basically the SocGen is throwing the BS flag on inflation. He argues for the bursting of the commodities bubble claiming it is mostly speculation and that when the bubble burst, the great sucking sound of going liquidity will wreak havoc on commodities. The upside? with recession looming in US/UK/EU and Asia growing more slowly, pressure on demand is not going to backfill the lack of speculation. Bottom line: commodity driven inflation will abate, it is the current spook but it is not real. In a related news, TIPS investments (inflation protected treasuries) HAD NEGATIVE REAL YIELDS AS OF YESTERDAY! meaning that the futures bet were on "NO INFLATION". Money quote from Albert Edwards: After the biggest cost push pressures on inflation from commodity prices in decades, isn't it absolutely amazing that the best core inflation can do is hover around 2 per cent [slightly higher ...

This morning's FT is a great one, I may keep it and frame it. Analysis is pouring in. Two articles, one by Mohamed El-Erian, head of Pimco, and the other by Albert Edwards, Global Strategist of the Societe Generale, offer great insights. I was still digesting the Wolf piece in yesterday's FT. Naked Capitalism's input was helping greatly. Basically, Wolf, usually measured is freaking out and the numbers he throws around, inspired by Roubini dwarf the numbers I had at the end of my previous blog arguing for "enough liquidity?". Nouriel Roubini of RGE monitor now puts the damage of the crisis in the $3T. A trillion here and a trillion there and soon enough it is real money. From the FT cover There is deep concern that banks are pulling back on capital at risk, drawing liquidity from the markets and triggering contagion at hedge funds. This has caused fresh turmoil in the market for mortgage-backed securities, intensifying the pressure on housing. "You have t...

Today was a big day in the markets with the FED announcing the creation of a new facility called the Term Securities Lending Facility. That is a mouthful that I can't remember. The dow surged 400points. Euphoria and relief. Some see it as the decisive FED intervention to resolve the credit crisis, others are already deriding it as a bailout that will ultimately cost the taxpayers. Me, I am just trying to make sense of it all, not exactly in real time but almost. This blog by Steve Waldman has greatly helped me get up to speed. I love the way this guy writes, very clear. A refresh: the credit markets have been paralyzed since June 07 when the subprime losses started appearing. Housing collapses, prices go down, defaults spike, collateral damage is estimated at $300Bn. Damage is everywhere, no one know where. Interbank rates spike on 3 occasions reflecting the facts that the banks themselves don't know. Bank balance sheet take hits, leverage goes in reverse, credit markets fr...

Study comes in this morning over science news that apparently electric-cars, also known as "plug-in" cars, may not solve our environmental problems because they will put a lot of strain on the water system in water-scarce regions like the west of the US. I am number 260 something in line for the Tesla, which I was supposed to receive this month but is being delayed by a year. Consolation price is that Tesla is officially the "hot car du jour" and since it was publicized that George Clooney and Hanold Gubernator are ahead of me in line, people around me think I am cool. Right now I feel like a chump for having ponied up 50k upfront for the right to ... be in line with people way cooler than me. Ah whatever, I define techno-cool. But apart from telling you how geeckily cool I am, let's go back to the news: why does electricity consume water? well a lot of electricity is still produced with 19th century steam technology. Fancy huh? I remember having this conversa...

(hedge fund run redux) Talking with a friend in the industry, the words "the banks are screwing the hedge funds" hit home. Basically, the drawing below in wrong in ONE aspect: "Your lost your collateral". NO! that is the point: they get the collateral for CHEAP. The banks are asking the hedgies for the collateral. The collateral is depressed and this puts more pressure on it. Basically the banks are getting all these assets at fire-sale prices except they are the ones SETTING THE BUILDING ON FIRE. The banks are telling the hedgies to hand over the goods! THIS IS A TRAIN ROBBERY, FAR-WEST STYLE! So let me get this straight: the FEDs are backing the banks so they get ALL the liquidity help they need. And they turn around and screw with the hedgies (and their shareholders/investors) knowing no one is going to shed a tear. Where the FED ease the pressure (costing everyone) the banks put the pressure on (costing everyone)... who is watching the banks? The legislatio...

The two comments on the previous post inspired this post. First a comment on "bank runs" and then a link to "fintag", a hedge fund news site that is rather fun. To the right is an image from that site (re-used without permission :) Hedge-funds are exploding. With all the leverage they had, debt being senior to equity, a 30x leverage means 3% is equity, and a 3% variation in assets means THE EQUITY IS WIPED OUT? So the banks are running on the hedge-funds, almost mechanically to shore up their balance sheets and the investors are getting screwed and so they run even faster to redeem. The hedgies unwind highly illiquid positions in a shitty market, making it shittier and looping back. This is clearly a downward spiral of the "bad kind" (see previous post for "downward spirals" of the good kind). The FED system was set up to provide ample liquidity to the bank system to avoid the bank-run phenomena where "temporary bankruptcy" isn't ...

While reading the future in the bottom of coffee cups is a well established middle eastern tradition, John Authers has a analysis piece on the commodities run in which he tries to devise the future of the economy from the price of coffee. In "Investors should pick up a reason for commodities run" he muses: If the "consumer demand" explanation is right, then you should not necessarily sell commodities, as the emerging markets may "decouple". But it also suggests inflation is a real threat to the emerging markets' growth, so this still is not a safe investment for the long term. If the "investor demand" explanation is right, then commodities are a bubble. You should get out now. If the "supply" explanation is right, then the economy is in deep trouble and pace the 1970s, commodities offer almost the only protection against what is going to hit us. He argues factually for consumer demand explaining that emerging economies are consumin...

From the weekend FT, by Krishna Guha, a fairly comprehensive review of the continuing credit market woes and the desperate attempts of the FED. I will actually skip on the analysis of the FED action and focus on the dynamics. From the FT Fed officials see a double squeeze taking place, with banks pulling back on their capital at risk in the face of balance sheet strains, while hedge funds and other investment vehicles are being forced to deleverage and sell assets amid margin calls from anxious lenders. Distress sales by funds have in turn pushed asset prices lower, triggering fresh rounds of margin calls - a so-called "margin spiral". Feedback loops, known sources of non-linearity in physics are known in economy as "downward spirals", "vicious circles" when the markets go down and "virtuous circles", when they go up. The strategy of "momentum investing", up attracts up, down attract down, while mostly psychology driven finds its roots...

Pigs would fly. Interesting brain teaser in the short view by John Authers (FT) What if gold, close to $1,000 per ounce, is the only true global currency? If we believe that, then it says something interesting about the price of US houses – another asset that can claim to be a store of value. In gold terms, US houses have never been as expensive as they were at the beginning of the 1970s when the median house cost more than 700oz gold, according to Tim Lee, of Pi Economics. But they nearly regained that peak in 2001. Their decline since then – even as their prices in dollar terms have gone through the roof – has been precipitous. A US house would now cost you only 220oz of gold. Over history, this price has tended to revert to an mean of about 350oz. So, if disparate markets are put together, the US financial industry has lost more than half its value and US housing more than two-thirds of its value since 2001. Either the US is on course for disaster or the moves on these markets are o...

Front page of FT companies and market section this morning. Margin calls came hitting the fund and the shares in the fund plunged 60% on the news. But the bit that *really* caught my attention is: The fund listed in Amsterdam by the Carlyle Group last year, has been hit by a fal in the value of its $21.7bn portfolio of triple-A rated residential mortgage-backed securities, illustrating that even the safest investments can be perilous when combined with the use of massive amounts of borrowed money. Carlyle had $28 of borrowings for every $1 of its own money Whaaaa??? did you get that? 28 to 1 leverage??? I find that amazing. Clearly the magic of leverage cuts both ways. For those of you that are not familiar with it, here is the simple math. Say you put $1 to work... you go get 28 dollars of debts. Say those $28 cost you 7% and you make 9% on them (some ARS muni yield 15% right now!), your profit is 2% or 56c. But really since I invested a dollar and get back 56c, it is showing a 5...

Picked up from the blog of a guy called David Dossot. So .NET is legacy and WCF is here to increase your productivity? What is this all about? Juval did a great job demonstrating how, by building this new platform on the CLR, Microsoft has delivered a complete development environment that offers a clean and efficient programming model for "enterprise" applications. But is there anything new here? For .NET developers, surely yes. But from a JEE development standpoint: not really. All this sounds like a mix of EJB3 (framework-free classes, remote exceptions), JBoss call stack model (dynamic proxies, client-sde and server-side interception), unified synchronous/asynchronous invocation model and workflow for long running operations. Wow, at JBoss a lot of us were a closet admirers of MSFT. By the end of JBoss we were pretty vocal about it. Of course with the acquisition by RHT, it became completely closeted again. As I am retired, I like taking credit for shit I have only margi...

Nature news has an interesting bit about a death star pointing straight at earth. You see that spiral? that a binary star system about to explode, well "about" in astrophysics is actually a precise unit of time that means "in a 100,000 years". The death-star is 8,000 light years away. The scary part is the spiral pattern you see is symmetric and therefore you are staring straight down its axis. The article points out that a certain type of explosion (spherical) would dissipate the effect. However another type with a burst of gamma-rays along the Z-axis would be equivalent to a laser beam hitting us: no dilution of the effect. What then? mass extinction. First the ozone layer breaks down, then we wash in UV radiation and from there on it is game-over, the same as nuclear war on earth. Apparently a massive UV wash/gamma ray wash has been proposed as a reason for mass-extinction on earth in the past, akin to the "meteor" hypothesis. From Nature: Caught in t...

This morning, there is an interesting opinion piece in the FT, penned by John Gapper. He offers insight into talent management in the music business. But I think that talent is talent whether in music or the software industry. Spotting, hiring, appreciating, nurturing and rewarding that talent is a big part of what management is about, imnsho. As a counterpoint the article also describes the abuses that "talent unchecked" brought about... (I can remember a few "expenses" that.... well never mind). Talent management within responsible limits is more easily done in the software industry than the music industry, less drugs floating around. From the FT. The late 20th century was a very good time to run a studio or a label in a media company. Apart from having a lot of freedom and being paid a lot of money, executives and producers could hang out with artists and feel creative themselves. Things are now tougher for studio executives and A&R (artists and repertoire...

I was surprised to find this controversial blog entry by Dana Blankenhorn . He certainly caught my eye with that title: "Is it time to call JBoss/RHT a failure?" Fleury left Red Hat in 2007, and since then I’ve gotten a steady parade of news releases, about former JBOSS executives starting brand new companies. In fact, I am overdue for a visit to one of those companies. Meanwhile, JBOSS rival SpringSource has gone from strength to strength. Its latest acquisition is Covalent. It’s hosting user meetings in five-star resorts. Let me first address the PR failure. What Dana is really saying is that he hasn't gotten any news releases from JBoss . As I have said in previous blog entries, all RHT has to do to be perceived as a multi-product company is to TALK about it's multi-product line-up. When I talk to RHT partners who do JBoss consulting they tell me that their business is going through the roof. The record JBoss World attendance and my previous coverage corroborate...