For once, I'm going to blog about something other than U.S. politics. I have a far more worthy subject: Creme brulee.

Leaving aside the obvious political inferences (only a latte-sipping elitist would even know what creme brulee is), I consider this more of a public service announcement than even my recent jabs at politicians. If you're anywhere near Queen Anne Hill in Seattle, you should definitely check out the Market Spice Tea creme brulee at Opal.

Opal is a pretty little corner place on Queen Anne Ave. and Boston Ave. Like many places on QA Hill, it suffers a bit from the overt yearning to be trendy - but not as much as many Hill spots. It's pretty, all right, but comfortable enough. The window tables put you close-up to the joggers, college kids, and the Hill's "beautiful people" alike, so the feeling is more like being in the neighborhood than being in a hipster hangout.  

Opal recently changed head chefs and menus, and it now offers a "tasting" menu. That means everything is offered in small, appetizer-sized servings as well as large entree-sized ones. So you can easily try two to three items in a visit. While JJ, our friends Dawn and Eric, and I enjoyed a number of the small plates - including the garlicky hazelnut gnocchi, the warm frisee salad, and the pearl-sized "mac and cheese" - the desserts were stand-outs, and especially the creme brulee that was perfectly infused with the sweet, comforting taste of Pike Place's famous Market Spice tea.  

Folks, I don't even like tea. I just happened to have stumbled across Market Spice at the Gene Juarez salon once (another place that yearns to be trendy), when I asked for lemon water and somehow got tea instead. It was a happy accident. The creme brulee at Opal captures all the taste and fragrance in a super-smooth center that everyone at the table loved. I thought it might be a bit gritty like many spiced brulees, but it wasn't at all. It was sweeter even than a lot of chocolate desserts, but nicely restrained in that it wasn't sickly-sweet in the least. More than any piece of decor, it made a classy impression. It's definitely worth a trip back.

And if you're in Queen Anne jonesin' for sugar anyway, you might as well stop at Chocolopolis too. It's a little shop a few blocks down Queen Anne Ave. and is run by friends of Dawn and Eric. JJ and I haven't been yet, but we have had their rosemary and raspberry truffles - and we can enthusiastically recommend both.  

Don't say I never gave you anything. And oh yeah, don't forget to vote...

I admit it.  I'm addicted to financial news these days, partially because for the first time in forever, thanks to having so many great quality souces of information, it feels like I understand what's happening.

I check the TED spread daily.  Here's why.  Despite all the efforts of the past week, it isn't getting any better.  In fact, it's getting worse.  Not good.

Here's a good article from this Sunday's Washington Post about what the world may need to do to fix things.  This weekend's meeting of the finance heads of the major countries in the world is really important.  It will be fascinating to see what they decide on, and whether it works or not.

Lingering in the back of my mind though is this nagging thought:  I really hope all of this remains only fascinating.  It could get terrifying pretty quickly.

One really interesting thing about investing and personal finance is how important the emotional component is.  For example, say you buy a house for $400k.  You can easily afford the payments for the duration of the loan, you have no need or desire to move any time soon, and you have enough money left over after the mortgage payments to live the lifestyle you want.

Case A: One year later the market increases 20% and your house is now worth $480k.  You think you're a genious and you say to yourself, "I'm really happy I bought when I did."

Case B: One year later the market decreases 20% and your house is now worth $320k.  You think you made a mistake and you regret your choice.

The interesting thing is that in either case, you're financially fine.  You can make the payments and live the lifestyle you want.  But the behavior of other people, which is out of your control, makes the difference between pleasure and regret.  Ideally, you'd emotionally prepare yourself for both cases at the point at which you buy the house so that what the market does has no affect on your emotional state after buying the house.

Emotional preparation is really important now that we're clearly in a bear stock market and flirting with a possible economic depression.  So how do we prepare, and what happens next?

Well, it's no secret what happens next.  By the way, the events of this past week were no secret either, if you were hooked up to the right information sources.  One principle of investing is that you can generally tell *what* is going to happen, but you don't know *when*.  Robin and I have been fully prepared for this past week...for about 3.5 years.  Just as the .com boom was a mania that had to end sometime, so it was with the housing mania.  But no one knew if it was going to happen the next week or the next year.

The challenge now is to prepare emotionally for the next phase.  At some point, we're going to reach a time when it's a great buying opportunity.  We'll reach a point where if you have the attitude of investing in something for the long-term (for several years) and only investing when the odds are substantially in your favor (when you have a decent margin of safety), it will be a great time to invest, be it in stocks or in a new house.

But, we don't know *when* that point will be.  It could be next week, or it could be 3 years from now.  However, emotionally preparing now is important.  Because, just as some people laughed at those 3 years ago when they said they had most of their assets in cash (with it's seemingly paltry 4.7% interest rate), at the point at which it's good time to buy others will probably laugh at you when you say that's what you're doing.

But first we have to get there.  First the credit markets have to get unstuck, and then all the sellers have to be exhausted.  That may take a month or several years, but that time is coming.  So we prepare.  And we read our sources of high quality information (which do not include *any* mainstream media sources) to help us judge when the time is right.

There's an interesting new blog/podcast that may turn into a high quality source of information to consume regularly:  the NPR Planet Money blog and podcast.

Here's a not-so-fun thought based on one of their recent blog posts...

Yesterday I criticized the Bush administration for herding us into the $700 billion bailout and not letting it be known that there was an alternative option in the form of the Fed buying up commercial paper.

It might be that I was wrong.  The actual truth might be worse than my view.  It might be this:

* No one actually knows how to solve the current economic crisis in the form of the frozen commercial paper market.

* Their first shot was the $700 billion bailout last Friday.  It didn't work.

* Their second shot was having the Fed announce a program Tuesday to buy up commercial paper.  It didn't work.

* Their third shot was coordinating with multiple countries around the world to lower interest rates today (Wednesday).  Right now it appears that didn't work either.

* Their fourth and current shot, if I'm reading this correctly in this article in New York Times, is to take an ownership stake in various banks.

At some point, the Fed and the government will run out of things to try.  I don't know what happens at that point, but something tells me it's really really bad.  Last week Warren Buffett used the analogy of the athlete who's had a cardiac arrest and paramedics are on scene trying to shock his heart back into beating.  To carry the analogy forward, each of the four actions above are shocks to the system to try to get things going again.  If none of those shocks work, what happens to our economy?

This American Life's latest episode deserves another mention.  Robin and I listened to it last night and I think I fully understand the most recent credit crisis.

It's well worth your time.  Go here and listen to episode 365.  Note that it's only available as a free download for another 5 days or so (after that it's 99 cents).

After you listen to the episode, go read this entry from Beat the Press.  That whole $700 billion bailout thing...did congress and the media get herded again by the Bush administration into making a hasty, incorrect decision of critical importance to the country?  I suppose only time will tell.  The more alarmist/cynical web sites I read say the Bush administration seems to have this down to a science by now...
    Step 1: Declare a crisis.  Use very scary language, and scare everyone into a stampede.
    Step 2: Block all routes and exits except the single one that you want the herd to take.
    Step 3: Wait for the herd to do the only thing it can--run through the only exit available.

With the majority of the U.S. public against the $700 billion bailout plan, this interview with Warren Buffett is an interesting view from the other side of the debate.

My personal beliefs?  I'll be the first to admit that in the short-term, I have no idea what's required to keep the economy from going over a cliff.  But in the long-term, I feel strongly that substantial work needs to be done to rework the incentive systems at the heart of the financial industry.

For example, it's amazing to me to read story after story about home buyers who were essentially setup for failure with their loan.  Yes, they signed the paperwork and they deserve their share of the blame (and financial punishment), but what about all the experts who enabled them?  What about their realtor?  What about the loan officer?  Because realtors and loan officers are rewarded when a transaction happens, they're incented to make as many transactions happen as possible, without regard for the borrower's financial well being.  This doesn't mean that all realtors and loan officers disregard their customer's well being, but enough did it to get us into this mess.

Random idea: instead of giving people huge amounts of $$$ when a transaction happens, what if things went to more of a royalty system, like how musicians make money off of songs.  Say a realtor makes $10,000 off the sale of a home.  Instead of getting all that $10,000 right away, perhaps they get $2,000 and the remaining $8,000 is paid out gradually over 10 years, but only if the homeowner doesn't default on their loan.  If the homeowner defaults, the realtor loses the remaining commission.  If the homeowner moves to a new place, the realtor is guaranteed the rest of their $8,000, but it's still paid out over the 10 year schedule.

Same system for the loan officer.

An alternative system would be to fine realtors and loan officers if a person they put in the home defaults on the loan.  The fine needs to be big enough to hurt, but not big enough to financially ruin someone (unless you put a ton of people in homes they shouldn't be in).  Sure, there will always be some number of defaults for reasons outside of the control of the realtor or loan officer, but I'd argue that's part of the costs of doing business.

In a nutshell, the interests of the homeowner need to be more tightly aligned with the interests of the realtor and the loan officer.

Going broader, it would be great if we could find a way to align the interests of individuals in the financial trenches with the interests of the overall U.S. economy.  I wonder how many Wall Street employees are out there who got in, did a ton of transactions, and got out with several million dollars.  They're all out there laughing at the rest of us as the system melts down.  Did you know the average employee compensation in 2006 at Goldman Sachs was $622,000?  (The median would be a better measure here, but no one seems to have that number.)

If you're making that kind of money, and the decisions you're making are setting up the U.S. economy for the painful position it's currently in, something is fundamentally wrong with the incentives at the heart of the system.

I've been reading Beat the Press for a few weeks now, and I've been very impressed with its criticism of the mainstream media with regard to reporting on financial stories.  Over the years I've been gradually adding to my list of under-the-radar sources I read to help me understand what's really going on amid all the noise in the mainstream media, and Beat the Press has made my list.  Check it out.

Over the weekend Beat the Press pointed to NPR's latest piece on the Bubble and the Crash (see episode 365 on Oct 3), done by the same team who did the excellent piece on the Giant Pool of Money several months ago.  Well worth the time to listening to.

I watched the VP debate last Thursday and was stunned at the amount of focus on the expectations game.  Sure, I'll agree with most other commentators that Palin beat expectations, but come on: we aren't deciding who can do better than expected.  We're trying to pick two people to lead our country.  And on that count, I think Biden easily beat Palin.

But I'm biased here, so let's look at the underlying data.  The instant polls after the debate showed that independents favored Biden two to one, and in the two days after the debate we're seeing Obama open up an even wider lead over McCain.  Check out the chart on electoral-vote.com today.  The uptick after the VP debate is striking.

But the media decided to focus on who won the expectations game, and few seem to be talking about the fact that so far the VP debate appears to have given Obama an extra 1 point advantage in the national polls.

I ranted before about this country falling for Palin when she was first announced.  Hopefully things have firmly turned around at that was just McCain's high water mark for the campaign.

For the past few days, I've only heard that Congress "must" go along with the proposed $700 billion bailout plan. This article presents the opposite view - that perhaps the house of cards should be allowed to fall down. http://www.huffingtonpost.com/jim-moore/a-nation-of-village-idiot_b_127340.html

I'm not educated enough to know whether the bailout is necessary or not. I do know that there are some members of Congress trying to fight, against unbelievable pressure, to make sure some protections are in any measure that's passed. These things include:

-  Limits on pay for CEOs of such failed institutions
-  Congressional oversight of the bailout execution
-  Warrants that would be held by the government and be turned into assets, once the banks/companies were profitable again - to ensure a return on taxpayers' enormous investment to bail them out

Putting the country's near-entire spending power into the hands of the Treasury Secretary - someone who is not accountable to public vote - is about as undemocratic an idea as I've ever heard. If you also have concerns, please consider writing your Congressperson and letting them know that you support their efforts to get taxpayer protections and Congressional oversight into this measure. The Role Call - Congress.org site makes it easy: https://ssl.congress.org/congressorg/home/ 

It may be the single most important decision our government makes in our lifetimes - and those who are trying to do the right thing need our support, lest they be crushed by a manufactured "pressure to act NOW." If Bush, Paulsen, or Bernanke are truly concerned about a recession, they can make compromises too.

Sorry to be such a downer, folks - one day soon I'll write something funny about food, dogs, and the like. Right now, I just don't think these are funny times.

I've blogged about this before, but after the past few days of performance in the stock market, it's worth mentioning it again.

If you were at all surprised by the last few days in the stock market and you don't want to be surprised like that again, or if you aren't quite sure what to do right now with your investments, I strongly recommend changing your regular diet of financial information.

In the dot com crash in 2000 I was surprised.  Very surprised.  And percentage-wise I lost a good chunk of change.  And then I found that there was a whole class of people who weren't surprised because they knew whom to listen to, and (just as important) whom not to listen to.

The following recommendations are less about finding a source that tells you exactly what to do, and more about gaining a steady diet of good information from which you can learn over time and make high quality decisions.

Richard Russell's Dow Theory Letters.  Yup, $300/year is a lot of money.  On days like today on the stock market, it pays for itself many many times over.

Outstanding Investor Digest.

Housing Panic.  It's free, and the quality isn't as good as the above sources, but it's a good voice from the more negative side of things.  Maybe it's that high school debate training in me, but I feel better when I'm hearing both sides of an issue.

Bull! A History of the Boom and Bust.

By the way, I am always on the hunt for additional high quality sources of financial information.  If you know of one, send it my way.