Thursday, August 07, 2014 - Surveillance Will Continue Until the Paranoia Stops

Surveillance Will Continue Until the Paranoia Stops
by Sinclair Noe

DOW – 75 = 16,368
SPX – 10 = 1909
NAS – 20 = 4334
10 YR YLD - .05 = 2.42%
OIL + .71 = 97.63
GOLD + 7.10 = 1314.00
SILV - .06 = 20.05

Normally, at least for the past 5 years, any dip has been seen as a buying opportunity. Lately, investors see a dip as reason to sell and ask questions later.

The Bank of England holds UK interest rates at a record low of 0.5% for another month. And the European Central Bank holds interest rates at 0.15% and announced they would keep rates low for an extended period of time. ECB President Mario Draghi warned there would be a "continued moderate and uneven recovery" in the eurozone. The annual inflation rate in the 18 countries of the eurozone was 0.4 percent in July, down from 0.5 percent in June; not quite deflation, but not headed in the right direction. Italy just announced its second consecutive quarter of negative GDP; which is the basic definition of a recession. Meanwhile, the website of the ECB has been hacked, and the hacker reportedly contacted the ECB and demanded a ransom for the stolen data.

The New York Times reported yesterday that a Russian crime ring had hacked more than a billion internet passwords, maybe more than 4 billion. It’s being called the biggest hack in history; which may or may not be accurate. Russian hackers are just a small part of the hacking world, about 2%. The major global hackers are Indonesia, China, the US, Taiwan, Turkey, and India. And while Russia may not constitute the same volume as other hackers, they make up for it in audacity; for example, the breach of the Target retail stores. And the recent tensions and sanctions between Russia and the US probably mean there will be no coordinated effort to crack down on international hacking. Of course, it might be argued that for true audacity, nobody can touch the NSA.

How dangerous is this hack? Hard to say. We still don’t know which websites were breached. We still don’t know how the hacked data will be misused. And we are being advised that the best thing to do is to change your password on various sites you use; which isn’t that difficult. There are, of course, companies that you can pay to provide cyber protection; coincidentally, these same companies are the ones that alert us to cyber problems; and I have a nagging suspicion some of them might actually create the problems in the first place. What this really does is to raise awareness that data hackers can collect almost anything, and digital security has been a weak spot in technological progress.

Perhaps braced by Moore’s Law, technology marches on; the journal Science reports that IBM researchers have developed a new computer chip they call TrueNorth.  The new chip was “designed to approximate the structure and function of the brain in silicon”, plus it is power efficient. The chip contains 5.4 billion transistors, yet draws just 70 milliwatts of power. By contrast, modern Intel processors in today’s personal computers and data centers may have 1.4 billion transistors and consume far more power, about 35 to 140 watts. The new chip weaves together all those transistors into an on-chip network of 4,096 neurosynaptic cores, producing the equivalent of 256 synapses. IBM has also tethered 16 of  these chips together in four four-by-four arrays, which collectively offer the equivalent of 16 million neurons and 4 billion synapses, showing that the design can be easily scaled up for larger implementations.

Think of the synapses as memory, and the neurons are the processor; working together they provide fairly complex pattern recognition, and what might be described as sensing capabilities. Right now, the chip is not real fast, but it can be strung together, and on a per watt basis, it really starts to fly. The low power consumption opens up a world of possible uses. This might be the chip that powers the internet of things, embedded in all sorts of devices and possibly revolutionizing mobile devices.

The big question is whether the chips can learn? Not yet, however IBM has already tested the chip’s ability to drive common artificial intelligence tasks, including recognizing images; TrueNorth was able to recognize things like people, cyclists, cars, buses, and trucks with about 80% accuracy. Keep in mind that this is a new chip, still in its early stages of development.  IBM is still investigating how to commercialize this processor and has made no commitments to either manufacture the chip itself or license the design out to others.

The problem with the idea of having even more devices than your smartphone and tablet gathering information for your convenience, of course, is the many ways all that data can be used against you. Traditionally, we think of the government as the invader of privacy, but as capabilities change, we see private corporations getting into the act. Last year the Wall Street Journal reported on new facial recognition technology; police could use an iPhone to take a photo, and then cross check the face in a criminal database; sounds good in the battle against terrorism, but the company that makes the technology wasn’t just considering sales to law enforcement, but also to the health care and financial industries. Yea, I don’t know exactly what those applications might be but I don’t think I like it.

Are health care companies going to start sensing every drop of sweat, every minute we work out, every time we puff a cigarette or sip a cocktail? Maybe we won’t even have to bother going to the doctor anymore. And what about the health insurance companies? Financial engineers believe they can pretty much put a price on anything. So what is your freedom worth? You need air, water, food, and relationships to survive. You want to go shopping, to the movies, to see friends. You have kids, romantic attachments, familial obligations. You like being able to travel, to explore, to watch TV. You need medical care. What are each of these worth? It’s a question that analysts are thinking about.

Or how about the school districts in Houston that require students to wear electronic tagging badges to improve security and increase attendance rates; the same electronic tagging badges formerly used to keep track of cattle.

The “Internet of Things” is probably the next Big Thing. How big? ABI Research estimates that over 30 billion devices will be connected to the Internet of Things by 2020; Gartner puts the number at 26 billion – not including 7.3 billion PCs, tablets, and smartphones. That’s a lot of internet-connected things, considering that there are “only” a little over 7 billion people on this planet, and many of those people are not connected to the internet, much less to electricity. And as technology increases and prices drop, in accordance with Moore’s Law, it opens up the possibility of connecting almost everything from the simple to the complex, and not only connecting, but sensing, monitoring, and controlling almost every facet of your work, home, and private life.

And then that brings us back to the hackers. How secure would all those embedded devices be in a world full of such things. You don’t need to break a code, it would be easier than ever to hack into everything you do, or think about doing. Don’t worry, I’m sure it will all work out fine, but the surveillance will continue until you stop being paranoid.

Some things never change. Bank of America is the latest big bank to work a deal with the Department of Justice. We’re still waiting for an official announcement but it looks like BofA has agreed to a $16 billion settlement for its role in the sale of toxic mortgage securities. The deal is reportedly for about $9 billion in cash and more than $7 billion in soft-dollar relief to consumers; things like loan mods or refi’s which they are supposed to be doing anyway; and this could still be a sticking point in the deal. The two sides continue to hammer out details and are still negotiating a statement of facts. For example, will BofA be forced to admit wrongdoing, and if so, will they actually describe what they did and who did it when they broke the law. Will they be able to deduct the fine from their taxes, thus sloughing off the burden onto taxpayers?

If or when the record deal goes through, Bank of America will have paid more than $50 billion in penalties and consumer relief in deals with government agencies, not including private investors, after acquiring subprime giant Countrywide and investment firm Merrill Lynch at the height of the crisis. And that raises the biggest question of all: how is it possible to cheat so many people out of so many billions without anybody actually breaking a law?

There is an interesting side case that is important to understand the BofA settlement. The bank had been low-balling the DOJ, offering to settle for maybe $3 billion, until last week, when Judge Jed Rakoff a federal judge in Manhattan ordered the bank to pay nearly $1.3 billion for selling 17,600 loans, many of which were defective. Bank of America had previously lost that case, which involved its Countrywide Financial unit, at a jury trial. Turns out, that going to trial was a very, very bad idea for BofA, and when Rakoff issued his ruling, the bank had no negotiating leverage in this case. The Department of Justice started preparing a suit to take to trial, and Bank of America returned to the negotiating table. The case before Judge Rakoff dealt with a Countrywide loan program known as the Hustle, which represented only a small fraction of the firm’s mortgage portfolio, meaning that penalties in cases dealing with larger programs could skyrocket.

Wednesday, July 30, 2014 - GDP, Fed, Vultures, and Banksters

GDP, Fed, Vultures, and Banksters

by Sinclair Noe

DOW – 31 = 16,880
SPX + 0.12 = 1970
NAS + 20 = 4462
10 YR YLD + .09 = 2.55%
OIL - .72 = 100.25
GOLD – 4.30 = 1295.50
SILV + .06 = 20.72

Last week we told you that this week would be very busy. Well, here we are; today we had a big report on second quarter GDP and the Fed wrapped up a policy session, and that’s just the beginning. 

This morning, the Commerce Department reported the gross domestic product grew at a 4% pace in the second quarter. Boom. And first quarter GDP was revised from negative 2.9% to negative 2.1%; but any way you look at it, this was a massive turnaround.

The government also published revisions to prior GDP data going back to 1999, which showed the economy performing much stronger in the second half of 2013, growing at a 4% pace, the strongest 6 months since late 2003. This was the first estimate of second quarter GDP, and the first revision will be released August 28.

Inventories added 1.66 percentage points to this GDP report. Stockpiles were rebuilt at a $93.4 billion annualized pace after a $35.2 billion gain in the first three months of the year. That could mean companies will keep tighter control on the number of goods on hand this quarter, which could cut into economic growth. Or it might mean companies are optimistic about sales.

Consumer spending rose at a 2.5% pace last quarter, which also topped expectations, and more than double the 1.2% advance in the first quarter of 2014, in part due to less spending on healthcare. Purchases of durable goods, including autos, furniture and appliances and recreational vehicles, jumped at a 14% annualized rate, the fastest since the third quarter of 2009. Despite the pick-up in consumer spending, Americans saved more in the second quarter. The saving rate increased to 5.3% from 4.9% in the first quarter as incomes rose, which bodes well for future spending.

Corporate spending on structures, equipment and intellectual property such as software increased at a 5.5% annualized rate after rising at a 1.6% pace in the prior three months. In addition to consumer spending and business investment, growth got a boost from the biggest gain in state and local government expenditures in five years. Congress is still debating spending for infrastructure improvements such as roads and bridges, and if they can’t work out differences that could prove a stumbling block later in the year. A widening trade gap subtracted 0.6% from growth. Excluding inventories and trade, so-called final sales to domestic purchasers climbed at a 2.8% rate, the biggest increase since the third quarter of 2011.

Still, the big swing from negative 2.1% contraction to positive 4% growth seems like a very big swing, almost freakish. We know that the first quarter was hit by bad weather and the polar vortex …, still. So, we can smooth out the numbers by looking at the full year growth rate; over the past 12 months the economy expanded at a 2.4% rate, pretty much in line with the past 3 years; in fact, 2.4% growth would be decent in normal times, but the economy is still in recovery mode, and 2.4% is not enough to achieve “liftoff”. The economy is headed in the right direction, it is gathering momentum, but it is still operating below potential. By the Congressional Budget Office’s estimates, the level of output reported for the second quarter is still $770 billion below the nation’s current economic potential, or 4.2% below. That implies that the nation still has plenty of room to grow if a faster expansion ever kicks in.

The economy is far from perfect, we have a long way to go, but today’s report indicates progress, real, honest to goodness progress.

A price index in the GDP report rose at a 2.3% rate in the second quarter, the quickest in three years, after advancing at a 1.4% pace in the prior period. A core price measure that strips out food and energy costs increased at a 2.0% pace, the fastest since the first quarter of 2012. The inflation picture should lend support to the Fed hawks who want to hike interest rates sooner rather than later, but for now the Fed is standing pat.

The Federal Reserve Federal Open Market Committee reaffirmed it was in  no rush to raise interest rates, even as it upgraded its assessment of the economy and expressed a level of comfort that inflation was moving up closer to its target, and the taper is  still on track. The Fed has kept overnight rates near zero since December 2008 and has more than quadrupled its balance sheet to $4.4 trillion through a series of bond purchase programs. The Fed announced, as expected, that it would reduce its monthly bond purchases to $25 billion per month, but it gave no indication that recent signs of stronger economic growth had changed its previously announced plan to hold short-term interest rates near zero well into 2015.

The Fed acknowledged both faster economic growth and a decline in the unemployment rate, but expressed concern about remaining slack in the labor market. The Fed’s statement said: "Labor market conditions improved, with the unemployment rate declining further… However, a range of labor market indicators suggests that there remains significant underutilization of labor resources."

Some Fed officials see evidence that the economy is settling into a pattern of slower growth, and that monetary policy has substantially exhausted its power to improve the situation. They want the Fed to retreat more quickly from its stimulus campaign, fearing higher inflation, or that it will encourage bubbles in financial assets. Fed chairwoman, Janet Yellen, and her allies have taken a more cautious view, arguing that the decline in the unemployment rate appears to overstate the improvement in the labor market, because it counts only people who are looking for work. Yellen expects some people who had been discouraged about their job prospects will return to the labor force as the economy continues to improve, and she has pointed to weak wage growth as evidence that it remains easy to find workers.

More optimism for the economy came in a report from ADP, the payroll processing company; private employers added 218,000 jobs last month, which was down from 281,000 in June. It was the fourth straight month of job gains above 200,000. While ADP’s numbers offered reason to be hopeful, the company’s figures cover only private businesses and often do not track with the government’s jobs report, which will be released Friday.

The ratings agency Standard & Poor’s says Argentina has defaulted after it failed to make a $539 million interest payment due on its discount bonds. The downgrade came late this afternoon as representatives for Argentina and New York hedge funds sought to reach a last-minute agreement on Argentina’s debt. Yet after more than five hours of mediated talks, neither side appeared closer to a deal. Standard & Poor’s lowered its rating on the country’s debt to “selective default”, noting that Argentina had a 30-day grace period following the June 30 scheduled interest payment date to make payment.

This story goes back to 2001, when Argentina defaulted on tens of billions of dollars of sovereign bonds. It later exchanged those bonds for discounted ones with most of its bondholders, but a small group of traders, mainly hedge funds, led by Paul Singer’s Elliott Management refused to take the new bonds, even though they had purchased the discounted bonds after the default, at pennies on the dollar, they demanded full payment, and they have not backed down, and they took it to court in the US.

In 2012 a US federal judge ruled that Argentina could not make payments to bondholders who had agreed to discounted bonds, without paying the holdouts. Argentina appealed and took its case to the United States Supreme Court which rejected the appeal last month. Argentina had until the end of the day to pay the holdouts or risk defaulting for a second time in 13 years.

A federal judge has ordered Bank of America’s Countrywide unit to pay $1.27 billion in penalties for defective mortgage loans sold to Fannie Mae and Freddie Mac in 2008. US District Judge Jed Rakoff in Manhattan issued the civil penalty against BofA in the first mortgage-fraud case brought by the federal government to go to trial. A jury in Manhattan found Countrywide liable. The judge determined that Fannie and Freddie had paid Countrywide nearly $3 billion for HSSL loans, but determined that 57% of the loans were of acceptable quality. HSSL refers to a Countrywide loan program called the High Speed Swim Lane, which basically fast-tracked almost any loan; it was also known as a “Hustle” loan.

In today’s decision, Judge Rakoff wrote: “While the HSSL process lasted only nine months, it was from start to finish the vehicle for a brazen fraud by the defendants, driven by hunger for profits and oblivious to the harms thereby visited, not just on the immediate victims but also on the financial system as a whole.”

Separately, Bank of America is reportedly nearing a settlement with the Justice Department to resolve an investigation into its sale of mortgage backed bonds centered on faulty loans the company inherited from Countrywide and Merrill Lynch, which it purchased in 2008. The discussions include how much money will be paid in cash and how much in consumer relief. Potential terms have ranged from $13 billion to $17 billion. The DOJ has been trying to work out a settlement for some time, and was reportedly dissatisfied with a $13 billion deal that included $5 billion in consumer relief. The consumer relief portion of these settlements has typically been an easy out for the banks. The amount of any settlement would come on top of the $9.5 billion the bank agreed to pay in March to resolve Federal Housing Finance Agency claims.

Monday, August 13, 2012 - The World Slows Down but Refuses to Admit or Deny Slowing

The World Slows Down but Refuses to Admit or Deny Slowing
- by Sinclair Noe

DOW – 38 = 13,169
SPX – 1 = 1404
NAS + 1 = 3022
10 YR YLD +.01 = 1.65%
OIL +.01 = 92.74
GOLD – 10.60 = 1610.90
SILV - .30 = 27.93
PLAT – 13.00 = 1391.00


The S&P 500 closed slightly negative, but the interesting part was the volume, or the lack thereof on the New York Stock Exchange. It was the lowest non-holiday-trading day volume in over a decade; only 380 million shares changed hands. You've got to wonder if the problems with Knight Capital last week have exposed a problem. Clearly something broke with Knight's algorithm software glitch. Could it be that the volume on the exchange has been artificially inflated? Yep. And what did we get for having a company like Knight Capital scalping with High Frequency trades? We all lost a little. 

The S&P 500 and Dow have risen every week for the past five weeks. The S&P 500 last wrapped up a five-week climb in mid-March. The Dow hasn't done so since last October. The Dow has fallen for 10 out of the past 11 Mondays, and the S&P 500 has finished down five of the last six.

Japan’s economy grew in the second quarter at a 1.4 percent annual rate, slower than expected. Last week, China released dismal figures on retail sales and exports in July. There was some speculation Beijing would roll out stimulus measures over the weekend. That did not happen.

Slower growth in Asia is problematic because Asia’s economic endurance has helped offset weakness in the US and Europe. Exports from China and Japan are declining as Europe’s economic problems hurt consumer confidence there. The whole world is slowing down.

Japan’s exporters are under duress as the debt crisis in Europe has cut into sales. There were some expectations about the possibility of action from Japan’s central bank; although I don't know what the Bank of Japan can do, except continuing to push on a string. And right now it looks like central banks globally have been hesitant to do anything. The general opinion is to wait a few weeks and see if the whole mess can just wait until September. 

A senior member of Chancellor Angela Merkel’s party issued a stark warning to Greece today, saying Germany would not hesitate to veto further aid to the country if there were any signs it was not meeting the conditions of its bailout…”Even if the glass is half full, that won’t be sufficient for a new aid package. Germany cannot and will not agree to that.” It is easy to be tough minded when things are going well, and the core of the euro-zone has been tough minded on the periphery, but now it appears the core may be feeling economic restrictions; not as bad as Greece.  Gross domestic product slid 6.2 percent in the second quarter from a year earlier. That follows a 6.5 percent year-over-year contraction in the first quarter.  The second quarter was difficult, with two parliamentary elections, tough austerity measures and a flight of deposits from Greek banks..  The Greek economy has shrunk almost 18 percent since the April-to-June quarter of 2008, a decline that suggests economic depression. So far, there appears to be little reason for optimism, with the unemployment rate in May reaching a record 23.1 percent, up from 22.6 percent in April. The jobless rate among youth has reached almost 55 percent.

Now the strain is starting to tell on the core countries, too. On Tuesday, estimates of second-quarter growth for the Euro-zone are expected to show a fall of 0.2 percent for the euro zone as whole, a 0.1 percent dip for France and just 0.2 percent growth for Germany. Germany's factory orders fell by an alarming 1.7 percent between May and June, much worse than the 0.8 percent forecast. If the euro-zone's biggest and healthiest economy is faltering, then who is left to do the bailing?

The recent emergence of an axis between Spain, Italy and France at the last euro zone leaders' summit shows that the political fault lines between core and periphery are shifting too. The relationship between German Chancellor Angela Merkel and her French opposite number, Francois Hollande, does not appear to be as close as her relationship with his predecessor Sarkozy.


There has been a lot of focus on the  LIBOR rigging scandal, but no one seems to be asking the question: why would banks want to contribute their LIBOR numbers at all? And what happens if they stop? If you run a bank you have to pay your treasurer to make up a bunch of numbers every day and send them out to be scrutinized. The media, the regulators, and clients will all read your contributions and compare them to other banks. Your numbers will inevitably be considerably higher or lower than the average and you will be accused of wrongdoing. 

Of course your treasurer can't be bothered with making up numbers daily, so the job gets sloughed off on junior accountants. And you can only hope those junior employees don't have too many persuasive friends on the trading floor trading basis swaps.  And the banks do this for free; a few of the more clever bankers figured out they could make a few proprietary trades on the side, but mainly it was not much upside opportunity. It is therefore likely that many banks will simply pull out of this exciting venture going forward. So will Libor die? What will take its place? Just asking. 

The Federal Reserve bank of St. Louis says the shadow  banking sector was close to $20 trillion at its peak and shrank to about $15 trillion last year, making it at least as big as, if not bigger than, the traditional banking system. The still scary part is that the shadow banks serve as  financial intermediaries that conduct functions of banking "without access to central bank liquidity or public sector credit guarantees." No guarantees means there could be problems; if so, the problems would be big. Remember what happened in 2007? Problems with money markets...

Peregrine Financial Group CEO Russell Wasendorf Sr., who attempted suicide outside his Cedar Rapids, Iowa office in July, has been indicted on charges of making false statements to regulators.

The Federal Trade Commission finished a settlement with Facebook on Friday over allegations that the company had violated its privacy policy, and in the process said it would re-examine its own practice of allowing companies to settle charges of wrongdoing while denying that they had done anything wrong.

The FTC’s turnabout came in response to dissent from the Facebook settlement by one commissioner, J. Thomas Rosch, who said that allowing the company to deny charges it was agreeing to settle undermined the commission’s authority.

In November, the FTC said that Facebook had deceived consumers by telling them that their personal information would be kept private, while “repeatedly allowing it to be shared and made public.”

The commission voted 3-1, with one abstention, to impose a 20-year consent order requiring Facebook to protect its users’ privacy. The company agreed to give consumers clear and prominent notice and to obtain their express consent before revealing information beyond their previously stated privacy settings, to maintain a comprehensive program to safeguard private information, and to obtain an independent privacy audit every two years. Facebook said in a statement on Friday, “We are pleased that the settlement, which was announced last November, has received final approval.” The company did not repeat its assertion, made in November, that it “expressly denies the allegations set forth in the complaint.”

The FTC is not the only federal agency that allows a company to deny facts that it seems to be conceding. In July, the Justice Department settled a case with the pharmaceutical maker GlaxoSmithKline in which the company agreed to pay $2 billion to settle civil charges that it defrauded the government with drug sales. Despite the payment, Glaxo expressly denied that it had engaged in any wrongful conduct. That seems to invite denials of liability in every case in the future.

Securities and Exchange Commission’s rules ban a company that settles a case from denying that it committed the acts in question. The SEC  also states that “a refusal to admit the allegations is equivalent to a denial, unless the defendant or respondent states that he neither admits nor denies the allegations.” That rule would disallow the FTC’s language that a settlement “does not constitute an admission” of guilt.

The SEC’s policy, however, has itself been a subject of dispute. A federal judge in Manhattan refused to approve an SEC settlement with Citigroup last year, saying that the agency’s policy of allowing a company to neither admit nor deny allegations gave him no basis on which to judge whether the settlement was in the public interest.

The case, heard by Judge Jed Rakoff of Federal District Court in Manhattan, is now being considered by a federal appeals court. So, we've reached a point where major corporations can't just pay a fine and deny wrongdoing; we've advanced to the point where they may have to pay a fine and not admit wrongdoing. These may seem like subtle distinctions but they are not. 



Credit card debt collection may achieve the dubious distinction of making mortgage servicers look good. The New York Times reports that credit card debt collection was a heavy user of robosigned affidavits, and credit card companies frequently file erroneous lawsuits, sometimes saying a customer owes money when they’ve paid off the balance, and then if they can establish there is a balance, there are problems with the accuracy of the balance. Unlike foreclosures, where even after the revelation of widespread and varied mortgage abuses, most judges are pro-bank, in the credit card realm, the conduct of lenders is so bad that experienced judges are skeptical of them. From the article:

As they work through a glut of bad loans, companies like American Express, Citigroup and Discover Financial are going to court to recoup their money. But many of the lawsuits rely on erroneous documents, incomplete records and generic testimony from witnesses, according to judges who oversee the cases.

Lenders, the judges said, are churning out lawsuits without regard for accuracy, and improperly collecting debts from consumers. The concerns echo a recent abuse in the foreclosure system, a practice known as robo-signing in which banks produced similar documents for different homeowners and did not review them.

“I would say that roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt,” said Noach Dear, a state civil court judge in Brooklyn, who said he presides over as many as 100 such cases a day….

The problem, according to judges, is that credit card companies are not always following the proper legal procedures, even when they have the right to collect money. Certain cases hinge on mass-produced documents because the lenders do not provide proof of the outstanding debts, like the original contract or payment history.

At times, lawsuits include falsified credit card statements, produced years after borrowers supposedly fell behind on their bills.

But the big reason that the credit card companies can ride roughshod over the law is that so few consumers contest these cases. The article reports that 95% go uncontested, meaning the lender will win a default judgment and can then garnish wages or bank account balances.

And if you think it’s bad with the credit card companies, it’s even worse with the bottom feeders. There ares statutes of limitations on unpaid debts; for most states, its about 4 or 5 years. Apparently a hedge fund is backing a company that buys bad debts from credit card companies, debt they’ve already written off, shortly before the statue of limitations is about to expire, for pennies on the dollar. They then file suit. They don’t even plan to spend any money fighting, they're just intent to win default judgments. So if you hire a lawyer and merely file an answer, you win. But a remarkably high percentage of people fail to do that. And this is the business model that the hedge fund has determined is a good business model.