Batten Down The Hatches

Shared Data Among Battlefield Operating Systems

I am no friend to hackers.  Thanks to hackers, we have to password-protect wireless routers, use firewalls, install virus and malware scanners, and other security measures.   There are plenty of good reasons why not all information should be free.  No one but my family and me has any business in my computer.  As far as I’m concerned, the Hackers’ Manifesto is the fast lane to 10 to 20 years in  prison.

An even bigger threat, though, are terrorists and foreign powers using the same types of tools to gain access to government secrets or to bring down communications, electric, or any other system that relies on computer technology and networks.

Mantech International Corporation is one of the world’s largest electronic and cyber security firms.  The people they hire make the average hacker look like a minimum wage entry-level Nerd Herd tech at the Buy More.  They provide “systems engineering, software development, enterprise security architecture, information assurance, intelligence operations support, network and critical infrastructure protection, information technology, communications integration and engineering support.”

Mantech started with a couple of guys in 1968 and is now a  a nearly two billion dollar a year business.  President and Chief Operating Officer Robert Coleman, who came aboard when his company, Integrated  Data Systems, was acquired by Mantech in 2003,  is stepping down in a few months.

Most of their work is for various branches and departments of the U.S. government.  Their clients range from the Central Intelligence Agency to NASA.  And therein lies a weakness.  Reviewing their annual reports, I discovered that, on average, 95% of their customers are government related.  That weakness, however, creates a strength.

In my cover letter to Board Chairman, CEO, and Co-Founder George Pedersen, I suggested “an expansion of Mantech into the private sector.  I believe that some of the technologies Mantech has deployed in the defense of our country can be deployed commercially.”  Encryption used by the State Department to U.S. Embassies abroad, for instance, could be used for business communications.

With very little effort Mantech could easily become a major player in information technology security, with the C.O.O. leading the efforts to keep private information private.  We are in an arms race with hackers.  Mantech products could help us turn the tide.

Terror of Freddie Macagodzilla

Mechagodzilla Action Figure. It's debt-free!

Let’s say, just for example, that I had my eyes on a Mechagodzilla action figure that cost $20.00.  And for the sake of our argument I had only $5.00.  The dealer would finance the remaining $15.00 at 6.5% interest for 30 years.  I would pay nine cents a month. But wait!  There’s more!

Suppose this dealer then sold the mortgage on my Mechagodzilla to another dealer soon after my purchase.  This new dealer would purchase the promissory note for, oh, say $17.00.  The first dealer has made an extra $2.00 over the list price of the Mechagodzilla.  Meanwhile, Dealer 2 is hoping that the action figure will appreciate in value, and I will sell it in a three years for $25.00, and pay off the note.  Not only does Dealer 2 get the $2.95 in interest during those three years, but he will receive the $17.00 he initially paid to purchase the note.  And I will have made a little bit of profit as well.  If I keep the Mechagodzilla for all 30 years, Dealer 2 gets $34.13, of which  $19.13 is interest. His total profit is $17.13.

Broadly, this is what “securitizing” loans is all about.

Continuing our supposition, let’s suppose that I’ve owned this Mechagodzilla for six years.  I’ve been riding high on the speculative market and Mechagodzillas have risen in value to a massive $28.00!  But the bottom begins to fall out.  Folks are losing their jobs and just don’t have the money to buy Mechagodzillas.  In three months the value of my Mechagodzilla has fallen to less than half of list price.  Now I own a Mechagodzilla that is worth only $9.37 and I still owe $13.79.

Broadly, this is the danger of “securitizing” loans and why our housing market is in such crisis.

Broadly, this is why Freddie Mac is in deep deep trouble.  Much of this quasi-governmental agency’s business was buying mortgages on the secondary market, packaging them up, and reselling them to investors.

David M. Moffett has resigned as CEO of Freddie Mac.  He took the job just last September.  The massive losses at Freddie Mac may have been too much for him to get a handle on.

This is going to be one brutal job, and it’s going to take a Mechagodzilla style of leadership to pull it off.  The first thing I would do is squash this 40 year mortgage concept that’s floating around right now.  I think 30 year mortgages are too long already (I’m on track to pay mine off in 20).    I would also try to minimize the buying and trading of real estate like baseball cards, which played a big part in getting us into this economic morass.  Houses are homes not poker chips.  Adjustable Rate Mortgages are also on my hit list.  ARMs should go down, not up, when interest rates go down.

Give me an Absolute Zero Cannon and let me get to work.