The long-awaited and much-anticipated version 7 of Drupal ("D7") was formally released this week. This open-source software package is known as a Content Management System ("CMS") and has been used to run this and other websites hosted by Toomre Capital Markets LLC ("TCM") for much of the past six years. We have known that this code was under a long development cycle for quite some time and have tested various components along the way. It appears to be quite promising and should enable the TCM team to do even more with this great software.

Hence, late last week we decided to bite the proverbial bullet and start the rather involved upgrade process of bringing "everything" current. As a result, this website, its sibling websites and the supporting servers all currently are under-going a massive maintenance upgrade. This means that the performance and availability of the website will be more spotty has been the case recently. (In particular, the image software is not working as desired.)

This upgrade includes finally switching the Ubuntu flavor of Linux software on the server from what was 8.04 (Hardy) to 10.4 (Lucid Lynx). Ubuntu 10.4 is the most current Long-Term Support (LTS) release and should be stable for the next several years (like Hardy has been). As is the case with practically any server upgrade, there are numerous packages that also either need to be or can be upgraded to work with the more current version of the software. We currently are in the midst of checking, confirming and installing the associated package changes.

One of the biggest packages that changed with the Ubuntu 10.4 was the programming language PHP. It switched from version 5.2 to version 5.3. Normally that would not be very much of a change. However, the Drupal 6 software was written prior to some of the changes that were introduced with 5.3. In particular, PHP 5.3 is much more strict about the issue of how it passes variables and also has some deprecated functions that were used quite a bit in the Drupal 6 core. Drupal 7 supposedly clears up these particular issues, but may well introduce others that need to be tested for before the final switch to Drupal 7 is completed.

Where we are at the moment is running the most current version of Drupal 6 and Ubuntu 10.4. In the log files, there are a number of errors being posted about problems with pass variable by value instead of by reference. These need to be corrected one by one to get Drupal, Ubuntu and our custom software all peacefully co-existing with one another. We are aware that hidden in this mess is the something that is preventing the correct display of images with their associated content. We are not sure where exactly the problem is, but hope to have the issue eradicated shortly this weekend.

Thanks for bearing with us!

This is being cross-posted to both the Toomre Capital Markets website and to Lars Toomre's personal website.

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Earlier this week, Lars Toomre broke up an LT post about Adding Images to Lars Toomre Website. Previously, buried at the bottom of that post, there was a hand-crafted HTML table summarizing what information currently was in Google Image Search for various combinations of site domain restrictions, safe search parameters and some typical search terms. That table is now presented in the LT post Sample Summary of Google Image Search Results and repeated here for easier reference.

The public presentation of these search results has already resulted in several stimulating conversations heading off in numerous different directions. Let me try to summarize some of the issues that have been raised thus far and the broad categories that they might be grouped into. Each of these categories probably will receive additional attention in the coming days. They include:

Over the past couple of months, there has been little posting here of original content. Instead, when not working on client engagements, much of the available time has been spent behind the scenes preparing to upgrade and further enhance first Lars Toomre's personal website [lars.toomre.com] and then in due course that of the business Toomre Capital Markets LLC ("TCM") [www.toomre.com]. Hopefully, soon there will be more time available to write here and share more ideas.

In the meantime, if the reader would like to gain further insight in what is coming, please free to read the blog entries on Lars Toomre's personal website here. All thoughts and comments are welcome.

IP address 95.108.240.252 maps to a spider computer hosted on the Yandex Enterprise Network. About every minute and a half or so, a spider process on that computer (still) attempts to retrieve yet another piece of content from the Toomre Capital Markets ("TCM") website. Many of the pages this spider requests either do not exist or are part of the no-follow rule section in the robots.txt file. This spider certainly is aggressive and ignores the rules that many other bots seem to respect.

A few months ago, after watching this particular malformed spider consume more five percent of the total hosting bandwidth used that month, we had had enough. Hence, some modifications were made to a custom Drupal module running on the TCM website concerning visitor information (including various bots) and what specific information was being sought. Now as a result, when this Yandex spider come looking for a page like "search/node/facebook", it somehow ends up redirected to a page from a third-party website.

One would think that the person(s) controlling the spider would get the message after some fifty thousand plus attempts to get information from the TCM website. Somehow a human user might wonder why attempts to retrieve information on structured finance products, risk management and/or MATLAB topics always results in a page full of "gay anal porn" or other similar material. Until then, the TCM website might well become a frequent referrer to certain pornographic websites.

Toomre Capital Markets LLC ("TCM") uses the open-source Content Management System ("CMS") system called Drupal to generate the web pages that are served up on this website. As part-time technology "geeks", we at TCM are big fans of the flexibility that this technology offers. That flexibility comes at a cost though. Whereas as some other popular CMS software like WordPress are much easier to use "right out of the box" so to speak, Drupal requires considerable effort in setting various parameters and even some programming to get a website to look and work as desired.

The current version of the TCM website has remained basically unchanged for the past two plus years. During the summer of 2010, we will be making some changes both to address the resolution of some long-known issues and to prepare for a move both to a new version of Drupal (Drupal 7) and the adoption of the HTML5 language. Hence, there may be some temporary hick-ups as these changes are incorporated into the production website.

If there are annoyances about the current presentation and/or operation of this website that bother the reader, please let us know. We will try to incorporate such changes before we are distracted by the upgrades to HTML5 and Drupal 7. Thanks!

Diana Furchtgott-Roth over at Real Clear Markets raises concerns about Section 342 of the pending Dodd-Frank financial regulation bill. This section has not been publicized much at all during the contentious reconciliation process.

Section 342 apparently "declares that race and gender employment ratios, if not quotas, must be observed by private financial institutions that do business with the government. In a major power grab, the new law inserts race and gender quotas into America's financial industry." Through the establishment of at least twenty Offices of Minority and Women Inclusion, this section aims to assure "to the maximum extent possible the fair inclusion" of women and minorities, individually and through businesses they own, in the activities of the agencies, including contracting.

Toomre Capital Markets LLC ("TCM") applauds the broad diversity goal that this section attempts to address. For far too long, the financial services industry and its service providers have been dominated by white males. It is reassuring to know that my teenage daughter, based solely on her capabilities, might have some possibility of obtaining employment in the investment banking sector should she desire so. In short, females and minorities will have a "fair" chance for opportunities and employment.

The devil is in the details of implementation, though: How does one define "fair"? As Ms. Furchtgott-Roth explains,

John Carney is headed to CNBC as a Senior Editor. The former editor and writer for Business Insider's financial news and gossip vertical, Clusterstock, will now be writing for the blogs section of the CNBC.com website as well as serving as an on-air commentator on the popular business news cable channel.

Toomre Capital Markets LLC ("TCM") has followed Mr. Carney's work since the beginning of the financial crisis when he at that time was writing for the Dealbreaker website, a Wall Street blog that covers the personalities and culture that shape the financial industry. Partly as a result of John Carney's insightful writing for his former employers, both of these Wall Street blogs became among the most popular. Perhaps the CNBC website will also soon become more popular because of John's work? TCM wishes John success with his new position.

Around 5 PM on Monday May 10th 2010, visitor traffic to the Toomre Capital Markets LLC ("TCM") website noticeably spiked. Many of the visitors first came to the post Possible Bankruptcy for Joe Gregory of Lehman Brothers before often continuing to other postings. The source of much of this increased traffic was tied to the micro blogging service twitter.

The market making results of Goldman Sachs are simply amazing!! According to its recently filed documents with the Securities and Exchange Commission for the first quarter of 2010, Goldman Sachs had zero trading days where it lost money from its trading activities!! Toomre Capital Markets LLC ("TCM") is stunned by this news.

According to the filing, on more than half of the 63 trading days in the quarter, it recorded more than a hundred million dollars in net revenues for that day!! Further, with the understanding that 76% of the firm's $9.7 billion in revenues came from trading activities, the average net revenue for each day was approximately $117 million — and on at least twelve of those days, the net revenues were north of $160 million!!

The chart to the left is from the Zero Hedge blog and their post Unfuckingbelievable: Goldman Has Zero Trading Loss Days In Last Quarter. As that post states, "The statistic probability of this event is itself statistically undefined." TCM whole-heartedly agrees that these results are unbelievable. Utilizing classic risk management measures, one could even argue that Goldman Sachs was not taking enough risk since it never experienced a penny of loss!!

The week of April 26th 2010 will be important for the future of derivatives and where those type of instruments may be legally transacted in the financial services industry. At the start of the week, it appears that the Senate bill will force commercial and investment banks to spin off those divisions that transact in derivatives into separate companies that will not have access to either FDIC deposit insurance or emergency borrowings from the Federal Reserve.

If passed into law, this proposal will dramatically change the securities industry in several ways. Derivatives have long been one of the most profitable areas of the securities business. Hence, by definition, the remaining portion of the securities firms will be less profitable. It is an open question about how much the valuation of financial institutions with securities businesses should be adjusted downward.

Second, derivatives are critical risk management tool(s), particularly in the management of physical commodities where both future supply and demand are uncertain. Apparently, there will be a narrow exception for "end users" — producers, manufacturers, and other companies that are not financial players who used derivatives to hedge. The proposed legislation will require exchange trading, with margining, with clearing and a number of other provisions that provide reasonable safeguards. However, whether it makes sense to restrict a major source of capital liquidity to the derivatives markets remains open.

Third, one of the main reasons credit default swaps ("CDS") first caught on in the interest rate markets was the ability for the first time to effectively 'short' a particular credit. Previously, it was virtually impossible to short a bond and then to borrow it to cover the 'short sale'. The introduction of CDS led to much better price transparency in the credit markets. CDS contracts also became an effective tool in the management of credit portfolios, both on the investor 'buy-side' and dealer 'sell-side' of the credit interest rate markets. Preventing security dealers from using CDS will likely lead to reduced liquidity, profitability and size of the credit trading businesses at major securities firms.

Toomre Capital Markets LLC ("TCM") hopes that the provision to spin-off derivatives units of securities firms fails to pass in the legislative process. There is an open question about what to do about the many derivatives contracts that are outstanding. Should they be moved to clearing houses where collateral will need to be posted or should just new contracts going forward be subject to the clearing house and collateral posting requirements? Good arguments can be made on both sides.

However, artificially separating derivatives from a major source of liquidity capital does not make sense. The forthcoming tussles over derivatives in the U.S. Congress will be well worth watching and understanding. Clearly the derivatives playing field will be changing. The question is how and what will the consequences be.

Goldman Sachs and one of its Structured Finance Vice Presidents, Fabrice Tourre, were sued in civil court by the SEC for fraud on Friday, April 16, 2009 regarding representations that they made in the marketing and offering materials for what is known as a synthetic CDO named Abacus 2007-AC1. This news has sent the Goldman Sachs common stock lower by more than ten percent. It is also significant implications as the investigation is said to be still open and on-going.

Toomre Capital Markets LLC ("TCM") has received several messages looking for more insight on this latest questionable activity in the mortgage and structured finance markets. We have been busy on a detailed review of the detailed Exhibits related to the Examiner's review of the Lehman Brothers bankruptcy. We will shift our focus and hope to shortly have some further insights posted here.

During his M.I.T. undergraduate days around 1980, Lars Toomre worked as a junior engineer for an iconic computer firm, Digital Equipment Corporation ("DEC"), in what then was its main engineering facility known as The Old Mill in Maynard, Massachusetts. Lars worked in a central engineering group then called Electrical Interconnect Engineering which was a firm-wide central resource for all mechanical issues involved in getting electricity from the power grid to the chip.

Although we did some work on the effectiveness of various connectors and contacts, most of our work centered on how to get heat away from the chips and printed circuit boards. This thermo-dynamics modeling work required extensive calculations on several PDP 11/70 mini-computers which were dedicated to the engineering group. In comparison to today's personal computers, those mini-computers were very rudimentary. However, in due time using the FORTRAN programming language, they did produce useful results. One wonders just how fast those same computer simulation models might run on today's laptops.

Shortly before Lars started working at DEC, Ken Olsen, the founder and President of DEC, pronounced at the 1977 World Future Society Convention, "There is no reason for any individual to have a computer in their home." Partly as a result of Ken Olsen's view on the value of personal computers, DEC was slow to adapt to the personal computer era and the firm slowly withered thereafter before it eventually was sold to Compaq Computer.

Ken Olsen was somewhat blind to the transformational change that was about to over-take the computer industry in the early 1980s. Toomre Capital Markets LLC ("TCM") likewise wonders whether the senior managements of today's very large financial institutions fully understand the popular anger that is likely to change the way their firm's operate for a generation or more to come.

The UK Telegraph has a fascinating technology article on Friday March 26th 2009 entitled Typing Technique 'Could Trap Paedophiles'. This article highlights some recent research by Professor Roy Maxion, an associate professor at Newcastle University, now working at Carnegie Mellon's Computer Science Department. Apparently "researchers believe technology could be used to determine a computer typist's age, sex and culture within 10 keystrokes by monitoring their speed and rhythm."

This newspaper article goes on to explain how this technology could be useful in tracking down on-line fraudsters and pedophiles. Professor Maxion's recent paper with Professor Kevin S. Killourhy entitled Comparing Anomaly-Detection Algorithms for Keystroke Dynamics provides more details on the basic research.

Toomre Capital Markets LLC ("TCM") is particularly fascinated by this research. If one truly could identify a computer user's age, sex and culture in as few as ten keystrokes, imagine how much more secure the Internet might become simply by requiring say passwords of at least a dozen characters. Imagine also what might happen if one of the search engines were to incorporate such technology into the place where one enters a query. Another possibility might include incorporating the technology into instant messaging software and/or the dialog boxes that users are frequently required to fill out in order to access some specific content.

The Euro fell to a ten month low as the US Dollar soared in value on Wednesday March 24th 2010. In late New York trading, the Euro was at $1.3324, down from $1.3501 late Tuesday. While it does seem like that big a move, it represents a 1.31% change in value.

As The Money Game blog notes, "If you live in the world of stocks and commodities you might not completely appreciate the magnitude of the 1% move in the dollar index today. But when you consider that many forex traders trade at leverage of 50x-200x just so that they can actually get some action on a typical, today's dollar move is epic."

Toomre Capital Markets LLC ("TCM") could not agree more. What an epic move for one day!!! TCM also wonders how many institutions and investors were hurt today by their "bets" against the value of the US Dollar.

BNP Paribas, Deutsche Bank and Moore Capital all are connected to the biggest-ever, "insider trading" raid ever conducted in the United Kingdom. On Tuesday March 23rd 2010, British regulators and the UK Serious Organized Crime Agency used more than 140 personnel to raid sixteen locations and initially arrest six people.

The identities of the six arrested are a bit sketchy still. One is said to be Clive Roberts, head of European sales trading at Exaine, in which BNP Paribas owns a fifty percent stake. At least one of those arrested was also employed at Moore Capital in London – supposedly a Mr. Julian Rifat. Another individual is said to be a junior employee at Deutsche Bank. The identities and affiliations of the other three arrested were not initially known.

According to a subsequent FSA press conference, Exaine, Moore Capital and Deutsche Bank employees apparently used inside information to trade for their firms and/or themselves, and have made significant profits as a result. This again apparently was a 'sophisticated and long running insider trading ring. The UK investigation began back in 2007 and is continuing.