“A man hath no better thing under the sun, than to eat, and to drink, and to be merry.”
Ecclesiastes 8:15

Financial markets may be rocky and bankers’ bonuses down - but for the diner with cash to burn a London restaurant has launched the city’s most expensive fixed-price seven course menu at 1,000 pounds ($2000) a head. Aiming at bankers, lawyers and other denizens of London’s rich financial district known as the “City” who did receive a bonus this year, restaurant Vivat Bacchus says the menu is actually a reasonable price.

It includes a vodka and seven glasses of wine including a 1963 port and a glass of Chateau Lafite Rothchild normally costing 700 pounds a bottle.

“It’s good value for money,” restaurant co-owner Naleen Strauss told Reuters. “People like to spoil themselves at bonus time. Everything is beautiful. It’s a bit decadent. You couldn’t have it every day or you would die of a heart attack.”

Reminds me of the four Barclay’s bankers who a year or two ago achieved notoriety by spending £50,000 on a single expense account meal (actually on the wine - the food was comped). These guys aren’t smart - they’re just thugs who are part of the financial insider group that systematically robs savers, investors and corporations with misleading advice, undisclosed fees, self-dealing and all the myriad of tricks and cheats that allow them to prosper. The WSJ revealed today that the FBI has opened criminal investigations of 14 (un-named) companies relating to the securitization of subprime mortgage loans. (SEC? Hallooo? Anyone there?).

C’mon. We need to see these folks marched off to jail by the platoon. (Program traders! Fall in! Ten-shun! Right dress! Eyes front! Left turn! Quick march!). There is nothing that they do that merits these indecent levels of compensation. Booty, really. Not that kind of booty. Booty as in pirates. Pieces of eight, etc. That kind.

Hat tip to Mish Shedlock. Not only is the “walk away” meme spreading, it has apparently already spawned a service business that helps the “walkers.” Mish takes the view that “walking away” is just a business decision that should carry no moral stigma. I disagree. Not only a promise, but a contract is being broken. It is not illegal, but that doesn’t make it right. Yes, lenders and other businesses do bad things. But two wrongs don’t make a right, and if people treat their promises so casually, then we are in a whole lot more trouble than I thought.

The betting (based on Fed Funds futures) is currently an 88% probability of a 50 bps rate cut on Wednesday. Wall Street has issued its instructions, and Ben is expected to follow them. The boyz have let him know that, if he doesn’t cut enough, the stock market will be tanked. Are the boyz bluffing? Probably not, they don’t want Ben to think he can get away with misbehavior. If they can jam it, they can slam it. But a sad state of affairs. Ben has let himself become a thrall to the stock market, and now it can be used to manipulate him.

Perhaps that would be OK if the boyz had anything but their own self-interest in mind, but of course they don’t. New York AG Cuomo seems to think he is striking paydirt in the investigation of Wall Street’s alleged concealment or misrepresentation of the results of due diligence on the mortgages it was securitizing. He has persuaded one of the due diligence consultants to turn state’s evidence on the promise of immunity. The rating agencies are asserting that it was not their fault, they just believed whatever the Wall Street boyz told them. Not their responsibility to verify the information. Sounds rather like “I was just following orders.” This begs the question, of course, where is the SEC? These mortgages were packaged into securities, you know, the “S” part of “SEC,” which were given high ratings and then suffered massive defaults. Uh, shouldn’t the SEC care about this? Of course not, their job is to patrol the chat boards and descend like a ton of bricks on some poor individual who runs a pump and dump scheme for $25 thousand, while letting the industry pump and dump a couple of trillion dollars worth of junk. At least Cuomo seems to take his job seriously. The SEC is dangerous - it allows the industry to argue that it is regulated, when in fact it is not.

Wall Street is running the Fed and the SEC. And you wonder why their profits and bonuses are so obscene.

Back in the real world, it looks like the housing market pretty much fell apart in December. Prices started to roll downhill - good in a way, as that’s a necessary step to clearing the huge inventories. But sales dropped too, and we are coming up on the Super Bowl, which is the traditional signal to list your house for sale in the spring. How many unsold houses will be coming back on the market?

A couple of good pieces for Sunday evening reading or viewing. CBS’ 60 Minutes show offers a segment on the mortgage mess, featuring Jim Grant. It also includes the “just walk away” thought process that appears to be taking hold like a California wildfire.

They say they can afford the higher payments, but see no point in making them.”The house keeps going down, payments keep going up. Where’s the logic in that? And how can we fix it? I mean, that’s what this whole thing’s about for us is how can we fix this? And if we can’t fix it, then what do we do?” Matt Valdez asks.

“Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense,” Stephanie Valdez adds.

“That’s what you agreed to do when you bought the house,” Kroft points out.

“Fine. If the value is going up. But we’re not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There’s no way,” Stephanie Valdez replies.

“You’re saying, essentially, that you’re going to stop making payments on it? You’re just gonna let it go into foreclosure?” Kroft asks.

“You know, that’s the only advice we’ve gotten so far is walk away from the home. We don’t want to do that to our credit. Why can’t our mortgage company work with us?” she says.

In other words, we only bought this puppy because we thought we could resell it for a profit. We now want to have our cake and eat it, essentially void the contract we signed and reprice the house at market without damaging our credit, or we’ll walk away. Sharp practice, indeed. They must be corporate employees, used to getting their stock options repriced down every time the corporation’s stock declined, to come up with this feeling of entitlement.

And another of John Hussman’s exceptionally thoughtful pieces. Certainly one of his top ten. It covers markets, the stimulus package, politicians and Keynesian economics with so much good stuff that I won’t excerpt from it.

The rumors served up by Marketwatch were correct. Yup, the hedges are definitely being trimmed. The Sunday Times:

A RAFT of European hedge funds have been forced to introduce emergency measures to protect their businesses from collapsing in the wake of the turmoil in financial markets. Up to 10 European hedge funds have suspended redemptions after investors clamoured for their cash when the managers made severe losses.

A London prime broker told The Sunday Times that even before last week’s extreme gyrations, nearly two-thirds of London-based hedge funds had lost between 4% and 10% of their value. A “significant number” had lost much more, he said.

The manager of one of Britain’s biggest hedge funds said: “It’s been an extraordinary week. Even in the crash of 1987 I don’t remember so much carnage.”

Experts warned that the problems among hedge funds were likely to cause more disruption in the markets, especially if many are forced to liquidate positions.

Funds with heavy losses reportedly include Corin, Phylon, Addax FX1, Henderson Global Currency, Odey Treasury, Sector ERV, Kinetic Special Situations, Systeia Alternative Risk Trading and Polar Technology, according to Eurohedge, which monitors the industry.

The problems have been exacerbated by the fact that prime brokers, the arms of investment banks that finance hedge funds, have tightened lending policies.

One manager said: “Since market losses are magnified by leverage in a hedge fund, there can be a sudden need for a cash injection. But this time, the banks can’t lend as easily. Funds are then forced to sell, which causes even more problems.”

Hedge funds said that for many the problems started last year with a difficult May followed by worse problems in November and December.