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Media Infiltrations: Obama's Social Security Fine Print  The Wall Street Journal June 25, 2008 Commodity-Prices Scapegoats The Wall Street Journal June 3, 2008
"What has been your worst blogging experience? "That's a guy who actually stalks me on the Web and once stalked me personally." "I'm saying this...guy's a jerk."
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Chronicle of the Conspiracy
Join us as we discover, document, expose and challenge the bad people, the bad institutions and the bad ideas that stand in the way of wealth creation -- and show you how to fight back!
Wednesday, July 23, 2008
MAYBE ECONOMISTS AREN'T SO STUPID AFTER ALL From Reuters:The U.S. stock market would fare better in the first year after a victory by Republican presidential candidate John McCain than by his Democratic rival Barack Obama, according to a majority of economists at U.S. banks and research groups polled by Reuters....On a scale of 1 to 5, with 1 being "very good", 12 economists gave McCain's proposals higher marks, while nine rated the two candidates equally and eight preferred Obama's policies, according to the poll released on Wednesday.
...The survey, conducted this week, found that 21 of the economists polled thought McCain would be better for the stock market in the first year after the election, while six chose Obama and two gave no response.
The sample includes a cross-section of U.S. financial institutions, large and small, including several prominent Wall Street names.
Posted by Donald L. Luskin at 9:35 PM |
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Tuesday, July 22, 2008
KUDLOW REPLAY Here's the video clip on CNBC's site. I think this is part one, and I think this is part two. I cross swords with Forbes columnist Quentin Hardy, one of these journalists who frequently appear on the show who, well, simply don't know what the hell they are talking about. Must be tough to fill five hours a week with knowledgeable people. Once you run out, the remainder are, of course, not knowledgeable. Maybe there should be fewer guests?Posted by Donald L. Luskin at 9:38 PM |
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AH, FOR THE OPEN ROAD ...and a GPS system when you need it. Richard Ridgeway sends along this photo taken outside of Hillsboro, Texas.
Posted by Donald L. Luskin at 3:10 PM |
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JUST FOLLOW THE MONEY... ...as usual in Washington. Here's Tim Carney:
Follow the divergent treatment recently of four different financial companies suffering from the mortgage crisis, and you begin to detect a pattern: The well-connected — with big lobbying budgets and generous campaign contributions — get special favors from Washington, while the others get special abuse. Government-backed mortgage companies Fannie Mae and Freddie Mac are collapsing, and so Congress and the Bush administration are rushing to save them, insisting to the investing public that everything is OK.Thanks to Jameson Campaigne for the link.Lehman Brothers is upset about negative rumors hurting its stock prices, and so Uncle Sam is investigating who is badmouthing the firm. But IndyMac, a commercial bank and mortgage lender, was pushed over the edge this week by a U.S. senator, Charles Schumer, D-N.Y.
The difference: Fannie, Freddie and Lehman are all famously well-connected to Washington, with high-priced lobbyists and burgeoning political action committees; IndyMac, meanwhile, had no PAC at all and only a tiny lobbying budget.
Posted by Donald L. Luskin at 7:58 AM |
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WHY DOES EVERYONE SAY OBAMA IS SO ARTICULATE? Or for that matter, why do they say he's a different breed of politician? Read this fragment from an ABC News interview from Iraq. This stumbling and evasive response by Obama isn't exactly a signal of "change," now is it? Anyone frustrated with George W. Bush's failure to speak clearly and intelligently isn't going to get any relief from Obama, if this is a sample.TERRY MORAN: If you had to do it over again, knowing what you know now, would you -- would you support the surge?
SEN. OBAMA: No, because -- keep in mind that --
MORAN: You wouldn't?
SEN. OBAMA: Well, no, keep -- these kinds of hypothetical’s are very difficult. Hindsight is 20/20. I think what I am absolutely convinced of is that at that time, we had to change the political debate, because the view of the Bush Administration at that time was one that I just disagreed with.
Never mind that the surge is a huge success -- which is an independent notion from whether we should have been in Iraq in the first place. Would he now support it? Nope -- because the "political debate" took precedence. Rather like Obama's view on low capital gains taxes, isn't it? Never mind that demonstrably, addmittedly, lower capgains tax rates lead to higher government revenues. Those rates are "unfair," and must be raised. Just what world is this guy living in? Is there any reality other than politics?Posted by Donald L. Luskin at 7:41 AM |
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STEELE ON JACKSON AND OBAMA We hang on every word by Shelby Steele when it comes to the emergence of Barack Obama as a social/political phenomenon. His book A Bound Man is indispensible. And an op-ed in this morning's Wall Street Journal explicates the recent outburst against Obama by Jesse Jackson:
Mr. Jackson was always a challenger. He confronted American institutions (especially wealthy corporations) with the shame of America's racist past and demanded redress....Mr. Obama's great political ingenuity was very simple: to trade moral leverage for gratitude. Give up moral leverage over whites, refuse to shame them with America's racist past, and the gratitude they show you will constitute a new form of black power. They will love you for the faith you show in them.
So it is not hard to see why Mr. Jackson might have experienced Mr. Obama's emergence as something of a stiletto in the heart. Mr. Obama is a white "race card" -- moral leverage that whites can use against the moral leverage black leaders have wielded against them for decades. He is the nullification of Jesse Jackson -- the anti-Jackson.
And Mr. Obama is so successful at winning gratitude from whites precisely because Mr. Jackson was so successful at inflaming and exploiting white guilt. Mr. Jackson must now see his own oblivion in the very features of Mr. Obama's face. Thus the on-camera threat of castration, followed by the little jab of his fist as if to deliver a stiletto of his own.
Posted by Donald L. Luskin at 7:37 AM |
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"ILLEGITIMATE" TRADING So now Congress will decide which market transactions are "legitimate" and which are "illegitimate" -- all in the name of curbing "speculation" in the oil market. It won't matter what you buy and sell. What will mater is your state of mind when you do it. How will that be known? Perhaps it will be judged by the pattern of your previous behavior, especially your political behavior. From the Wall Street Journal:
...Congress's legislation, introduced by Majority Leader Harry Reid, aims to cut down the volume of futures transactions. Instead of merely increasing funding and manpower at the U.S. Commodity Futures Trading Commission, it vastly broadens the CFTC's regulatory purview. It also orders the CFTC to distinguish between "legitimate" and "nonlegitimate" traders. Legitimate firms are those trying to manage their price risks; the nonlegitimate are "speculators" purely in it for the money.Those that happen to fall in the latter category will face position limits that restrict the contracts they can hold at one time. In the words of Senate ringleader Byron Dorgan, the bill will "wring the speculation out of this market." He's probably right, but that means the bill will drain off liquidity from U.S. futures exchanges.
Traders with exclusively financial purposes take the other side of options when the goals of "legitimate" short and long hedgers don't match up. Arbitrarily discriminating between commercial and financial investors is not only pointless -- price risk is price risk -- but destructive. In an increasingly integrated global marketplace, investment banks and clearing firms will merely do their business through affiliates in London or other less regulated exchanges, in Dubai or elsewhere. So will pension funds and other institutional investors trying to hedge legitimate inflation risks with energy-related contracts. "Legitimate" traders will follow them.
Posted by Donald L. Luskin at 7:30 AM |
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Sunday, July 20, 2008
THANKS FOR THE WARNING But can you believe the kind of risk they take with the health of consumers? Paul Krugman is right about how food processing should be more regulated! The very idea -- packaging peanuts in a factory that handles peanuts.
Posted by Donald L. Luskin at 8:47 AM |
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WRONG, BUT RIGHT ANYWAY (THIS IS THE TIMES, AFTER ALL) New York Times "public editor" Clark Hoyt reviews the paper's coverage of the government's proposed contingency rescue plan for Fannie Mae and Freddie Mac. The story that the government was considering emergency measures spread panic, and Hoyt admits caussed the stocks of the two companies to fall by half. And as it turned out -- which Hoyt also admits -- everything the paper reported as under consideration for a rescue plan was not included in it, and what it did finally include was not covered in the paper's reporting. No matter. Hoyt follows that great tradition of Times financial reporting and finds an "expert" who whom he can quote agreeing with what he had already concluded before he called the "expert." In this case it's bank analyst Richard Bove:
“Whether the specifics were correct, the thrust was correct,” he said.Rather like the Times' coverage of the scandal concerning Dan Rather's fake evidence of George W. Bush's avoidance of combat service. "Fake but accurate."
Posted by Donald L. Luskin at 8:27 AM |
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Saturday, July 19, 2008
FROM MY FAR-FLUNG TRAVELS Seen in the San Jose, CA airport. This certainly does make things easier.
Seen in Chicago. So global warming itself is not certain, but its disastrous negative consequences are? My, how he mighty Paul Volcker has fallen.
Also seen in Chicago, here are some of those fatcats that Obama and McCain are always villifying.
More Chicago. Is this that drain that Volcker was talking about?
More Chi. I often marvel at the mysterious use of quotation marks in signage. But here's a new mystery. Just what does the elipsis here do? Create suspense as one drives behind this truck?
Last one from Chicago -- the city that works, and the city that is happy in its work. Goes to show that status systems exist everywhere throughout the society and the economy (and that pride is a powerful motivator, no matter how trivial it may seem to one outside the status circle involved).
Posted by Donald L. Luskin at 3:13 PM |
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Friday, July 18, 2008
JOKE OF THE DAY This joke relates to palindromes. We believe the longest legitimate one-word palindrome in the Enlglish language is "detrarted." Here's the definition. But reader Neil Ferguson gives and alternate one:Adjective. Of or relating to a person from whose life a tart has been extracted. Example: After Vernon Jordan arranged a new job for Ms. Lewinsky, President Clinton revelled in his detartrated state.One might go further:
Adjective. Of or relating to a person whose success ratings have improved following the extraction of a tart from his life. Ex: After Vernon Jordan arranged a new job for Ms. Lewinsky, President Clinton was detartrated by the elecorate, as reflected in his higher approval ratings in opinion polls.
Posted by Donald L. Luskin at 1:29 PM |
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Thursday, July 17, 2008
KUDLOW REPLAY Featuring the long-overdue return of my friend Mike Darda! Here's more. I think.Update... Reader John Kranz asks,
I'd like to hear you expound on your aversion to naked shorts. I was surprised when you criticized the practice on Kudlow last night."Naked" shorting and "naked" option-writing have nothing to do with each other, except for the coincidence of the term "naked." In the case of option-writing, the "naked" writer is simply taking a short position in a put or a call without a risk-offsetting position in the underying asset (usually a stock). I have no problem with that at all. A short option, whether "naked" or not, is simply a contract to sell (in the case of a short call) or buy (in the case of a short put) at a fixed price by a fixed date. No issue there.Aren't naked puts and calls just pure option plays? Don't they provide more efficient price information and get risk in the hands of those who can best handle it? I'm sure you saw the Wall Street Journal editorial today, which is a little closer to my position.
However, "naked" shorting is an entirely different matter. When you sell a stock short, you are selling something you do not own. Yet the buyer requires that you deliver to him the thing he bought from you. Normally you accomplish that by arranging to borrow the shares from someone else who owns them. You sell the borrowed shares, and deliver them to the buyer in exchange for the buyer's cash. Ultimately, you expect to buy back the stock at a lower price, and replace the borrowed shares. In "naked" shorting, you sell to the buyer without any intention of borrowing stock to deliver. So on settlement day, your trade fails. You cannot deliver what you do not have. Yet when you made the sale, you were implicitly promising to deliver. After the fail, you can cure the problem by buying stock and delivering it, hopefully at a profitably lower price. But shat amounts to fraud -- in very much the same way that kiting checks amounts to fraud. It doesn't matter if you ultimately deliver. At the time of the sale, you had no intention or capability to deliver.
Posted by Donald L. Luskin at 8:54 PM |
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THE COMEDY THAT IS CONGRESS Our friend Jim Carter writes in IBD:
For anyone who is interested in a solution to America's fiscal policy woes, the person to watch is Jerry Seinfeld.Although not widely recognized as a fiscal policy expert, Seinfeld's advice to George Costanza in the final episode of season five is pure genius.
What was that advice? "If every instinct you have is wrong, then the opposite would have to be right." Congress should take this advice to heart.
Congress' natural instinct is to spend, spend and spend. Consider discretionary spending: Over the past 10 years, federal discretionary spending has virtually doubled. This year alone, discretionary spending is slated to jump $50 billion — an expenditure larger than the entire economic output of all but a few nations in Africa, South America and the Middle East.
Posted by Donald L. Luskin at 6:37 AM |
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Tuesday, July 15, 2008
CHUCK SCHUMER: HEDGE FUND TOOL An amazing story in today's Wall Street Journal:The federal takeover of IndyMac Bank over the weekend could cost the Federal Deposit Insurance Corp. between $4 billion and $8 billion. But Senator Chuck Schumer, who helped to precipitate the collapse by publicizing a letter to the bank's regulator last month, has no remorse.My DC-insider friend "Mick Danger" sees deeper implications.He was, he says, just doing his job in telling regulators that the bank "could face a collapse," a prophecy that quickly proved to be self-fulfilling. "It's what legislators are supposed to do," the New York Democrat told the Journal. Depositors who spent Monday trying to recover some of their money might beg to differ.
The Office of Thrift Supervision (OTS), whose job it actually was to regulate IndyMac, took a different view. "The immediate cause of the closing," the OTS wrote in a press release, "was a deposit run that began and continued after the public release of a June 26 letter to the OTS and the FDIC from Senator Charles Schumer of New York." The OTS added: "In the following 11 business days, depositors withdrew more than $1.3 billion from their accounts."
The SEC is investigating hedge funds to see if they circulate rumors, knowing they are false, and trade on them, manipulating the market. Now, did the brave writers at the WSJ miss something?Someone -- with an interest -- brought Schumer information on IndyMac. Who? When? Why? What are the chances that Schumer was looking into irregularities into IndyMac because some hedgie with a big short position turned him onto it?
Well, they ain't zero.
What are the chances Schumer was "investigating" IndyMac because the Senate Banking Committee assigned that case to him? Zero.
What are the chances the SEC enforcement guys will get very shy, very fast if they pick up a trail leading up the Hill? Close to 100%. (Note, Senators have a constitutional shield against certain prosecutions of actions taken in the course of their work as Members of Congress.)
Most likely result? The SEC staff will pluck a few hapless hedgies out of the middle ranks and shoot them in the public square.
Is Schumer correct? Or did Schumer break a law by leaking his letter? What if he were a research director at a hedge fund and told people what he suspected? Would that be the kind of rumor the SEC is hunting?
Think there might be a clever hedge fund which might use Schumer to leak info so they can trade on it without fear of prosecution? Uh, yeah.
Posted by Donald L. Luskin at 10:37 AM |
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