31 October 2008

Strangeness from Gasparino

Charles Gasparino zoned out on camera yesterday. Or at least, that's one way to read this YouTube clip.

CG, as many of you must know, is an on-air editor at the business-oriented cable channel CNBC.

On their regular late-afternoon program, "Closing Bell," anchor Dylan Ratigan introduced CG, obviously under the impression that CG was in possession of some new important information about Merrill Lynch.

The camera then framed Charles with the words "Management turmoil continues at Merrill Lynch" bannered beneath his face.

But whatever news or rumor Charles had been ready to convey on that subject never got out to us. Apparently, he took offense at the way he was introduced, the open-ended phrase "what do ya got?" -- what followed was an extremely odd colloquy over the Zen-like nature of that expression.

When Dylan tired of this, he told Charles that he didn't have all day, here's a "capitalist system" to cover.

Charles replied, "shoot to the capitalist system," an expression I've never heard. I would assume he meant, "then cut to your other stories about the capitalist system, because I don't really have anything about Merrill."

Dylan replied by repeated Charles' words while dropping the preposition: "shoot the capitalist system??"

Watch it yourself. Tell me what the heck you think was going on, and how safe can Charles' job be.

30 October 2008

Phil Spector

The second trial of Phil Spector in the death of Lana Clarkson is underway in a Los Angeles courtroom.

Bloody time, too. Ms Clarkson has been dead for five and a half years, and the first effort at adjudication was declared a mistrial about one year ago.

That first jury was deadlocked at 10-2, with the two holdout voting "not guilty." I believe it was Jay Leno who remarked at the time: "Amazing coincidence that OJ Simpson and Robert Blake happened to be on that jury, isn't it?"

The usual people are playing the usual parts. Alan Jackson is again prosecuting the case. As reports indicate he gave an opening statement that sounded a lot like the one he gave last year.

Still, one should make an effort to avoid getting jaded. Just because something sounds familiar to those of us who've been following it probably too closely doesn't make it wrong.

Here's a quick link to some not-at-all jaded particulars.

26 October 2008

Mahalia Jackson

It was on this day, October 26, 1911, that Mahalia Jackson was born.

She lived until 1972.

For much of the time in between those two years she was known as the Queen of gospel music.

Jackson was inducted into the Gospel Music Hall of Fame 1978, given a star on the Hollywood Walk of Fame in 1988, and honored by the US postal service with her image on a stamp in 1998.

Since it is now 2008, and one wouldn't want the string of posthumous honors in years ending with the year "8" to snap, she now has the distinction of a Pragmatism Refreshed salute.

You can learn more about her here.

I admire a quotation sometimes attributed to her: "It's easy to be independent when you've got money. But to be independent when you haven't got a thing -- that's the Lord's test."

God bless.

25 October 2008

I don't break the rules (I'm sneaky that way).

Another dispatch from the lipstick wars, WR battlefront.

I've written of wikipedia and its conflicts over "sock puppetry" here often enough. I'll try not to repeat myself unduly.

I don't think I've ever mentioned Wikipedia Review (WR), which is a website designed by and for those with a wikipedia-related grievance, something of a "shadow site," if you will.

I've only recently discovered that I've become a subject of some discussion at Wikipedia Review. This seems to have been set off by a piece I wrote in the HedgeWorld blog, back when HW was still a semi-autonomous newsgathering organization within the Reuters family and when they still employed the likes of me.

I wrote in that piece about certain wikipedia articles that had a direct or indirect connection with the "naked short selling" debate, and about the contention -- in that context especially hot -- about who was a sock puppet of whom.

I also was explicit in this piece that I have edited wikipedia myself. I gave the name I use in that context, Christofurio. So, just to be clear: the identity of Christopher Faille and Christofurio isn't something that anybody else had to do any detective work to discover. I have been very clear about it.

Another point: within wikipedia, I am always and only "Christofurio," -- so nobody ever has to wonder whether I am using two or more names strategically. There's only the one.

This is all simple enough, and unremarkable, one would think. Yet I find myself mentioned in the Wikipedia Review as if I were being especially sneaky.

Here's a direct quote from someone who writes there with the name Piperdown.

I think the reason Christofurio hasn't been publically curbed on editing Byrne/NSS/Weiss/etc is that he's been very careful to not actually do any editing that could be blatantly cited as breaking any WP rules.

Um ... right. The reason I haven't been disciplined for breaking any rules is that I haven't broken any rules.

Likewise, the reason I've never been imprisoned for burglary is that I've never burgled. Pretty crafty, eh?

I don't know what axe exactly Piperdown is grinding here (actually I think I do, but I'll let it pass) but it does seem that he is oddly perplexed by the spectacle of someone who joins a collective editing enterprise, uses one and only one name, edits as he thinks best, sticks to the spirit as well as the letter of the collective enterprise, gives his reasons for his edits in the Talk pages, and generally comports himself according to Hoyle.

If any of that makes me remarkable, I'll see if I can keep it up.

24 October 2008

The IG Report on the Gary Aguirre matter

May be found at at the finance committee's website.

The pdf is 231 pages long, but some of it is prefatory matter, so the report itself is a slender 191 pages.

And you were worried you'd have nothing to do this weekend.

Today's Press: Ups, Downs, and Overs

Are newspapers, old-fashioned pen-and-ink type newspapers of the sort that a young person might plop onto your porch in the morning, dinosaurs? Are the present remnants of a once-proud industry just the decaying carcasses left after the mass extinction?

Some points to ponder:

1. Good news. Newspaper readers are better educated and more affluent than TV news viewers. According to one recent survey, 70% of the readership of the average newspaper consists of households with incomes of more than $60,000 annually. This compares to about 40% for CNN and Fox News. Presumably this makes the tree killers of continued value to advertisers.

2. Bad news. The stock of the parent corporation of the US "paper of record," The New York Times Co., is now down in the sub-$10.50 per share neighborhood. It hasn't been this low for at least a decade. The Times Co. stock spent most of the period between the presidential elections of 2000 and 2004 above $40 a share. It was briefly above $50 in mid 2002.

On a related front, the NYT has announced its profits for the third quarter of 2008. They're down 51% from the 3d quarter of last year.

3. Moving on and starting over?

I don't know what to make of this, as to whether it is good news or bad for the NYT or for newspapers as such ... but ... famous/notorious former New York Times reporter Judith Miller is going over to television. Fox News announced Monday that she will "provide commentary and analysis on national security issues, counterterrorism, and international affairs, including the Middle East...."

Here's her blog.

Just putting this stuff out there. Make up your own WMD punchline.

23 October 2008

Credit Rating Agencies & Cows

I think Waxman may finally have blundered into something important.

Henry Waxman has been excoriating Wall Street and all who have any connection therewith in recent weeks from his post as chairman of the House Committee on Oversight. For the most part, the hearings have been the standard look-like-I'm-doing-something stuff.

Were I a cynic, I might suggest that there's an element of shake-down in them, too. Of course my faithful readers know better than to suggest I'm one of those.

At one point, though, Waxman had scheduled a hearing for Oct. 16 in which he expected to have several of the most prominent hedge fund managers in the world testify on the question: whether excessive speculation had contributed to the present financial crisis. Soros was going to be there, Simons, Griffin, and others of that ilk.

On October 14, Waxman announced the delay of that hearing until November 13. Cynical minds suggested that he was telling those witnesses and other speculator types, "hey, we've got an election coming up. You may have noticed. Its been in most of the newspapers. There's still time to get a check to our campaign committees. The size of the contributions you make may correlate inversely with the intensity of the question you'll face when we do get around to this post-election hearing thingy."

Anyway, as I say, he may have blundered into something. Yesterday's show was entitled "Credit Rating Agencies and the Financial Crisis."

There is a powerful case to be made that the credit rating agencies have had an inherently conflict-prone business model, and that this has introduced an element of instability into the US financial system in recent years. In short, they're paid by the issuers they rate. If they rate an issuer's garbage AAA, that issuer will presumably give them repeat business. If they downgrade, the issuer has had the option of shopping around for a higher rating elsewhere. So there's been a race to the bottom, and anyone can get a AAA.

The above paragraph is a very simplistic statement of a very complicated matter, but there is enough truth to it to be disturbing. I'm glad Waxman and his colleagues grilled some agency execs on this subject.

Efforts at reform in this field have been underway for some time. But its been one of those policy-wonk things for a small circle of professional ponderers. It is just as well that this has gone mainstream.

And those cows! The committee unearthed an i-m exchange that crystallizes the situation in a way that makes wonks and non-wonks both laugh out loud.

Two of the analysts at the largest of the raters, rating agency Standard & Poor's, started gossiping about a year and a half ago. It went thus:

"That deal is ridiculous," Rahul Shah, wrote.

"I know right ... model def. does not capture half of the [risk]," Shannon Mooney replied.

"We should not be rating it," Mr. Shah said.

"We rate every deal," Ms. Mooney wrote. "It could be structured by cows and we would rate it."

Insert your own e-Cow-nomics joke here.

19 October 2008

A lunch, and Anne Hutchinson

A friend and I had lunch this Friday with an author's group in South Hadley, Massachusetts.

Why? Well ... as I mentioned in this August entry I have a way-too-unwieldy manuscript sitting around that is meant to be a novel. In recent weeks I've formulated a plan to get the ms into publishable shape, by trimming and re-writing it in the YA model.

The lunch meeting's authors involved those with YA experience and success, and I was happy to hear from them. I've since ordered three of their books.

One of the authors there was Jeannine Atkins, the author of Anne Hutchinson's Way.

I'm especially curious to see how that one is written. It involves I have to expect not just the conveyance of events, an adventuresome narrative, but the conveyance of the ideas. What the events were all about to the participants.

Anne Hutchinson was exiled from the Massachusetts Bay Colony for her antinomian theological opinions.

Booklist says, "Atkins is able to take the issue of religious freedom and make it personal ... this offers something solid for children, especially those studying early American history."

18 October 2008

Half a century

I reach the half-century mark today.

Birthdays are arbitrary, and the idea of giving special significance to one birthday per decade is doubly so. But there is that human impulse to divide the flow of time, and the digital imperative of making the divides subservient to the base ten number system.

There's an episode of Monk, in fact, in which Adrian complains about the packaging of eggs by the dozen. A new acquaintance, trying to become his buddy, says, "I see what you mean. We've got a base ten system, let's stick with it!"

So we watch the odometer of our lives spin about and look with some awe at those moments when another "0" comes up on the right side.

Since I was born in mid-October, and I've long been a baseball fan, one way to measure my life and its landmarks involves the fall classic, the World Series. I was delighted Thursday by the Red Sox' come-from-behind win to keep alive their chances for a World Series appearance this year. But I was reminded that the event itself is creeping forward in the calender, creeping toward colder days.

Looking at the big picture, over the decades, the trend has been toward expansion of the leagues and then division. The marketing folks have felt the need to get more teams involved in the post-season play, so more fans stay interested longer. This in turn has made the post-season longer.

There is a lesson in that, I suppose. As any set gets larger it tends to break up into sub-sets, and those into further sub-sets, and so on in fractal fashion.

As people age, likewise, we find that we've had more experiences, so we divide them too into sets and sub-sets. We have more categories of "things to think about" and ways to try to think about them. And our efforts at them sorting out ... need sorting out. The sorting efforts break up into subsets and sub-subsets!

The World Series of sorting-outs arrives, if at all, on one's death bed. That would be one of those classically literary death beds, where the protagonist says, "Aha!" and then imparts the distilled wisdom of his years to young'uns gathered round.

I'll try to avoid my death bed for a few decades yet. Obviously, I need a lot more time with this wisdom-distilling stuff. When I try to come up with something these days I end up reaching for Monk and baseball.

Let's end, instead, with a quote from Herbert Spencer. He thought it described the history of civilization -- it might better describe a human life, or at least mine as I look back in self-definition and forward in hope.

"Civilization is a progress from an indefinite, incoherent homogeneity toward a definite, coherent heterogeneity."

17 October 2008

Corporate bankruptcy and the little guy

Here's the text of a letter written by a businessman in Whitney, Texas, to a bankruptcy judge in Kansas City. MO, in October 2006.

The reference is to the Interstate Bakeries Corp., which had filed for chapter 11 protection two years before. The IBC, which is the company behind such famous brands as Twinkees and Wonder Bread, failed to adapt in time to the low-carb diet craze and went under.

The letter gives an idea of how that affects ordinary folk. After all, a corporate entity on IBC's scale is general one of several inter-related corporations, a family in which it isn't clear to outsider who is a subsidiary of whom.

"My name is ***** *****. I am the landlord for Dolly Madison Bakeries located at 584 S. -------- Rd., ------, Texas....

"The Attorneys for Interstate Bakeries are asking you to disallow my claim in the amount of $5,230.75 due to IBC being the improper Corporation.

"I was told in 2004 to request payment from IBC and did so. Interestate Bakeries made payment in the amount of $1,993.61 (copy of check attached) which was for the 2004 taxes prior to the filing of bankruptcy. The total amount of the taxes for that year was $7,224.36. They still owe $5,230.75. Their lease states that they are to pay their pro-rata share of the property taxes each year.

"I respectfully request Interstate Bakeries Corporation debt to me not be demolished."


I was looking to develop some story ideas recently, rummaging (in a cyberspatial sense) through the years-old file for interesting legal issues. Not much luck.

But I did find the above letter, which I consider very poignant and in its own sociological way, fascinating.

The usual mental habit is to think of the landlord as the 'upper hand,' the tenant as the one fearing, and often experiencing, oppressionor ill treatment.

But here the landlord is one guy, a natural person not a corporation. And not enough of a big shot to have a lawyer write a letter for him. He writes it himself. Not even a lawyer friend who can give him a once-over and some free advice. Or that strange use of the word "demolished" wouldn't have made the cut.

I hope he ends up with something out of the re-organized entity. Some stock in the new version of IBC when it emerges from the court's protection, perhaps. Let's root for that.

16 October 2008

Marconi's demonstration

Today is the anniversary of a foundational event in the development of mass media of communication.

On October 16, 1899, 109 years ago, Guglielmo Marconi demonstrated his new wireless telegraph, what we call radio.

All radio could transmit at that time were the dots and dashes of telegraphy. Still, it was a marvel. And that first use, in the demonstration of October 1899, broadcast yacht racing results. He broadcast from Sandy Hook, Long Island, and the bulletins were received in Herald Square, New York City.

So give some thought to Mr. Marconi this day. And give some thought, too, while your thoughts are telegraphic, to Jack Phillips, the wireless operator who went down with the Titanic thirteen years later.

As the ship foundered, and as the captain knew the end was near, he released Phillips from his duty. A lesser man might have headed for the deck and the hope of a space on the rapidly-filling lifeboats. Phillips stayed in his seat, above and beyond the call of duty, and kept sending out the distress call until the ship's engines failed and there was no power with which to transmit.

All the lifeboats were gone by then.

Phillips' sacrifice has become myth-incrusted. Phillips was NOT, in fact, the first wireless operator to use the SOS call. The call had been proposed by a conference in Berlin in 1906, and adopted by Great Britain in 1908. The myth-busting website Snopes covers the general subject with its usual thoroughness. It documents seven examples of ships that sent out SOS calls between 1908 and April of 1912.

But the fact remains: Phillips did start the evening by sending out the older CQD call, later switching to the new-fangled SOS.

So when you toast Marconi and the invention of the wireless, make sure that whatever you're drinking is neat. No ice. Phillips would prefer it that way.

12 October 2008

The IG report on Aguirre

Continuing with my chain of thought from yesterday.

Personally, I can't get too worked up about the underlying charge, i.e. that the possibility of insider trading regarding the GE/Heller merger wasn't pursued as it might have been.

I don't believe in the prohibition of insider trading per se. I suspect, in fact, that it is economically counter-productive. Yes, in many cases "insider trading" actually means "breach of fiduciary obligation." And, when that is the case, there ought to be remedies for the victims of that breach. But then the proper term to use is, precisely, "the breach of fiduciary obligation." Or if that's too many syllables, call it BFO!

The problem with "insider trading" is that it doesn't very snugly overlap with the long-standing legal understanding of a BFO.

Former hedge fund manager Ralph Cioffi stands accused of insider trading, for example. I know of no plausible BFO claim in that matter. [Subscription will be required if you follow that link].

Nor is it clear to me that Pequot Capital was the sort of "insider" who in a rational world would be prohibited from trading on the basis of what its execs knew about the upcoming acquisition of Heller by GE.

"Ah," you might reply, "but the law is what it is, whether you like it or not, and ought to be applied equally to all persons without fear or favor."

To which, IMHO, a shrug is a sufficient response. The problem with the prosecution of insider trades beyond the BFO limits is that it has a very strong detterent effect upon the best informed traders: which necessarily means that it slows the process of aggregating information -- the process of price discovery in the broadest sense, which is what the markets are for.

None of this, BTW, is to concede anything as to the facts in dispute on Mr. Mack's or Pequot's behalf, BTW. I of course have no authority to make any concession for them, and they have denied any insider trading.

In a statement in June 2006, Pequot said that it has $7 billion in assets under management, and that it had made some 136,000 trades during the period under review by the SEC. This allows for statistical cherry picking.

It is only natural that, because of the consequence of timing, some of those 136 thousand trades could be identified as possible insider trades by market surveillance. In other words, any trade that comnes just before a merger looks suspicious if seen in isolation, though the cherry was in fact only part of a much larger sundae.

11 October 2008

New IG sides with Aguirre

It has been a year and a half since I mentioned Gary Aguirre in this blog.

It's time for an update.

The Inspector General of the Securities and Exchange Commission has put out a 191 page report on the controversy that arose in 2005, when supervisors fired Aguirre while (and allegedly because) he was pursuing insider-trading charges involving the hedge fund Pequot Capital Management, and GE's plans to acquire Heller Financial.

The New York Times ran a story on his termination in June 2006, making the matter a political hot potato.

By December 2006, at a Senate Judiciary Committee hearing, some of those supervisors offered their own accounts of wht Aguirre was actually fired. Of course, they didn't say, "We were trying to protect our buddy John Mack, formerly of Pequot, from this whipper snapper."

What they said was perhaps put best by Mark Kreitman, the assistant director of enforcement at the SEC. Kreitman testified that when Aguirre began working under Kreitman at the SEC, "I refused his request for special treatment to be allowed to report outside the chain of command directly to me."

Kreitman further: Aguirre came to believe "primarily on the basis of speculation, that Mr. Mack was the tipper in Pequot's trading prior to announcement of GE's acquisition of Heller Financial, and repeatedly and heatedly insisted that we subpoena John Mack for testimony immediately, before he had developed evidence that Mr. Mack had access to material nonpublic information, or indeed any potentially inculpatory evidence with which to confront Mr. Mack."

The contention, then, is that Aguirre may have been rather too full of himself even at the start of his employment there, and may have overstretched in terms of his own speculations.

Nonetheless, in August 2007 the two relevant Senate Committees, Judiciary and Finance, but out a joint report on the matter, sympathetic to Aguirre and critical of the then-Inspector General of the SEC for failing to pursue the issue of the true reason for his termination. The IG at that time, Walter Atchnik, "retired" from his office, simultaneous with the release of the Senate report.

So this new report is obviously the product of another IG, H. David Kotz. Excerpts have been quoted in a lot of publications but I don't believe the whole 191 pages is publicly available yet.

Here's a link to the account in The New York Times.

Kotz, like the Senate committees, finds Aguirre's version of events credible. He doesn't focus on the underlying insider-trading case, which is now closed (and all involved have denied wrongdoing, BTW) but he does conclude that Aguirre's supervisors, including Kreitman, allowed "inappropriate reasons" to factor into their decision to fire Aguirre.

I'll have some further observations on the whole mess in tomorrow's entry.

10 October 2008

Fragrant Harbour: The movie script

I blogged about a John Lanchester novel, in my Sept. 25 entry here.

Or I didn't. I set out that day to blog about the novel, but ended up in my errant stream-of-consciousness way talking merely about a single proverb that the novel invokes.

Can I say anything more generally about the book. Well, although I admired much in it, I couldn't help but wonder as I was reading how, if at all, it could ever be turned into a screenplay. It seems to have too much disparate material for that.

No author has a duty to produce a movie-adaptable novel, of course. This was simply the path my thoughts followed.

I can imagine myself angling for the screenwriter's job (hey, work with me here). Then reading the book and becoming dismayed at the task of reducing it to two hours -- three at most -- of filmable material. Ah, but it's time to get on the phone to the studio exec and make my pitch.

"Yes, JB, of course I think we can do it. Get this. There's a woman in a newsroom. No, not in Hong Kong. She starts off working for a small daily in a seaside resort town in England. She wants to make it big, our gal. She's ambitious. Has her eye on the London papers, and covering the biggest stories there.

"Fortunately for her, the Tory Party [pause as JB talks] those are the Conservatives ... the party holds a convention in her resort town. She meets a group of members of Parliament and goes out drinking with them.

"The next morning, she's in the newsroom, all hung over, but struggling to meet a deadline on a story about some missing kid. One of the guys she'd been drinking with approaches her, looking all shame-faced.

"At first she asks herself -- we use voice over of course -- did I sleep with him? No, I would have remembered that. I'm pretty sure. What's he here for.

"So they go off into the break room for some privacy, and he says to her, 'I said some quite indiscreet things last night. I would take it as a great favor if you would keep that especially sensitive bit I told you to yourself.'

"Well of course, JB! You're catching on. She has no idea what secret it is to which she is supposedly privy. But she's ambitious and bright. She looks him right in the eye and says, 'I'll take it to my grave.'"

"Thanks to this Tory and his friends, she gets her gig at a London paper. Once tghere, other rung-climbing opportunities and challenges present themselves, and of course there's a romance angle with a photographer.

"Yes, eventually we follow her to Hong Kong. And our gal makes it big there, too. But she breaks up with her now-long-distance boyfriend.

"Unfortunately the novel then cuts away from her story and she's only tangentially involved in the rest of the book. But ignore all that. Her story, early on, is the most cinematic part of the whole. We can give it a different ending -- something about how boundless ambition in time leads to her fall -- or something sweet involving the photographer. Or both. We'll work it out.

"Wonderful, JB! Now, let's talk about my pay...."

09 October 2008


The Nobel Prize in Physics this year went to three scientists -- two Japanese nationals, the other a US citizen who, as it happens, was born in Japan.

The Japanese-American, Yoichiro Nambu, of the University of Chicago, is the senior of the three, and his share of the award is for work done earlier than that of his co-honorees. He receives half of the prize money, whereas Makoto Kobayashi and Toshihide Maskawa share the other half.

The idea behind the work of all three is the intriguing one of "spontaneous broken symmetry" on the sub-atomic level.

We tend to think of symmetry as the "default mode" of nature, so that anything asymmetrical requires explanation. Imagine a teetering boulder poised on the peak of a mountain, in such a way that it seems it COULD easily roll down two or more possible sloped paths. The situation is symmetrical, and this symmetry is broken when the boulder in fact does start to roll -- because of course it will only roll down one of them. We'd want to know: why? Was there a sudden gust of wind in one direction rather than the other?

Maybe in some cases there isn't any explanation. The boulder simply did roll one way rather than another, and at bottom there's no better answer than "just because." In other words, there may be breaks in symmetry that are "spontaneous." Indeed, the world may owe its existence to spontaneous broken symmatry. After all, imagine a Big Bang that produces as much anti-matter as matter. Shouldn't the two have annihilated each other and left the world with ... nothing? There must have been a break in the symmetry then. An excess of matter over anti-matter, in order to get the world underway.

In the world of sub-atomic particles, there are three sorts of symmetry: mirror (or positional) symmetry, such as that of the boulder, charge, and time: called P, C and T respectively.

In the 1950s, studies of the decay of the atomic nucleus in the element cobalt 60 revealed that it didn't follow P symmetry. Particles leaving that nucleus preferred one direction over another.

Nambu entered the picture in 1960, while he was working on superconductivity, i.e. the resistence-free flow of electrical currents. Spontaneous symmetry violations showed up as he worked on the theoretical description of superconductivity. Later in the 1960s he translated these violations into the world of subatomic particles. The Nobel committee says that "his mathematical tools now permeate all theories concerning the Standard Model." Hence his award this year, nearly a half-century later.

Meanwhile, a consensus view was developing that the really important and unbreakable symmetry at the subatomic level is CP, i.e. the combination of charge with position. Symmetry can be broken in either C or P, but surely not in both at the same time, the reasoning went.

Experimenters soon shattered that consolation. CP symmetry fails, too. Makoto Kobayashi and Toshihide Maskawa, working together in the early 1970s, developed a theoretical explanation for why even the breaking of the CP symmetries as observed need not shatter the "standard model." [I won't even try to explain what the "standard model" means in this context. It's a model, it's standard, and they saved it. That's all we need to grasp.]

The Kobayashi/Maskawa theory predicted the existence of three hypothetical families of quarks. Lo! and behold, the experimenters have recently (2001) confirmed their predictions, finding those quarks as described.

Fascinating stuff. I'm not at all confident that I understand the material I've just bee summarizing, but I'm quite certain these three gentlemen deserve their recognition. Bonzai!

05 October 2008


Pentecostalism is newly in the news, with both a Sarah Palin connection and a "subprime lending" connection.

Such news items have exposed my own ignorance of such practices as the "dedication" of a baby. In the background in which I was raised, an infant was baptised. I early became aware, of course, that there are Christian churches that don't believe in infant baptism, but that they have what seems a sociological substitute, the practice of dedication, is new to me.

This is a ceremony at which the parents ask for the congregation's help in raising their child.

Okay, live and learn.

A Newsweek article on Palin said that she doesn't consider herself a Pentacostalist, that her Church in Wasilla is "most remarkable for being unremarkable," but that she attends a Pentacostal church in Juneau when she's there -- doing Gubernatorial stuff.

It makes no difference to me, no more than Mitt Romney's Mormonism. I mention it because I can't help but consider the "speaking in tongues" phenomenon characteristic of that denomination a sociological/psychological oddity. Still, one is entitled to one's sociological oddities on a Sunday morning.

What about the subprime mortgage connection? That is expounded by David Van Biema in TIME, in a piece called, "Maybe We Should Blame God for the Subprime Mess."

Mr. Van Biema attributes this connection to Jonathan Walton, of the University of California at Riverside.

Again: live and learn.

04 October 2008

On the bailout bill's passage

That was a sad spectacle. I cheered when the back-bencher's rebellion wrecked the "leadership's bipartisan compromise."

Likewise, I mourn now that the "leadership" has put down the rebellion.

"Ah," you say, "but they had to be practical. Wall Street tanked after the bill failed Monday."

So, what did Wall Street do after the bill's passage Friday? See the above graph.

The Dow Jones was up for the day by about 1% of total value when voting began. It fell immediately (this is the 1:12 peak and drop on that chart) when the early numbers on the C-Span screens showed that the bill was heading to passage.

As the process dragged on, the index recovered, returning almost to the earlier intra-day high, by about 1:25 in the afternoon.

Then the finality of it, realization the mess HAD passed, and the index dropped dramatically. And kept dropping, so that it was in negative territory for the day by 2:30.

And well I'm on the subject, can we please retire the use of "Main Street" as a metonym for "the broader economy"? I'm tired of it, I suspect you dear reader are tired of it, and even the people who keep using it are likely tired of it.

As far as the broader economy is concerned, the bailout likely substitutes the scary prospect of a brief sharp panic (followed, as such a panic was in the period 2001-03, by a prompt recovery) for the scarier prospect of a very long period in the doldrums. A lost decade or more.

After all, what has the bill done? Will this money recapitalize and de-leverage the banks? No. As I read it, it will simply allow them to jigger their numbers and pretend that they've been recapitalized.

But pretending that they're making loans will be more difficult. Pretending that the loans are going to productive borrowers will be trickier still. The experience of Japan throughout the 1990s seems dispositive here.

Get ready for a brief and malaise-plagued Obama presidency, followed by the rise of a new hyper-conservative reaction. Get ready, in short, for President Huckabee after 2012.

03 October 2008


An acquaintance who doesn't cotton to my theorizing about anarcho-capitalism put his objections thus: "How can money arise without a government? You're back to stuff with intrinsic value like precious metals but that puts power into the hands of those with mines or anyone who has enough power to corner the market."

To which I answered thusly.

Money can arise without government because humans are intelligent creatures who can easily recognize the utility of a medium of exchange.

As for going back to precious metals, that's possible. But why are precious metals "precious"? What is their "intrinsic value"? Use in jewelry? That's a big leap.

The value of gold comes from certain physical facts. First, there's only a limited amount of it in the world.

Second, it is a chemical element -- so it is neither created nor destroyed except by very unusual processes (is gold fissionable? -- probably not).

Third, gold is malleable enough so that numbers can be printed on it easily, yet sufficiently solid so that a coin can keep its shape.

There might be a more psychological point here, one that I believe John Maynard Keynes suggested. Perhaps to our symbol-hungry minds, silver reminds us of the moon and yellow/gold reminds us of the sun, and since these two heavenly bodies are of primordial importance, so are the metals.

Government doesn't have to exist in order to inform people of such facts. They operate whether or not they are broadcast, and they keep gold valuable as a medium of exchange.

Of course other media may also come about. I'm told that unopened packs of cigarettes are frequently exchanged under battlefield conditions. The intrinsic value of a cigarette, the pleasure of smoking, may be the original inducement to their value -- just as the decorative use of gold as jewelry might have originally suggested its value as a medium of exchange -- but once they start circulating they can be sought after simply because they ARE such a medium, and continue to circulate for a long time before anyone breaks the seal, reconverting the packet into a consumer good.

But suppose the precious metals were generally accepted as a unit of exchnage. You worry about this because it "puts power into the hands of those with mines...."

So someone will have a mine, even in the absense of government? Are you acknowledging that private property in real estate -- and in the sort of expensive capital tools used to dig and retrieve gold -- would survive anarchy? [This is btw the sort of contention that my acquaintance, earlier in the exchange, had denied]. If not, you are contradicting yourself here. If no one will "have a mine" then no one will have the power you say you're worried about.

"...or has enough power to corner the market."

Precisely what I'm worried about. The Federal Reserve Board has cornered the market in federal reserve notes. Shouldn't we rebel? Or work to undermine the conditions that cause people to think this is "necessary"?

02 October 2008

Short selling

The lunacy continues. Indeed it worsens. The SEC has extended its emergency ban on any short selling in the stock of financial companies.

I italicize the word "any" to make the point that this isn't about "failures to deliver" or "short and distort" or any other practice that one might want to argue is an abuse of short selling. The ban is on all short selling, however completely covered, in the stock of any of a wide range of issuers.

The SEC has statutory authority for "emergency" orders (those which for example don't have to go through the normal notice-and-comment process) for a period of up to 30 days. In this case, the SEC announced its order on September 17, originally giving it a two week span. But with those two weeks up, the extension runs through October 17 -- i.e. as long as is allowed.

Short selling, of course, fulfills a variety of crucial roles in the financial system, and the SEC lists these roles even in the order announcing the extension of the ban: "contributing to efficient price discovery, mitigating market bubbles, increasing market liquidity, promoting capital formation, facilitating hedging and other risk management activities." But you can't do any of that for another couple of weeks. And how will prohibiting short selling resolve an emergency?

It won't. It'll give some of the jerks in power the warm and fuzzy feeling that they're doing something important, that's all.

Consider AMB Property Corp., a real estate investment trust, incorporated in Maryland. I take the following from the estimable folks at Dealbreaker.

It appears that AMB wasn't on the original list of financial stocks subject to the shorting ban. So it asked to be added, and the SEC, like a genie, granted that wish.

Two days later, on Wednesday, September 24, AMB slashed its earnings guidance for the remainder of the year. So if you had owned AMB stock, and had been thinking about hedging your long position with something on the short side -- two blows came in quick succession. First, you aren't allowed to hedge (pessimism ist verbotten) and -- second -- bad news! "we're not going to earn as much as we used to tell you we would!" Guess you should have hedged, huh?

Friday night, September 26, AMB said that they wanted off the no-shorting list. "It didn't feel right. We believe we're a good company and if someone wants to short us that's okay."

Except when it isn't. Well-played. If you're going to be a bastard, be upfront about your bastardy, like Edmund in King Lear.

Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.