Goodbye CPI - CME Delists CPI Contracts

http://www.cme.com/clearing/clr/clradv/20830.html

Effective Friday, December 15, 2006, CME will delist the CME Consumer Price Index (Clearing code: CU) futures contract months. There is currently no open interest in any contract month, nor has there been any recent activity in this contract.

So its back to gold for inflation hedgers.

Rent Controls Always Have the Same Result

Mayor Quimby: Are these morons getting dumber or just louder?

Aide: Dumber sir, they won't give up the bear patrol, but they won't pay taxes for it either. Ducking this issue calls for real leadership.

Having a group of economists come to a consensus is not easy. On the issue of rent controls however, there is near universal opinion that they are a bad thing. Besides the people who live in the buildings and NY Times Op-Ed writers its hard to find anyone who thinks they are beneficial.

So it is suprising that the Dutch would rather living in cockroach and rat infested shipping containers then get rid of the horriffic rent control laws in their country.

And these people are supposed to have such a great standard of living? Perhaps its the beatiful scenery of hookers and passed out heroin addicts on the way to the docks to live in a rodent infested box.

``There is a big shortage of housing, and at the same time a resistance to rent liberalization.''

The Dutch don't want to hear about more delays, as waiting lists lengthen and people flood into the city's three container towns.
...
Amsterdam's geography is reinforced by a 1901 law that caps how much landlords can charge. More than 70 percent of leased apartments are rent-controlled and command an average price of about 300 euros a month, or half the rent for those on the open market. Waits to get into the rent protection system can last as long as 26 years as people stay put.

TradeSports Senate Race: Were the markets wrong?

The answer, unequivocally, is no.

The suggestion that Tradesports "missed" on the control of the Senate is based on a faulty understanding of probabilities. By Election Day, Senate control really came down to three close races, Virginia, Missouri, and Montana. A probability calculator shows that if the markets accurately gave each of those races about a 60% chance of going to the Democrat, then the odds that all three would go Democratic were only 22% (0.6 to the third power). Therefore, a rational person would choose the Democrat in the individual races, but would nonetheless choose the Republicans to retain control. After all, the Republicans needed only one of those three, while the Dems needed all three. Only if we posit that the Democrats had an 80% chance to win each race would Senate control have been even a 50-50 proposition.

Capitalism in Action

Free markets work better for all goods. This includes ones that are typically thought of as being supplied only by the government.

According to this Bloomberg article, India’s private sector unsurprisingly does a better job building roads and power plants than the State. Now if only they would privatize the water supply.

The highly indebted Indian government hasn't the wherewithal to make a decisive improvement…
Private enterprise is playing an increasingly important role. Inadequate public spending is still a huge constraint, yet domestic non-state companies are slowly taking the lead in allocating much-needed capital to some of India's most overlooked requirements.

Great Blog - The TS Maven

http://the-ts-maven.blogspot.com/ from Alex Forshaw. This are Masse's MidasOracle are the best ones out there for PM followers.

One of the most ill informed finance articles I've ever read...

It might be a joke that I'm missing but this article is stunningly awful.

Link here, and some amusing exerpts:

On the news of Amaranth's problem, the credit swaps based on Amaranth funds collapsed creating massive problem for the London credit instuments markets. Even the little hedge fund was able to bring the market to its knees.

What is this guy talking about?

Remember 1987. Before the October crash public were arguing about the fact that the market will not give an inch on the down side. Every individual investor was in the elevator at the Penhouse level.

No idea...

Betting Exchanges Redux

Lots of great info in this article from bettingmarket.com.

This table stood out, and show Betfair giving large cost savings to bettors:

Teams____Svenskaspel____William Hill____Ladbrokes____Betfair
Over-Round 112.9________111.6_________112.9_____100.92

Media Watch Pt 1

Check out this Gears of War commercial.



Cinematic shots, perfect music to go with the scenes. Its only a minute long and every shot is good. The initial pan up when you see his tear hit the water. The things moving in the background you can barely make out. The perfect smoke and fire. The way his jaw drops when the spider thing comes out. And that music! Beautiful stuff.

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Why are so many "news" programs interviewing Borat in character? No one seems to care, but should a news organization be acting as the marketing arm of the studio. That's not journalism. They should be ashamed (I'm looking at you CNN).

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Why were the articles so lame during the free Times Select preview? You would think the would bring out the big guns. Nope. Trite, boring, I'll pass.

Trading in housing prices reflects pressure, not panic - OC Register Interview

From blogger Jonathan Lansner :

Trading volume the last three months did turn sluggish in response to the S&P/Case-Shiller index more or less flat-lining for the 10 listed cities. The release of the August index (last) week showed some steep decline in the U.S. coastal cities. This should start a renewed round of higher trading volumes.
...
This scenario is telling the market that right now L.A./O.C. is not in meltdown like the East Coast, but under price pressure.

The Scam of Microcredit Pt. 2

This chart is from mises.org, "showing that the much-praised Grameen Bank is a highly subsidized, unprofitable, and unsustainable institution."

Previous posts on this topic: http://nastybrutishandtall.com/2006/11/scam-of-microcredit.html

A Hedge for Emotions

A very clever post from The Economist blog:

Whether you are laying in champagne or valium in anticipation of tomorrow's results, you can make yourself better off by betting against the outcome you desire. Go to Tradesports (or the officemate you like to argue politics with) and lay a wager against your party. If they lose, your sorrow will be mitigated by the burst of dopamine which accompanies a sudden realisation that you are now several hundred quid to the better.
...
This is a particularly good tactic for foreigners who care about tomorrow's outcome. You can't affect the results, but you can ensure that it makes you less miserable

Election Day Quotes

There is an inherent tendency in all governmental power to recognize no restraints on its operation and to extend the sphere of its dominion as much as possible. To control everything, to leave no room for anything to happen of its own accord without the interference of the authorities - this is the goal for which every ruler secretly strives.

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The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

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The idea that political freedom can be preserved in the absence of economic freedom, and vice versa, is an illusion. Political freedom is the corollary of economic freedom.

- Ludwig von Mises

The Death of Pundits

One of the yet to be realized benefits of prediction markets is that hopefully it will put many professional pundits out of business. These bores make a living constructing sound bites and being “controversial” and rank about a picometer above reality TV “stars” in terms of respectability. Think of professional wrestling in suits: Ohh that Ann Coulter isn’t she just soooo controversial?? And Al Franken, wow is he snarky!! He uses humor to really showing those stupid Bush lovers up!!! –You get the idea, its only theatre.

If the concerns of the people on every topic can be quantified what is there to discuss? People aren’t entitled to their own facts. The number is, what the number is and that should be the end of the discussion. The question of whether Democrats or Republicans control the House becomes moot when you can say with certainty that the data indicate that the Democrats have X percent chance based on all the information now available. [Of course if you believe in property rights, individual freedom, fiscal responsibility, sound money, and a smaller State the question of who controls Congress has been irrelevant for a while.]

Anyway, Forbes says this guy is the best of the best when it comes to following elections:

As far as race-by-race election forecasting goes, Cook and his friend Stuart Rothenberg, who publishes the rival Rothenberg Political Report, more or less have the market cornered.

"They created this industry, and there's really no one else in the same ballpark as the two of them...”
…
Cook has been forecasting a Democratic takeover of the House since early August. But he was beaten to the punch by Rothenberg, who predicted it back in July.

The TS GOP House control contract closed below 50 for the first time on May 15th.

The Enron Emails

This fantastic link has been floating around for a while http://enron.trampolinesystems.com . It's an archive of over 200k Enron emails fully searchable.

I spent more than a few hours reading through it, here are some of the better ones and some observations:

-No attachments

-Lots of fwd’s. The marriage Before and After and Taliban TV schedule were popular.


-Ken Lay had a lot of email sent to him, most very supportive. Since we know the aftermath they are a depressing read:

http://enron.trampolinesystems.com/show_email/134205 - My wife has been with ENRON for fifteen years eversince she came out of U of H . Our hearts bleed ENRON blood and they were wounded deeply last…We are and still very grateful to all the good things that ENRON has provided to our family ( we have three children) and feel so blessed to be associated with such a caring and generous company .

http://enron.trampolinesystems.com/show_email/176732 - You have more employees behind than you know!! We are all committed to working harder than ever and do whatever it takes to weather this storm.

http://enron.trampolinesystems.com/show_email/223475 - I just wanted to communicate my disappointment with the events over the last couple weeks here at Enron.

http://enron.trampolinesystems.com/show_email/246554 - I don't understand how this could have happened. So many decent, hard working, loyal, honest people are being devastated by the results of questionable management, a lack of leadership and the appearance of abject greed among Enron Sr. executives. This is a truly sad state of affairs that will be the subject of so many "B" school projects most of which will focus on our mistakes.

http://enron.trampolinesystems.com/show_email/149407 - Mr. Lay, the I am not writing this in malice but in hopes that it helps get Enron back the way it used to treat their employees and makes it the number one employer of choice again. I hope you can get back the feeling that I had when I first started there and get the stress level down in your organization for the sake of your employees.

Enron employees had a great sense of humor, this email written in the voice of Andy Fastow was very funny:

http://enron.trampolinesystems.com/show_email/234292 - I have been impressed by your willingness to look forward, stay the course, ignore GAAP requirements, and maintain your stock purchase payments. Your loyalty and naivety have sustained me during some of my darkest moments. I am grateful for friends, family, and the opportunity to live and work in a free and open society, whereas by rights I should be living and working in an open prison.

-This is satire put together Reliant about a merger between Enron and hell along with the Enron response.

http://enron.trampolinesystems.com/show_email/145485

Hey--I thought this was pretty good! Of course we at the evil empire are
proud of being thought of as greedy overbearing SOBs! DF

The Scam of Microcredit

All the statistics that come with the articles praising Nobel Prize winner and Grameen Bank founder Muhammad Yunus seem too good to be true. Frankly, they never passed the smell test. Here are some of the fantastic figures that have been frequently quoted:

-Grammen Bank has lent $5.7 billion to over 6.1 million borrowers (an average of $934 a borrower)

-The default rate is around 1% !!

-100 million people are expected to participate by the end of this year

And you thought ARMs were shaky? Grameen bank does not require collateral or loan guarantees. How is it possible that this guy could out-maneuver real banks and get a 6 million customer base with a nearly 100% payment rate? If that were the case, seemingly it would mean that large banks, the most sophisticated analyzers of credit in world, missed a massive profit opportunity and a huge growing market.

An article in Forbes sheds some light on the scam. Some of the highlights:

-No one has made any profits

-There are no studies that look at the success or failure of the businesses that are being funded

-There are no stats on the long term repayment rates. In other words, the low default rate is fiction since the banks have no idea how stale the loans are.

So why is this initiative still being funded?

...the microcredit bubble is being inflated by government rules that all but force lenders to keep pumping out microloans. New Delhi requires banks to devote 40% of the money they lend to a category of borrowers that includes small enterprises, with about half of that going to rural outfits. Banks have long struggled to meet this obligation, and lending to microcredit institutions that then lend to the groups of women offers an easy way to do it.

You have to pay to play but at least you get to brag that it was charitable. Of course there are no profits in an industry created by gov’t (read taxpayer) money. Same old bureaucracy scam as welfare, the bureaucrats and politically connected middlemen get rich under the guise of the greater good while the underlying causes of poverty never change.

NFP Forecast - October Employment Numbers

Last month both the consensus numbers and the CME were on the high side when the figure came out at 51,000, less than half the estimates.

This month we are seeing a big divergence again in Economics consensus vs CME participants. Normally they are very close. They last time they diverged this much was in July when the CME numbers were on the high side and the Economists consensus ended up being closer.

For Octobers numbers here are the estimates:

Economists' consensus - 123,000
CME Auction Market participants' consensus - 102,000
ADP - 128,000

Previous posts on this topic:
October - http://nastybrutishandtall.com/2006/10/fundamental-event-of-week-non-farm.html
August - http://nastybrutishandtall.com/2006/08/nfp-forecasts.html
July - http://nastybrutishandtall.com/2006/07/nfp-forecast-divergence.html

A solution to global warming?

The printing press:

In a nutshell, he writes that if we don’t forgo 1 percent of global income now in order to control pollution, future generations will lose 20 percent of global income.

How Cooperation Agreements Make a Mockery of the Right to Trial by Jury

This is from Ellen Podger at law.com:

The demise of Arthur Andersen demonstrated the high cost incurred when challenging a government prosecution. The Supreme Court's reversal of the conviction didn't help resuscitate the company -- serving instead as a mere postscript on Andersen's tombstone. The government's ability to destroy a company, irrespective of legal accuracy, sent reverberations through the business world, resulting in companies across the United States entering into deferred prosecution agreements with the Department of Justice to avoid an Andersen-like destruction.

...availing oneself of the constitutional right to trial by jury is an incredible gamble, with the stakes raised higher than ever before, as the sentencing guidelines provide for draconian sentences in white-collar cases.

...We have to wonder whether this right is fully realized when so many individual defendants and companies are folding to government demands because of the high risk entailed in proceeding to trial.

The government doesn’t bear the cost of its own screwups. The prosecution had no incentive to be right back then and now they have even less of one now since it would be suicide for any company to risk trial. It’s the Spitzer play book, make wild accusations of wrong doing, leak documents to the press, and threaten prosecution to force a deal and claim victory.

We covered this with Enron here: http://nastybrutishandtall.com/2006/10/skillings-show-trial-has-predictable.html