Governor Spitzer's Budget Failure

All the histrionics and posturing have brought the rookie governor no closer to cleaning up Albany as he promised. It turns out that without being about to threaten criminal indictments Mr. Spitzer is rather impotent. The trust fund baby still has his millions but at least he is in a place where he can't do any real damage. The NY Post reports on the governors failure:

Bruno, despite a shrinking majority and a criminal probe of his private business dealings, relied on his instinctive sense that Spitzer was a bully who would blink rather than fight beyond the budget deadline. And he parlayed that into a nearly $1 billion windfall for Long Island schools and his leftist allies in the totally self-centered hospital workers union.

The record-high, $123 billion budget deal neither reforms nor reshapes New York's notoriously special-interest-driven spending plan, other than at the edges.

Legalized Gambling Will Clean Up Sports - Bloomberg

A dramatic headline, "Woolmer's Murder Shows India Must Allow Betting" for a unique idea:

India, however, should allow professional bookmakers to price sporting outcomes.

Until that improvement takes place, mobsters will keep collecting bets through illegal bookies from Mumbai to Kolkata. And they will keep running the business according to their core competence, which is to try to control some results by bribing or intimidating players.
...
As long as a big chunk of this money is being collected by shadowy, crime networks, there's a powerful incentive for them to rig matches and perhaps even commit murder.

The idea should be to encourage legitimate bookmakers and get the Securities and Exchange Board of India to regulate them.

Once the underworld loses its monopoly power, its henchmen would stop hanging around competition venues looking for players to manipulate. The taxes collected from legitimate gambling could be spent on nurturing new sporting talent.

Bloomberg, Capitalisms Fifth Column Gets Worse

Is there any business transaction they do like? Their online rag has been railing for more intervention, more regulation, and less freedom at a fever pitch. With the sometimes exception of Caroline Baum, their op/ed writers are statists to the man.

Matthew Lynn covers the hackneyed rant; bankers’ bonuses are too high and they are obnoxious people. I can’t think of a single banker who would take these ludicrous arguments seriously. His reasoning speaks for itself:

The only people who have a right to share bank profits are the people who put money at risk: the shareholders. The employees don't usually put their money on the line, so they can't expect to receive some of the profits.
…
A bonus isn't a salary. Nor is it a dividend. It is a reward on top of your usual remuneration for exceptional effort or outstanding performance. It should probably be unexpected.

Bankers may claim they have made a lot of money for their employers. So what? That's what they were paid for. The people serving the burgers and fries at McDonald's Corp. restaurants aren't entitled to a bonus just because the business happened to do well one year. They already got paid for doing their jobs. The same principle should apply at a bank.

..and so on.

Conrad Black Betting

No volume yet on Intrade, but Betus.com has taken over 3,000 bets on the trial – mostly for Black being guilty. Gambling911.com reports: “The company enlisted the aid of legal experts in order to set the odds, and doesn't expect them to change during the trial.”








Peter Worthington nails the main issue of the trial; that what Black did isn’t even a crime. He boldly speculates that Black will walk:

Conrad Black will be found not guilty, as will his four co-defendants, even more so: Ex-Hollinger execs Peter Atkinson, Jack Boultbee and Mark Kipnis.
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From what has been revealed so far — the main points in both the prosecution and defence cases, and early government witnesses — it seems charges involving racketeering, obstruction, money laundering, mail fraud, etc., are not only unwarranted but wrong.
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Besides, in the first two weeks of the trial there has been no evidence produced that clearly indicates a crime committed — and never mind the essential “beyond a reasonable doubt.” There’s just nothing.

It wouldn’t be the first time that charge has been leveled against rouge prosecutor and insufferable showboat Patty Fitzgerald.

Market Skewed In Black Case, Conrad Black News

Only a one-way market on the Ask is being made – no volume yet. This is not surprising since it’s too early to get a feel for how the charges will play out.

Black Tales:

Toronto Life talks about what Black’s trial would have been like in Canada where the, “accused has considerable leeway to unilaterally dispense with a jury and stand trial by judge alone.”

Canada Nation Post discusses the CYA document that was put together after Black left. The smear job has been called, “very prejudicial” and won’t be read by the jurors.

Humorist PJ O’Rourke, apparently not having read about Jeff Skilling in The Smartest Guys in the Room, says about the case, “Conrad Black is just so much smarter and sexier than Enron.”

And soon you’ll know where to mail those FIJA pamphlets to.

Yvon Chouinard - A CEO Worth Respecting

This Fortune cover story is incredible. Fortune always has interesting CEO profiles, but why would anyone give a damn about those other guys after reading this? I will be ordering his book soon.

Despite his anti-business quotes he acts like a salty capitalist. His firm, Patagonia, was one of the first companies in America to provide, "onsite day care, both maternity and paternity leave, and flextime". Some of my favorite quotes:

To Chouinard, the average suit ranks somewhere between alcoholic and criminal on the respect scale, and American business, when powered by the endless consumption and discarding of stuff, is unimaginative at best and evil at worst...
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I wanted to distance myself as far as possible from those pasty-faced corpses in suits I saw in airline magazine ads...
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If you're not pissing off 50 percent of the people, you're not trying hard enough...
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When the surf was up or the powder wafted down, employees would be where they ought to be: outside. If an employee's child was sick, the parent would also be where he ought to be: at home. They would keep Patagonia privately held and say no to anything that compromised their values.
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Everybody tells me it's an undervalued company," he says, "that we could grow this business like crazy and then go public, make a killing." He shakes his head. "But that would be the end of everything I've wanted to do. It would destroy everything that I believe in."
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I don't want a Wall Street greaseball running my company.

Must Read Article - Deconstructing Today's Ongoing Revolution In Finance

This article is from the always excellent John Mauldin, by Woody Brock.

Some of the better quotes:

...yes, there is a theoretically optimal value of contracts that ideally "should" exist: Incredibly, it is a number millions of times larger than today's value...This being true, the number of securities now in existence is a mere drop in the bucket of what is required for true economic efficiency to be reached.

...

Their impact far transcends the kinds of securities that are now created and traded, and is permitting new solutions to a broad array of financial and economic problems. As one example, our new found ability to securitize and repackage assets and to slice and dice risk has led to a complete reconceptualization and utilization of leverage.

...

Even more fundamentally, without a complete set of hedging markets in which all agents can hedge all risks, the Invisible Hand of the market will fail to achieve an efficient allocation of all resources--commodities, services, and risk. This is Arrow's main theorem. In brief, if you believe in capitalism, in markets, and in the Invisible Hand, then you had better sing the praises of today's revolution in finance. For it has brought us closer than ever before to the idealized economy of the text book.

Taiwan Prediction Markets Call Election

More accurate than the media polls which didn't even predict the winning candidate:

While media polls failed miserably in predicting the results of the Taipei and Kaohsiung mayoral elections, one group of academics and political soothsayers prophesied the outcome with stunning accuracy.

Their nearly dead-on predictions were no accident, they insist, nor were there any crystal balls involved.

Conrad Black Resources – No Volume Yet on Intrade Contacts

Peter Worthington of the Toronto Sun http://www.torontosun.com/News/Columnists/Worthington_Peter/

Janet Whitman of my beloved NY Post – Link is Google news since the Post online is awful http://news.google.com/news?hl=en&ie=...

This one is new but looks interesting:
The Black Blog: http://www.torontolife.com/blog/conrad-black-trial/

Another Spitzer Claim Bites the Dust - WSJ Op/Ed

Remember when Trust Fund Baby Spitzer tried to blackmail AIG Chairman Hank Greenburg? When Greenburg didn't rollover, Spitzer went to the press to conduct the trial there. The WSJ fills in the details on the recently released report that exonerates Greenburg and raises questions about Spitzers methods:

One of his smears accused Mr. Greenberg of bilking the Starr Foundation, a New York charity. A report released this month by an independent committee exonerates Mr. Greenberg of that charge, even as new facts have emerged about Mr. Spitzer's nasty prosecutorial methods.
...
We now know this was merely one more hardball attempt to bludgeon Mr. Greenberg into settling the unrelated AIG charges. Sources who were part of the discussions at the time now say that Mr. Spitzer made clear that, unless Mr. Greenberg admitted guilt in the AIG case and personally wrote a check for north of $500 million, the AG would go public with the Starr allegations.
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Mr. Greenberg is fortunate in that he is wealthy enough to defend himself and is also at the point in his life when he has little to lose from fighting a legal case to restore his reputation. Many of Mr. Spitzer's other targets weren't so lucky and had no choice but to settle or risk ruin. Mr. Spitzer and his former gang of bully boys in the AG's office owe Mr. Greenberg and the Starr Foundation an apology.

The Plan To Take the Online Gaming Market - US Gaming Firms Tale of Shame

1. Pass legislation to get rid of foreign competition - The US Casinos had fallen so far behind the competition at this point that they didn’t have a chance of winning on merit. No matter - Senators are cheap. Although the majority of Americans disagreed with its contents, the bill was snuck through by Bill Frist with the laughably stupid claim it would protect children and stop terrorism.

2. Establish an Online Presence – Of the majors, only LV Sands has had the gall to announce it was starting to establish an online presence. For now it will stick to Europe through a partnership with Cantor Gaming. Make no mistake, this is a trial run for the US market. Other casinos are sure to follow.

3. Repeal the Gaming Act – The majority of Americans support it. The senators have already been paid off. And Chanos is long (kidding!). The trial balloon was floated today by Barney Frank who called it: one of the “stupidest laws” ever passed and said he wanted to “repeal” the law.

The entire affair, the arrests and the tough talk were exactly what they seemed - protectionist measures by "useful idiot" politicians.

SEC's Information Socialism Failure - NY Times Op/Ed

The SEC’s recent break up of a so-called insider trading ring made it obvious what their real goal was – to stay relevant. After getting hugely embarrassed by the feedback regarding their hedge fund minimum increase, they had to do something to make it appear they were doing something. And what better way to get headlines than by arresting a bunch of random people and calling it an insider trading ring, it’s like a real conspiracy theory!

The busts included not just a guy who had no insider knowledge but instead followed his customer’s insider traders, but two traders who started following his trades. How can they have any fiduciary responsibility or presumed to have any inside knowledge is beyond me.

A NY Times Op/Ed today points out how idiotic current Information Socialism laws are, but does not go far enough:

Insider trading encompasses the buying or selling of stocks based on non-public information about the securities in question. It is illegal to tip such information to others or to act on tips oneself. Under this definition, insider trading is so common that the only way the Securities and Exchange Commission can enforce laws against it is selectively, much as a patrolman tickets only the red sports car when everyone on the road is speeding. It may make for sexy headlines when a brazen conspiracy is uncovered, or a Martha Stewart is accused. But stopping the sports car slows traffic only for a mile or two. It gives the false impression that the policeman is on the beat, making the financial markets safe for the rest of us.

Good Luck Mr. Black

They have gone after the oil producers (BP, a target because of Browne), the gaming bosses (David Carruthers), and now Conrad Black. Conrad Black, another victim of the war on capitalism, has chosen to fight the charges.

Intrade has posted several contracts with no volume yet:

http://www.intrade.com/news/mainpage.jsp?article=news_107.html

Trust Fund Baby Eliot Spitzer - Millionare and Still an Insufferable Brown-noser

Trust Fund Baby Spitzer shows that daddy's money isn't enough to avoid the politicians job of obsequious fawning over whatever victim group is hot this week. Swine politicians love to attach themselves to these tragedies. They get to appear to care and not actually have to do anything.

The sleazy millionaire is willing to shed his dignity and self-respect because one day it might by him a few votes - now that's dedication! What wouldn't he do for a positive press release?

My favourite part is his generosity with the taxpayers money, "pledging that the state would help the families with housing and employment." The sad part is the people who wouldn't send a dime of their own money would probably support it - as if the governments money just falls from the sky.

Why We Do Not Behave Like Human Beings - Albert Nocks Philosophy of Mass Men

"All the animals come out at night - whores, skunk pussies, buggers, queens, fairies, dopers, junkies, sick, venal. Someday a real rain will come and wash all this scum off the streets."

Travis Bickle - Taxi Driver

In Taxi Driver, one of the best American movies, Travis Bickle's alienation from society has violent results. He lashes out at his own irrelevance by purchasing several guns and going on a rampage. His attempt to kill a politician fails and he ends up killing a pimp instead. Like vigilante Bernie Getz, Bickle ends up an odd hero when his intentions are interpreted by the public to be noble.

Surely there is better way to deal with the undesirable members of society without growing frustrated by their unchanging self-destructive nature. In Nock’s Memoirs of a Superfluous Man he discusses his own change in philosophy that insulated him from the idiocy of the mass men.

Ralph Adams Cram’s nearly unreadable essay Why We Do Not Behave Like Human Beings, makes a simple proposition – “that we do not behave like humans because the great majority of us, the masses of mankind are not human beings.” Of course, physically they are men, and yet they are mindlessness, selfishness, and rely mainly on brute instinct. They have all the raw material to be considered man and yet they remain sub-human - as if civilization has eluded them.

Acceptance of this view had great results for Nock – he expected mass men to act that way and he was never disappointed. He says:

Since then I have found myself quite unable either to hate anybody or lose patience with anybody…One can hate human beings, at least I could, - I hated a lot of them when that is what I thought they were, - but one can’t hate sub-human creatures or be contemptuous of them, wish them ill, regard them unkindly…If cattle tramp down your garden, you drive them away but can’t hate them, because you know they are acting up to the measure of their psychical capacity.

My acceptance of Mr. Cram’s theory also caused me for the first time to really like people-at-large…when one gets it fixed firmly fixed in one’s head that they are living up to the measure of their capacities to the point of making themselves as human beings, one comes at once to like them.

One has great affection of one’s dogs, even when one sees them reveling in tastes and smells which to us are unspeakably odious. That is the way dogs are, one does not try to chance their peculiar penchant…

So there you have it – the mass men and their habits are not a group to be scorned or hated. They do all they are capable of. Expecting their, “virtues to be touched with nobleness,” is too much.

Sark - Tiny Island in the English Channel

Does this sound like the setting of The Wickerman to anyone else?

Sark has remained pretty much the same for 442 years, since Queen Elizabeth I declared it a noble fiefdom. Transport is by bicycle, horse-and-carriage or Wellington boots. When absolutely necessary, one may resort to one of the island's few tractors.

600 residents, 250 rounds - worst coup planning...ever:

The constable is one of the few who gets a salary. He earned it in 1991, when an unemployed French nuclear physicist, dressed in military fatigues and armed with an automatic rifle and 250 rounds of ammunition, launched a one-man invasion.

February Non-Farm Payroll

Economists' consensus: 100,000
CME Auction Market participants' consensus: 82,500
ADP: 57,000

None of the three numbers have really been able to hit NFP consistently but they are usually all wrong in the same direction. For example in January the estimates were:

Economists' consensus: 160,000
CME Auction Market participants' consensus: 134,800
ADP: 152,000

The actual number came out at 110K - below all the estimates.

In December the numbers were:

Economists' consensus: 100,000
CME Auction Market participants' consensus: 82,000
ADP: -40,000

This was a big upside surprise at 206K – all of the estimates were low.

Weekend Reading - That Which is Seen, and That Which is Not Seen

A Bastiat classic from 1850. Its depressing in that it could have been written yesterday. It means 150 years of the ascent of man and capitalism in lockstep has not advanced economic debate very much at all.


“Your arguments are fashionable enough, but they are too absurd to be justified by anything like reason.”

“They would gladly suppress the capitalist, the banker, the speculator, the projector, the merchant, and the trader, accusing them of interposing between production and consumption, to extort from both, without giving either anything in return. Or rather, they would transfer to the
State the work which they accomplish, for this work cannot be suppressed.”

"Directed by the comparison of prices, it distributes food over the whole surface of the country, beginning always at the highest price, that is, where the demand is the greatest. It is impossible to imagine an organization more completely calculated to meet the interest of those who are in want; and the beauty of this organization, unperceived as it is by the Socialists, results from the very fact that it is free. It is true, the consumer is obliged to reimburse commerce for the expenses of conveyance, freight, store-room, commission, &c.; but can any system be devised, in which he who eats corn is not obliged to defray the expenses, whatever they may be, of bringing it within his reach?”

Titbottom's Spectacles on Wall St

How things really are:

But I had pulled out my spectacles, and put them on for my own purpose, and against his direction and desire. I looked at him, and saw a huge bald-headed wild boar, with gross chops and a leering eye--only the more ridiculous for the high-arched, gold-bowed spectacles, that straddled his nose. One of his fore hoofs was thrust into the safe, where his bills payable were hived, and the other into his pocket, among the loose change and bills there. His ears were pricked forward with a brisk, sensitive smartness. In a world where prize pork was the best excellence, he would have carried off all the premiums.