Real Life 'Ace' Rothstein - WSJ

Stats are not enough, you need a voice! These are gamblers ready to risk what they can't afford for what they can't have, you're selling the world's rarest commodity: certainty, in an uncertain world. - Two For The Money

The Wall Street Journal has a fascinating article about a full time sports handicapper:

Each Thursday morning at precisely 10 a.m. Nevada time, every major casino sports betting operation in the world from here to Costa Rica was being simultaneously pounded by thousands of bettors wagering millions of dollars on the same few college football games. Odder still, most of these lock step bets were turning out to be winners, costing the casinos a fortune.
...
There were rumors. Some thought terrorists were involved, or hackers, or maybe a shadowy international gambling syndicate known as the Asian Group. But as the month wore on, the truth began to bubble up through the Las Vegas whisper pool.

Turns out there was no grand conspiracy. The global business of sports betting was being jolted every week by one person: an obscure 41-year-old statistician from San Francisco named Dr. Bob.

If you've never placed a sports bet in America, you are fast becoming a member of the minority. Since its beginnings at Colonial horse tracks in the 17th century, the amount of money Americans wager on sports has grown to rival the gross domestic product of New Zealand.

He won't disclose his revenues but its hard work:

As well as these methods have worked, they have done nothing to cut his workload. In the months when basketball and football overlap, Mr. Stoll works 18 hours a day nearly every day, sleeping in bursts of no more than four hours.

The full article is excellent, if you can't get paste the gated version send me an email for the full one. Do not miss it.

Sarbanes - Unconstitutional? Yes Argues Ken Starr

Its own creator, Mike Oxley, said it was, "hastily written and enacted." In a WSJ Op/Ed Ken Starr says that it may be unconstitutional as well.

The Sarbanes-Oxley Act powerfully illustrates the law of unintended consequences. Due to hasty drafting by Congress in the wake of the Enron and WorldCom scandals, Sarbox has cost the U.S. economy over $1 trillion, according to one study published by the AEI-Brookings Center. To add insult to grievous injury, it is unconstitutional.
...
It is time to call Congress back, both to help our economy and reaffirm that our constitutional system imposes clear limits on the government's urgent desire to "do something." Congress must be reminded that the "solution" is at times worse than the problem.

More Market Freedom? – Regulatory Tide Turning

Remember when Trust Fund Baby Elliot Spitzer tried to shake down H&R Block for the crime of offering retirement accounts for the poor? It was hard to miss since it was front page news everywhere. You may have missed the fact that Spitzers abusive prosecution failed again becuase the only media play it got was the Wall Street Journal Op/Ed Page.

Trust Fund Baby Spitzer is leaving the AG post in disgrace (unfortunately he isn’t disappearing for good) after a long string of embarrassing losses. At the same time regulations from the post Enron era are being rolled back.

Paulson is going after Sarbox, and the “Justice” Department got smacked down yesterday with new restraints being put in place in response to the brutal Thompson Memo. From the NY Times:

Under the revisions, federal prosecutors will no longer have blanket authority to ask routinely that a company under investigation waive the confidentiality of its legal communications or risk being indicted. Instead, they will need written approval for waivers from the deputy attorney general, and can make such requests only rarely.

It may be too late. The US’s burdensome regulations helped London eat our lunch.

Comrade Bloomberg and Schumer say that are going to help. With friends like these…

Wall Street Drivel – Now Publishing Op/Eds Praising Spitzer

At first I thought it would be satire, but Donald Kempf appears to be completely serious in yesterdays WSJ Op/Ed, “Spitzer Is Good for Business.”

Somehow he didn’t cover the main issues that most capitalists had with trust fund baby Spitzer’s abusive regime. Spitzer’s main tactic for getting press was to make unsubstantiated accusations and indicting to force settlements. It had to be close to the easiest job in the world, especially since he never had any intention of going to trial. It’s the equivalent of holding a gun the head of the businesses and coercing them to settle. It’s pure prosecutorial abuse, and the press ate it up.

His fiat laws were not subject to oversight, review, or input from the industry, but hey I’m sure his intentions were good. The illegal leaks to journalists smearing the businesses and individuals he was going after (Citigroup, et al) went unpunished and practically unmentioned in the press. The few times Spizter did go to trial, he only went after low level employees he could bully around. Ohh and he still lost.

Thankfully honorable men like Richard Grasso wouldn’t back down and give in to the looter.

We can only conclude from this Op/Ed that Mr. Kempf is signaling he wants a job in politics. He’s rich, and clearly flexible on his principles so he should fit right in. Elliot Spitzer is a great example of why trust fund babies should stick to Greenpeace, where they can’t do any damage to the productive members of society.

Records Opium Yields in Afghanistan – Another Drug War Failure

…economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics. – Ludwig von Mises

The United Nations' anti-drugs chief announced a "staggering" 60% rise in opium cultivation in Afghanistan this year, and demanded the government arrest scores of major traffickers and remove corrupt officials and police who are profiting from the trade.

If the supply of any good declines while the demand remains constant, what happened to the price? Its goes up of course! So how did the anti-drug policy cause a rise in production in the first place?

The rise comes despite an injection of hundreds of millions of dollars in foreign aid to fight the drug over the past two years.

This should actually start off, “The rise comes because of…”. In other words the supply was restricted and caused a rise in prices. The rise in prices gave growers more incentives to raise opium. The actions taken to eradicate the supply of the drug provided the price incentives for supplies to grow more of it. There is no victory when you battle the market.

The record crop yielded 6,100 tons of opium -- enough to make 610 tons of heroin -- outstripping the demand of the world's drug users by a third.

I’m not sure what the WSJ means by this. Likely this is just a sloppy comparison to last years consumption figures and may portend a price fall.
The benefits of eradication are a windfall to the growers and intermediaries involved in the drug trade. The drug war is better thought of as a massive transfer of wealth from the US taxpayer directly to the traffickers. With out the Leviathan spending so much to keep the price of drugs high the suppliers and dealers of narcotics wouldn’t have so much incentive to advance and perfect their trade.

Banks Balk at Gambling Enforcement Crackdown - WSJ

Banks Balk at Congressional Plan
To Cut Off Cash From Net Casinos

A group representing 5,000 small banks is opposing a tool lawmakers hope to use to stop illegal online gambling, posing a challenge to what is widely seen as the government's best shot at cracking down on the activity.
...
The U.S. Chamber of Commerce, in a recent letter to U.S. senators, said it is concerned about deputizing banks "to enforce social policy."

Finally some good news!

"This would be a huge blow" to banks, says Ellen Zimiles, chief executive of New York-based Daylight Forensic & Advisory, which advises banks on regulatory compliance. "It would be extremely challenging, and it would take their efforts away from all the other things they're trying to do right now," such as helping authorities flag terrorist financing.

Apparently the "terroism" excuse works both ways.

David Carruthers Arrest - Wall Street Journal Op/Ed

WSJ Editoral Page Going Soft

Nearly three weeks after the arrest of David Carruthers today’s Wall Street Editorial page tepidly expressed their dismay that this was a case of, “extraordinary prosecutorial zeal”.

This case is one that only a statist could love.

Illegal?

The Wire Act is frequently used as a stop-gap measure when existing legislation hasn’t caught up with reality but what Mr. Carruthers did was not illegal in the UK.

But BetOnSports and Mr. Carruthers are not charged with dishonest behavior toward their customers. They are being told that a business they believed was legal was a criminal enterprise even if it was being run in the open. That suggests that prosecutors believe they have the right to enforce compliance with even ambiguous U.S. laws on any business, wherever based, solely because some of the people accessing their site happen to be Americans.

Protectionism

….they'd rather not have the online competition, which is why most of those "good" gambling operations support suppression of online gambling sites like BetOnSports.

The lobbying to restrict gambling is pure protectionism masquerading as protection for the children. The argument that online gambling puts the young at risk is absurd given that nearly any other age restricted product can be purchased online. Is it really necessary to throw foreign CEO’s in jail to protect our casino industry?

Political Games

This Nifong style prosecution has nothing to do with morality and is a pure political move. Carruthers was a target because of his outspoken views on gambling and his arrest was a message to the other gaming CEO’s to keep their mouth shut. Since the Blair the lapdog cares not a whit about what happens to his businessmen it’s a message that won’t take long to sink in.

Follow the latest news on the case here: http://www.freedavidcarruthers.com/

The Berkowitz "Victories"

1. While completely avoiding addressing any of the 28 charges against Skilling, Sean Berkowitz did reveal that Skilling had invested more than he originally thought in a photo shop. How much was this error? Less than .002% of Skilling's net worth. Maybe Seanie should be an accountant instead of a lawyer, such attention to detail!

2. As the WSJ and Houston Chronicle Blogs covering the trial breathlessly reported, Skilling lost his temper on the stand when Berkowitz tried to classify preliminary earnings estimates as evidence of accounting fraud. In other words, if figures change from initial estimate to audit it's because of fraud. A line of reasoning that would put every public company on the planet in trouble. This deliberate misrepresentation clearly got to Skilling but is anyone convinced that its evidence of fraud? Berkowitz caused Skilling to lose his temper but so far has not advanced his case. If the best Seanie can do is this ham fisted manipulation, then Lay can rest easy and we can remain short.

Berkowitz hasn't advanced beyond words games and deception to make his case, but with 28 charges he might not have to for us to get payoff. At some point he should try and incorporate some evidence. The contract still has not moved. I am still long Skilling, Short Lay.

Skilling Guilty….of preparing for the trial – Sean Berkowitz on the run – Enron Update

The two Harvard grads went toe-to-toe, with Skilling winning this round. First Berkowitz couldn't get his A/V exhibits to work and to keep the momentum had to plow through without his visual aids. According to the WSJ law blog this, "seemed to visibly frustrate Berkowitz, possibly throwing him off his game." Off his game is a good explanation for the Berkowitz follies later in the day.

The fact remains that there is no smoking gun evidence from emails or documents that points to Skilling. The prosecution has relied on tainted witnesses to make their case so far. The prosecution's cover for this seems to imply that Skilling has something to hide since there are no documents which implicate him. In other words, Skilling has something to hide because Seanie can't find any evidence against him. That seems a bit tenuous.

Apparently still reeling from the A/V disaster Berkowitz let the jury know the bombshell that Skilling had prepared for the trial by hiring a consultant. Even SHOWING A WEBPAGE THAT'S CONCLUSIVLEY PROVES SKILLING WORKED WITH A TRIAL CONSULTING FIRM! I'm not sure if it was as significant to the jury but it should have been. Working to prove innocence should not be a sign of guilt.

With no real evidence Seanie's main tactic seems to try to "crack" Skilling. The former McKinsey director so far has been too smart to take the bait which isn't stopping Berkowitz from trying.

Showing much less dignity than the average Harvard grad, Seanie is relying on word games and extreme, almost satirical, indignity to make his case. Here are a few of the more amusing gems taken from http://blogs.chron.com/enrontrialwatch/ If you are following the trail you need that link:

Berkowitz continued this tack, giving Skilling little time to answer questions. Finally, Skilling tried to elaborate on the timing of when a study was done on the company's international assets.

Berkowitz wouldn't allow it.

"I don't want to hear speeches, OK?" Berkowitz said sharply.

"I was just.."

"Do you understand?"

"I will try to answer your questions."

Berkowitz continued to question whether Skilling was up front with analysts.

"I think the market knew the nature of our balance sheet," Skilling said, adding that Enron was open about the health of the assets.

"But you didn't tell them what they would sell for, did you?" Berkowitz interrupted.

This followed Skilling's joke about the energy crisis CA brought on itself.:

"You think that's funny?!" Berkowitz said sternly. "You think that was funny?!"

Skilling's smirk disappeared and he tried to explain that the "regulatory environment in California was just like Brazil..."

Berkowitz interrupted.

"You made jokes about (the energy crisis in California)," said Berkowitz pointedly.

Uhh, no Seanie it wasn't that funny, at least not compared with your joke of a cross-examination. I'm still long Skilling and short Lay on Tradesports, so lets hope Sean gets his act together. The contracts have not moved a tic all day.

Goodbye Larry?

Thrust back into the spotlight by this recent New York Times article Larry Summers is back on the brink of keeping his job. Two days after it was published Tradesports added the contract and a vulgar banner ad to their front page.

“Summers’ future will be decided by the Harvard Corporation, the University’s highest governing body, not by public opinion—but that hasn’t kept people from being interested in speculating on what Summers’ fate will be.

Visitors to Tradesports.com yesterday were greeted with a banner ad that read, “Larry Summers in Hot Water Again!?,” next to images of the Harvard insignia and of Summers’ head hovering above a boiling cauldron.”

The Crimson


This is from the WSJ released a little after 4am today, “Calls for Mr. Summers's departure from faculty critics have escalated in recent days, while his supporters complain that he hasn't responded with his customary vigor.” The article also says that the issue is still up in the air but Mr. Summers does seem to have lost the unconditional support that he enjoyed during the women in science scandal.

The Trade: Buying in up to the 60 level and scaling out leading up to the vote. A battle for his life and he is on a “ski vacation”?!?! Either he is really confident or he has already given up.