Monday, June 30, 2008

There's More Gold About Wall Street Here Than Any Book

What Really Killed Bear Stearns?June 30, 2008, 8:30 am

Did Bear Stearns melt down — or was it murdered?
That is one of the big questions that Bryan Burrough, who co-wrote the best-selling 1990 book “Barbarians at the Gate,” tries to answer in a lengthy article in the August Vanity Fair magazine.
Mr. Burrough spoke with many Bear executives and board members who described in vivid detail the events that unfolded that fateful week in March when Bear Stearns was ultimately forced to sell itself to JPMorgan Chase for a pittance.
According to Mr. Burrough’s account, Bear did not have a liquidity problem, at least at first. In fact, he said it had more than $18 billion in cash to cover its trades when the week began. There were no major withdrawals until late in the week, after rumors flew that the company was in trouble.
A top Bear executive told Mr. Burrough, “There was a reason [the rumor] was leaked, and the reason is simple: someone wanted us to go down, and go down hard.”
Bear executives frantically tried to find the source of the rumors, but failed to do so. They have their suspicions, and they have turned over the names to federal authorities that are investigating the matter.
Two possible sources named in the article — albeit with few supporting details — are hedge funds: Chicago-based Citadel, run by Ken Griffin, and SAC Capital Partners of Stamford, Conn., run by Steven Cohen. The third was one of Bear’s main competitors, Goldman Sachs.
All three firms denied any involvement in spreading the rumor, according to the article.
Several Bear executives also told Mr. Burroughs that an individual may have been spreading rumors about the firm that week — Jeff Dorman. Mr. Dorman briefly served as global co-head of Bear’s prime brokerage business until resigning to take a similar position at Deutsche Bank. One Bear executive said, “We heard Dorman was saying things last summer […] At the time we reached out to Deutsche Bank and told them he better stop it.”
But the rumors caused a run on the bank and depleted Bear’s capital base. Alan Schwartz, the firm’s chief executive, then reached out to his counterpart at JPMorgan, James Dimon, for help. Mr. Schwartz called Mr. Dimon, who was eating dinner with his family, celebrating his 52nd birthday.
Mr. Burrough described the call this way:
Dimon stepped outside onto the sidewalk. Schwartz quickly explained the depth of Bear’s plight and said, ‘We really need help.’ Still irked, Dimon said, ‘How much?’ ‘As much as 30 billion,’ Schwartz said. ‘Alan, I can’t do that,’ Dimon said. ‘It’s too much.’ ‘Well, could you guys buy us overnight?’ ‘I can’t — that’s impossible,’ Dimon replied. ‘There’s no time to do the homework. We don’t know the issues. I’ve got a board.’
Mr. Dimon then called the New York Federal Reserve and worked out a deal where the government would lend the money to JPMorgan, which would then lend it to Bear Stearns. Bear would live another day — but just a few more. Bear executives thought they had 28 days to pay the money back. The article recounts a conversation that Mr. Schwartz had with federal officials informing him that he had far less time than he thought:
Schwartz’s phone rang. It was Tim Geithner of the Fed, with the Treasury secretary, Hank Paulson. Paulson came right to the point. ‘You’ll recall I told you when we cut this facility [that] your fate was no longer in your hands,’ he told Schwartz. ‘Well, we don’t plan on being here on Sunday night like we were last night. You’ve got the weekend to do a deal with J.P. Morgan or anyone else you can find. But if you’re not done by Monday, we’re pulling the plug.’ And, like that, Bear’s 28-day cushion evaporated. The Fed’s credit line was good only till Sunday night.”
The news came as a shock to Bear executives.
When Bear’s chief financial officer, Sam Molinaro, heard the news from Mr. Schwartz he said, “You’ve got to be kidding me.” The firm was eventually forced to sell itself to JPMorgan to avoid a bankruptcy filing.
Go to Article from Vanity Fair »
20 comments so far...
June 30th,20088:53 am
So a combination of former Goldman Sachs eexecutives and some very big hedge funds that do significant business with Goldman Sachs are coincidently at the center of the demise of a Goldman competitor. Rumors of how SAC Capital turns their profits [illegally] have been circulating for decades and yet somehow they are insulated from any enforcement risk. Must be that Goldman secret handshake and decoder ring they wear.
How is it the $30 Billion federally sponsored loan to Bear Stearns was good for a weekend but that same $30 Billion is a long term loan to JP Morgan?
— Posted by Dave
June 30th,20089:02 am
Stop!….with these supposedly informed/insightful tidbits about Bear’s stellar liquidity and balance sheet. To say someone had $18 billion in cash presents a one-sided analysis. How much was out in repo against that $18 billion? Additionally, most execs pick a quote based on the day the balance sheet is gussied up.
When Bear’s liquidity crisis developed their repo book had expanded dramatically over the past year to the tune of 2x the previous year. During the same period Lehman’s repo book had declined by roughly 25%. Bear got a taste of their own medicine by virtue of committing the cardinal sin of overreliance on short term funding. For repo lenders perception in many instances is reality. The last man standing gains nothing, the first out gets his money back.
— Posted by former bear employee
June 30th,20089:21 am
“The news came as a shock to Bear executives.”
So why did Mr. Burrough go to many Bear executives and board members to find the reason for Bear’s collapse?
It wasn’t murder; it was negligence and ignorance on behalf of Bear’s executives and board members. The outcome is that taxpayers and Bear stakeholders will pay, all while those executives blame others, demand everyone’s pity, and holdout to negotiate their next big contract.
— Posted by Perseus
June 30th,20089:57 am
Barbarians at the Gate is one of my all-time favorite books, but honestly, hasn’t this story been told already? Didn’t the WSJ do a three-day expose on how Bear Stearns collapsed? The next article I read about Bear Stearns better be in Playboy, is all I’m saying.
— Posted by Dan Daoust
June 30th,200810:36 am
The Vanity Fair piece blames everyone from shorts to CNBC to Charlie Gasparino and David Faber.
Yet bottom line remains: If your financial condition is so precarious that rumors can bring you down, then its the finances, and not the rumors, that are to blame . . .
— Posted by Barry Ritholtz
June 30th,200811:02 am
Exactly. That’s what happens when you try to run with 30 to one leverage. All it takes is one rumor and…you are screwed. Not even commercial banks are allowed that kind of leverage.
— Posted by oldgeezerpilot
June 30th,200811:04 am
Am I suppose to feel sorry for Bear Stearns or its employees?? When the going was good, did Bear Stearns care how it was making its money, its profits, the bonuses? Whether the death of Bear was by murder or otherwise, the executives made their money by murdering the consumers. Bears Stearns lobbyists in Washington made it so consumers couldn’t breath with so many hidden caveats to contracts. Chickens are coming home to roost. This article is blaming others for demise of Bear Stearns instead of the decisions made by the executives of the firm. The firm has to be pretty shaky if rumors takes it down. Greed, malfeasance, unscrupulous deals. Now if any other firms hire these executives from Bear Stearns, I would question those firms judgement and avoid those firms. If these executives of Bear Stearns were so good, smart, cunning , they couldn’t save Bear, how they going to help another firm. Think folks
— Posted by seedyrum
June 30th,200811:12 am
In 1965, Bill Kaufamn, Joe Osorio then of Citibank,a Bear Sterns executive and I formed a Hedge Fund with a certain Jerru Tsai, guru. In those days the spector of Hedging as an institution frightened the SEC as well as the street.In view of the recent liquidity problems surrounding mortgage backed securities fiasco and the death of BearSterns, the Street and the SEC were right then and wrong in the recent past and now.Rumur mills that profit from false or true rumors should not co-exist in an orderly mnarket.John Wright
— Posted by John Wright
June 30th,200811:27 am
I knew since the beginning that BSC was taken down on purpose; the book will be written by my guy Lowenstien, and will be out in a year or so detailing the ugly truth.
— Posted by Steve Raznick D.M.
June 30th,200811:29 am
Hey Barry, listen sport you have a lot to learn about gearing; if you were to use your assertion(s) as de-facto governance, there is not a single firm that would survive!
— Posted by Steve Raznick D.M.
June 30th,200811:37 am
Barry, ANY company can be destroyed by false rumors and a Bear Raid. A financial services company is at greater risk because unlike other businesses, financial services is susceptible to that run on the bank that a GE, IBM, Microsoft, etc… would not be.
— Posted by Dave
June 30th,200812:04 pm
Spreading rumors on Wall Street to effect stocks is an old time ruse, everyone on a trading desk has been through this at one time or another.
Some geek decides he wants to sell or short an equity,so puts a rumor out there. The desks are so nervous, they react vs. responding and the originators use that opportunity to buy or sell.
We also have frontrunning by every major firm. They buy a position then lay it off on their unsuspecting clients. Many are still trying to get their money out of the Auction Rate Preferreds that the major houses sold to their clients knowing full well that the firms would never step up to the plate to support the auctions as they had been.
Where the hell are our regulators and legislators? That’s what I want to know.
— Posted by Kate
June 30th,200812:21 pm
Funny thing is, the SEC went out and solicited the opinions of “seasoned economists” for their insight on the tick test removal. The panelists were a who’s who of short sale apologists including the most vocal apologist and Jim Chanos friend and Associate - Owen Lamont.
In the roundtable meeting every economist on the panel denied that a bear raid could exist in this marketplace because of the regulatory structrure we have. It goes to show how blind our so-called experts have become to the tricks of the trade in todays market abuse network.
Not only do bear raids exist, they are actually quite prevelant. They just don’t last as long as they did in the past because of all the potential for liquidity. Today market abusers can raid a stock and cover for profit before our regulators have even opened their eyes to the abuse.
— Posted by Dave
June 30th,200812:53 pm
Could the short volumes taken on by Citadel, SAC, and GS be gathered from the records and plotted for the takedown week?
— Posted by dave
June 30th,20081:24 pm
A sound institution cannot be undone by rumors.
— Posted by wendell tripp
June 30th,20082:13 pm
No matter whether Goldman Sachs, Citadel, JP Morgan, SAC et al deepsixed Bear-Stearns or if B-Stearns oeverreached and pulled the plug themselves. The fact is that none of these money flows in either direction were productive investments, merely attempts to game ineffeciencies in the market with the vampires raking off every time money changes hands. No value created here; too bad they all didn’t go down together.
If this money had been used, say, to invest in fuel cell technology development, perhaps GM or Ford, instead of Honda, would have put the first pre-production hydrogen feul cell vehicules on the road.
This ghoulish posturing can be stopped by revisiting US fiscal history. Under Truman and Eisenhower the highest marginal income tax was 92%. All annual income over $100,000 was imposed at this rate. Allowing for inflation today the figure would be $400,000. If all net income (including wages, salaries, fees, investment gains, capital gains, realized stock options, partnership payouts…) exceeding this amount were imposed at 92%, these conflict of interest specialists wouldn’t have our money to play with.
400,000 dollars/yr is about 10 times US median household income.
Bill P
— Posted by Bill P
June 30th,20082:19 pm
Bear Stearns demise was much like a baseball game. A team doesn’t lose a game because the last game strikeouts. There are 26 other outs where the team could have generated runs and 27 other outs they could have struck out the opponent.
BSC had opportunities to raise capital, it had opportunities to reduce expenses, it had opportunities to sell assets; but the incompetent senior executives stood by as the house was burning down. After years at the top of the mountain they forgot they could roll off the hill easily. And the trek downhill would be much faster than the slog uphill. Name calling, gamesmanship, and rivalry are part of the business and there is nothing illegal about it. BSC was like a patient that ate and smoke themselves to death. At many times they could have healed themselves if they only followed prudent business practices. Instead the king and prince spent their time playing bridge and gold. And the newly appointed prince was too inept to understand complex treasury management. The culprits may have had a hand in BSCs demise, but the management was the group that set the company for a fall.
— Posted by hammer
June 30th,20082:27 pm
The analysis to be gathered would require effort by the regulators as it requires trade ticket information but to answer your question yes regulators can do exactly that. They can also analyze the trade settlement failures to determine who it was that was creating such volume. On teh Wednesday before the collapse the fails accumulated from 200K to 1.4 Million on a $60 stock marking over $60 Million in failed trades. Trading the Monday of the collapse generated over 10 Million additional failed trades at net settlement.
None of this accounts for day trading activity where a failed trade is closed net out on the same day. A raid can easily consist of selling out huge fails in early market trading and then covering most in the panic that ensues.
— Posted by Dave
June 30th,20082:43 pm
I you are right, then every bank or financial group can be murdered the way you describe. The financial system is therefore much more fragile than I could imagine.
It holds together by the strength of the belief of the people working in it.
I used to name it religion.
— Posted by Didier
June 30th,20082:53 pm
What really brought down Bear Stearns was a dysfunctional bankruptcy system.
As trustees, receivers, etc. have become more aggressive about pursuing fraudulent-conveyance claims, financial entities have become increasingly nervous about the possibility of ending up as the defendant in such an action.
How can an entity avoid being the target of an avoidance claim? By not doing business with any who might soon declare bankruptcy, that’s how. But this means severing relations with counter-parties on mere rumor (because often there isn’t a lot more than rumor to go on before the actual filing).
This leave-on-the-rumor mentality is self-reinforcing. If some funds stop doing business because of a rumor, that fact itself looks like confirmation of the rumor to others, and a classic run-on-the-bank mentality develops, until somebody gives a Jimmy Stewart type speech about how we can’t let the old Bailey bank close down, that’s what the Mr. Potter (read: sovereign wealth funds?) wants of us!
Think of the rumor, however it started, as the butterfly in a classic chaos-theory thought experiment.
The butterfly couldn’t cause a tornado unless atmospheric conditions were already such as to allow that. And the crucial atmospheric condition in this case is the changing nature of corporate bankruptcy.
What can we do about it? That’s a tricky question. Anyone have any ideas?
— Posted by NotNasser

This is Close to Being The Crux

Bill Gross

Published: June 30, 2008
Filed at 12:07 p.m. ET
Skip to next paragraph
NEW YORK (Reuters) - Longer-term U.S. Treasury bond yields have bottomed and will steadily rise because of inflation pressures as the U.S. economy clambers out of the current downturn, the manager of the world's biggest bond fund wrote on Monday.
"Intermediate and long-term yields on government bonds have already bottomed and will gradually rise" during the term of the next president, due to start in January, wrote Bill Gross, chief investment officer of Pacific Investment Management Co., or PIMCO, in his monthly "Investment Outlook" letter for July.
The benchmark 10-year Treasury note's yield, which moves inversely to its price, dipped to 3.285 percent in January, the lowest since 2003, on signs of a weakening economy and escalating credit market strains.
But since then, surging commodity prices and rising inflation expectations have pushed the 10-year yield up by about one percentage point, to above 4.30 percent last week.
Over time, current negative real interest rates, the Federal Reserve's extraordinary liquidity provisions to the banking system and the government's fiscal stimulus measures should promote reflation, Gross said.
"This economy will need an additional jolt of $500 billion or so of government spending real quick," he wrote.
This month's investment outlook letter was addressed to Democratic White House hopeful Barack Obama, as if he had been elected.
The next president has little choice but to step up fiscal stimulus to revive the economy, Gross said.
"You've inherited an asset-based economy whose well has been pumped nearly dry with lower and lower interest rates and lender of last resort liquidity provisions," he wrote. "Your administration will produce this nation's first trillion dollar deficit."
Foreign central banks and private investors may not continue to buy Treasuries at the same rate as in previous years a trend that has kept Treasury yields lower than they would otherwise be. Absent these low interest rates to aid the economy, "what you need now is fiscal spending and lots of it," Gross wrote.
The housing market's decline will continue, he forecast.
By January, U.S. home prices will have fallen nearly another 10 percent, "and our Japanese-style property deflation will be in full stride," Gross wrote.
Japan's real estate markets crashed in the early 1990s and have yet to fully recover.
"Dear President Obama," the letter began. "You have inherited a mess. Your predecessor, fixated on emulating a former Republican icon from a far different economic era, chose to emphasize tax cuts for the rich and excessive consumption for all Americans," Gross wrote. "He promoted deregulation and free markets when, in fact, the markets and their institutions needed tough love."
(Reporting by John Parry; Editing by Dan Grebler)

Also The Very Crux


Published: June 30, 2008
It’s feeling a lot like 1992 right now. It’s also feeling a lot like 1980. But which parallel is closer? Is Barack Obama going to be a Ronald Reagan of the left, a president who fundamentally changes the country’s direction? Or will he be just another Bill Clinton?

Current polls — not horse-race polls, which are notoriously uninformative until later in the campaign, but polls gauging the public mood — are strikingly similar to those in both 1980 and 1992, years in which an overwhelming majority of Americans were dissatisfied with the country’s direction.
So the odds are that this will be a “change” election — which means that it’s very much Mr. Obama’s election to lose. But if he wins, how much change will he actually deliver?
Reagan, for better or worse — I’d say for worse, but that’s another discussion — brought a lot of change. He ran as an unabashed conservative, with a clear ideological agenda. And he had enormous success in getting that agenda implemented. He had his failures, most notably on Social Security, which he tried to dismantle but ended up strengthening. But America at the end of the Reagan years was not the same country it was when he took office.
Bill Clinton also ran as a candidate of change, but it was much less clear what kind of change he was offering. He portrayed himself as someone who transcended the traditional liberal-conservative divide, proposing “a government that offers more empowerment and less entitlement.” The economic plan he announced during the campaign was something of a hodgepodge: higher taxes on the rich, lower taxes for the middle class, public investment in things like high-speed rail, health care reform without specifics.
We all know what happened next. The Clinton administration achieved a number of significant successes, from the revitalization of veterans’ health care and federal emergency management to the expansion of the Earned Income Tax Credit and health insurance for children. But the big picture is summed up by the title of a new book by the historian Sean Wilentz: “The Age of Reagan: A history, 1974-2008.”
So whom does Mr. Obama resemble more? At this point, he’s definitely looking Clintonesque.
Like Mr. Clinton, Mr. Obama portrays himself as transcending traditional divides. Near the end of last week’s “unity” event with Hillary Clinton, he declared that “the choice in this election is not between left or right, it’s not between liberal or conservative, it’s between the past and the future.” Oh-kay.
Mr. Obama’s economic plan also looks remarkably like the Clinton 1992 plan: a mixture of higher taxes on the rich, tax breaks for the middle class and public investment (this time with a focus on alternative energy).
Sometimes the Clinton-Obama echoes are almost scary. During his speech accepting the nomination, Mr. Clinton led the audience in a chant of “We can do it!” Remind you of anything?
Just to be clear, we could — and still might — do a lot worse than a rerun of the Clinton years. But Mr. Obama’s most fervent supporters expect much more.
Progressive activists, in particular, overwhelmingly supported Mr. Obama during the Democratic primary even though his policy positions, particularly on health care, were often to the right of his rivals’. In effect, they convinced themselves that he was a transformational figure behind a centrist facade.
They may have had it backward.
Mr. Obama looks even more centrist now than he did before wrapping up the nomination. Most notably, he has outraged many progressives by supporting a wiretapping bill that, among other things, grants immunity to telecom companies for any illegal acts they may have undertaken at the Bush administration’s behest.
The candidate’s defenders argue that he’s just being pragmatic — that he needs to do whatever it takes to win, and win big, so that he has the power to effect major change. But critics argue that by engaging in the same “triangulation and poll-driven politics” he denounced during the primary, Mr. Obama actually hurts his election prospects, because voters prefer candidates who take firm stands.
In any case, what about after the election? The Reagan-Clinton comparison suggests that a candidate who runs on a clear agenda is more likely to achieve fundamental change than a candidate who runs on the promise of change but isn’t too clear about what that change would involve.
Of course, there’s always the possibility that Mr. Obama really is a centrist, after all.
One thing is clear: for Democrats, winning this election should be the easy part. Everything is going their way: sky-high gas prices, a weak economy and a deeply unpopular president. The real question is whether they will take advantage of this once-in-a-generation chance to change the country’s direction. And that’s mainly up to Mr. Obama.

The Very Crux


Published: June 30, 2008
Few countries can afford the luxury of limiting their diplomacy to friendly countries and peace-loving parties. National security often requires negotiating with dangerous enemies. Fortunately, Israel’s prime minister, Ehud Olmert, is now displaying a clearer grasp of such realities than President Bush has mustered.

Israel is increasingly willing to explore conversations with states and groups Washington would prefer to ignore and isolate. In recent weeks it has agreed to a limited, Egyptian-brokered cease-fire with the Hamas authorities in Gaza and is engaged in indirect peace talks with Syria, sponsored by Turkey. It is attempting to start similar discussions with the Lebanese government, despite — or more likely because of — Hezbollah’s growing political influence.
There are clear risks. Hamas may not respect or enforce the cease-fire; there have been almost daily violations. Syria may be as unbudging as it has been in past negotiations. Hezbollah may block talks with Lebanon or use them to buy time to build up its armaments and political leverage. Mr. Olmert, politically weak and legally besieged, may not have the staying power to see any of these initiatives through.
Israel is still right to try. With its security and even survival at stake, it would have been irresponsible to continue to let Washington’s ideological blinders constrain Israeli diplomacy.
To its credit, the administration has given belated support to Israel’s diplomatic initiatives.
This new burst of diplomatic activity has revived a long-running Mideast policy debate. Does real progress toward peace require constant American nudging and nurturing? Or do the parties only move ahead when their own sense of self-interest propels them?
It is a question with no one simple answer. True, it was Anwar el-Sadat’s surprise 1977 visit to Jerusalem that led to the breakthrough peace treaty between Egypt and Israel two years later. And it was secret talks in Oslo that truly began the historic, if failed, Israeli-Palestinian peace process of the 1990s. In neither case was America trying to discourage negotiations. And in both, subsequent progress depended heavily on very active United States involvement.
Even when there is a strong mutual desire for peace, the history of distrust and the weakness of political leaders can be overcome only with the kind of outside help the United States can uniquely offer. Syria might be much more willing to make peace with Israel — and cut its ties to Iran — if it were offered the same kind of step-by-step diplomatic and economic rehabilitation that Washington has recently used to induce more constructive behavior from Libya and North Korea.
Israel’s latest diplomatic initiatives come despite, not because of, seven years of malign Mideast neglect by the Bush administration. If any long-term good is to come of them, the next American administration will need to be truly committed to diplomacy — and a lot more adept at it.
More Articles in Opinion »

William Kristol -- Turning Over a New Leaf


Published: June 30, 2008
Half a century ago the philosopher Leo Strauss remarked that the passage in which the Declaration of Independence proclaims its self-evident truths “has frequently been quoted, but, by its weight and its elevation, it is made immune to the degrading effects of the excessive familiarity which breeds contempt and of misuse which breeds disgust.”

William Kristol

I’ve had occasion to test this claim. The last few years, we’ve spent July Fourth at the house of friends who have had the assembled company read the entire declaration. It’s a longer document than one thinks; the charges against the king take quite a while to get through.
But I can report from firsthand experience that the declaration as a whole, and not just its most famous phrases, remains remarkably immune to the degrading effects of excessive familiarity. I was doubtful at first that reading the declaration would enhance the overall beer-and-hamburger experience of the day. But the effort has proved more thought-provoking and patriotism-stirring than I expected.
So this year, perhaps pressing our luck (and patience), I’m thinking of proposing the reading of an additional text: Thomas Jefferson’s letter to Roger Weightman of June 24, 1826.
With regret, the 83-year-old Jefferson wrote that his ill health compelled him to decline the invitation to travel to Washington for the celebration of the 50th anniversary of American independence. But then, perhaps knowing this would be his final word, Jefferson sets forth in stirring prose his faith in the universal significance of the Declaration of Independence:
“May it be to the world, what I believe it will be, (to some parts sooner, to others later, but finally to all,) the signal of arousing men to burst the chains, under which monkish ignorance and superstition had persuaded them to bind themselves, and to assume the blessings & security of self-government.”
Jefferson claims his faith is based on the progress of enlightenment. He is confident that “all eyes are opened, or opening, to the rights of man.” Indeed, “The general spread of the light of science has already laid open to every view, the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately, by the grace of god.”
Jefferson may have been overly sanguine that the spread of the light of science would necessarily strengthen the cause of human rights. But even the optimistic Jefferson was well aware that the enemies of liberty and equality could regroup and resist — certainly abroad, perhaps even at home.
That’s one reason he trusted that “the annual return of this day” would “forever refresh our recollections of these rights, and an undiminished devotion to them.” Our devotion — and the sacrifices inspired by that devotion — are needed to make effectual the palpable truth of human equality.
The fate of equality, Jefferson makes clear, also depends on those who see further than, and act first on behalf of, their fellow citizens. In the letter, Jefferson pays tribute to his fellow signers — “that host of worthies, who joined with us on that day, in the bold and doubtful election we were to make for our country, between submission or the sword.” He wishes he could meet with the few of that band who still survived “to have enjoyed with them the consolatory fact, that our fellow citizens, after half a century of experience and prosperity, continue to approve the choice we made.”
So the signers of the declaration made the bold and doubtful choice for independence. Their fellow citizens ratified the choice. But they might have been slow to act if the worthies had not moved first.
For, as the declaration itself notes, “all experience hath shown, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.” The people are conservative. Liberty sometimes requires the bold leadership of a few individuals.
Perhaps that’s why the representatives, who have signed on behalf of “the good people” of the colonies, “mutually pledge to each other” their lives, their fortunes and their sacred honor in support of the declaration. Their pledge isn’t to the people. The pledge is an individual one by the signers to one another.
And the pledge has to be supported by a sense of honor — even of sacred honor. The declaration’s assertion of equal rights, one may say, is supported by what is necessarily unequal, the sense of honor of those acting on the people’s behalf.
Shortly after writing the letter to Weightman, Jefferson died at home in Monticello. On that very same day — the 50th anniversary of the adoption of the declaration, July 4, 1826 — in Quincy, Mass., Jefferson’s fellow drafter and signer John Adams also died. Yet as Adams reportedly said on his death bed, “Thomas Jefferson survives.”

From Gerry Spence

"Winning is fun. One should not wonder that so many lawyers are unhappy in their profession facing, as many do, a lifetime of trudging down the road to defeat as they try, with all that they have, to win, and only lose.

Sometimes to set the mind in proper winning order, I have a conversationwith myself. The conversation begins with my listening to the wee omnipresent voice within. The voice tells me the truth. It tells me that I am all right. That I possess the power to win. The power does not come from my appearance. It does not come from tricks. It does not emerge from my acquiring a set of special techniques or from knowing the right people or being accepted in the right society.

The power comes from being genuine, from being who I am. The power comes from recognizing that I am unique--that in all of the universe there is no one exactly like me, and that if I present my case out of who I am, not who I pretend to be, out of my feelings, not my covered feelings, out of my fear, my caring, even out of confusion, not my pretenses at being a lawyer who looks good, I will win. I will not try to win, for merely trying to win is my agreement that losing is an alternative. Indeed, it is my agreement to lose.

Trying is to lose and excuse. A lawyer cannot adopt the winning mind-set in his case without caring about his case and his client. Belief in the case, in the cause of justice, and in the deep-belly stuff of putting his whole human agency into the war is the necessary mind-set. It is a place where the lawyer and the cause are bonded. I tell lawyers that we cannot expect a jury to care about our clients if we do not care about our clients. We cannot expect a judge to care unless by our presence, by the glow on our faces, by the tincture of the blood in our voices, by the raw flesh of our words, our commitment to the justice of our case is undeniable. Caring is contagious. Witnesses catch it. Judges cannot defend against it. Juries are helpless against it. Caring is horribly contagious. Perhaps some can feign it--but not for long."

Saturday, June 28, 2008

Thursday, June 26, 2008

Cramer Said "Circle the Wagons" But Did Not Recommend P&G

A significant omission, as every time in the last two years he has said "circle the wagons" he has recommended P&G, exclusively.

Unprecedented Responses in Last Hour to Floyd Norris's Blog on Oil

Oops, since 2:00 pm; Still pretty incredible.
June 26, 2008, 2:00 pm

Floyd Norris
The Beginning of the End for High Oil Prices
Oil prices are up sharply (again) today. But stocks in oil companies are not.
For most of the run-up in oil prices, the stocks of the oil companies have moved right along. But lately, that has not been the case.
The divergence came after June 4, a day when oil prices fell to $122.30, and the Amex Oil Index (a group of oil stocks) also fell sharply. As I write this, the oil price is up to $137.90, a rise of nearly 13 percent. Oil stocks are up less than 1 percent.
Today, the oil price is up more than 2 percent, and oil stocks are down almost 1 percent.
It may be that the stock market is growing worried that high oil prices contain the seeds of their own destruction.
“At some point, it is likely to dawn on people who own oil shares that rising oil prices are raising global recession risks, and that a global recession would be really bad for oil companies,” said Robert Barbera, the chief economist of ITG.
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38 comments so far...
June 26th,20082:23 pm
The traders have used every excuse in the book to “justify” why the price of oil should be in $140 range, in the absence of any supply shortages….
As I pointed out in my previous posting on “blame the speculators”, there are parallels between this fiasco and the energy trading of a few years ago, that caused bogus rolling blackouts and soaring electricity prices…. At the end there were no shortages and in fact the industry had 20-30 percent excess capacity, and as we all know, following the collapse of Enron, many other power producers also went bankrupt (Calpine, Mirant, etc.) or came close to filing for bankruptcy (Dynegy), and spent years selling off assets, raising capital and fixing up their balance sheets….
Floyd, your observation is right on the money, the “financial players/traders” who have jacked up the oil prices beyond any logic, are getting out of the oil company shares first (being ahead of the curve), and soon will be unloading their futures contracts…..
Stay tuned!!!
— Posted by Hassan Azarm
June 26th,20082:45 pm
Who is putting money in oil? I mean is it all institutional and if there is a crash who is going to suffer?
— Posted by Doug
June 26th,20083:37 pm
Hey Hassan,
Enron was primarily an energy trading and transporting company, not a primary energy producer. But your analysis is very pertinent.
Also, maybe governments will start excess profit and windfall taxing of oil companies. Gasp!! Taxing the rich, radical idea.
Bill P
— Posted by Bill P
June 26th,20083:38 pm
Wishful thinking. The price is up to stay. Demand is escalating and supplies are tapering downward. This is not going to stop.
How can the chief financial correspondent of The New York Times and The International Herald Tribune get this basic economic principle so wrong?
— Posted by Beerzie Boy
June 26th,20083:54 pm
I agree that the behaviour of oil stock not following the oil price is a direct sign of a possible tide change, I am still impressed by the overall economy state, where I see the result of a real state”gold rush” that lead nowhere, a consistent fiscal deficit as a war byproduct, a growing global inflation and unrest the result of seemingly the change of usage of grains into fuel, and the real possibility of recession, what’s next?
— Posted by Angel Palacios
June 26th,20084:01 pm
Some of us would like others to believe that speculation is a bad word. As if the common man is suffering because of ‘greedy’ speculators. The reality is that it is not. In fact, it is just the opposite. Speculation keeps the market going. And, there is nothing morally wrong in speculating. Speculators may win or lose (again Enron serves as a point). Instead of raising a rhetoric against speculators, politicians will be well-served if they create conditions that change the underlying sentiment of the speculators. If the government signals its intent to prospect oil in US or if it says that it will sell a quarter of its oil reserves (say) at the current price to book profits, that acts as a strong negative for speculators’ expectations. After all, what good is a strategic reserve if we cannot use it in times of requirement? Those who say that it will take 10 years to prospect for oil and, hence, it will not help, have no idea how modern markets work. Markets account for the future based on expectations. For example, the markets dropped instantaneously as they heard of the 9/11 attacks - even though it would take months for the economy to be affected. If the current runup for oil price is indeed a bubble created by speculation it should not be too difficult to burst that bubble.
— Posted by Deb
June 26th,20084:10 pm
the reason why oil stocks are down could be because of selling to raise capital for margin calls on other stocks
— Posted by browne
June 26th,20084:14 pm
This is simplistic, and wrong.
What if you were selling a valuable product, whose price kept rising, but you didn’t have much more to sell? Public Oil corporations control a small % of reserves. National oil co’s hold by far the most.
Why buy into a company, or hold their stock, if their access to product to sell is drying up?
— Posted by Jonathan
June 26th,20084:17 pm
Ah yes, this is looking and smelling like Enron all over again, except much bigger in every aspect. Just like Enron, the key players are Wall Street, Washington and the Industry. Particular scrutiny should be paid to ICE - Inter Continental Exchange, which accounts for a significant portion of key trades in price setting points of the oil market. ICE is designed to operate beyond the scrutiny of regulatory mechanisms and is opaque to outsiders. No surprise there. Ken Lay is laughing, wherever he is.
— Posted by Dave
June 26th,20084:23 pm
At the end of the quarter, when the oil companies report their profits, the stocks are going to fly.
— Posted by Jonathan
June 26th,20084:24 pm
Doug posted:
“Who is putting money in oil? I mean is it all institutional and if there is a crash who is going to suffer?
That’s the problem, everyone suffers if there is a financial collapse. And it is possible. When it becomes impossible to pay, people don’t pay, and no more is delivered. As the real wages of American workers slip month to month and the real prices of what they have to buy rise month to month, at some point, it becomes impossible to keep paying. So we don’t buy as much gas, or crap from China, and a downward spiral can begin. A genuine collapse will prove devilish difficult to get out of.
— Posted by Fred Bauder
June 26th,20084:27 pm
It isn’t that hard to see why the oil futures traders are betting on a higher price of oil. If you made a chart of the oil prices over the last two weeks, and you listed, in one column, oil price deflators - for instance, China’s selective release of some sectors from price controls, or the promise by the Sauds to pump more oil, what would you put in the column of oil price inflators? Easy. Israel minister says that Israel may have to bomb Iran before the end of the year. Bush goes to Europe, succeeds in tightening sanctions on Iran. Israel plans war game mimicking the bombing of Iran.
For years, I thought the lefty hysteria about Bush attacking Iran was hokum. I couldn’t see how he could afford that action.
However, lately I believe the atmosphere of tension which Bush has created is slipping out of his control.
There was a Financial Times item, yesterday, about the effect of the sanctions on the second largest producer of oil in the world - Iran - and guess what? Sanctions are visibly slowing down production and exploration in some of Iran’s most productive fields. This is happening at the same time that we are asking, like dummies, about the supply and demand situation.
The atmosphere that Bush has created between Iran and Israel looks eerily like the atmosphere in the summer of 2006, when Israel invaded Lebanon. So, if you were a futures trader, what would you see regarding the geopolitics of the Middle East?
1. A U.S. policy of hostility to Iran that is adrift;2. No effort on the part of the U.S. to negotiate a demand that they can’t enforce - Iran’s surrender of its nuclear power program;3. The encouragement of extremists in the Israel government to ratchet up the threat level vis a vis Iran4. No discussion, none, nada, in the U.S. press about the cost of the present course of U.S. foreign policy. I’d say that the cost of the hostility towards Iran is now at about 50 cents to 1 dollar extra at the pump.
Drift and hostility are a good combination for disaster. If Israel does bomb Iran, that will not only probably cause Iran to turn off its spigot, but Iraq too, while creating vast popular outrage across the Middle East that the major producers would resist at their peril.
Yet, one has yet to read one single article in the business section of the NYT about the security premium on oil in the market. When articles are published about what possibly possibly could be driving up the price of oil, the recent atmosphere of tension isn’t even mentioned. This is my definition of frivolity among the establishment - the wise men who have a lock on our foreign policy and their press minions can’t even discuss the costs of that policy. This is an unhealthy sign. Oil will keep going higher.
— Posted by roger
June 26th,20084:29 pm
China will pick up the demand. Chinese are just now buying their first cars.
— Posted by Tom
June 26th,20084:30 pm
@ some point recently, I heard that “The best cure for high oil prices are high oil prices.”
— Posted by David Butler
June 26th,20084:36 pm
The Oil prices are high because the US dollar has lost half of its value compared to the Euro with which it was at par on December 2002. It will continue to go up as long as the US dollar goes down. When they decide to raise rates and also allow oil exploration in Alaska and in east/west coast offshores, the prices will stabilize and move down. Meanwhile, the stock market is extremely oversold; watch for a bottom to go fishing! (not anytime soon though).
— Posted by Pal Anand
June 26th,20084:36 pm
It’s also the beginning of an economic boom for an oil free industrial age. So far, we’ve enabled the age of micro-electronics and its ever so evolving age of telecommunications. Most ills of society are founded in oil (carcinogens) and no price is too high to alleviate the symptoms of suffocating from its pollution. Now is as good a time as any to re-invent the wheel and with it less friction to make this transition to become a truly fuel friendly economy.
— Posted by Mark
June 26th,20084:38 pm
I think Floyd’s and Mr. Barbera’s explanation are dead wrong. Most large oil companies are vertically integrated. Exploration, Refining, Distribution and Marketing which includes Retailing.
Does anyone care to guess why Exxon/Mobil is ridding itself of its retail gas business? Margins are too thin or non-existent. It might surprise some that most refiners are operating at a loss on these high crude prices.
If you think gas prices are high now you ain’t seen nothing yet. Just wait the large integrated oils start shedding their refining operations - they’ll have to if crude remains at current levels.
Also, did you know there has not be a new refinery built in the U.S. in the last 30 years?
— Posted by Rev. Dave
June 26th,20084:39 pm
On the other side of every oil future trade or oil index trade is a buyer and a seller. How is it that speculators are causing this exactly? Speculators are both losing and winning as the price goes up. I they were just holding they would never make any money and there would be no more buyers to drive the price up.
— Posted by Niko
June 26th,20084:40 pm
If convinced there’s an oil bubble inflated by speculators and it’s about to pop, you may consider selling naked calls, it may make you rich.
— Posted by Jason Walker
June 26th,20084:50 pm
— Posted by Barry
June 26th,20084:53 pm
The Fed could have put a stop to this oil bubble foolishness by increasing the Fed Funds Rate to 2.25% instead of leaving it at 2%. Rather than being injected into the economy where it is needed, all this cheap Fed money is going straight into commodities speculation. I suppose the Fed will have to bail out Goldman and their ilk when they lose their fannies in an oil price collapse.
— Posted by Geoerg C
June 26th,20084:54 pm
I don’t know if I’m missing something here, but the Oil market is not the same as the power market. Power is a perishable product while oil is not.
When power is generated, it is either used or is lost, so it’s easy for the Enron traders to control supply and manipulate the market by taking down plants for “maintenance”. However, this situation was limited to the US as the scope of the “power crisis” did not extend beyond our borders.
The oil market is global and it is more difficult to size-up. If the speculators decide to close their positions, we would expect the price to go down. But the oil-producing countries can counter this by announcing a reduction in production or stir up enough political uncertainty to prop up the market price. Whether they actually do reduce production, “cheat” and produce more than they say, or sell less oil due to the reduced demand, in the end, these countries and their governments will end up with more money even though the true demand may be down.
Hopefully, I’d like to see some sanity after the “peak driving season”, but with all these players beyond the reach of the US market regulators, I don’t think I’ll ever see prices falling below $100/bbl again in my lifetime.
These oil-producing countries have obviously learned their lessons well from their experiences from our EHMs. By being so indebted to the rest of the world now, we may well be on our way to becoming a global economic colony.
— Posted by doppleclutch
June 26th,20085:06 pm
Oil company stockholders do not want their profits to continue rising, due to continued increases in the price of crude, partly because they are afraid of Congress slapping them with some kind of new tax.
— Posted by Lester
June 26th,20085:19 pm
I feel after the property slump speculators took out their investments just before the downturn and they along with BANKS, and most other financial institutions poored their resources into oil by buying up most availble stocks to force the price up.This has got nothing to do with oil stocks going down but that of those who feel a very large fast buck is fair game even if it puts some economies into turmoil.I wish they would realise all the heartache and pain millions of families arfound this globe,soem of whom will break up marraige or even commit suicide.Loose their homes which they may have spent years scraping and saving to make wht is is today.This false way of accounting has got to stop and real factors brought to fall in line with what goes on in every street.We the people own as much of the plant as all those greedy groups that just exploit by creating wealth from misery.They will die just the same as we do except lets hope their death may be much slower and much more painfull than ours.The oil prices will come down and when they do let us hope the governments aropund the world stop all this profit crazed cooperations from using our natural resources to rip the heart out of the global economy.Even China and India will get hit eventually and then prepare to duck.
— Posted by Terry Bayliffe
June 26th,20085:20 pm
I’m sure that these high oil and gas prices are very good for the American economy and industry in the long run and are very bad for oil-producing companies and countries.
— Posted by mike
June 26th,20085:22 pm
Another sure sign of a downturn in oil prices: I was at my dentist today and he was telling me about all the money he was making in oil futures….
— Posted by Ken
June 26th,20085:23 pm
These prices will continue until the elections. Prior to that the oil companies and traders will keep prices up and once it is clear that a more consumer frendly administration is going to take over the prices will drop this goes the same for the Euro.
— Posted by Sr Tocino
June 26th,20085:28 pm
I think we need to differentiate between integrated oils and oil services. Integrated oils could well be off because they must replace their inventories at higher prices, and the market is seeing that their margins will be squeezed if the higher retail pricing results in dampened sales.
Also, those who claim that speculation is resulting in a bull market in oil have it backwards! The bull market in oil is rewarding those who are speculating long on oil, while punishing speculative bears. People speculate on both sides of the trade — and the market is rewarding the bulls. We had shorts speculating and making lots of money as oil dropped to $10 but no one was blaming speculators for the weak oil market ten years ago. There is absolutely no Enron at work here. This isn’t the California electricity market, it’s far bigger with far more players all over the world involved.
Higher oil prices may indeed be their own undoing. Despite the relatively inelastic demand for the stuff, eventually we will find ways to avoid buying it. That’s a good thing and it’s exactly the way markets are supposed to work. Our drive-through way of life is falling apart and I say, good riddance. Let’s replace it with sustainable communities and an energy policy that consists of more than just dropping bombs.
— Posted by Flarben
June 26th,20085:29 pm
No one really knows what’s driving this runup, but one thing is for sure, until the current administration releases the reins, there won’t be any relief until it is politically expedient (advantageous) for them. The oil companies are getting theirs while they can. That’s what a monopoly is for!
— Posted by steve
June 26th,20085:40 pm
I find it interesting that the crude oil surplus increases and so does the price of oil. Libya suggests it will lower production because the market is well-supplied, the price of oil goes up. Much of the oil that we use in the U.S. comes from the U.S., but oil prices are internationally set. The price of crude has increased 100% in a years time, even though demand has only increased maybe 2% in the same time. I sincerely believe that supply and demand are not the basis for this run-up. Instead, I believe speculation and market manipulation are too blame. Notice that when a couple of investment bank’s analysts make predictions of what might happen to other companies those companies shares plummet, even in the face of evidence to suggest that the predictions are wrong? How about investment house analysts who are making predictions on each other’s profit and loss? I think much of what we are seeing is market manipulation reminiscent of many similar markets dating as far back as London in the 1700s. Read Robb’s book on the history of white-collar crime in England for a better understanding of this statement and idea.
— Posted by Larry
June 26th,20085:42 pm
For us simple minded folk out here.How come nobody dare say the word nuclear?So many other countries are and have beensupplyingthe power at an affordable price per kilowatt.If they had any problem, we would pay too from thefallout.And it has been 40 years of more advancedtech information to more than make me safe withmultiple backup computer systems to avoidfailures.I would not protest them in my neighborhood whenthe risk is already here on the planet.Electric cars would be a given.Clean water and clean air? What a concept!Jodie
— Posted by Jodie
June 26th,20085:42 pm
If you have investments in oil get out now. The market has to fall and fall hard. There is a surplus of oil in the market, not a shortage as some would have you believe. This could be the biggest fall in prices ever. The real price should be somewhere near 40 not 140.
How do I know this? I am directly involved in wholesale fuel oil, there is an abundant supply.
— Posted by oil man
June 26th,20085:47 pm
Not a chance this view is correct. Total global oil supplies are decreasing every day. The cost of recovering the amount that remains is very high and increasing by the day. This modern world can not possibly function without huge energy use. World stock markets have little to nothing to do with Chinese or Indian main street. Sheer population numbers means energy consumption and demand for basic survival goods will continue to sky rocket.
The real story here is that Wall Street for the most part is built on hot air. It knows little about which it pontificates. The real action is that stocks are being dumped while the money pours into oil or safer places.
RobertWashington, DC
— Posted by Robert
June 26th,20085:57 pm
Oil shares are quietly pricing in the pandering next congress hell bent on a “windfall profits tax” which will show their constituents that they are “doing something” even if it is totally counterproductive. No matter that the national oil companies of countries we have worked hard to alienate will be gaining power and market share.
— Posted by Kirk Cornwell
June 26th,20085:57 pm
Bill P Posting 3
Enron owned or operated 38 power plants in the US and internationally. The US capacity was about 2500 MW and did not register as a big part of their business.
All those who are sold on the idea of supply-demand and efficient markets, should revisit other hypes, electricity trading, .com, housing, Wheat, etc.
Oil Man posting #32 is on target….
— Posted by Hassan Azarm
June 26th,20086:02 pm
Contrary to what US Energy Secretary Samuel Bodman says I don’t think supply and demand are really causing the problem. There are to many other factors at play here. Too many middle men skimming profits. Too much manipulation of supplies and inventories. The price of oil nearly doubled and gas went up a third in just one year and yet figures are coming out that indicate we are using less gas, not more, probably because people are cutting back on gas. That clearly means supply and demand have nothing to do with these prices. Speculation is driving prices !!! Lawmakers blame loopholes in commodities trading like the Swaps loophole or Enron Loophole. Whatever you want to call it, It’s a get rich quick scheme and not much less obvious than a pyramid scheme. There is no way supply is causing this gas crisis. I put the full blame on speculators and commodities traders and I am sick of the smoke and mirrors. The meeting in Saudi Arabia hasn’t achieved any substantial results from what I can see. The price of oil is still going up. There must be something else that’s driving prices up and I think I know what it is. Although il appears to be a good hedge against inflation, a lower dollar and a low oil supply, in reality nothing could be farther from the truth. The main thing driving inflation is oil prices and as inflation goes higher investors buy more oil driving inflation higher again. Some experts predict this will trigger the worldwide recession. This will result in lower gas consumption and it will free up more gas supplies.. I am no expert but even I can see the writing on the wall. Investors are going to loose their shirts on oil. We may be looking at another ENRON. Hedge funds will topple leaving old age pensioners with nothing. The government won’t be able to bail them out this time because the cost would be far to great. The CFTC and ICE will be too slow to react to the cracks forming in commodities trading so the govenment will finally step in. By that time it will probably be too late.
— Posted by Ted
June 26th,20086:29 pm
In other words-It’s a BUBBLE!
— Posted by Paula
June 26th,20086:46 pm
With nothing to show for my trouble except being left alone to enjoy dead silence, I have told my Republican representative, the Department of Justice, and anyone in this corrupt government that would listen to me since 2002 that Internet based commodity auction (energy trading) markets are entirely corruptible and given the money involved almost certainly so. The issue is that the Internet was never built to run auctions — so they have an unintended Achilles heal. The problem is that computers used by bidders to these online auction markets set their time by making unencrypted port 13 calls to time servers in order to set their time, and since these calls use frames of unencrypted plain text these frames can be nefariously intercepted and manipulated in transit between the bidding computer and the time server. The net effect is that it is possible to manipulate the clock settings on either the computer running the auction or on the computers of the bidders. A nefarious 100 mille second time shift (one tenth of a second) on a 4 meg connection is enough to push a thousand bids by one market participant in or out of an auction time window, but insufficient to not be attributed to excess traffic on the Internet slowing things down and resulting in a slightly off clock setting. Consider the genius of this scam — without ever touching the communication between a bidder and the auction system (which might be monitored) you can affect the outcome of the bidding process by affecting an entirely different communication which isn’t monitored between the bidder and a time server. You pick your winners and losers and thus affect prices over time by altering their time windows to make them individually either bigger winners or bigger losers. This is a crime which cannot be detected or punished, but it will leave consumers punished at the pump — so at least someone gets punished . Bravo !
— Posted by Ivan

There's Something Out There

And CNBC isn't telling us. Cramer will only hint at it, but cannot recommend short sales, nor does he want to cause a crash.

My guess: some foreign bank. Some huge foreign bank.

Do I have any information? No.

The fed left itself some gunpowder yesterday by doing nothing, but not much (firepower). It's now pretty much up to the world. Can all the countries work together? So far I believe they have.

Are We Going Back to the Procter Carry Trade?

Selling the market short; buying P&G.

Perhaps. P&G is hardly down.

Back last August when the market collapsed, P&G was up and every day this worked.

Other factors with P&G:

fiscal year is coming to a close;

if dollar rises considerably, P&G's earnings go down.

Why I Was Too Busy -- Chaucer

In the Prologue to the Canterbury Tales, Chaucer (speaking as a pilgrim) makes all of the following observations about The Sergeant-at-Law (i. e. The attorney):
He is very well-dressed, in brocades, silks, and satins.
He is very well versed in legal precedent, able to cite case law all the way back to William the Conqueror..
He is very busy.
And last, the zinger, cloaked as an arch observation:
“And yet, he seemed busier than he was.”
The art of seeming busier than one is is still practiced by well-dressed professionals today, especially by Americans following the advice of Benjamin Franklin to do just that.
Christine Bird

More of Fonts and "Painting With Print"


Published: June 26, 2008
WHEN Spike Gjerde started to build a new restaurant in an old mill in Baltimore, he did not want a slick menu with crisp, perfect letters. “We’re all totally about salvage and reuse,” he said. The menu had to reflect the restaurant’s goal: presenting local ingredients in a rough-hewn complex that once cast the 36-inch-wide columns that support the dome of the United States Capitol.

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So he turned to Mary Mashburn, a designer with an office filled with old type just a few blocks away. Ms. Mashburn set the restaurant’s name, Woodberry Kitchen, with scratched and nicked wooden type from her collection of antique block types and then printed a copy on her old letterpress. She then scanned the result into her computer, where she tweaked a few letters and adjusted some spacing. A new version of an old font was born.

“The fact that the letters were distressed, it was real,” Mr. Gjerde said.

Before the personal computer, most people were oblivious to fonts. Some may have recognized Courier and Elite on the I.B.M. Selectric typewriter ball. Then word processing programs offered a hundred or more fonts, from Arial to Wingdings. More were offered in software packages and on the Internet. Now, many people can recognize fonts by name. Indeed, a documentary about typography and one of the most familiar typefaces, “Helvetica,” played to sellout crowds at film festivals.

People like Mr. Gjerde are realizing that the thousands of fonts available on the Internet are not enough anymore. They can build custom fonts in which the letters are not perfect duplicates of one another. They can mix in other fonts and produce something that is uniquely suited for the job.

Good commercial and free programs make the job easier for a wide range of users. Some people with degenerating handwriting are freezing their script in a font. Scrapbookers are casting their lettering into a font so they can have a personal look. Battle re-enactors are even printing out orders in historically accurate typefaces.

Gene Buban, a DVD producer in the San Francisco Bay area, wanted an urban flavor for a hip-hop music video compilation, so he turned to, a font design and sharing Web site that is a combination of a drawing program and a social network.

FontStruct runs in a Web browser and builds fonts out of blocks, dots and other elements. Letters are edited on a checkerboard grid by adding or subtracting the marks from boxes. When all the letters are finished, the site will build a TrueType font file that can be downloaded and used on a Mac or PC.

Many designers also share their creations and display them on other social networks. The site lets users choose from among six licensing options, which range from locking out others from using the font to encouraging people to borrow as much as necessary.

While the dot-matrix-like grid rules out some of the curvy, swooping styles evoking calligraphy, Mr. Buban embraced the limitations to create Brickd, a design filled with letters that run together to build a brick wall. Another of his designs, Weaver, echoes the woven patterns of some Celtic illuminated manuscripts. Mr. Buban says that he spends so much time on the site that he wants to start a group for font addicts he calls “FontStructors Anonymous.”

Charles Andermack, a font designer who works under the nom de lettres Chank Diesel, likes to brag that one of his custom fonts has been sitting at the top of the New York Times best-seller list. He created Truck King, the font used to typeset “Jon Scieszka’s Trucktown Smash! Crash!” an illustrated book about trucks. Mr. Andermack’s design firm, Chank Fonts (, builds custom fonts for advertisers, book designers or corporations looking to capture a special look or style.

While Mr. Andermack’s fees can run into the tens of thousands of dollars for full families of fonts with all the diacritical marks and permutations, he can turn anyone’s handwriting into a font for $200. These custom fonts, also available from other sites like, are popular not only with scrapbookers but also with professionals like real estate agents who want to add a personal touch to their letters.

Mr. Andermack asks clients to copy a collection of words in their handwriting, then scans the letters into his computer and produces a font. The only catch is that Mr. Andermack keeps the rights to resell the font to others. He publishes a collection of distinctive handwriting fonts to ad directors who want to capture a particular style or era. Your handwriting could end up in the next bundle. Exclusive rights cost more.

VLetter sells a collection of historical fonts built by scanning the Declaration of Independence and the letters of John Adams and George Washington — something that might be handy if your idea of the pursuit of happiness is to send memos that look like a broadside fired at a monarchy.

Software developers are creating tools that simplify font design. Erwin Denissen, the founder of High-Logic ( just released a tool called Scanahand that will let the user produce fonts from handwriting samples. The basic version is $79; the professional version, which includes more advanced tools for tasks like editing the contours, is $149.

Many professionals use a variety of programs from developers like FontLab (, a company that makes font tools that range from $99 to more than $1,000.

There is also some free software. FontForge, ( open-source software that permits editing of font files.

Andrew Leman, a font developer from Los Angeles, often builds modern versions that preserve and update some old typefaces. He created a font for World War II re-enactors.

“Many of the people who eventually find me are looking for some vintage documents,” he said.

The price for his work varies widely and depends on the rights and the scope of the project. “If they’re not going to use the letter q, then you can skip it,” he said of some projects for restaurants and logos.

He also works for the movie studios, producing realistic props. One of his display fonts appears on the cover of a textbook in “Harry Potter and the Order of the Phoenix.”

Mr. Leman’s Web site also offers fonts like Cablegram, a monospaced font that duplicates the Western Union telegrams from the 1920s, and Satisfaction, a popular retro-script font that, he jokes, pays his rent each month.

How useful are any of these do-it-yourself fonts? Graphic designers have an answer. Old typefaces offer almost subliminal cues for the brain that help construct an aura of reality around a document. “The goal is not to make the font, it’s to make a replica of the vintage newspaper,” Mr. Leman said.

Fonts can shape reality in intangible ways, as Phil Renaud, a graphic designer from Phoenix, discovered when he studied the relationship between his grades and the fonts he used for his college papers. Papers set in Georgia, a less common font with serifs, generally received A’s while those rendered in Times Roman averaged B’s.

While he acknowledges that his study was very unscientific, he wanted to remind all high school graduates heading for college that an element of surprise is important. “You don’t want to fall into the same pattern that the professor sees on every new paper,” he said.

Ah Enron! This Time Graham of Texas and Commodities Speculation

New York Times Blog:

June 25, 2008, 6:43 pm
The Petro-Manipulators
Anyone who lived on the West Coast during the phony energy crisis of 2000 and 2001 cannot help thinking of Texas and two of its worst products — Enron and a politician not named George Bush — as gas creeps up toward $5 a gallon this summer.
What happened during the great energy heist at the start of the new century was like an extended bad dream, part “Twilight Zone” and part “Chinatown,” the extraordinary 1974 film about water manipulation and long-buried secrets.
The price of energy spiked — tenfold, a hundredfold — despite low demand. Californians became the most efficient users of power in the nation, and still suffered through dozens of rolling blackouts. None of it added up.
And into the worst energy crisis since the Arab oil embargo of 1973 came Vice President Dick Cheney, blasting conservation as a sissy virtue and saying the nation needed to build a new power plant every week for the next 20 years.
The administration’s neglect was breathtaking, a harbinger of what was to come when a natural disaster, Hurricane Katrina, would do to Louisiana what a man-made disaster had done to California. We now know, of course, that the problem eight years ago was caused by manipulation by Enron and other speculators who gamed a faulty system, sticking it to Grandma Millie while laughing at how easy it was to rob 40 million people.
Now consider the present dilemma: oil doubling over the last year, gas at $4.50 a gallon in places and the oversized influence of speculators in a market where few used to tread. Big investors are free to run up oil futures contracts thanks in part to former Senator Phil Gramm. He is the Texas Republican who co-sponsored the so-called Enron loophole in 2000 at the behest of what was later found to be one of the nation’s biggest criminal enterprises.
Enron may be gone, but its legacy lingers in the work done by politicians who did its bidding. And Gramm, who once told corporate contributors, “I have the most reliable friend you can have in American politics, and that’s ready money,” is now the chief economic adviser to Senator John McCain.
Gramm’s role in helping to unleash energy speculators has been well-documented in recent months, and Senator Barack Obama has made an issue of it. Both Obama and McCain have called for closing the loophole. But just how big a role that kind of global gambling plays in the overheated commodities market is only now coming to light.
Testifying before the Senate on Wednesday, the ever-knowledgeable Daniel Yergin blamed speculation for part of the run-up. Yergin, an author and the chairman of Cambridge Energy Research Associates, and pointed to numerous other causes, as have other experts.
But he also noted that 2007 may have been the peak year for oil demand in the United States. In other words, the world’s largest energy consumer has reached the height of its gluttony, and will be using less oil from here on out.
Keep that in mind when thinking of the parallel to California. Less demand from the biggest consumer, yet record high prices. Why? Yes, tight supply during the end stages of the 200-year reign of fossil fuels, higher use by China and India, and global troubles all contribute to the bloat of oil prices.
But market manipulation seems obvious.
Over the last five years, investment in index funds tied to commodities like energy and food has gone from $13 billion to $260 billion. At the same time, the prices of those commodities have risen 200 percent.
Take away the excess speculators who are in the market purely for the ride, and oil prices could drop by half. That’s the view of Michael W. Masters, a hedge fund manager who’s been advising Congress this year.
“There are no lines at the gas pumps and there is plenty of food on the shelves,” said Masters, whose testimony has been widely discussed in financial circles but rarely in the political realm. What has changed, he said, is the presence of big speculators making futures bets.
“If Wall Street concocted a scheme whereby investors bought large amounts of pharmaceutical drugs and medical devices in order to profit from the resulting increase in price, making these essential items unaffordable to sick and dying people, society would be justly outraged,” he said.
This testimony came before a committee chaired by Senator Joseph Lieberman, the former Democratic vice presidential candidate who is now one of John McCain’s biggest boosters. If you want to see the effects of McCain’s top financial adviser, look no further than the hearing run by McCain’s top ally in the Senate.
With five months to go, it looks like energy will dominate the presidential campaign. Nutty ideas will abound, from the gas tax holiday to $300 million prizes for wonder batteries.
And just as in California eight years ago, the oil industry’s most devoted politicians will use this troubled time to advance a tired agenda – more drilling for the last of the nation’s oil, in distant, fragile corners of the earth.
If nothing else, we should remember the lesson from that debacle: When something smells this bad, look for rotten fish as well.
Comments (2) E-mail this Share Digg Facebook Newsvine Permalink 2 comments so far...
1.June 25th,
10:01 pm I agree with the conclusion of this article, but disagree with how it gets there. I have been following fellow NY times columnist Paul Krugman’s ideas on speculation and have to say that I am not buying into the speculation theory of rising gas prices. It just doesn’t logically make sense when looking at the math. Read Krugman’s blog, he has a lot of entries on this topic and they are backed up by multiple sources.
However, I think there are some rotten fish out there that need to be sussed out. Maybe we should stop subsidizing the oil companies quite so much. Maybe we should stop burning gas quite so much.

I currently live in thailand where gas costs around $5.25 a gallon and where the average college graduate makes around $300 a month. People here are living just fine. They drive motorcycles instead of cars, and when they do drive cars, they make sure they are filled up with people (sometimes too many- I’ve seen pick up trucks with 30 people in the back). America will just need to adjust to what the rest of the world already knows: Energy is expensive. Use it wisely.

— Posted by Marshall Balick
2.June 25th,
10:04 pm Yes, Enron gamed the power market in California. It was pretty easy because the market was semi-controlled. There were not sufficient mechanisms for high prices to cause demand destruction. Oil, on the other hand, trades pretty much in a free market. And we should be thankful. Today’s high prices are a better reflection of the true cost and value of oil. I hope prices keep going up. Maybe then people will think twice before buying a two-ton land yacht they don’t need. Gasoline demand is down a little bit in the U.S. this year. Isn’t that a good thing? Or should our government try artificially lower oil prices to encourage increased demand and use? To do so would be papering over the fact that demand is exceeding supply. Here are some more facts. Speculative length in the oil market has been decreasing and prices are going up. That’s right. The speculators have been selling and price is rising. And, inventories of oil in the U.S. (as reported weekly by the Department of Energy) are falling. It’s not the speculators causing inventories to fall. So any clown in front of congress who says “remove speculation and the price of oil will fall to $75/barrel” is both wrong in the short run, and promoting bad policy. Does anyone remember how we beat the Russians? We went with a free-market economy, and it worked. Their government tried a price-controlled economy, and it collapsed under it’s own weight. Now, as a country, which direction do we want to go?

— Posted by MWB

Wednesday, June 25, 2008

One -- Particularly Bear Stearns -- Does Not Mislead a Bank

That's against federal law. Remember the Cincinnati Banker from a prominent family who borrowed from a bank and lied about his net worth? He went to jail in a clean case.

We can see the derivatives world using this approach, even if it involves German banks, apparantly.

The article just this afternoon:

Published: June 25, 2008
Filed at 5:22 p.m. ET

Skip to next paragraph NEW YORK (Reuters) - Prosecutors are looking into whether two former Bear Stearns hedge fund managers, who were indicted last week on conspiracy and securities fraud charges for misleading investors, also broke the law in their dealings with banks, BusinessWeek reported on Wednesday.

Investigators are gathering evidence about possibly misleading comments that Ralph Cioffi and Matthew Tannin made to major lending and trading partners, BusinessWeek reported in its online edition, citing people close to the probe.

The report named Bank of America , Barclays , Dresdner Bank and Merrill Lynch & Co as having dealings with the pair that have attracted the attention of investigators.

Cioffi and Tannin pleaded not guilty after being charged last week for touting the financial health of two large hedge funds they oversaw to investors even as they knew the funds were about to collapse. The collapse helped kick off the widespread credit and sub-prime mortgage crises.

Prosecutors are focusing on a $4 billion collateralized debt obligation that the pair got Bank of America to guarantee and sell in the spring of 2007 when the market for risky mortgage-backed securities teetered on the brink of collapse, the report said.

The current indictment alleges that Tannin lied to a bank lender by understating the number of investors who wanted to pull their money out of the funds in May 2007, shortly before the collapse.

That lender was Germany's Dresdner Bank, BusinessWeek reported, citing people familiar with the matter.

The prosecution team is also talking to Merrill, another big lender to the Bear funds, the report said.

Allegations in a civil lawsuit filed by the U.S. Securities & Exchange Commission against Cioffi and Tannin also could point to additional criminal charges, the report said.

The SEC claims that the ex-Bear executives persuaded Barclays to sink an additional $100 million into one of the ailing funds in February 2007. That suit contends that the hedge fund managers provided the British bank with false performance figures for the portfolios.

Barclays, in a lawsuit it filed against Cioffi and Tannin in December, said it was the victim of "a series of misrepresentations," BusinessWeek reported.

Andy Merrill, spokesman for Cioffi and Tannin, declined to comment to BusinessWeek and could not immediately be reached by Reuters for comment.

The U.S. Attorney's office in Brooklyn, where the criminal case was filed, declined to comment on the BusinessWeek report.

(Reporting by Bill Berkrot, editing by Richard Chang)

Gas Costs and Suburbia -- Denver

ELIZABETH, Colo. — Suddenly, the economics of American suburban life are under assault as skyrocketing energy prices inflate the costs of reaching, heating and cooling homes on the distant edges of metropolitan areas.

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Just off Singing Hills Road, in one of hundreds of two-story homes dotting a former cattle ranch beyond the southern fringes of Denver, Phil Boyle and his family openly wonder if they will have to move close to town to get some relief.

They still revel in the space and quiet that has drawn a steady exodus from American cities toward places like this for more than half a century. Their living room ceiling soars two stories high. A swing-set sways in the breeze in their backyard. Their wrap-around porch looks out over the flat scrub of the high plains to the snow-capped peaks of the Rocky Mountains.

But life on the edges of suburbia is beginning to feel untenable. Mr. Boyle and his wife must drive nearly an hour to their jobs in the high-tech corridor of southern Denver. With gasoline at more than $4 a gallon, Mr. Boyle recently paid $121 to fill his pickup truck with diesel fuel. In March, the last time he filled his propane tank to heat his spacious house, he paid $566, more than twice the price of 5 years ago.

Though Mr. Boyle finds city life unappealing, it is now up for reconsideration.

“Living closer in, in a smaller space, where you don’t have that commute,” he said. “It’s definitely something we talk about. Before it was ‘we spend too much time driving.’ Now, it’s ‘we spend too much time and money driving.’ ”

Across the nation, the realization is taking hold that rising energy prices are less a momentary blip than a change with lasting consequences. The shift to costlier fuel is threatening to slow the decades-old migration away from cities, while exacerbating the housing downturn by diminishing the appeal of larger homes set far from urban jobs.

In Atlanta, Philadelphia, San Francisco and Minneapolis, homes beyond the urban core have been falling in value faster than those within, according to an analysis by Moody’s

In Denver, housing prices in the urban core rose steadily from 2003 until late last year compared with previous years, before dipping nearly 5 percent in the last three months of last year, according to But house prices in the suburbs began falling earlier, in the middle of 2006, and then accelerated, dropping by 7 percent during the last three months of the year from a year earlier.

Many factors have propelled the unraveling of American real estate, from the mortgage crisis to a staggering excess of home construction, making it hard to pinpoint the impact of any single force. But economists and real estate agents are growing convinced that the rising cost of energy is now a primary factor pushing home prices down in the suburbs, particularly in the outer rings.

More than three-fourths of prospective home buyers are now more inclined to live in an urban area because of fuel prices, according to a recent survey of 903 real estate agents with Coldwell Banker, the national brokerage firm.

Some now proclaim the unfolding demise of suburbia.

“Many low-density suburbs and McMansion subdivisions, including some that are lovely and affluent today, may become what inner cities became in the 1960s and ’70s — slums characterized by poverty, crime and decay,” declared Christopher B. Leinberger, an urban land use expert, in a recent essay in The Atlantic Monthly.

Most experts do not share such apocalyptic visions, seeing instead a gradual reordering.

“It’s like an ebbing of this suburban tide,” said Joe Cortright, an economist at the consulting group Impresa Inc. in Portland, Ore. “There’s going to be this kind of reversal of desirability. Typically, Americans have felt the periphery was most desirable, and now there’s going to be a reversion to the center.”

In a recent study, Mr. Cortright found that house prices in the urban centers of Chicago, Los Angeles, Pittsburgh, Portland and Tampa have fared significantly better than those in the suburbs. So-called exurbs — communities sprouting on the distant edges of metropolitan areas — have suffered worst of all, Mr. Cortright found.

Basic household arithmetic appears to be furthering the trend: In 2003, the average suburban household spent $1,422 a year on gasoline, according to the Bureau of Labor Statistics. By April of this year — when gas prices were about $3.60 a gallon— the same household was spending $3,196 a year, more than doubling consumption in dollar terms in less than five years.

In March, Americans drove 11 billion fewer miles on public roads than in the same month the previous year, a 4.3 percent decrease — the sharpest one-month drop since the Federal Highway Administration began keeping records in 1942.

Long before the recent spike in the price of energy, environmentalists decried suburban sprawl a waste of land, energy and tax dollars. Governments from Virginia to California have in recent decades lavished resources on building roads and schools for new subdivisions in the outer rings of development while skimping on maintaining facilities closer in. Many governments now focus on reviving their downtowns.

In Denver — a classic Western city, with snarling freeway traffic across a vast acreage of strip malls, ranch houses and office parks — the city has had an urban renaissance over the last decade.

A $6.1 billion commuter rail system has been in the works over the last four years, drawing people downtown without cars, while stimulating swift sales of densely clustered condos near stations.

Coors Field, the intimate, brick-fronted baseball stadium for the Colorado Rockies, has transformed the surrounding area from a desolate skid row into fashionable Lower Downtown, a neighborhood of restaurants and microbreweries in restored warehouses. Along the Platte River, new condos set on a park strip offer an arresting tableau of glass, steel, and futuristic geometry, attracting throngs of buyers at rising prices.

“This is a city where it’s fun to be in the center,” said Tim Burleigh, 56, who sold his house in the suburbs and now walks to Rockies games from his downtown condo.

To Denver’s mayor, John W. Hickenlooper, $4 gasoline offers a useful incentive for such plans.

“It can be an accelerator,” he said during an interview inside the imposing column-fronted City Hall. “It’s not going to be the dagger in the heart of suburban sprawl, but there’s a certain inclination, a certain momentum back toward downtown.”

Dollars spent at the gas station leave fewer for mortgage payments. Mark Zandi, chief economist at Moody’s, calculated that the jump in gas prices from $2 a gallon to $4 has taken $50 a month from the typical suburban commuter driving 25 miles a day.

“The fuel price change should be capitalized into the cost of houses,” Mr. Zandi said. “Prices in the outer suburbs will get clobbered.”

Elizabeth is the archetype of a once-rural community sucked into the orbit of the expanding metropolis, its ranch lands given over to porches, picket fences and two-car garages.

Megan Werner, 39, a mother of three, moved here five years ago from a dense suburb closer to Denver. She and her husband bought a home set on a 1.5-acre lot in the Deer Creek Farm subdivision. The space justified her husband’s 40-minute commute.

“We wanted more than a postage stamp,” she said, as her 5-year-old daughter walked barefoot across the driveway.

It used to cost her about $30 to fill her Honda minivan with gas. Now, it is more like $50, and she coordinates her trips — shopping in town, combined with dance lessons for her children. But she has no thoughts of leaving.

“I can open up my door and my kids can play,” Ms. Werner said.

For others, though, new math is altering the choice of where to live. Houses are sitting on the market longer than in years past. “The pool of buyers is diminishing,” said Jace Glick, an agent with Re/Max Alliance in Parker, Colo., next to Elizabeth.

Juanita Johnson and her husband, both retired Denver schoolteachers, moved here last August, after three decades in the city and a few years in the mountains. They bought a four-bedroom house for $415,000.

Last winter, they spent $3,000 on propane for heat, she said. Suddenly, this seemed like a place to flee. “We’d sell if we could, but we’d lose our shirt,” Ms. Johnson said. Recently she counted 15 sale signs. One home nearby is listed below $400,000.

“I was so glad to get out of the city, the pollution the traffic, the crime,” she said. Now, the suburbs seem mean. “I wouldn’t do this again.”

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