Monday, May 31, 2010

12 Angry Men

(c) 2010 F. Bruce Abel

Juror No. 11 -- that's me.

Local News - Sayre, PA - The Morning Times - Experiencing the natural gas boom
House committee holds Marcellus Shale hearing Thursday, tours area todaytext describing the image

Local News - Sayre, PA - The Morning Times - Experiencing the natural gas boom<br />House committee holds Marcellus Shale hearing Thursday, tours area today<IMG SRC="http://adsys.townnews.com/storage/1/6/169317.gif?1233756682" WIDTH="25" HEIGHT="25" BORDER="0" ALT="text describing the image">: "ULSTER — Members of the Pennsylvania House Republican Policy Committee today are getting a hands-on experience with Bradford County’s thriving natural gas industry as they look toward potential future legislative decisions regarding the Marcellus Shale region."


A Spill Afar: Should It Matter? - Green Blog - NYTimes.com

A Spill Afar: Should It Matter? - Green Blog - NYTimes.com: "Gas tax now! Followed with an equal amount of tax reduction at the Federal level is the only answer. Americans pay some of the lowest prices for gas in the world, sometimes less than half what Europe and Japan often pays. There is no mystery why SUV's are only sold here and no other country in the world."


Don’t Fall for This Fund Industry Trick - CBS MoneyWatch.com

Don’t Fall for This Fund Industry Trick - CBS MoneyWatch.com: "So how do they plan to accomplish this? By hiring more analysts? Shuffling their managers? Futile as those efforts might ultimately prove, they might be what an owner of Wells Fargo funds might expect. But no, that’s not the strategy Wells Fargo is adopting. Rather, the method they’re using is quite simple and effective: they’re killing off their underperforming funds."


The Pain Caucus - Readers' Comments - NYTimes.com

The Pain Caucus - Readers' Comments - NYTimes.com: "At this point in our history I would have thought that conventional wisdom would have been thoroughly discredited. For starters, conventional wisdom got the US into the biggest foreign (and perhaps fiscal) policy disaster in its history in Iraq. Conventional wisdom says we should continue to double down on the tragic quagmire in Afghanistan. Conventional wisdom was convinced that there was no housing bubble. Conventional wisdom told us the Great Moderation brought an end to volatility in financial markets. Not a very good track record of late for old conventional wisdom."


Mayoral Election Helps Georgian President - NYTimes.com

Mayoral Election Helps Georgian President - NYTimes.com: "With 95 percent of precincts tallied on Monday evening, Tbilisi’s incumbent mayor, Gigi Ugulava, a close ally of the president’s, had won about 55 percent of the vote. One of Mr. Saakashvili’s prominent critics, Irakli Alasania, trailed with around 20 percent, according to the Central Election Commission."


At Least 10 Killed as Israel Intercepts Aid Flotilla - NYTimes.com

At Least 10 Killed as Israel Intercepts Aid Flotilla - NYTimes.com: "Thousands of protesters gathered in Istanbul’s busy Taksim Square, chanting anti-Israeli slogans and repeating Islamic verses while government officials called for calm and urged demonstrators to avoid retaliation against Israeli nationals."


ETFs and the Flash Crash - CBS MoneyWatch.com

ETFs and the Flash Crash - CBS MoneyWatch.com: "Ironically, the allure of ETFs has always been their liquidity. (Indeed, the fact that investors can buy and sell them throughout the day is really the only point of differentiation between an ETF and a traditional index mutual fund.) But that liquidity ended up costing quite a few investors dearly. IndexUniverse.com for example, noted that hundreds of trades of the Rydex S&P Equal Weight ETF were made at prices between $10 and $30 per share, far below its $41.25 closing price. (Quite obviously, half of the people involved in those trades were very pleased. The other half paid dearly for the market’s glitch.)"


Move To Asia And Teach Your Children Chinese

Move To Asia And Teach Your Children Chinese


yes, we have healed: why bill ackman is bullish on america ... and citigroup: Tech Ticker, Yahoo! Finance

yes, we have healed: why bill ackman is bullish on america ... and citigroup: Tech Ticker, Yahoo! Finance: "Truth will out - Friday May 28, 2010 01:26PM EDTThree days ago, Yahoo and Aaron Dick was parading the naysayers who were predicting the collapse of the market. Past two days, they are bringing on these idiots who can see nothing but the rainbow. This is all a scheme to fool the retail investors, confuse them, and wrench the money out of their hold. All this time, Bill Ackerman and his hedgie buddies, are running computerised systems that pick out any trends in any areas of the market, and then use their vast amount of money to trade against it. This is how they wrench the money out of the middle-class retail investor, who does not have the resources,or the finances to beat these scheming bastards. Yahoo finance, CNBC and the SEC are all in this scheme
report"


yes, we have healed: why bill ackman is bullish on america ... and citigroup: Tech Ticker, Yahoo! Finance

(c) 2010 F. Bruce Abel

An interview with Bill Ackman, a name I have blogged on in late 2008. Read the interview then look as my prior blog. Ackman is consistent, I believe.


yes, we have healed: why bill ackman is bullish on america ... and citigroup: Tech Ticker, Yahoo! Finance: "Of course he is bullish on America. What does he really have to ever worry about? He's set for life. This puke probably has never had to worry about money his whole life, and certainly never will need to. As a hedge fund manager in by far the world's most deregulated economy, he operates in the world's biggest playground for the rich. He can fund more deregulation,he can fund job and industry outsourcing, he can fund taxpayer backed casino gambling, he can fund cowboy oil drilling and coal mining companies, he can fund collusion with authoritarian governments, and take the earnings from this unethical thievery and not only buy more politicians, he can send his blood profits offshore to weasel out of taxes to boot. Things are indeed rosy for him! Things have rarely never been better for a hedge fund manager! We need to see guys like this hanging from trees."


Editorial - Questions About the Gulf - NYTimes.com

Editorial - Questions About the Gulf - NYTimes.com: "One outside-the-box question that looms large is whether the federal government should now develop its own capacity to deal with a huge blowout. As things stand now, industry has all the equipment and experience. In an interim report to the president on Thursday, Mr. Salazar suggested the creation of a kind of parallel technological universe in which government would have the robots, the coffer dams and the other tools necessary to help control a big blowout."


Op-Ed Columnist - The Pain Caucus - NYTimes.com

Op-Ed Columnist - The Pain Caucus - NYTimes.com: "Now, however, demands that governments switch from supporting their economies to punishing them have been proliferating in op-eds, speeches and reports from international organizations. Indeed, the idea that what depressed economies really need is even more suffering seems to be the new conventional wisdom, which John Kenneth Galbraith famously defined as “the ideas which are esteemed at any time for their acceptability.”"


Fears Rise in Europe Over Potential for Deflation - NYTimes.com

Fears Rise in Europe Over Potential for Deflation - NYTimes.com: "The problem was that, to buy the bonds, the bank had to expand the assets it held on its books. So to prove that it had not stooped to printing money, the bank promised to offset the bond purchases, which totaled 26.5 billion euros ($32.6 billion as of May 24, the most recent data available), by taking in a like amount in short-term deposits from banks. In effect, it siphoned off as much liquidity as it had added."


Sunday, May 30, 2010

After ‘Top Kill,’ Few Options to Cap Well - Dot Earth Blog - NYTimes.com

After ‘Top Kill,’ Few Options to Cap Well - Dot Earth Blog - NYTimes.com: "BP should never have been allowed to drill without having workable worst-case backup solutions at hand. In other countries a relief well is a required element, to be drilled at the same time as the well intended for production; a device for worst-case blowouts, costing an additional half-million is also SOP. That BP, for economic reasons did not do so, after claiming an environmental impact report was unnecessary as the probabilities of a spill was infinitely small amounts to criminality. The assets of BP should be seized, the top BP officers should be charged and imprisoned and held on bail for the full value of BP. And all other oil industry wells should immediately have to comply with existing laws, and the Congress should change the laws to implement worst-case solutions-at-hand or a well cannot be drilled."


That Stupid CNBC

(c) 2010 F. Bruce Abel

One video is worth a 1000 words. Carl Quintanilla will never live this down.

http://video.uk.msn.com/watch/video/billionaire-summit-allen-stanford/3xnxjxjb

The Seven Year Itch (1955) - Synopsis

The Seven Year Itch (1955) - Synopsis: "After sending his wife and son to Maine to escape the sweltering summer heat of New York City, 38-year old Richard Sherman meets a 22-year-old blonde television commercial spokesmodel, who is renting the apartment directly above him. Despite recent paranoia about becoming unfaithful (he is reading a book his company is going to publish about a '7-Year Itch'; which claims a significant proportion of men have extra-marital affairs after seven years of marriage) Richard invites the girl for a drink after she accidetnly knocks over a tomato plant from the balcony above and almost hits him. He fantasizes in hilarious scenes of himself seducing the woman as well as thinking about his wife having an affair on her retreat with their neighbor."


Oh Oh My First Casualty: Flynn’s Oil Company, Exeter New Hampshire, News Releases - NHDOJ

Flynn’s Oil Company, Exeter New Hampshire, News Releases - NHDOJ: "Flynn’s Oil Company sells home heating oil to consumers. The State’s Petition for Injunctive Relief alleges that Flynn’s has entered into prebuy contracts for the purchase and delivery of home heating oil, but has failed to comply with RSA 339:79. RSA 339:79 requires an oil company which sells oil and requires prepayment by the consumer to include in its contact &rlquo;a clear explanation of the means by which the dealer will meet the obligations of the contract for the entire contract period, including supplier agreements, futures contracts, bonding, or a line of credit.”"


Our Fix-It Faith and the Oil Spill - NYTimes.com

Our Fix-It Faith and the Oil Spill - NYTimes.com: "As BP struggled last week to stanch the flow of spewing oil at the Deepwater Horizon rig, it has become clear that the pressure to dig deeper and faster from what Mr. Eyton then called a “frontier province” of oil exploration has in some ways outpaced the knowledge about how to do that safely. (And there is still the question of whether BP used all the tools and safety mechanisms available.)"


Cottage Life - June 2010 issue of Cottage Life

(c) 2010 F. Bruce Abel

This is not an ad. I know these people, I am proud to say. Eunie and I produced Becca. We love you guys (of course)!


Cottage Life - June 2010 issue of Cottage Life: "THE LIFE AQUATIC
By Martin Zibauer
This live-in boathouse started out as a wrong number, but ended up an architectural marvel on Georgian Bay."


Saturday, May 29, 2010

The Man Himself Writes!

(c) 2010 F. Bruce Abel

Michael Lewis.

http://www.nytimes.com/2010/05/30/opinion/30lewis.html?pagewanted=all

Price To Compare Calculator - Ohio Customer Choice-Duke Energy

Price To Compare Calculator - Ohio Customer Choice-Duke Energy: "To calculate your individualized price to compare, please enter your most recent 12 months of electric usage in kWh values in the spaces provided and select 'Calculate'. Your 12 months usage data appears at the bottom of your Duke Energy electric bill. The result is the price that a supplier must beat (in cents per kWh ) for you to realize savings. Your price to compare is based on the energy usage that you provided and may change quarterly. If you are a residential customer and are billed on a rate other than Rate RS, please call us to obtain your price to compare.
12 months kWh"


Commentary: How P&G Plunge Derailed One Investor | Wall Street vs Main Street | Financial Articles & Investing News | TheStreet.com

Commentary: How P&G Plunge Derailed One Investor Wall Street vs Main Street Financial Articles & Investing News TheStreet.com: "I feel bad for Mike but the story is clear he called his broker several times and said 'sell, sell, sell.'
I was spared any anguish that day because workmen were doing things in my house and I was tuned out from all that.
While I would not use a mutual fund - why pay them a percentage for riding the market up and down? - I would advise Mike to put his money into mutual funds and let the experts be a barrier between himself and the churning market.
He should dump his accounts in TD Ameritrade to do this.
Last year I entered a good til cancel order to pick up 100 shares - big deal - of enlay.pk at a little over $4 when it was selling well over 5. One day a specialist program somewhere dropped down a buck and half and filled my buy order. Soon after I got a notice the trade was canceled. I know and Mike should know the cards are always stacked against the customer. They will not absorb a $100 loss to me and apparently his full price broker won't absorb a $19,000 loss to Mike either. The bank bailouts should prove these big shots really don't have the temperment to take losses and the federal welfare support payments will only go to the professional traders and their bankster employers."


A Book Agent’s Descent and Ascent From the Ashes - NYTimes.com

A Book Agent’s Descent and Ascent From the Ashes - NYTimes.com: "When the interview at the Gansevoort ends, Mr. Clegg seems relieved that no blood has been spilled. He ducks into the men’s room to refresh and, while waiting for the elevator, chats easily about the fried chicken that he had been making earlier that afternoon. The secret, he says, is to dunk the pieces in milk twice, followed by generous coatings of seasoned flour.
Then, with the sun setting over the Hudson River, he bundles up and walks back home. Several friends in publishing were coming over."


A Book Agent’s Descent and Ascent From the Ashes - NYTimes.com

A Book Agent’s Descent and Ascent From the Ashes - NYTimes.com: "The two threads may seem disjointed, but they point to a single pathos. Hidden behind Mr. Clegg’s carefully cultivated persona — the talented agent with a discerning ear; the preppy host who gave suave parties at 1 Fifth Avenue; the publishing insider who garnered big advances for A-list writers — were these monstrous secrets."


Final witness says she had sex with chief master sergeant and his wife

Final witness says she had sex with chief master sergeant and his wife: "WRIGHT-PATTERSON AIR FORCE BASE – An airman testified Friday, May 28, that she had consensual sex on multiple occasions with the Air Force Materiel Command’s former top enlisted man and three-way sex with him and his wife.
Master Sgt. Denise O’Connor said she exchanged sexually explicit text-messages with Chief Master Sgt. William C. Gurney and, at his request, sent him nude photographs of herself."


Yale Daily News - Embattled baseball donor arrested - Comments

(c) 2010 F. Bruce Abel

Mazzuto...sounds like Rizutto.

How many "steals" did Mazzuto have when he played shortstop for Yale?


Yale Daily News - Embattled baseball donor arrested - Comments: "Updated, May 25, 5:30 p.m. After months of allegations that John Mazzuto '70, who gave at least $1.7 million to Yale's baseball program, had made his fortune through accounting fraud and insider trading, Mazzuto was arrested Monday at his home in Palm Beach Gardens, Fla.
A representative of the Manhattan District Attorney's office confirmed that Mazzuto was arrested Monday after a yearlong investigation, as was his longtime business partner, attorney James Margulies. Both men have been charged with conspiracy, grand larceny, fraud and falsifying business records in a 57-count..."


Open Option

(c) 2010 F. Bruce Abel

Companies will be readjusting the Europe Effect in the next few weeks. It will not be pretty.
Thus, July 57 1/2 put options on P&G:

"Last Trade 0.70
Primary Market Tick
Open 0.64
Volume 332
P/E Ratio N/A
Change -0.15
Change % -17.7
EPS $0.00
Day High 0.77 52
Week High 4.50 EPS Date N/A
Day Low 0.64 52
Week Low 0.40
Last Split Date N/A
Bid 0.80 Bid Size 65 Current Yield N/A
Ask 0.84 Ask Size 42 Maturity Date N/A
Dividend N/A Div. Pay Date N/A
Open Option Interest 14160
Sell Short Restricted N/A Expiration Date 07/17/2010"



Spain’s troubled savings banks may spur new financial crisis - The Globe and Mail

Spain’s troubled savings banks may spur new financial crisis - The Globe and Mail: "It took a priest in southern Spain to remind the world that the European banking industry might be on the verge of another disaster.
The Rev. Santiago Gomez Sierra, the chairman of CajaSur, a regional savings bank in Cordoba, began his last board meeting last week with a prayer. Several directors performed the sign of the cross. No miracle happened. Within hours CajaSur, controlled by the Roman Catholic Church, was seized by the Bank of Spain."


Can Erodogan slay Turkey’s zombies? - The Globe and Mail

Can Erodogan slay Turkey’s zombies? - The Globe and Mail: "If you turn on a Turkish television today and turn to channel 6, you’ll encounter something that would have been unimaginable even a couple years ago: the letters W, Q and X, emerging from the mouths of soap-opera actors on a legal, public national channel.
Those letters, absent from the Turkish alphabet but part of the minority Kurdish language, are still officially illegal to utter or print in Turkey, despite the fact a sixth of the population, or 12 million people, are Kurds. The Turks, according to the constitution that founded their country, are one people, one ethnic group, with one language, regardless of the facts."


Cramer Last Night

(c) 2010 F. Bruce Abel

One of his classic reruns. Crucifying the "buy and hold" crowd.

Op-Ed Columnist - An Unnatural Disaster - NYTimes.com

Op-Ed Columnist - An Unnatural Disaster - NYTimes.com: "“Where I was wrong,” said President Obama at his press conference on Thursday, “was in my belief that the oil companies had their act together when it came to worst-case scenarios.”

Bob Herbert

"With all due respect to the president, who is a very smart man, how is it possible for anyone with any reasonable awareness of the nonstop carnage that has accompanied the entire history of giant corporations to believe that the oil companies, which are among the most rapacious players on the planet, somehow 'had their act together' with regard to worst-case scenarios.'"



Op-Ed Columnist - An Unnatural Disaster - NYTimes.com

Op-Ed Columnist - An Unnatural Disaster - NYTimes.com: "The U.S. will never get its act together until we develop the courage and the will to crack down hard on these giant corporations. They need to be tamed, closely monitored and regulated, and constrained in ways that no longer allow them to trample the best interests of the American people."


Op-Ed Columnist - An Unnatural Disaster - NYTimes.com

Op-Ed Columnist - An Unnatural Disaster - NYTimes.com: "President Obama knows that. He knows — or should know — that the biggest, most powerful companies do not have the best interests of the American people in mind when they are closing in on the kinds of profits that ancient kingdoms could only envy. BP’s profits are counted in the billions annually. They are like stacks and stacks of gold glittering beneath a brilliant sun. You don’t want to know what people will do for that kind of money."


'Tender is the Night' Quotes

'Tender is the Night' Quotes: "'so that while Rosemary was a 'simple' child she was protected by a double sheath of her mother's armor and her own - she had a mature distrust of the trivial, the facile and the vulgar.'
- F. Scott Fitzgerald, Tender is the Night, Book 1, Ch. 3"


Review: 'The Great Gatsby'

(c) 2010 F. Bruce Abel

OK, what's going on here? The Great Gatsby is being discussed Wednesday at the Lyceum. So I've read it. Jim Surface and Brenda Colazzi, two of my favorite people, will be there.

Review: 'The Great Gatsby': "In the closing pages of The Great Gatsby, Nick considers Gatsby in a wider context. Nick links Gatsby with the class of people with whom he has become so inextricably associated. They are the society persons so prominent during the 1920's and 1930's. Like his novel The Beautiful and the Damned, Fitzgerald attacks the shallow social climbing and emotional manipulation--which only causes pain. With a decadent cynicism, the party-goers in The Great Gatsby cannot see anything beyond their own enjoyment. Gatsby's love is frustrated by the social situation and his death symbolizes the dangers of his chosen path."


Friday, May 28, 2010

Op-Ed Columnist - Drilling for Certainty - NYTimes.com

Op-Ed Columnist - Drilling for Certainty - NYTimes.com: "Over the past decades, we’ve come to depend on an ever-expanding array of intricate high-tech systems. These hardware and software systems are the guts of financial markets, energy exploration, space exploration, air travel, defense programs and modern production plants.
These systems, which allow us to live as well as we do, are too complex for any single person to understand."


Cat, Snow, Interior 2010

(c) 2010 F. Bruce Abel

PG 07/17/2010 57.50 P

PG 07/17/2010 57.50 P


Gaylording

(c) 2010 F. Bruce Abel

Came across this word searching for a NYT book review on The Great Gatsby. It was contained in a Princeton University discussion about the history of its main library, as in "we don't do 'gaylording.'"

politicalbetting.com » Blog Archive » New pollster Opinium also finds a move to the blues: "I’ve just watched Cameron at Lewisham. I advise all Cameron skeptics to do the same.
Just recently (as may have been obvious) I have become severely disenchanted with His Gaylording Ponceybootiness. But that was a bravura performance. Especially given a very tricky audience. No hint of smarm or swank or sulkiness or self regard. Just top notch.
If he performs that well during the campaign, in contrast to the desperately plodding, offputting, and self-justifying Brown (as we saw on Sunday), that might be worth another 3 points to the Tories.
At his very best Cameron even has a touch of the Obama about him. He just hasn’t been at his very best for a VERY long time."


Gatsby’s Green Light Beckons a New Set of Strivers - New York Times

Gatsby’s Green Light Beckons a New Set of Strivers - New York Times: "Here, too, she had found inspiration in “Gatsby.” “The Dutch settlers went all the way across the ocean to this new land — America,” Jinzhao said, referring to Nick’s bittersweet reflections that end the book. “America appears to the Dutch settlers as Daisy appears to Gatsby. Gatsby’s hopes and dreams are American ideals. His effort is the real ideal of the American dream.”"


Our Towns - Celebrating the Half-Century of Great Neck South - NYTimes.com


Our Towns - Celebrating the Half-Century of Great Neck South - NYTimes.com: "BUT our Great Neck is about as ancient as Gatsby’s. The school, once overwhelmingly white and heavily Jewish, is now 44 percent Asian, 7 percent black and Hispanic, and 49 percent white. Great Neck North, once our somewhat richer doppelgänger, is dominated by Persian Jews. There is a huge Orthodox contingent sending children to yeshivas. Downtown includes a glatt kosher Mexican-fusion cafe."





Our Towns - Celebrating the Half-Century of Great Neck South - NYTimes.com

Our Towns - Celebrating the Half-Century of Great Neck South - NYTimes.com: "Few suburbs have as rich a recorded history, in scholarly books (“Inventing Great Neck: Jewish Identity and the American Dream”), popular ones (“Ultimate Book of Great Neck: Fabled Tales and Fabulous Images”), modern novels (Jay Cantor’s 2003 “Great Neck,” about ’60s radicals), creepy documentaries (“Capturing the Friedmans”) and the Greatest American Novel (as West Egg in “The Great Gatsby”)."


Our Towns - Celebrating the Half-Century of Great Neck South - NYTimes.com

Our Towns - Celebrating the Half-Century of Great Neck South - NYTimes.com: "For one thing, many graduates are perfectly happy not to have much more to do with Great Neck South — a place remembered by some as too affluent, too competitive, too evocative of a certain type of suburban experience. For another, potential attendees are often more demanding than any sane person might want to put up with — prone, for instance, to wanting to negotiate what part of the $100 reunion fee works for them. And Great Neck can be a team-play-optional place, so you can’t assume that designated helpers will come through"


Will Wall Street Go Free? - Opinionator Blog - NYTimes.com


(c) 2010 F. Bruce Abel; photo (c) 2009 Rebecca Abel Worple and owenemma.com


I've clipped the last paragraph of this very excellent detailed summary of the personages behind the Wall Street/world collapse.



Will Wall Street Go Free? - Opinionator Blog - NYTimes.com: "Now that the politicians in Washington have used Goldman Sachs as a bogeyman to help push through new legislation to re-regulate Wall Street — which is badly in need of it — the American people should now get the justice we deserve, in the form of prosecuting the people on Wall Street who had major roles in causing the financial crisis in the first place. Unless, of course, we would prefer to pretend that no one was responsible and it was just another one of those once-in-a-lifetime tsunamis we’ve been hearing so much about lately."





Thursday, May 27, 2010

Mad Money Recap | Nightly Recap for:  Wednesday, May 26, 2010

Mad Money Recap Nightly Recap for: Wednesday, May 26, 2010: "Do not take it from me… JP Morgan says that all of these non-core stakes are worth 76% of Vodafone’s market capital… again, cash flow… only 16% of the cash flow… so like Verizon Wireless, they are not being correctly valued into the stock… let me give you one more reason to own this… this is going to wake you up from whatever stupor that Europe put you under… Apple, Apple… if Verizon Wireless gets the iPhone, I think that it could add millions of frustrated AT&T wireless subscribers… also get a huge amount of revenue from the data hogs who swap from dumb Verizon phones to whiz kid iPhones… boy is that ever not in the story."


Mad Money Recap | Nightly Recap for:  Wednesday, May 26, 2010

Mad Money Recap Nightly Recap for: Wednesday, May 26, 2010: "The next time that you are looking for stocks to buy… after we get hammered off of the Euro… after the banking crisis in Spain or potential countries defaults… take a look at Dollar General (DG), Dollar Tree Stores (DLTR), Family Dollar Stores Inc. (FDO), AutoZone Inc. (AZO), O'Reilly Automotive Inc. (ORLY), Acme Packet, Inc. (APKT), SanDisk Corp. (SNDK), VMware (VMW)… and their derivatives to the list of stocks to buy on weakness… now look, these are no where near as safe as our accidental high yielding imperatives… we are not going to buy these here… not up here… but they are intriguing for those of you looking for growth in the trust and verified by the new high list places…"


Oil Rigs and Reality - Opinionator Blog - NYTimes.com

Oil Rigs and Reality - Opinionator Blog - NYTimes.com: "I know you aren’t a big fan of “more government oversight” in general, but it does seem as if there should have been, um, more government oversight. The regulators at good old M.M.S. were cozy with the oil drilling industry they were supposed to oversee. Just like the Wall Street firms and their bond rating agencies. The current Secretary of the Interior, Ken Salazar, says he started trying to clean house as soon as he took office. And industry watchdogs do say things had gotten better. But apparently not fast enough."


The Palin Brand - Opinionator Blog - NYTimes.com

The Palin Brand - Opinionator Blog - NYTimes.com: "But at the same time Palin was calling Didier “a commonsense constitutional conservative [who] will help put our country on the right track,” it was revealed that he took at least $140,000 in federal farm subsidies. If having his hand out seems inconsistent with his bumper-sticker politics, it follows a familiar pattern of the Palin brand. In Idaho, Ward, the Palin candidate, also blasted government intervention in the private sector, even though his wife, the family breadwinner, earns her living through a mess kept alive by Federal bailouts — Fannie Mae."


Op-Ed Contributor - Easy Money, Hard Truths - NYTimes.com

Op-Ed Contributor - Easy Money, Hard Truths - NYTimes.com: "The Fed bailed out the equity markets after the crash of 1987, which fed a boom ending with the Mexican crisis and bailout. That Treasury-financed bailout started a bubble in emerging market debt, which ended with the Asian currency crisis and Russian default. The resulting organized rescue of Long-Term Capital Management’s counterparties spurred the Internet bubble. After that popped, the rescue led to the housing and credit bubble. The deflationary aspects of that bubble popping created a bubble in sovereign debt, despite the fiscal strains created by the bailouts. The Greek crisis may be the first sign of the sovereign debt bubble bursting"


Op-Ed Contributor - Easy Money, Hard Truths - NYTimes.com

Op-Ed Contributor - Easy Money, Hard Truths - NYTimes.com: "Government statistics are about the last place one should look to find inflation, as they are designed to not show much. Over the last 35 years the government has changed the way it calculates inflation several times. According to the Web site Shadow Government Statistics, using the pre-1980 method, the Consumer Price Index would be over 9 percent, compared with about 2 percent in the official statistics today."


Wednesday, May 26, 2010

Journeys - The Albergo Diffuso Puts Rooms All Over Town - NYTimes.com

Journeys - The Albergo Diffuso Puts Rooms All Over Town - NYTimes.com: "Albergo diffuso translates literally as “scattered hotel.” The principle is that rooms, decorated in a consistently authentic and local style, are scattered throughout different buildings within the town but overseen by one manager. A traditional breakfast might be served at a local cafe or in the kitchen of one of the local houses, or delivered to your room. Call it a B & B village."


Op-Ed Columnist - Of Top Hats, Top Kills and Bottom Feeders - NYTimes.com

Op-Ed Columnist - Of Top Hats, Top Kills and Bottom Feeders - NYTimes.com: "Consorting with the industry intensified once two oilmen took over the White House. Dick Cheney, Duke of Halliburton — responsible for the cementing of the calamitous well, now under investigation — had his aides conspire with BP America and other oil companies to draw up an energy policy."


Tuesday, May 25, 2010

Editorial - The Supreme Court Opens a Door for Workers - NYTimes.com

Editorial - The Supreme Court Opens a Door for Workers - NYTimes.com: "Ms. Ledbetter’s deadline, he wrote, started with the first act of discrimination against her because she was trying to prove that Goodyear’s pay system caused a “disparate treatment” of men and women, a stricter standard that can result in more damages but requires proof of intentional discrimination. The aspiring firefighters, on the other hand, were trying to show that the test had only a “disparate impact,” which does not require intentional discrimination, and, Mr. Scalia wrote, lacks the strict deadline requirements."


Editorial - The Supreme Court Opens a Door for Workers - NYTimes.com

Editorial - The Supreme Court Opens a Door for Workers - NYTimes.com: "Workers won an important victory at the Supreme Court on Monday when the justices ruled unanimously that a group of African-American applicants to the Chicago Fire Department did not wait too long to challenge a hiring test they claimed was discriminatory."


This...or This!

(c) 2009 Rebecca Abel Worple

News Analysis - Worries Mount on E.C.B.’s Ability to Stem a Panic - NYTimes.com

News Analysis - Worries Mount on E.C.B.’s Ability to Stem a Panic - NYTimes.com: "But the continued erosion of the euro against other major currencies and the dark mood reflected in nervous financial markets highlight perhaps the most crucial question facing Europe today: Who ultimately stands behind the banks if the loans they and the E.C.B. have extended directly and indirectly to Greece, Portugal, Spain and a few other sovereign debtors need to be written down?"


Schaeffers Opening Statement

U.S. stock futures indicate a massive sell-off on the open


Monday's late-session sell-off on the Dow Jones Industrial Average (DJIA) appears to have been merely a prelude to today's plunge. The DJIA traded between 10,200 and 10,100 for much of Monday, only to plummet to within 70 points of the 10,000 level by the close. Heading into the open this morning, DJIA futures are trading some 225 points below fair value, indicating that the blue-chip barometer could open at or below its February low of 9,835. Meanwhile, futures on the S&P 500 Index (SPX) are trading more than 30 points below fair value, potentially placing the SPX below its February low of 1,044. If these levels fail to hold, the next area of support for the DJIA lies near 9,700, while the SPX could find buyers near 1,030 - home to the market's October 2009 lows. Finally, VIX watchers will want to keep a close eye on the 50 level, as the CBOE Market Volatility Index (VIX) could make a beeline for this round-number level

How to Read This Blog

(c) 2010 F. Bruce Abel

OK, you've noticed. I've stooped to pretty much just clipping segments from key articles and putting them on this blog without commentary or labeling. It's because of the new ease of doing this -- probably the work of Google, but I'm not sure! One clicks over about a paragraph and can transfer a link and the paragraph directly to this "Blogger" blog.

In the meantime European markets are extending their losses. Lowest levels since September. Geithner and Secretary Clinton talk from China. Cramer has saved me a lot by his call to basically get out of the market. At least for the past ten days.

Monday, May 24, 2010

The Old Enemies - Readers' Comments - NYTimes.com

The Old Enemies - Readers' Comments - NYTimes.com: "I daresay FDR is long dead and gone and also volunteer that the problems today are far more heinous, sophisticated, and entrenched than any he had to face. He also had a population relatively unstupified by corporate media in all their multitudinous, verisimilar, and intricately woven forms."


The Old Enemies - Readers' Comments - NYTimes.com

The Old Enemies - Readers' Comments - NYTimes.com: "Much of the difficulty the US has in reining in corporate influence on public policy relates to the absurd notion of corporate personhood. The idea that a corporation is a person was a useful and probably necessary legal fiction that allows, among other things that corporations can be sued in civil courts. The 'activist' courts however have used corporate personhood to extend other rights to corporations carrying it so far that a recent Supreme Court ruling recognizes that corporate entities have First Amendment rights, making it possible to buy elections outright. This is insanity as James Howard Kunstler observed after the ruling '... the fundamental character of corporations is sociopathic, insofar as their only express allegiance is to their shareholders, meaning they are devoid of any sense of the public interest, meaning they are unfit to participate in electoral politics.'"


Muskoka's sodden summer of discontent - The Globe and Mail

Muskoka's sodden summer of discontent - The Globe and Mail: "I arrived last week to the news that Muskoka had been struck down by a swine-flu outbreak. More than 200 children at several camps in the region had been diagnosed with the highly contagious, occasionally fatal virus. There were more cases of swine flu in Muskoka than in all of Britain – a cruel irony for someone who had crossed the ocean in the hope of “getting away from it all” in the Canadian wilderness."


Op-Ed Columnist - The Principles of Rand Paul - NYTimes.com

Op-Ed Columnist - The Principles of Rand Paul - NYTimes.com: "Instead of celebrating the usual Republican pantheon, paleoconservatives identify with the “beautiful losers” of American history, to borrow a phrase from the paleocon journalist Sam Francis — the anti-imperialists who opposed the Spanish-American War, the libertarians who stood athwart the New Deal yelling “stop,” the Midwestern Republicans who objected to the growth of the national security state after World War II. And they offer an ideological synthesis that’s well outside either political party’s mainstream — antiwar and antiabortion, against the Patriot Act but in favor of a border fence, and skeptical of the drug war and the welfare state alike."


Op-Ed Columnist - Obama Versus the Corporations - NYTimes.com

Op-Ed Columnist - Obama Versus the Corporations - NYTimes.com: "From the outside, this rage against regulation seems bizarre. I mean, what did they expect? The financial industry, in particular, ran wild under deregulation, eventually bringing on a crisis that has left 15 million Americans unemployed, and required large-scale taxpayer-financed bailouts to avoid an even worse outcome. Did Wall Street expect to emerge from all that without facing some new restrictions? Apparently it did."


The Mystery of Capital « The Baseline Scenario

The Mystery of Capital « The Baseline Scenario: "“Capital does not exist in the world. It is not accessible to the senses. When we claim a bank or any other firm has so much ‘capital’ we are modeling its assets and liabilities and contingent positions and coming up with a number. Unfortunately, there is not one uniquely ‘true’ model of bank capital. Even hewing to GAAP and all regulatory requirements, thousands of estimates and arbitrary choices must be made to compute the capital position of a modern bank. There is a broad, multidimensional ‘space’ of defensible models by which capital might be computed. When we ‘measure’ capital, we select a model and then compute. If we were to randomly select among potential models (even weighted by regulatory acceptability, so that a compliant model is much more likely than an iffy one), we would generate a probability distribution of capital values. That distribution would be very broad, so that for large, complex banks negative values would be moderately probable, as would the highly positive values that actually get reported. . . . Given the heterogeneity of real-world arrangements, no ‘one-size-fits-all’ model can be legislated or regulated to ensure a consistent capital measure. We cannot have both free-form, ‘innovative’ banks and meaningful measures of regulatory capital.”"


Baseline Scenario -- Core

(c) 2010 F. Bruce Abel

This one is good! The Mystery of Capital

The Baseline Scenario


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The Mystery of Capital
The VC Tax Break
Focus On This: Merkley-Levin Did Not Get A Vote
The Mystery of Capital

Posted: 21 May 2010 09:05 AM PDT

By James Kwak

So the dust has settled on the Senate bill, and it remains studiously vague about capital requirements — no hard leverage cap, for example. This is what the administration wanted, for two reasons: first, they claim that regulators need ongoing flexibility to modify capital requirements; second, they claim that they need flexibility to negotiate a uniform international agreement.

There is one thing in there that is controversial enough to get the attention of the bank lobbyists: the Collins Amendment, which Mike Konczal has written about here. The main provision of the amendment is that whatever capital requirements apply to insured depositary institutions (banks), they also have to apply to systemically important financial institutions, including at the holding company level.

Sheila Bair of the FDIC is in favor of the amendment, on the argument that bank holding companies should not be able to evade capital requirements that are imposed on their subsidiary insured banks; she doesn’t want to regulate the depositary institutions but have all her work rendered irrelevant because the holding company collapses, triggering a mess of cross-guarantees.

This seems entirely unobjectionable, but as Konczal points out, the real threat to the banks is that it makes it harder for them to engage in financial engineering on the holding company level to evade capital requirements. According to the Wall Street Journal, not only the banks, but also the administration itself is planning to try to kill this amendment (at this point, in conference committee).

The administration’s argument, as mentioned above, is that these kinds of rules should be negotiated internationally, not set by Congress, which is overly political. But as Bloomberg pointed out earlier this week, international negotiations are nothing if not political. And as Konczal highlighted, the administration is also taking the banks’ side in the international arena.

The Collins Amendment wants to make basic capital requirements simpler, with the option of adding more complex requirements on top (“shall serve as a floor for any capital requirements the agency may require”). Opponents want regulators to have as much discretion as possible. I think it’s important to have a simple floor, because discretion and complexity are just a way of fooling ourselves into thinking we can measure something that is inherently unmeasurable.

A while back, Steve Randy Waldman weighed in on bank capital requirements. He goes much further and deeper than Simon and I did in our article about capital requirements. “Bank capital cannot be measured,” he says. His point is both practical and epistemological.

On the practical side, look at Lehman: it was well capitalized on paper right before it collapsed, and then a few days later it had negative equity of at least $20 billion. (And it wasn’t because of some fire sale, Waldman explains.)

Here’s the epistemological side (the part I like the most):

“Capital does not exist in the world. It is not accessible to the senses. When we claim a bank or any other firm has so much ‘capital’ we are modeling its assets and liabilities and contingent positions and coming up with a number. Unfortunately, there is not one uniquely ‘true’ model of bank capital. Even hewing to GAAP and all regulatory requirements, thousands of estimates and arbitrary choices must be made to compute the capital position of a modern bank. There is a broad, multidimensional ‘space’ of defensible models by which capital might be computed. When we ‘measure’ capital, we select a model and then compute. If we were to randomly select among potential models (even weighted by regulatory acceptability, so that a compliant model is much more likely than an iffy one), we would generate a probability distribution of capital values. That distribution would be very broad, so that for large, complex banks negative values would be moderately probable, as would the highly positive values that actually get reported. . . . Given the heterogeneity of real-world arrangements, no ‘one-size-fits-all’ model can be legislated or regulated to ensure a consistent capital measure. We cannot have both free-form, ‘innovative’ banks and meaningful measures of regulatory capital.”

This is a point that I think is often lost. People talk about capital like levees to protect against a flood, but it’s like levees that you can’t see and measure, only guess at. Capital is probabilistic, so it’s only as dependable as your ability to assess those probabilities.

And, of course, with banks the errors always come out the same way — overstating capital:

“For a long-term shareholder of a large financial, optimistically shading the firm’s position increases both the earnings of the firm and the ‘option value’ of the firm in difficult times. It would be a massive failure of corporate governance if Jamie Dimon or Lloyd Blankfein did not fib a little to make their firms’ books seem a bit better than perhaps they are, within legal and regulatory tolerances.”

And here’s Waldman’s conclusion: “We need either to resimplify banks to make them amenable to the traditional approach, or come up with other approaches more capable of reigning in the brave new world of banking.”

Ultimately, capital requirements alone are not the answer. But as long as we’re going to base our banking regulation on them, we should make them as resistant to definition error and measurement error as possible.





The VC Tax Break

Posted: 21 May 2010 07:47 AM PDT

By James Kwak

The House of Representatives is considering a bill that would change the tax treatment of venture capitalists’ income (and that of private equity fund managers as well). Currently, VCs typically are paid “2 and 20″ — that is, an annual fee of 2 percent of assets, plus 20 percent of profits. For example, let’s say a fund starts out with $200 million. Most of that money is invested by the fund’s limited partners — pension funds, endowments, insurance companies, the usual suspects. After ten years (roughly the average life of a VC fund), the investments made by the fund are now worth $400 million — a pretty humdrum return of 7 percent per year (before fees). The venture capitalists themselves will earn about $14 million ($200 million x 2% x 7 years)* plus $40 million (20% x ($400 million – $200 million)) equals $54 million. (Note that they earn that $40 million even for doing worse than the stock market’s long-term average return.) The limited partners get what’s left over after those fees. And before you start crying for the VCs, remember that a typical VC firm will have multiple VC funds going at once.

Right now, the $14 million is taxed as ordinary income, but the $40 million is taxed as capital gains — that is, at a tax rate of 15%. The bill would tax the $40 million as ordinary income (actually, 75% as ordinary income and 25% as capital gains), for an effective tax rate of about 35%.

The current tax treatment has never made sense to me. The lower rate on capital gains is supposed to provide an incentive for capital investment.** This is why, if you buy stock and sell it more than a year later, you pay tax on your gains at a lower rate. So clearly the actual investment returns on money invested in the VC fund should be treated as capital gains — but not the VCs’ 20 percent fee, since that’s compensation for fund management services, not returns on their investment. (VCs typically invest their own money in a fund, but it is only a small fraction of the whole, and no one is debating how that money should be treated.)

One argument I’ve heard is that the 20 percent comes out of the capital gains of the fund itself, so it should be treated as capital gains. But that’s nonsense. If the limited partners got to keep it, it would be capital gains. Once they pay it to the VCs, it becomes an investment expense for the limited partners and a performance bonus for the VCs.

Gerry Langeler, a venture capitalist, made a valiant effort to defend his tax break in the New York Times, but his arguments are so full of holes I wonder if even he believes them.

He starts off trying to equate the VCs’ 20 percent to the profit a homeowner makes on the sale of his house.

“If you buy a house and take out a mortgage, you usually put a small percentage down, with the bank carrying the balance. To keep the math simple, say the house costs $200,000 and you put down $20,000. Ten years later, if you sell the house for $300,000, you have a gain of $100,000 on that $20,000 investment. It is taxed as a capital gain because your capital was locked up for a prolonged time, there was a material risk of loss and the gain was not ‘guaranteed’ to you for just showing up every day, the way a salary is. You used the bank’s capital as leverage on your $20,000 investment, but that does not matter from a tax standpoint. Neither does the fact that you worked around the house over those 10 years to improve its value.

“Now, let’s compare that with carried interest in a venture capital partnership. We in the industry invest a small percentage of the total dollars in our partnerships, like the house purchase above, with our limited partners investing the rest. Our investments are locked up for prolonged periods of time, often five to 10 years before we see any return. There is a real, material risk of loss of capital. In fact, many venture funds in the bubble lost money, including partners’ capital. Like the house situation, our downside loss potential is ‘fixed’ by what we invested, while our upside is unbounded.

“We do a lot of work ‘around the house’ to help our start-up companies grow. Our investors get their return on the profits we make. For those investors that are taxpaying entities, they pay tax on the gain at capital gains rates, just as they would if they had invested in a home. No one is proposing to change that tax treatment.

“If there is a profit on the entire partnership, then and only then do we as managers of those partnerships get our carried interest — usually about 20 percent of the total profit. That carried interest is delivered in the form of stock in those start-ups, stock that has been held for 5 to 10 years. Unlike our salaries (rightly taxed as ordinary income), the carried interest is not guaranteed by our just showing up, and it is only delivered if a long-term gain in the form of capital is created.

“Carried interest in a partnership bears a striking resemblance to our personal ‘carried interest’ in our homes.”

This argument ignores the difference between equity and debt. When you buy a house, your mortgage is debt. You are in the first loss position. When a VC puts some of his own money in his fund, that’s equity; it’s on an equal footing with the limited partners’ money, and they share losses proportionally. Investment gains on that money — the VCs’ actual investment in the fund — are already treated as capital gains; it’s the 20 percent we’re talking about here. Saying that a VC is “leveraging up” his investment in his fund with LPs’ money is nonsense. If Gerry Langeler really wants to put in all the equity in his VC fund and borrow the rest from investors — well, good luck trying to find people who will lend 90 or 95 percent of the money in a VC fund. If that’s what he’s doing, he’s getting 100 percent of the profits after servicing his debt, not 20 percent; that’s what owning all the equity means.

More fundamentally, even if the return profile of carried interest has a resemblance to the return profile of buying a house, that doesn’t make it capital gains. The fact that there’s risk involved doesn’t make something capital gains; if that were the case, then banks could start paying long-term bonuses (based on multiple years’ work) and calling that capital gains. The fact that the upside is unlimited doesn’t make something capital gains; if that were the case, then sales commissions would be capital gains. The fact that there’s downside . . . wait, there is no downside. If the fund loses money, the VCs don’t make up 20 percent of the losses to the limited partners. Their downside is restricted to their direct investment in the fund.

The second argument attempts to equate VCs to founders.

“In another example, closer to home, say an entrepreneurial team starts a business and raises money from venture capitalists. Those entrepreneurs pay ordinary income taxes on their salary (of course), but any gains on their stock — generated by leveraging our money and our help, as well as their hard work — are taxed as capital gains.

“The powers in Washington say that one rationale for taxing venture capitalists’ carried interest as ordinary income is that this is a ‘fee for service’ situation. But how is that different from an entrepreneur’s founders stock? He or she is being compensated based on the wealth created by direct labor. If ours is now a fee for service, then so is that of the entrepreneur. Can you imagine the uproar about stifling company formation and job growth if Congress suddenly chose to double the tax on entrepreneurs in this country?”

Again, Langeler can’t tell the difference between a founder and an investor. To start off, what does it mean to say that founders are “leveraging our money”? The concept of leverage only applies to debt. VCs invest by buying convertible preferred shares, which are a form of equity, not debt.*** They are buying a share of the company, and they get all the upside on that share. That’s not leverage. Seen purely from the standpoint of the capital structure, VC investments dilute the founders. Granted, the company is getting something valuable — cash — in exchange for that dilution. But it’s giving up some of the upside. That’s the opposite of leverage.

And if Langeler doesn’t know how VCs’ carried interest is different from founder stock, he doesn’t know how his business works. It typically works like this. At time zero, the founders decide to start a company and do some work. At time one, which could be the next day, they actually create the company and they invest all of the capital. At this point, they own the whole thing. And they keep working. From that point forward, the founders are compensated for their labor through their salaries, which are taxed as ordinary income. (And in most cases, the founders either pay themselves no salary or a considerably below-market salary for several years.) Someday they may sell their founder stock for a large gain, but they got that stock because they owned the company to begin with.

At time two, the VC fund comes along and buys a piece of the company. As part of that deal, one of the VCs gets a seat on the board of directors. At that point, he has a fiduciary obligation to act in the best interests of all of the shareholders. Any work he does for the company is in that capacity. He is working for the investors in the company. The limited partners want this, because if they’re going to put their money in a company, they want someone they trust (the venture capitalist) watching over that company. So the VC on the board is acting directly as a fiduciary for the shareholders and indirectly as an agent of the limited partners. That is why the LPs are willing to pay him 20 percent of the profits. The fact that it’s 20 percent of profits, rather than an amount that’s fixed up front, makes it a bonus, and bonuses are always taxed as ordinary income; it doesn’t make it a capital gain.

The compensation for both the work Langeler does as a board member and the work the founders do as employees should be taxed as ordinary income. Langeler wants the compensation for his work as a board member to be taxed the same way as the appreciation on the founders’ initial ownership share in the company. That’s not apples and oranges; that’s apples and chartreuse.

Langeler continues:

“The gains of the limited partner investors in the stock owned by venture capital partnerships are taxed as capital gains. The gains by entrepreneurs on their stock holdings are taxed as capital gains. Under the new proposal, the only people taxed as ordinary income on the capital wealth created in that start-up would be the venture capital partners themselves.”

Um, right. That’s because the VC partners didn’t invest any of the capital.****

And it’s worse than that. The last sentence in that excerpt is an insult to anyone who ever worked at a startup company but who was not a founder. Many early stage employees contribute much, much more to the “capital wealth created in that start-up” than any VC. For Langeler, they don’t even exist.

(There’s a similar but better argument made by Bill Burnham a few years ago: that the 20 percent is compensation for the venture capitalist’s “sweat equity” for helping the company. But if you’re going to make that argument, I don’t see how you avoid acknowledging that founders also invest “sweat equity” beyond their actual capital contributions. Like the VCs, they own stock that everyone agrees should be treated as capital gains, and then they do some work. Why is the VCs’ work any different from the founders’ work? Especially when you consider that founders–and most early employees–are making considerably less than their opportunity costs, and hence their risk extends beyond their initial capital investments.)

There’s more, but I’ll stop there. Really, I have nothing against the VC industry. I regularly cite venture capital as one of the best parts of the financial system (and one that does not rely on anything that could be called “financial innovation”), my former company would not exist without VCs, and many of them are smart, hardworking people who have contributed greatly to the economy. Some VCs (well, one at least) are even in favor of the proposed tax change. The treatment of carried interest as capital gains is by no means the biggest problem with our tax code. I might be able to live with it if the argument were simply, “VCs are good, and this special perk is intended to provide an incentive for them to do what they do” (Daniel Shaviro thought about this line of argument, but wasn’t particularly impressed).

In short, I wouldn’t even have bothered with this post. Except that duty called.

* This isn’t quite right, because the $200 million is a capital commitment that gets drawn down, and the 2% fee is probably assessed on current asset value, not initial fund size, but this we’re not discussing this part of the fee here.

** I don’t actually this is a good idea to start with. The premise is that people are irrationally conservative when it comes to preservation of capital. and hence you have to provide an incentive for them to put their capital at risk. But even if you accept that premise, the better solution is allow full refundability of losses — meaning that you get to take a tax deduction for all of your capital losses. That solves the problem more directly, since it provides a benefit in the state of the world that people want to be protected against, and it is less distorting. In any case, the effect of the lower capital gains tax rate is to lower taxes for rich people, since they are the ones with capital gains. But for the purposes of this post, let’s just assume that capital gains are taxed at a lower rate than ordinary income.

*** Convertible preferred has debt-like features, but they only matter in a bad outcome (they give the VCs a disproportionate share of whatever value is left in the company). So from the founders’ perspective, a VC investment provides the downside of debt, but not the upside.

**** Again, you can debate whether labor should pay higher taxes than capital — my instinct is that it shouldn’t — but everyone, including Langeler, is taking that as a starting point for this debate.





Focus On This: Merkley-Levin Did Not Get A Vote

Posted: 21 May 2010 06:02 AM PDT

By Simon Johnson

After 9 months of hard fighting, yesterday financial reform came down to this: an amendment, proposed by Senators Jeff Merkley and Carl Levin that would have forced big banks to get rid of their speculative proprietary trading activities (i.e., a relatively strong version of the Volcker Rule.)

The amendment had picked up a great deal of support in recent weeks, partly because of unflagging support from Paul Volcker and partly because of the broader debate around the Brown-Kaufman amendment (which would have forced the biggest 6 banks to become smaller). Brown-Kaufman failed, 33-61, but it demonstrated that a growing number of senators were willing to confront the power of our biggest and worst banks.

Yet, at the end of the day, the Merkley-Levin amendment did not even get a vote. Why?

Partly this was because of procedural maneuvers. Merkley-Levin could only get a vote if another amendment, proposed by Senator Brownback (on exempting auto dealers from new consumer protection rules) got a vote. Late yesterday afternoon, Senator Brownback was persuaded, presumably by his Republican colleagues and by financial lobbyists, to withdraw his amendment.

Of course, Merkley-Levin was only in this awkward position because of an earlier lack of wholehearted support from the Democratic leadership – and from the White House. Again, the long reach of Wall Street was at work.

But the important point here is quite different. If Merkley-Levin did not have the votes, it was in the interest of the megabanks to have it come to the floor and be defeated. That would have been a clear victory for the status quo.

But Merkley-Levin had momentum and could potentially have passed – reflecting a big change of opinion within the Senate (and more broadly around the country). The big banks were forced into overdrive to stop it.

The Volcker Rule, in its weaker Dodd bill form (“do a study and think about implementing”), perhaps will survive the upcoming House-Senate conference – although, because this process likely will not be televised, all kinds of bad things may happen behind closed doors. Regulators may also take the Volcker Rule more seriously – but the most probable outcome is that the Fed and other officials will get a great deal of discretion regarding how to implement the principles, and they will completely fudge the issue.

Most importantly, everyone who wants to rein in the largest banks now has a much clearer idea of what to push for, what to campaign on, and for what purpose to raise money. This is the completely reasonable and responsible ask:

The Volcker Rule, as specifically proposed in the Merkley-Levin amendment
Constraints on the size and leverage of our largest banks, as proposed by the Brown-Kaufman amendment
When the mainstream consensus shifts in favor of these measures, or their functional equivalents, we will have finally begun the long process of reining in the dangerous economic and political power of our largest banks.




Marcellus plus: The parfait shale play - No Hot Air

Marcellus plus: The parfait shale play - No Hot Air: "May 23, 2010
Marcellus plus: The parfait shale play
The Marcellus Shale in the Eastern US has been THE example of the sudden emergence of abundant natural gas. The only issue over the Marcellus is whether or not it or Qatar has the world's largest gas field, even though as little as six years ago any idea that the shale would be commercial was not discounted so much as derided - somewhat like many UK or European shale plays are today.
The story of shale seems to be that however optimistic and seemingly over the top initial estimates, they end up being wrong. But this isn't something to give shale deniers any help: the shale plays keep on getting bigger and bigger:"

Sunday, May 23, 2010

Op-Ed Contributor - The Debt of Socrates - NYTimes.com

Op-Ed Contributor - The Debt of Socrates - NYTimes.com: "WENT down yesterday to the Piraeus with Glaucon, that I might offer up my prayers to the goddesses Brussels and Euro. There we chanced to find among other companions Polemarchus, who was sorely vexed."

Op-Ed Columnist - Bumper to Bumper With the World - NYTimes.com

Op-Ed Columnist - Bumper to Bumper With the World - NYTimes.com: "I really hope he is right. Winston Churchill famously observed that, “You can always trust the Americans. In the end, they will do the right thing, after they have eliminated all the other possibilities.” Is that still true for our generation? We’re going to find out. The time for bluffing ourselves is over. Are we going to do what it takes to fix our country, or are we going to be remembered as the generation that received more poker chips from their parents than any other and then had to turn around and toss a single chip to their kids and tell them to put it on “Lucky 21” — and hope for the best."

12 Angry Men - This is how you deal with prejudice.



Fair Game - Principal-Protected Notes Aren’t as Safe as They Sound - NYTimes.com

Fair Game - Principal-Protected Notes Aren’t as Safe as They Sound - NYTimes.com: "Yet, these securities appear to have been sold to conservative individuals whose financial market forays were usually limited to certificates of deposit. Many of these investors, to their great misfortune, bought principal-protected notes issued by Lehman Brothers. They are now worth pennies on the dollar."

Saturday, May 22, 2010

Op-Ed Columnist - More Than Just an Oil Spill - NYTimes.com

Op-Ed Columnist - More Than Just an Oil Spill - NYTimes.com: "Think songbirds. Paul Harrison, a specialist on the Mississippi River and its environs at the Environmental Defense Fund, told me that the wetlands are relied on by all 110 neo-tropical migratory songbird species. The migrating season for these beautiful, delicate creatures is right now — as many as 25 million can pass through the area each day."

Brazil and Turkey rush to the middle - The Globe and Mail

Brazil and Turkey rush to the middle - The Globe and Mail: "Brazil and Turkey became this week what Canada has long tried to be: successful middle powers. Ottawa has never really achieved this status, except maybe for a few years in the 1960s, because Canada has never really managed to be in the middle – less so today than ever. What we saw Monday was a genuine middle."

Friday, May 21, 2010

Super Sexy CPR From Globe and Mail

Super Sexy CPR from Super Sexy CPR on Vimeo.

Cottage Life - Our marina crisis

Cottage Life - Our marina crisis: "Cottager Jane Milligan owns one of those properties and may have part of the answer. Nine years ago, Nicholson’s Marina on Gloucester Pool, near Orillia, went on the market after more than 50 years in operation. Access to Milligan’s cottage was suddenly in doubt. Her first reaction was to contact the cottagers who use the marina. She invited them to a meeting, not really expecting anyone to come. The meeting drew a crowd. So Milligan formed a corporation—something she’d never done—and offered shares to cottagers. A cottager could secure a share by putting $1,000 up front and further committing to loan the corporation another $15,000 if the marina purchase went through. The marina’s asking price was $650,000. Milligan’s corporation offered $500,000—which meant that she had to sell more than 30 shares, or the deal was off. The property was on a whopping 319 acres, including an area with potential for rental, a feature that may have been the clincher for the more reluctant of the cottage owners. In the end, Milligan bought five shares herself (an outlay of $80,000); the marina owner bought six; other cottagers, including children of the owner, bought 24."


Mad Money Recap | Nightly Recap for:  Thursday, May 20 ,2010

Mad Money Recap Nightly Recap for: Thursday, May 20 ,2010: "We are still in no man’s land… no reason to get aggressive… a series of big, bad events are upon us… but even if they turn out to be as horrible and negative as predicted… like financial regulation or Parliament resolution that makes it seem like the weaker European countries could get kicked out of the Euro… once these events are completed, then you cannot be as negative as I am… until then, you can afford to wait it out… I want you to remember this, no Sergeant is holding a gun to your head to go over the top… no General will execute you if you do not buy a stock here… so why by so foolishly brave as to risk getting your head blown off… when you just do not have to do so."


Op-Ed Contributor - The Military’s Mission Of Mediocrity - NYTimes.com

Op-Ed Contributor - The Military’s Mission Of Mediocrity - NYTimes.com: "In my experience, the students who find this most demoralizing are those who have already served as Marines and sailors (usually more than 5 percent of each incoming class), who know how the fleet works and realize that what we do on the military-training side of things is largely make-work. Academics, too, are compromised by the huge time commitment these exercises require. Yes, we still produce some Rhodes, Marshall and Truman Scholars. But mediocrity is the norm."


Irish Miracle — or Mirage? - Economix Blog - NYTimes.com

Irish Miracle — or Mirage? - Economix Blog - NYTimes.com: "8.Charles
Philadelphia
May 20th, 2010
9:39 amThere is no doubt that much of Ireland's astonishing growth during the 90s and early years of this decade was the result of smoke and mirrors accounting tricks. It never ceased to irritate me when American neo-conservative economists and pundits (e.g. the Times' own Thomas Friedman) routinely praised Ireland to the heavens because superficially it confirmed their ideological mantra regarding globalized free trade and low corporate tax rates. To those of us actually connected to Ireland, it was always clear that much of the money credited to the 'Tiger' was in fact repatriated to corporate headquarters not only in the US but also in Japan and Germany. That our little country of barely 4 million souls was routinely listed as the number two global exporter of computer software is but one comic example of these accounting sleights of hand."


Irish Miracle — or Mirage? - Economix Blog - NYTimes.com

Irish Miracle — or Mirage? - Economix Blog - NYTimes.com: "When we adjust Ireland’s figures accordingly, the situation is dire. The budget deficit was about 17.9 percent of G.N.P. in 2009, and based on European Commission projections (and assuming the G.N.P.-G.D.P. gap remains the same) it will be roughly 14.6 percent in 2010 and 15.1 percent in 2011, while the debt-to-G.N.P. ratio at the end of this year is expected — by our calculation — to be 97 percent, and 109 percent at the end of 2011. These numbers make Ireland look similarly troubled to Greece, with a much higher budget deficit but lower levels of public debt."


Irish Miracle — or Mirage? - Economix Blog - NYTimes.com

Irish Miracle — or Mirage? - Economix Blog - NYTimes.com: "The problems are strikingly reminiscent of Latin America in the 1980s. Those nations borrowed too heavily in the 1970s (also, by the way, from big international banks) and then — in the face of tougher macroeconomic conditions in the United States — lost access to capital markets. For 10 years they were stuck with debt overhangs, just like the weak euro-zone countries, which made it virtually impossible to grow."


Thursday, May 20, 2010

Cottage Life - June 2010 issue of Cottage Life

Cottage Life - June 2010 issue of Cottage Life: "THE LIFE AQUATIC
By Martin Zibauer
This live-in boathouse started out as a wrong number, but ended up an architectural marvel on Georgian Bay."


Mad Money Recap | Nightly Recap for:  Wednesday, May 19,2010

Mad Money Recap Nightly Recap for: Wednesday, May 19,2010: "I want you to remember this chess game… fears about governments are knocking over company, after company, after company… that delivered terrific, terrific news… for now, pessimism at the government level beats good news at the corporate level… but I cannot believe that the profits will always fair that poorly in a chess match against the government… eventually, even if it takes a while, there will be a rematch… and profits will at last beat politics… so remember the companies that have been knocked down in this stock market game of chess… because they are the ones that will eventually end lower, be worth buying on the weakness."


Op-Ed Contributor - The Rush Limbaugh Victory - NYTimes.com

(c) 2010 F. Bruce Abel

The following post is spot-on, but late by about ten years. Where has mainstream media been? Intimidated, that's where. Democrats too have been intimidated, not just Republicans.



Op-Ed Contributor - The Rush Limbaugh Victory - NYTimes.com: "But the most obvious explanation is the one that’s been conspicuously absent from the gusher of analysis. Republican success in 2010 can be boiled down to two words: Rush Limbaugh."


Wednesday, May 19, 2010

The New Truth About Natural Gas Could Shock the Market -- Seeking Alpha

The New Truth About Natural Gas Could Shock the Market -- Seeking Alpha: "Investor sentiment is changing – to the positive – on natural gas. Despite record or near record injection levels into storage in the US most weeks, gas prices have remained steady or even risen. The number of drill rigs actively drilling for gas has barely budged, though it has been down in the US three of the last four weeks"


The Issues in the TIVO Case (For the En Banc Panel to Come)

(c) 2010 F. Bruce Abel

This from last Friday's decision of the federal appeals court vacating the three-judge panel's decision and setting up an argument before the entire banc of judges.

(4) The parties are requested to file new briefs addressing the following issues:
a) Following a finding of infringement by an accused device at trial, under what circumstances is it proper for a district court to determine infringement by a newly accused device through contempt proceedings rather than through new infringement proceedings? What burden of proof is required to establish that a contempt proceeding is proper?

b) How does "fair ground of doubt as to the wrongfulness of the defendant's conduct" compare with the "more than colorable differences" or "substantial open issues of infringement" tests in evaluating the newly accused device against the adjudged infringing device? See Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618, 5 S. Ct. 618, 28 L. Ed. 1106, 1885 Dec. Comm'r Pat. 295 (1885); KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1532 (Fed. Cir. 1985).

c) Where a contempt proceeding is proper, (1) what burden of proof is on the patentee to show that the newly accused device infringes (see KSM, 776 F.2d at 1524) and (2) what weight should [*3] be given to the infringer's efforts to design around the patent and its reasonable and good faith belief of noninfringement by the new device, for a finding of contempt?

d) Is it proper for a district court to hold an enjoined party in contempt where there is a substantial question as to whether the injunction is ambiguous in scope?

Clients Worried About Goldman’s Many Hats - NYTimes.com

Clients Worried About Goldman’s Many Hats - NYTimes.com: "“Now it’s all about the score. Just make the score, do the deal. Move on to the next one. That’s the trader culture,” said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University and former counsel to the Federal Reserve Board. “Their business model has completely blurred the difference between executing trades on behalf of customers versus executing trades for themselves. It’s a huge problem.”"


CNBC - Best 1/2 Hr I've Heard

(c) 2010 F. Bruce Abel

Best discussion, by knowledgeable, person(s), on real effect of Germany's prohibiting naked shorting. 7:30 to 8:00 am, i.e. just now. One guy especially. Host let them go. Best rapid-fire segment I've seen. With huge, huge implications.

Tuesday, May 18, 2010

In Tea Party Victory, Rand Paul Takes Ky. Senate Primary - NYTimes.com

In Tea Party Victory, Rand Paul Takes Ky. Senate Primary - NYTimes.com: "For Republicans, this has meant a challenge from the right that has prompted public opposition this fall, that is a major problems, particularly given the evidence of voter disapproval of what many see as Democratic policies backing . Mr. Paul’s campaign had portrayed Mr. Grayson as the the very model of the country club Republican – referring to him in news releases by his full name, Charles Merwin Grayson III."


Nassim Taleb on What Should Really Worry Us About the 'Flash Crash' -- Seeking Alpha

(c) 2010 F. Bruce Abel

Nassim Taleb ("The Black Swan") and Jim Cramer seem to be on the same wave length.

Nassim Taleb on What Should Really Worry Us About the 'Flash Crash' -- Seeking Alpha: "Nassim Taleb, professor at New York University and author of “The Black Swan: The Impact of the Highly Improbable”, talks with Bloomberg’s Erik Schatzker about the May 6 stock market selloff and his investment strategy. Taleb also discusses the drivers for the financial crisis, the U.S. economy and the performance of Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke."


Mad Money Recap | Nightly Recap for:  Monday, May 17,2010


(c) 2010 F. Bruce Abel

Was Cramer ever so pessimistic on the actual market? Gold and "accidental high yielders." Nothing more, except Canadian Banks.


Mad Money Recap Nightly Recap for: Monday, May 17,2010: "I need you to accept the inevitable tsunami of pessimism, skepticism, and corrosion… and continue to pick at the accidental high yielders, I have got a real good one coming up after the break… but you have got to accept that the market is just not working right now… that we have these rallies when the pessimism gets too great… but the rallies are strictly from too much pessimism… and not from a redo at the look from the fundamentals… which the bears have written off… no matter how good they are and getting better… so do not try to fight it… instead try to make some money off of it by buying SPDR Gold ETF (GLD)… or one of my fave gold stocks, on any dip like the one that we had today that you can catch."





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