Affirmative Action is a Zero Sum Game

True story: a man is laid off from a Wall Street job for over a year. He submits resume after resume -- because the Street is hiring for his skill -- but never gets the call.

Finally, a friend, who knows a hiring manager at a Bracket Firm recommends the man highly. The hiring manager's first question is, "what color is he?" He explains that he has to hire an Asian this week, that a white man -- no matter how qualified -- will not fulfill racial hiring quota. He explains that, in fact, he must hire X blacks, X Asians, X you-name-it's, but they already have plenty of white men.

We all knew this happens, but rarely do we hear it described so plainly by those who administer these idiotic rules.

US Bishops Repudiate Markets, Pope Repudiates Marxism

Go figure. Developing.

The Gate Crashers

Well, let's see what we have here: A couple without proper credentials manages to get into the White House with charm and chutzpah, and nobody's really sure how it was able to happen or what motivated them.

Perhaps they figured if the Obamas can do it, they can. Equal opportunity and all.

We think they ought to get a Nobel for something.

Memo to the Archbishop of NY

[posted on his blog, typos corrected].

There is no need for a government in a highly developed free market society to appoint itself as "provider of healthcare coverage." None, whatsoever. The proposition would be identical to the government taking control of the restaurant and grocery businesses because there are some people who, regrettably, cannot afford to eat. To do so would undermine the market mechanism of distribution, which is quite an effective mechanism. I believe the discussion of "subsidiarity" speaks to this.

Furthermore, New York City once was a shining example of what Catholicism, when practiced, can do to generously overcome any "shortcomings" -- temporary or otherwise -- in the market mechanism.

It is interesting to me, indeed -- in a grotesque way -- that the Bishops are inclined to welcome government interference into the operation of the market mechanism when the Church itself has witnessed the destructive effect government intervention has on the delivery of charitable services. For it is my understanding that Catholic schools in NYC currently are "permitted" to operate in disobedience of a court order to hire those who not only don't agree with the Church, but in fact demonstrably live in rebellion to her (as practicing homosexuals, for example) in proportion to the number of such people in society at large. I believe His Eminence Cardinal O'Connor addressed this in the book he co-wrote with Mayor Ed Koch, "His Eminence and Hizzoner."

Finally, I was dismayed to be asked, during the Prayers of the Faithful at a recent Mass, to "amen" this: "that congress would act to provide healthcare for all....[with disclaimers for protection of life and acknowledgment of conscience]. " It was repulsive on many grounds, and bizarre for the reasons given above: why pray to enlarge government which is not only an offense to the principle of subsidiarity, it ignores the effectiveness of the market mechanism, is contrary to the virtue of personal responsibility, likewise contrary to the principle of limited government, which quenches the spirit of charity and indeed may even outlaw it, and which has set itself up in legal opposition to the Church?

Half-heartedness As A Geopolitical Strategy

How’s that for a headline? You’d think we’d know something about geopolitics, tossing around the twenty dollar word like that. But we don’t -- not too much, anyway. We do, however, know more than we’d like to about half-heartedness, as most probably do. And one doesn’t need any specialized education to know what sort of trouble half-heartedness gets everyone into. A little experience in the business of everyday life is sufficient to impart the lessons.

We all know what half-heartedness is – we’ve seen it in ourselves and in those we’d relied upon for something at one time or another. And we usually learn after a time or two of being disappointed by the same person or group or corporation or whatever that it just doesn’t pay to call on them to do anything. So after a few letdowns, we don’t bother with them any more. We find other ways of getting things done, and discount the credibility of the half-hearted one accordingly.

So why would we expect any different an outcome if/when America, under the leadership of its nominal commander-in-chief president Barack Hussein Obama, decides it’s time to “cut and run” from our commitment to Afghanistan. You know he’s going to, don’t you? There is already a democrat surrogate of his in congress bellowing about introducing legislation to tax Americans for the troops deployed there as if, all of a sudden, the cost of anything mattered to anyone in Washington DC (and that any such notion would be taken seriously in any other time and place besides this confused age). Well, it does when they’re trying to ram a regressive revolution in economics and government like “healthcare reform” down our throats.

Well, this is how politics operates: it’s very refined but no less blatantly passive-aggressive. Somebody stirs up some half-baked idea and the press repeats it until it becomes an “issue,” and then, why, the president’s hands are tied. He has to do something, for “the people” have spoken. Of course, they haven’t spoken at all, the media has spoken for them, and the media is simply the oracle of the administration. But that’s the mechanism, anyway.

So, we'd wager that next week the nominal commander-in-chief, from the vaunted campus of West Point, will begin describing the half-hearted geopolitical strategy that he has chosen for America. It will begin, probably, with a promise of fewer troops than necessary, than has been requested by the commanders on the ground who know what it takes to get the job done. And people will get the message. They will conclude that Barack Obama isn’t too high on America’s initiative in Afghanistan, even though he’ll pepper his presentation with lots of American-sounding high and lofty ideals about commitments and allies and liberty but oh, we need to take care of those in need here at home, beginning with healthcare for our veterans, etc. Surely you can come up with some drivel on your own that would be as close to what he’ll say as ours is. Talk is oh, so cheap.

He’ll have us cut-and-run, and we won’t be trustworthy in the eyes of those who might need our help, and we will have lost precious credibility – this from the man who’s self-appointed presidential mandate is “restoring America’s prestige around the world.” The ironies never cease, do they? Only they’re looking less and less like ironies, and more like outright falsehoods, the sorts of things that someone says when he’s saying what he knows you need to hear in order to consider trusting him while he picks your pocket as you’re thinking about it.

But it isn’t mere vanity to lament the loss of credibility and prestige, not in a world such as ours, where there are rogue warriors hell-bent on killing anyone and everyone who stands in between them and the worldwide implementation of their way of seeing things. Even before this was a problem, it wasn’t mere vanity. Credibility and prestige – and the means to back them up – are what prevent warrior rebels from gaining ground anywhere. They are a deterrent to bullies. And a deterrent to the use of force against bullies who assert themselves. But bullies are popping up everywhere, and the deterrent is becoming less deterring, and that only emboldens bullies.

A Meditation on Incentives

We've been hearing for years that "medicare is broke" and that the unfunded liabilities of this entitlement, and the Social Security system, are mind-boggling. These liabilities are promises to provide care and support for the elderly and the infirm. If this is true of these entitlements, it must also be true of state, municipal, and private systems that have made promises to the aging and the infirm: pensions and insurance companies.

When these claims began to surface, America was in the midst of a historical economic boom -- unemployment at historic lows, asset values at historic highs and increasing at historic rates. Assets, mind you, that are on the balance sheets of various pools of capital, including pension funds, insurance portfolios, etc.

Now, of course, the bubble has burst, asset values have been in a freefall for a year or more, unemployment is at near historic highs (for this is "the deepest recession since The Great Depression"). Pension assets have plummeted and we have plenty of reason to guess that insurance company assets have, too. The Pension Benefit Guaranty Corporation, another bit of moral hazard introduced by the Government to provide taxpayer bailouts to pensions that have been run into the ground, is said to be "on the brink..." History has shown that even private failures ultimately become government liabilities.

So, then, here we have the very real, actuarial problem of "unfunded liabilities." There is only one cure for this condition -- see to it that the liabilities are funded. And there are two ways to do this: increase funds or reduce liabilities. And the government has taken aggressive steps to do both. To increase funds, an all-out effort to create inflation has been undertaken, which would yield myriad taxing opportunities, if only the money would circulate. And to reduce the liabilities...

We said that the liabilities in question are the elderly and infirm. And from almost the moment of its inauguration, the Obama administration has been pushing with all its might by promotion, coercion, propaganda, and who knows what other means, a "healthcare bill" that has introduced into the lexicon of our age the concepts of "end of life counseling" and something called a "Complete Lives System" of healthcare allocation.

We've already begun to see -- in presumption of the passage of legislation giving the government this sweeping authority, despite the overwhelming objections of the American people -- the trumpeted release of "research" and "statistics" that prove, for example, that women really shouldn't bother with breast exams until they are fifty years old, rather than forty. It is chillingly obvious that this heavy-handed propaganda would lead to a larger number of deaths of women by breast cancer which would amount to...a reduction in the liabilities of the federal government.

So here we have an object lesson in how liabilities to the government can be reduced. And this monster isn't even law yet.

This is a meditation on incentives. We can see that the Government is "incentivized" to reduce its liabilities for its undeniably bankrupt entitlement programs and those it might ultimately have to bail out. It's right there in black and white. At a certain point, you're worth more dead than alive to your government. Giving it control over the delivery or payment of your healthcare is giving them that power. Underscoring the absurdity of the entire effort is the pretext of "fixing" these bottomless entitlements with...another entitlement ("free healthcare for all").

Not only do they regard you as worthless, they apparently regard you as stupid as well.

And you're OK with that?

Reality Checks

In a world going increasingly off the rails, we offer these occasional rants and reality checks as a public service.

Just how mad is the world? Or rather, how much madder is it since our last rant (what, three days ago?)? More importantly, is it correct grammar to nest question marks like we just did?

We'll discuss some recent happenings, and you can decide for yourself.

Item: A particular brand of baby crib has been on the market from 1993 to 2008. That's 15 years. It comes to light just now, a year after the model has been discontinued, that 4 babies have died wile sleeping in these cribs. Suddenly, the Government has risen to respond to this "outrage" and the offense du jour is the recall of these cribs. After 16 years?! It's been all over the news, what with interviews with outraged parents who can't get through on the telephone when trying to claim credit for the fifty or a hundred bucks they spent a decade ago for this crib.

To put this travesty in perspective -- in other words, to demonstrate just how ridiculous the idea of a recall and the ensuing public overreaction is, consider that more babies die in car crashes in a day (or less) in the United States than have ever died in all these cribs ever sold over 16 years. Where's the outrage?

And then, too, is this comparison: three babies will die each and ever minute of each and every day by abortion. This includes some babies who might have survived a mishandled attempt at abortion, and were killed after live delivery (a practice President Obama supports). Where's the outrage?

So, getting back to this crib thing, can you say, "manufactured crisis?"

Item: The pending "healthcare" bills before congress authorize the government and its agents to influence or make life and death decisions -- who gets what medical treatments, who is "worth treating," who should be thinking of getting his house in order with "end of life counseling" -- for the citizens of the US. This is unheard of and so clearly outside the proper authority of any just government. No wonder, then, it's being peddled as "healthcare," and that its supporters are sinking to unheard-of moral lows by declaring that "if this bill isn't passed, employers will begin denying healthcare coverage" -- an outright lie, a scare tactic. One must always ask the question, "why are they working so hard to make me believe this," when he hears something on the popular news channels, or when a politician's mouth is moving.

Let's consider precedent: you don't have to be a lawyer to feel your blood going a bit cold when you consider that Terri Schiavo was denied food and water by a court order in a very public legal battle that her loving parents -- and Terri -- eventually lost -- denied the right to feed their own daughter, here in the U.S. of A. (We acknowledge that the blood of most lawyers is cold to begin with).

Mind you, the state worked overtime to starve this woman to death, and simply would not, under any circumstances, accede to or acknowledge the principal of the sanctity of human life but instead relentlessly asserted its absolute authority to end a person's life on the flimsiest of legal arguments. The issue was simply the state's right to decide and Terri Schiavo was merely its prop.

Dear readers, do you need a roadmap to see the "moral hazard" such a precedent sets in a context of a government that has asserted on its own behalf the decision of who lives and who does not?

Dealing with It

I've accepted the new culture we live in. To wit, I've added a new greeting to my standard "how ya doin'," etc.

When I see someone who looks like a muslim, or, especially, is wearing a burkha or driving a cab, I point my finger at them, like it was a pistol, and say, "allah akbar!" with a wink and a big smile.

It's a blast -- no pun intended!

Things to like about Gov. Paterson

For starters, one of the first things he said as Governor was along the lines of, "I don't want this job." How many -- how many!! -- people in political power haven't lusted all their lives for it? How many of them don't fantasize about all the ways they can use it to their advantage, fulfilling all kinds of bizarre wants? So, Paterson might have lusted to be Lieutenant Governor, a cushy job with a salary, perks, a cool office and an official sounding title. But not the real thing! No way! That, in our opinion, qualifies him more than all the ruthless aspirants to power that hold every other elected position in the US. We acknowledge that's not saying much, but it's a key distinction.

Next, he doesn't seem to know the party line. Consequently, he doesn't spout it at every opportunity. The state is broke, he says it's broke. Budget cuts are going to have to happen, he say so. The halls of government resist them tooth and nail, and he says, "they won't let me cut the budget." That kind of candor is refreshing, and the people deserve it.

The next item follows from the previous: Obama doesn't like him. That's a really good thing for the institution of public service, even if it means Paterson has no political future. At least he isn't on Obama's string. On the "enemies list," perhaps, but so are a lot of good people.

Next: He took advice -- that means he's advisable, teachable, humble. At least it means he felt desperate, which is the opposite of arrogant, which, again, distinguishes him from every other instance of political animal we can think of. Right after his former boss, the disgraced barbarian Elliot Spitzer was forced out of office and into a sabbatical for whoremongering with a 23 year old "call girl," Paterson confessed marital infidelity right up front. Good move, if having to own up to such a disgrace can be called that.

Finally, he's got a loveable demeanor. Something about that look on his face makes him a great target for harmless jokes. He provides much-needed comic relief.

So, we're not saying he's a paragon of virtue, only that there are some things to like about the fact that he's governor. The biggest thing, of course, is that it means that Elliot Spitzer is not.

Loser-in-Chief (rant)

Dear Friends:

Your president is a loser. He's a spineless, grovelling incompetent. He is the very face of the worst possible outcome of affirmative action: the quota-in-chief. He's travelling at our expense all around the world, telling everyone who will listen that America is a terrible place that does terrible things -- isn't this exactly what Islam believes?

He doesn't understand America because he doesn't understand greatness. He doesn't get the virtue of "exceptionalism." He doesn't understand leadership by example. He's never been great, and never will be. We identified him as a "silver-tongued slacker" the first time we heard him speak.

He's an embarrassment abroad and at home. Abroad he slanders this great land and at home he and his team of hypecaffeinated malcontented radical power junkies brainstorm new ways to destroy it from within.

He's a disgrace and he's disgracing this country, and the sooner we can put this abysmal episode behind us, the better.

If we survive it.

Which we will. But in what condition? And at what expense?

Regards,

TOT

Not so Bullish After All

As we reminded our readers a few posts ago, ancient Wall Street wisdom teaches that “bull markets climb a wall of worry.”

We suggested that, what with so much to worry about, perhaps we should be on the lookout for a bull market. Not that we have any sane reason for expecting one. But that’s sort of the irony of the premise, isn’t it?

At any end, we got to wondering just how much of this substantial move from the pits of March to giddy days of this week was indicative of genuine market optimism, and how much was the simple algebraic readjustment of the numerator (the index) as the denominator (the currency) continues to shrink.

The answer is summed up handily by the following graph:

We simply grabbed daily closing data for the $/Eur and the Dow going back one year. We took the first day of $/Eur data to be the baseline and normalized successive $/Eur prices to it by creating a ratio of each to the baseline day. We then multiplied by the Dow by the successive ratios in order to adjust it for the changes in the value of the $/Eur.

Since the world didn’t end after all, at least not yet, we enjoyed a pretty nice bounce from March. But not as nice as it would appear in passing. All things being equal, there’s a sizeable correction in store in the Dow unless earnings can grow fast enough to cushion a realignment in currency rates, assuming there is one.

Everybody's really worried about the dollar, too...

Time again to play "Connect the Dots"

Dot: Michael Bloomberg engineers third term as mayor of New York. Some rhetorical resistance is floated, but no meaningful effort is made to rebuff this heretofore unprecedented (and arguably unjustified) claim to power.

Dot: Attorney General Eric Holder, a native of The Bronx, announces that the surviving engineers of the September 11, 2001 attacks on the US, currently designated as enemy combatants, will be tried as civilians in New York City. The decision is universally acknowledged as terrible idea by all except Mr. Brown, Mayor Bloomberg, and President Obama, and their cheerleaders in the media.

We always figured there was a good reason that Bloomy skated into an unprecedented third term as mayor, and that we'd eventually see the reason why. We consider this development to be the strongest contender yet for that reason. Bloomy clearly sees millions of dollars in revenue for the City -- and damn the risk to its citizens -- plus one really fat favor that Holder and the Obama administration owe him.

Holder, it can be reasonably argued, is greasing skids back home. And Obama? No clue. He seems to be obsessed with New York City, in a bizarre way.

We wish he would just leave us alone.

Dr. Jekyll / Adam Smith

There always seems to be a nasty backlash even to a man's noblest efforts. Perhaps this phenomenon is the evidence supporting the "Law of Unintended Consequences." Few would argue that Alexander Hamilton's "blessing," the Federal Reserve system, has been the enabler of prosperity without peer. But it has an alter ego, or at least an evil twin. Enticing as it is to man's base motives, stimulating the imagination with visions of "magic money," it is also the enabler of a debt burden so inexhorable as to be seen as nothing less than a curse to entire generations, generations which might not even have been born had the "blessing" of prosperity it brought been foregone to begin with. So the blessing has a dark side.

Adam Smith advocated persuasively for an "elastic" money supply, heeded so effectively by Hamilton, even as he did for the "blessings" of division of labor. We have seen the dark side of Hamilton's blessing. Dickens fantasies, along with the realities every assembly line everywhere have illuminated the dark side of Smith's ideas on the division of labor. Great levers of production and prosperity, these, and yet, not without unintended, unwanted consequences of at least equal proportion.

We recently recalled a conversation we had long ago with a truck driver who worked for what is probably the most enduring trucking company in existence -- it's still in existence today. He marvelled at a new set of instructions drivers had been given for handling their rigs. Apparently, running a loaded tractor trailer at low engine speed, in a high gear range -- known as "lugging the engine" -- uses less fuel. However, the practice also has a tendency to snap the engine's crankshaft -- a major repair that would entail a hefty towing expense and substantial failure in service for the on-board freight.

However, the bean counters at the home office had concluded that, given the costs of repairing such a breakdown, and the costs of fuel, driver's labor, etc. etc, against the probability of actually incurring the crankshaft failure to begin with, made economic sense. In other words, when it was all said and done, the data suggested that not enough crankshafts would be snapped to offest the fuel savings of "lugging the engine." This puzzled the driver.

As it would puzzle anyone except, perhaps, Adam Smith and the "learned." Why not? It's a perverse course of action: inviting the risk of destruction of assets and increased emergency repair costs, impairment of highway safety, disruption of employees personal lives, willful abnegation of service commiments to customers. Who benefits here? Who in his right mind would do such things to save money on fuel? A modern economic "thinker," that's who. And that's the dark side of Adam Smith.

And so, with this in mind, we might be able to comprehend just what sorts of ghosts are at work in the recent pronouncement by US Preventative Services Task Force -- whatever that is -- that it's better for women to have mamograms at 50, instead of at 40 as was previously recommended. The explanation was given that "as counterintuitive as it sounds, all the data points to this being better." OK, better for whom? The women in the 40 - 50 age bracket, or the Adam Smith's who work for the entitities -- public and private -- that write the checks for the mamograms?

The dark side of Adam Smith is perverse economic comes out in incentives pitting the interests of collectives -- that's a socialist term -- responsible for paying for services -- against those who receive the services. It's a division-of-labor from hell.

In the US currently, there is a private market for health insurance and so the competing interests of patients vs. payers isn't one of absolute dominance. Competition for customers forces insurers to provide something in return for their premiums. But what happens when the payer isn't just a company, it's also the supreme law of the land? In other words, when government dictates who gets paid what for which medical procedure, where does the patient turn for a fairer shake?

And when the government is forced to be more concerned with aggregates than individuals, with its balance sheet than yours, you can be sure that some pretty bizarre dictums are going to be forthcoming regarding the "efficient" delivery of healthcare, because what's good for the patient isn't what's good for the payer. Doctors will marvel, as they are at the new mamogram "guidelines," -- guidelines for now, but what happens when the government controls the delivery of healthcare? -- just as drivers marvelled at the dictum from on high to "lug the engine" even if it meant ruining a motor, delaying deliveries, reduced efficiency at all levels of service, inconvenience to employees and customers.

Below is the infamous "Complete-Lives" graph, which depicts the "probability" of getting medical treatment for any age, under the vision of government controlled healthcare espoused by Dr. Ezekiel Emanuel, health policy adviser to President Obama, and the evil twin of Adam Smith.

So you see, women over age 50 are substantially less likely to receive an "intervention" -- that's how Dr. Emanuel refers to medical care -- than those in the 40 - 50 age bracket. Fewer intenventions means less money spent. The patients, like the customers of that trucking company, be damned.

Oops, sorry.

Bloomberg reports:

Lawmakers were wrong to repeal the Depression-era Glass- Steagall Act in 1999, Reed said. At the time, he supported overturn of the law, which required the separation of institutions that engaged in traditional customer banking services from those involved in capital markets.

So we told Mr. Sandy Weill in an email a year or so ago. He never responded.

The Obama Doctrine

This week 13 US soldiers were shot dead at Ft. Hood, Texas -- that's on American soil -- by a Muslim screaming "Allah Akbar." President Obama held an emergency news conference during which he said, "Let's not rush to conclusions" about it being an act of terrorism. This is the commander-in-chief's message to the American people fighting a war on terror: "Let's not rush to conclusions." This is the Obama Docrine. And this is no way to deal with a terrorist enemy who is sworn to your destruction.

Note, now, that it's perfectly allowable to "rush" to pass a government takeover of the healthcares business, and that doing so is "the call of history." But when it comes to Islamic terrorism, when it comes to innocent people being shot dead en masse by crazed Muslim fanatics, no, we mustn't rush to conclusions.

Thankfully somebody rushed to put that raving animal down with 4 slugs, or the death toll would undoubtedly be much higher.

the smartest guys in the room

In the upscale neighborhoods of this city, the trendiest breeds of dog urinate and defecate on the sidewalk day and night. In the not so upscale neighborhoods, ungentrified by such fauna, human beings do it.

And the platinum-degreed-ivy-league kids still strut around on those sidewalks in shorts and flip-flops.

Ick.

Us and Them

Today's NY Post cites the following very pertinent event:

...A passerby less than thrilled with the Midtown shoeshine hustler's sales pitch yesterday "took his anger out on me because of his own dirty shoes," Ward sniffed.

The 43-year-old shoeshine pro with two decades in the business had gone into his usual spiel from his perch on West 47th Street and Sixth Avenue -- pointing out that the well-dressed man's leather kicks could use a $5 deep polish.

"Why don't you get an education, so you can get a real job!" the man retorted, before taking his swing.

Like many people of his generation, the "man" in question, the one who swung his briefcase at the head of the shoeshine vendor, has bought into the idea that a "real job" can't possibly involve honest labor and effort and that an "education" is what one gets when he is presented with a college degree.

This is patent nonsense and every disinterested observer knows it. It is common knowledge that a desk jockey is the most redundant of parasites on an economy and that a modern college degree is merely a certificate attesting to the ownership of liability for a portfolio of student loans with which the newly "educated" is to be burdened for the rest of his elongated adolescence.

A Tainted Season

Not even The World Series is immune to the filth of modern politics. It wasn't enough that the ceremonial opening pitch turned out to be an advertisement for the Obama administration -- minus the president, of course, because the last time he threw out an opening pitch -- St. Louis, wasn't it? -- he looked so ridiculously effeminate that his handlers barred him from doing so.

So they got his much more masculine looking wife into the act, pimping a noticeably disabled Veteran for an emotional hook. Undoubtedly this was some young geniuses strategy to shore up those plummeting approval ratings, to convince Americans that the president and his administration really are Americans, too. Because you sure wouldn't be able to tell by his actions.

Even CBS radio had talking points. Baseball is a sport for statistics junkies, but what of this non-sequitir: "The Yankees haven't won a world series with a republican in the white house since Grover Cleveland..."?

So inherently innocent and pure is Baseball that, when something dirty is done that involves it, it cannot pass unnoticed. And we felt pretty muddied up after wading through the political cesspool that was the opening of the 2009 World Series. Put an asterisk next to this one in the history books.

At least the Yankees remain a first class operation, looking better than ever.

Dispatches from the Abyss

Item: It was reported, from California, that a 15 year-old girl was raped as she left her high school homecoming event, by upwards of 20 teenage boys. There were passersby. Some did nothing. Others captured the event on cellphone video cameras for posting on the Internet.

Item: While standing on the 14th St Union Square subway platform at about noon, looking into the tunnel for signs of a train, we notice the lanky black man leaning against the last I-beam is urinating on the platform. We turn away. Then we turn back, deciding not to give him the benefit of tacit approval by ignoring him. He is scrawny, but wearing clean clothes. He hides behind the next nearest I-beam pillar. God bless him -- at least he has a sense of shame, a sign of humanity.

Item: On that pillar, we notice the following, scrawled in thick black magic marker. It is the only graffiti on the pillar:

F**k you MOM! I hope you die B**TCH!

The writer then goes on, in the same literary style, to graphically described his planned dismemberment of his mother.

Well, then. These, apparently, are the sorts of things that are on the "minds" of some of your neighbors.

We can't help but marvel at the patience of the Almighty.

A Wall of Worry

Ancient (and timeless) Wall Street lore teaches us that "bull markets climb a wall of worry." It may not be all that is necessary for a bull market, but we certainly have plenty to worry about these days. So don't be surprised if the market continues to surprise us all.

A Method to Dollar Madness

Bloomberg reports that the tumbling dollar is helping spur Chinese exports, owing to the yuan peg to the dollar (they've yanked the story so we can't link to it).

Since it's apparent that the Treasury has adopted an aggressive posture of appeasement toward the Chinese monetary authorities, we'd say this stands to reason.

But at what cost to Americans?

Revisiting the VIX

Bloomberg reports: "VIX Posts Worst Losing Streak in Four Years as Dow Tops 10,000"

We posted a long time ago about the VIX as an inverse "moral hazard" meter, implying that is has effectively been correlated with the dollar. Think about it. A falling dollar is the manifestation "moral hazard," "plunge protection," the "Greenspan Put," TARP, or however else you refer to the availability of monetary support of asset values.

So, the VIX is measuring risk as though this were the old days, when the dollar was king. But is it still? And if not, is the VIX still accurately reflecting risk? Is the US National debt a problem, a great big problem, and mightn't that mitigate the true value of monetary support for markets? So perhaps the curious might want start watching CDS spreads on US Treasuries a bit more closely. And I'll bet there's a trade there, between the VIX and Treasury CDS spreads.

disenfranchised

Since the NFL has, for the first time in its history, decided based upon public comment to whom a team franchise can be sold, and Rush Limbaugh has been denied the right to purchase one, can it be said that the white, conservative, politically astute and outrageously popular radio talk show host has been "disenfranchised?"

Is this affirmative action in reverse? Reparations? Does interference in commerce somehow right the wrongs of the past? Perhaps in the calculus of this brave, new, post racial America of Barack Obama it does.

Easy for you to say.

Question: In a market panic, what happens to asset prices, in general?

We wager that even the most casual observer can deduce the answer.

However, if you have a PhD from Columbia university, like Lisa Borland, PhD, Evnine and Associates, you would say it this way:

...A significant anti-correlation between dispersion and cross-sectional kurtosis is found such that dispersion is high but kurtosis is low in panic times, and the opposite in normal times. The co-movement of stock returns also increases in panic times. We define a simple statistic s, the normalized sum of signs of returns on a given day, to capture the degree of correlation in the system. s can be seen as the order parameter of the system because if s = 0 there is no correlation (a disordered state), whereas for s different from 0 there is correlation among stocks (an ordered state).

Talk like this gets you a half a million a year on Wall Street.

Nobel goes to Zero

Amazingly, the Nobel Peace Prize was "awarded" to president Barack Hussein Obama.

We are reminded of the Green Acres episodes in which Mr. Douglas would wake up and find everyone talking gibberish as if it were normal. He would shake his head just to rouse himself and then attempt get on as best he could amidst the temporary, almost conspiratorial insanity that surrounded him.

We think that describes the world today. Global Hooterville.

Red Sox/Angels 2009 ALDS

Angels Stadium. Not only is that fake rock sculpture out past center field tacky, not only does it make the place look like a scene from the Flintstones, but those little fireworks that go off when a home run is hit out there are a really juvenile touch.

And people find fault with the Yankees?

Chicago 2016: The Agony of Defeat

The Olympics are about winning -- you know, the Thrill of Victory. Olympians are champions -- they have to be, just to be Olympians.

And champions understand that, if Victory isn't everything, you won't be a winner. You'll be a loser. "Winning isn't everything. It's the only thing."

But Mr. Chicago, Barack Obama, recently told the world, he's "not interested in victory." So is it any surprise that the world, when looking for a city to host the 2016 Summer Olympics, blew him and his city, and his country, off?

It shouldn't be.

[addendum: This is the first Summer Olympics where women's boxing will be an official event. We say, it's best that America doesn't host that kind of barbarism.]

The Great Deleveraging of Human Capital

U.S. job losses continue at a frightening rate, albeit on a seemingly "less bad" trend, even though last month's losses were slightly more than expected. How long can this go on?

It's not likely the economy will die in one fell swoop. There are centuries of economies of scale and a multitude of expertises that civilization depends upon; a legacy of assets including intellectual capital, a healthy and a well-educated labor force.

Unless civilization itself were overturned or refashioned (say, by some epochal shift in economic incentives -- eek, I think we've seen about three in the past few years), all this machinery will shake, rattle and roll on. At some point, it won't be necessary to "deleverage human capital" any further -- the demand for goods and services of the ordinary business of life are too great (how much more so in a world that is still developing?). However, we sense that expecting a reversion to historical norms (in composition of work force if not employment rates) would be presumptuous, considering the sheer scale of economic events in just the past decade.

Presidents don't make economies. History does. But historical (and historically bad) presidencies will affect them.

Google posts unemployment data here in a way that makes it easy to use, especially for doing state-by-state comparisons historically.

Culture Corner.

Train of Thoughts makes a brief stop in the artsy district.

More hilarious T-shirts at the link, which is also the graphic. No, we aren't being compensated (but if they insist, we'll talk).

When Governments Promise "Hope"

A friendly reminder from the Catechism of the Catholic Church:

675 Before Christ's second coming, the Church must pass through a final trial that will shake the faith of many believers. The persecution that accompanies her pilgrimage on earth will unveil the "mystery of iniquity" in the form of a religious deception offering men an apparent solution to their problems at the price of apostasy from the truth. The supreme religious deception is that of the Antichrist, a pseudo-messianism by which man glorifies himself in place of God and of his Messiah come in the flesh.

676 The Antichrist's deception already begins to take shape in the world every time the claim is made to realize within history that messianic hope which can only be realized beyond history through the eschatalogical judgment. The Church has rejected even modified forms of this falsification of the kingdom to come under the name of millenarianism, especially the "intrinsically perverse" political form of secular messianism.

Nuclear Musings

This morning we noted that there exist somewhere, so the media lead us -- perhaps not so unreasonably -- to believe, some very determined people whose life's goal is to detonate a nuclear bomb in our neighborhood.

Perhaps smart people. Well-financed people. Brainstorming people. People who managed to reduce two magnificent skyscrapers and 3000 human bodies to dust with a few hijacked jets and some boxcutters. Crazy people.

You know your government is weak...

...when someone else's central banker talks up your currency. Bloomberg reports:

Trichet Says ‘Extremely Important’ That We Have Strong Dollar

By Gabi Thesing
Sept. 28 (Bloomberg) -- European Central Bank President Jean-Claude Trichet said it is “extremely important” to have a strong U.S. dollar.

“In the present situation it is extremely important that we can have in the framework at the level of global finance and the global economy a strong dollar as the authorities in the US are saying,” Trichet told lawmakers in Brussels today.“The solidity of the dollar is very important.” Last Updated: September 28, 2009 11:46 EDT.

We can just hear it now:

[Trichet]Your collapsing currency is killing us! Do something! Say something, at least!

[Geithner] But I can't say anything positive about the dollar! It's not in my approved talking-points!

[Trichet]Then I'll just have to say it for you, you milquetoast!

But actually, coming as it does on the heels of the infamous gathering of rabble-rousers known as the G-20, it probably went down more like this:

[Trichet]Your collapsing currency is killing us! Do something! Say something, at least!

[Obama] But I can't have anybody say anything positive about the dollar! It's not in my approved talking-points!

[Trichet]Then I'll just have to say it for you, you milquetoast!

We acknowledge a sense of vague unease in knowing that "lawmakers in Brussels" are sitting around talking about our dollar.

The Obama's Halloween Picture?

Here's Barack and Michelle Obama with Spanish Prime Minister Jose Luis Rodriguez Zapatero and his family.

No, this is how the Prime Minister of Spain and his family always look -- like the Addams Family. And they're even scarier seen on the NY Post website, where we found this, just in time for Halloween.

Bats of a feather...

It's Only Rock and Roll

Apple has always had a flair for marketing fantasy. Check out how they reinterpret a catalog of 40 years of popular music as somehow being all about Barack Obama. We've highlighted the thematic parts. Oh, and while Apple has a "flair," that doesn't imply "finesse." This stuff is sophomoric and heavy-handed, we think.

It's not a cult, but if it was, you'd see stuff like this...

The Basics

Welcome to the beginning of a new era in the U.S.—Barack Obama’s history-making win is really a victory for all those who keep faith and firmly believe that people have the power to make a change. John Lennon was one of rock ‘n’ roll’s most determined dreamers, and the better world he dared to “imagine” may finally be within our grasp. Obama’s goose bump-inducing victory speech on election night referenced Sam Cooke’s dare-to-dream statement “A Change is Gonna Come,” envisioning a future where spirit plus soul equals a brand new day – just the kind of day Bruch Springsteen started planning for in the wake of 9/11, when he forged his anthem “The Rising.”

Dig in as the work begins on a brighter future in Next Steps.

Next Steps

Faith is the first step towards a better tomorrow, but Barack Obama will be the first to tell you that the world won’t change itself – if you’re pushing for progress, you’ve got to plant your feet as firmly as out 44th President, face the obstacles head-on, and sing along with Tom Petty’s gutsy promise to persevere, “I Won’t Back Down.” One thing our forward-looking leader’s sure of is the madness of escalating an unwinnable war, and Cat Stevens arrives to remind us that reaching a brave new world requires a ride on the “Peace Train.” But you can smell the hope in the air, and feel the conviction we need to get there, when the Kinks chart the optimistic logistics of “Better Things.”

Get fully immersed in the feeling of history happening right in front of you, in Deep Cuts.

Deep Cuts

The unprecedented arrival of Barack Obama brings with it a feeling that it’s not just OK, but vital to dream big. That confidence in the currency of hope finds enthusiastic echo in Richie Havens’ acoustic reinvention of “Here Comes The Sun.” The heady cocktail of conviction and optimism the U.S. is enjoying as it moves ahead feels just right alongside the sunny glow of the Zombies’ British Invasion flashlight-on-the-future “This Will Be Our Year.” And the classic-rock-meets-R&B forward motion of Eric Clapton’s Babyface-produced blockbuster “Change the World” mirrors the way we’ll all come together in Obama’s America to bring about a bold new vision.

Complete Set

Call it the Obama effect – the feeling that we’re living in times we’ll tell our grandchildren about; despite the current crises, we’re looking at a golden moment we can call our very own. These are the tunes that move to the same beat of positive change that’s in the hearts of Americans on the eve of this new era. From the giddy groove-pop of
Sting’s “Brand New Day” to the soulful bump of McFadden & Whitehead’s driven-and-determined “Ain’t No Stoppin’ Us Now,” this is the soundtrack for the new America we’re about to usher in, with the eyes-on-the-prize guidance of our new commander-in-chief. Tune in to the sound of a dream long deferred that’s finally coming into focus. In other words, “It’s been a long time coming, but a change is gonna come.”

It is a dream, because this is all advertising copy. America is not "Barack Obama's America." America belongs to Americans. A president is merely a temporary officer.

Seems somebody, somewhere, wants children singing the praises of Obama. And they want adults singing the praises of Obama. This is the secular beatification of Obama. And they're doing it because he's a complete loser, and the only way support can conjured for him is to recast him in the image of a secular saint, an untouchable messiah, a bearer of a new age. This is nothing more than diabolically dirty and patronizing politics. But the players don't realize that they're playing with fire, because some people will really fall for it.

Power Corrupts

[this is a draft]

Concentrations of power abuse individuals. Concentrations of power give abusive individuals something to hide behind and diffuse rightful accountability for their actions, leaving individual victims nearly powerless to seek redress. This happens in corporations, governments, and cliques of any shape, size and form. In the private sector, such concentrations lead to price rigging and customer abuses, and hinder progress and the creative benefits of the marketplace. In government, the effects are similar, except the abuse of "price" comes in the form of taxation and regulation; moving down the spectrum, the ultimate end is obviously a dictatorship of one form or another. Gangs are concentrations of power.

Concentrations of power are to be resisted. This is what the Constitution does, and why it’s so fabulous. It doesn’t give the government power – it places power squarely in the hands of individuals who are responsible for governing themselves. It provides a mechanism by which individuals cautiously delegate temporary control of power to representatives who are, in theory, accountable to the individuals who elect them. These representatives are charged with representing the interests of the people in matters where a government is best suited to have power: national defense and certain national infrastructure interests. These could be semantically referred to as "concentrations of power" but they clearly do not derive their power from the oppression of the citizenry, and are plainly just and necessary.

A “concentration of power” transfers control and accountability of power from a person who is affected by it to one who is not.

A government is never affected by any single individual’s welfare, unless that individual plays a key role in that government. Certainly no ordinary citizen’s well being is of any consequence to a government or any of its agents. Thus the individual must look after his own well being – no other party, save a loved one or a loved one’s agent – is fit for the task.

The problem with a national healthcare initiative is that the very concept is based upon a concentration of government power, which is always bad, in the most personal of all decisions. Government (or corporate) control or influence of individual healthcare is a concentration of power – transferring control from individuals who are responsible for the care of themselves and their loved ones to bodies of individuals are have no interest in that individual’s care, who instead represent a concentration of power (be it “the government,” a panel, a collective of any sort) with interests that cannot include any individual.

This is the entire argument in a nutshell: Concentrations of power are to be resisted. Government involvement in an individual’s healthcare is a concentration of power. Therefore it must be resisted.

Power begets power. The Founders knew it and bequeathed us a mechanism to protect us from it. Concentrations of power are also inevitable (there would have been no need to protect us from it otherwise). But when they arise, how are they dealt with? The antidote for concentrations of power is not another concentration of power -- for example, expecting a government insurance program to somehow correct problems arising from a concentration of private insurance interests. It may be effective in the short term, but in the long run, the surviving entity is still a concentration of power, and the solution will be a much greater problem (loss of freedom, inept management of resources, a legal monopoly, etc)

The antidote for concentrations of power is competition. And competition takes place in a marketplace. Competition (between branches of government) is built into the Constitution. And in the private sector, it is a natural occurrence in a free market. Government's just role is to defend liberty - on a national level, by providing for defense, and by defending the freedom of the marketplace and the rule of just law.

In this light, the current initiative by the president and his surrogates, to promote a binding national government healthcare de facto monopoly, will be a gigantic step backwards. It solves nothing, and we will assume that the bright lights in the Administration understand this.

So the question remains, why are they pushing so hard for such a massive, overt concentration of power over you?

Arguably the most influential blog ever.

We don't exert ourselves to prove the veracity of that slogan, but from time to time, when it's so obvious and easy to do, we'll just offer little reminders.

Like this line from this post:

Bury government healthcare, and the culture of death, with Ted Kennedy

and the subsequent appearance of this sign:

daily digest

Item: obama ditches Poland -- probably the most genuinely Catholic country in Europe, and, next to Israel, one that has paid its dues in history. Another really stupid move. Another blatant trampling on Catholics by the One.

Item: Listen to the drumbeats (from House Speaker Nancy Pelosi, for example) about "rhetoric leading to violence" -- listen carefully to every orchestrated, repeatedly-broadcast soundbyte. TV time is expensive -- in favors if not in dollars. So ask yourself, "why are valuable time and resources being expended to make me believe this?"

Then consider the principles of repetition in advertising and in propaganda ("repeat a big lie enough..."). Consider the moral responsibility of those in positions of authority to promote peace. Now then, why does the rhetoric invite (and by default, incite) social unrest?

The most charitable view is that it's misguided. Another, that it's massively poor judgment. Another view is that it's willful. Whatever its motive, it's an abuse of authority in any case.

It is widely known...

...that things aren't always what they seem. It is with this in mind that we offer the only plausible explanation of how a complete nobody can become president of the United States of America:

A bunch of rich, powerful, globalist-like white guys get together and say, "what kind of person can we put in as president of the US who will be completely immune to all criticism?...I know! We'll get a black guy, and every time somebody speaks up about all the crap we'll have him doing, we'll have the media cry 'RACIST!'"

You have to admit, it does describe the circumstances, doesn't it?

Next subject: some democrat congressman from Georgia is on record as saying that, today, you call the president a liar, and tomorrow, everybody's "wearing white sheets." We thank him for saying this, because for months we've been calling attention to fact that Planned Parenthood, which seems to hold a handful of the strings attached to Barack Obama's extremities, has "honored" the president's Secretary of State (Hillary Rodham Clinton) with its esteemed "Margaret Sanger Award." Below is a picture of Madame Sanger herself, sharing her unique vision of the future of the "negro" race with...a bunch of people in white sheets.

Here's some other stuff we've pointed out about the president, the KKK, Hillary Clinton, Margaret Sanger, and various and sundry associated individuals and organizations:

http://noisefromthetrain.blogspot.com/2009/08/whos-more-kkk.html

http://noisefromthetrain.blogspot.com/2009/06/lets-play-connect-dots.html

http://noisefromthetrain.blogspot.com/2009/04/put-on-your-overcoat.html

http://noisefromthetrain.blogspot.com/2009/04/margaret-sanger-reader.html

http://noisefromthetrain.blogspot.com/2009/03/endless-ironies-of-first-black_28.html

Pimping 9/11

You have read that your president has decreed this day in history, September 11, to be a National Day of Service. And remembrance of the September 11, 2001 attacks on the United States.

We sit at this moment watching the names of the victims of the attacks on the World Trade Centers being read in remembrance of them. We notice that the names are read by pairs of readers. On your right, as you watch, a relative of a victim reads. The relative reads the name, and finishes with a comment about how hurt they are at the loss of their loved one. It's a bit vain, because, after all, remembrance is about the victim, not the survivors.

But the real offense comes from the individual on your left. When they're done reading the names of the victims, the announce proudly that they are "honored to be here on behalf of" some volunteer organization. For example, somebody from "Elders Receive the Arts" just read some names.

What on earth are these "volunteers" doing here, since they haven't lost anybody? And why is the world forced to hear about their "volunteer organizations?" That's easy. They're pimping the president's agenda, on a day that's supposed to be sacred.

How does that make you feel? Even somebody who lost nobody on September 11, 2001 might find the hijacking of the memory of the victims in this way disconcerting. We wonder how it will make those who did lose somebody feel, to have the memory of their loved ones used to promote a political agenda that is wholly unrelated to the events of September 11, 2001.

If you cannot "exploit the crisis," you can at least exploit its memory.

Selling Dollars

As expected, given the developments in the previous post, the EU has made new 2009 highs against the Dollar.

EUR-USD: 1.4506
change: 0.0174
% change: 1.22

Source: Bloomberg.

Global Currency Update

The tom-toms continue to beat for the implementation of a global currency -- which already exists in prototype, in the form of Special Drawing Rights, and has since Bretton Woods.

The latest press release from the global currency promotion home office comes from none other than the UN, as reported in Bloomberg:

The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said.

Indeed. It should be noted that this blog postulated these very developments in several previous posts, including A Primer on The Coming Global Currency.

This statement begs the question of what would protect emerging and developed markets from the “confidence game” of a global currency. As we predicted, the current scheme for a global currency is a fiat one, and if there's one thing we all agree on, it's that nothing requires "confidence" quite like a fiat currency.

No matter, either, that this "confidence game of financial speculation" has, over the past 20 years, created such a robust and effective (free) market linkage between disparate currencies that the melding of them into a single, global unit would not be possible without it. Evidence that aspirants to absolute power make good use of its opposite in achieving their ambitions is hereby submitted.

We would observe that such a draconian, utopian, and just plain foolhardy initiative, which has been simmering for time immemorial, would never gain traction in a sane and just world.

Just how much the current world fits that description might be ascertained by observing such traction as the current push for a single-payer currency gets. In a politically unstable world hobbling along with financial infrastructures that are somewhere between spastic and nearly-comatose, a world whose most notorious national leader is (when seen in the best light) starry-eyed and wet behind the ears, the stars have lined up for globalists like they haven't done for a long, long time. The Aquarians appear to be intent upon leveraging their good fortune with a public relations campaign.

Some ideas seem to be as inevitable as they are unwise. It's hard to fathom reasonable people giving continuous and progressive mental assent to a global currency scheme, especially one that is patterned on the very model they seek to replace. It's not that the model is all that bad, but it's disingenuous to criticize what one copies. As we noted in those previous posts, a global currency scheme provides a new set of smoke-and-mirrors for governmental financial alchemists. The ultimate concentration of power, as an indispensible tool in the hands of the power-hungry, it offers a certain appeal to those so inclined.

It's a confidence game of an entirely different order.

The Starbucks Theory of Mass Insanity

For the first time in months, we discovered that even hardcore coffee drinkers might not be able to finish a small (that's English for "small") cup of Starbucks coffee.

And this undeniable fact, along with that potent brew, gave birth to a hypothesis: Starbucks expanded out of Seattle, and went public, in the 1990's.

Since then, the world has gone stark raving mad, hasn't it?

Just a coincidence?

Brevity is the soul

of wit. Let's see if it's also the soul of rant.

So here we go:

If The Post accurately related the events of yesterday in Brooklyn, that is, that a young woman who screamed for help as her "estranged husband" beat her on the street and shot her four times (3 in the back), then, we would like to puke all over this wicked city.

We already knew, by experience, that most "men" in New York City are arrogant, spineless, stupid, loud-mouthed bullies. But we didn't think the entire city had been emasculated.

So many ways this story can be developed...but one that comes to mind is this: we already know what bullies do with guns. What would have happened had a real man been allowed to carry one, and heard the lady screaming? Would he have backed off, as did the lone Good Samaritan in this tragic episode, once the abuser had pulled his? Would the abuser have pulled his at all, had the Good Samaritan had a gun at the ready?

Would the lady have been spared 4 gunshot wounds, and the horror, not to mention the chilling realization that you can scream in somebody's face for help in the God-forsaken City of Primping Slackers and Killers and your "neighbors" will just ignore you?

Let's put it another way: we already have ample evidence that making it illegal to carry a legally registered pistol didn't prevent this poor young woman from being shot. If she could have legally carried one herself, she probably would have been able to defend herself, which nobody else could be bothered to do.

OK, we promised brevity, so...

Next and last order of business: How can an alleged "news show," that is, "60 Minutes," do an "expose" on financial derivatives and their role in the financial crises, and liken them to "side bets on a football game?" How can it portray financial instruments as bets and completely ignore the market-function of shifting risk, instead portraying the entire market in derivatives as though it were an OTB outlet? And how can it talk about the subprime mortgage component and omit completely any reference to the Community Reinvestment Act, to Fannie Mae, Freddie Mac, Franklin Raines, et al? How can it discuss the collapse of the financial sector and imprudent risk taking, and not mention Christopher Dodd, the Chairman of the House Banking Committee, and the "VIP" treatment given him by Angel Mozillo, the man who ran Countrywide Credit, notorious subprime-mortgage factory?

How? It's easy -- it's "60 Minutes," and it's completely unreliable.

But then, you alread knew that.

G'day!

Kennedy's Legacy? The Culture of Death.

Universal healthcare was Kennedy's crusade. A terrible idea for any government, and like all terrible ideas, its roots are in the best of ideas: man's moral duty to his fellow man. But Marxism was rooted in the same noble idea, at least ostensibly, and it's nothing if not hell on earth. So common is this sense that there is a cliche for it: "The road to hell is paved with good intentions."

The man would never be president, but he was still one of the most powerful men in America. He was never to be the resident of the White House, but he influenced it. And he had a crusade. Suddenly, the wife of a president -- Hillary Clinton -- took up the crusade. Did Kennedy, wielding his tremendous power, offer her something to make his dream, his crusade, a reality? Did he offer to make her president? Was he that powerful?

And when she failed, and he backed Obama, did he anoint the Young Nobody from Illinois -- the man least likely to be president of anything -- his proxy to make his dream of universal healthcare a reality? And all the other pro-abortion Catholics in the administration, were those not also Kennedy proxies? And was the hurry to get the draconian legislation passed, as Ted Kennedy was diagnosed with terminal cancer, a coincidence? Is there any such thing as a coincidence, where power is at work?

Ted Kennedy, we learned, "loved to joke about Chappaquiddick." Imagine that. It was on Chappaquiddick Island that a young, spoiled scion of a powerful family took a young girl out for ride one night, drove his car off a low bridge over shallow water, and left her to drown in it (it is said that she actually suffocated). He joked about that.

To be able to joke about such a thing -- a death of young girl, at the hands of a spoiled rich kid who intended to be the president of the United States some day, and therefore might have had a motive, under certain circumstances, if he were chillingly pragmatic -- is it not a mark of contempt for human life?

This brings us back to the Crusade for Universal Health Care. The sum and substance of this effort is a bill also marked with contempt for human life, with its scientific terms and formulas and arguments about who is most productive and who is not, and who will be denied medical care and who will not. Just reading anything by Dr. Ezekiel Emanuel, the intellectual firepower behind the "complete lives system" -- a "system" designed to prioritize medical care according to cost to the government, not individual need -- is a chilling experience that would be unbelievable if it weren't right there in black and white.

Kennedy's Crusade -- yes, it's even been suggested that it be renamed from "ObamaCare" to "KennedyCare" -- what was its animating spirit? Was it that fearful master, the tormented conscience? Or was it merely ambition, focusing on the closest thing to the presidential power that was almost his destiny? Or was it both? Was he trying to redeem himself in the eyes of his country and the Church, and at the same time prove that he was "presidential" after all?

Whatever it was, it has departed. That contempt for human life that made Kennedy laugh, and which was the defining characteristic of his life's work, no longer animates him.

Bury government healthcare, and the culture of death, with Ted Kennedy.

A picture is nice...

...even when you don't need a thousand words.

Not a coincidence.

...you'd think an enterprising copyright attorney could make a case.

Worth a thousand words...

Somebody gets it.

What if the Government Decides Who Lives and Who Doesn't?

Do you marvel at that possibility? You should - it's unconstitutional, on its face. And yet, this is the debate -- the ostensible debate, for it's this close to being codified in law -- that this constitutional republic is having today. It's unjust, isn't it, that the government is pushing laws that are patently unconstitutional? Of course it is.

Have you got your head around the implications? It only takes a few moments' realistic reflection, to see how fraught with potential for unimaginably chilling totalitarian scenarios a government controlled medical "industry" is. History has meticulously documented recent examples for us to learn from.

Do you marvel at the talk of "death panels," of "Quality Adjusted Life Years," of a "Complete Lives System," of the premise, under consideration for signing into the law of the land, that some people are allowed to receive medical treatment, and some not, based largely upon how many productive years they are likely to have left?

Do you recoil in horror at the idea that a dull, cold-hearted bureaucrat with a computer could someday look you in the eye and say, "it's been decided that you will get the pain pill, not the surgery," knowing it means the end of your life? Does your instinct for self-preservation, your God-given sense of justice, infuse you with adrenalin at the very thought of it? That somebody who doesn't care about you as a person has authority to dispose of your very life, and does so out of concern for costs, for utility to the state?

Have you ever wondered what it must feel like to be sleeping peacefully, to have your world invaded by a mechanism that is designed for one purpose: to eliminate you, and that because somebody who doesn't care to believe that you are a person has decided it makes more sense to him if you die, and the sooner you're out of the way, the better?

It happens 3,000 times a day in the United States alone; a million times a year. It's been happening for over 40 years. It's legalized abortion.

And it's about to come to adults. On what grounds can we call it unjust?

As long as

abortion is legal in the US, this country has no moral authority. You can decide for yourself if that matters or not. But with economic superiority past us, and solvency that much more so, that leaves us with little to stand on besides smoke and mirrors.

Consider the folly of this: our national debt is in the trillions and the country is "debating" (making a pretense of debating, really) the nationalization of 1/6 of the economy (the healthcare industry) -- that means making it a taxpayer-funded liability. With tax receipts falling because of increasing unemployment, how on earth with this ballooning debt be repaid?

Why, it's been assigned to future generations of taxpayers. But we currently abort about a million of them a year.

Not only that, but the command-and-control proposals for nationalized healthcare include plans to make abortion -- by diabolically twisted logic -- "healthcare," to be paid for by taxpayers. Recall the power of supply-side economics and ponder for a moment if abortions will increase once paid for by "the government." Remember, each aborted baby is one less "future taxpayer."

So, the plan that requires future taxpayers to fund it, funds the extermination of future taxpayers.

Does that seem like a good plan? Would you invest in a company that managed its resources in such a self-defeating way?

He's already had schools, streets...

and who knows what else -- probably entire galaxies -- named after him. Isn't it time he had his own postage stamp?



We like it.

Remember, dissent is patriotic!

Who's more KKK?

Heather Hogue, writing in The Examiner.com, reports:

Rep. John Dingell (D-MI) says town hall crowds remind him of the [Ku Klux] Klan.

Here's the clip, complete with the talking-head asking a question calculated to set-up the blustering, sanctimonious indignation of a man who must surely make the founders spin in their graves:

We can strip this utterance of its disingenuousness and reduce it to its bare essentials in a few tidy paragraphs. To wit:

First, these talking points, in which obama's spokespersons, formerly known as your representatives, demonize you for daring to participate in the American political process, have become cliche. The more these -- what can you call them besides "obama-bots" -- repeat them, the more ridiculous they all look.

But since they're bringing up the KKK (and Nazis, which we alluded to in the previous post on Fascism in America), let's remind ourselves of who really is more directly linked to the KKK, and who should be reminding normal, honest people about that wicked cabal.

By now everybody has seen the pictures and read the transcripts of Planned Parenthood's founder, Margaret Sanger, addressing adoring KKK members at some of their meetings.

I got your back!

By now everyone has seen footage of President Obama giving his valuable time to address Ms. Sanger's legacy organization during his campaign, and sending emmissaries there to speak continually.

And by now everyone's seen the stories and read the quotes from Hillary Clinton's acceptance of Planned Parenthood's Margaret Sanger Award for Achievement. That august event is recorded in three parts, conveniently presented below.

****

(During the first 60 seconds of part 3, the Secretary of State declares that "models" predict that nations most likely to suffer economic decline and social decay are those with the highest infant mortality rate. She then suggests that the solution is..."family planning." In other words, the cure for infant mortality is government funded abortion, and this is the price a society must pay for "economic growth" and social stability. This is consistent with Ms. Sanger's dictum: “The most merciful thing that a large family does to one of its infant members is to kill it.” Margaret Sanger, Women and the New Race (Eugenics Publ. Co., 1920, 1923))

These people who have duped you into electing them, who see "abuse of power" as a privilege, who liken you to "KKK" and "Nazis", who have hijacked the American system to create a Fascist nightmare, are becoming victims of their own native sloth. They make it so easy to make them look ridiculous.

The Bad News

is that a reasonable person cannot fail to conclude that fascism is now the operative model of the US government.

We're not talking about SS troops in the streets. We're talking about a methodology enforcing an ideology. I'm not going to enumerate the proofs, it's been done by far more intelligent, eloquent, and readable people than we are. We're just gonna say what nobody else wants to say: our government is now fascist (absolute control of an ostensibly free society) by totalitarian methods (neutralize true religion, use capitalism against itself, etc) in its behavior.

We've all read 1984, most of us experienced that brief wave of terror when we did, and then we convinced ourselves that it couldn't happen to us. But it has.

The Obama administration is executing with absolute confidence a playbook that is detailed and thorough and time tested. We have no idea what's in it, but it's clear from its strutting arrogance, its abuse of power -- beginning with the media -- that the group in power is in possession of an agenda that imbues it with a sense of absolute...well, we said before the election: Power. It's all about power.

It should be clear to anyone who has observed (and has the courage to acknowledge) the de facto nationalization of the media that we have been attacked upon our own soil by weapons of mass destruction: ideas.

The way to fight back is with ideas. Truth, actually, which are ideas that cannot be trumped because they are truth. Truth inspires people. And inspired people can move mountains. America is an inspired country. Our constitution is an inspired document. Our Founders were inspired men. Inspired men will not give a vain thought about the cost of a worthy undertaking.

Speaking of The Founders, John Adams declared:

"We have no government armed with power capable of contending with human passions unbridled by morality and religion. Avarice, ambition, revenge, or gallantry, would break the strongest cords of our Constitution as a whale goes through a net." — John Adams, October 11, 1798

As indeed it appears they have. Adams continued:

"Our Constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." ibid.

Since it's a matter of casual observation that the expression of religion has been excised from the town square and the dogma of morality has been emasculated to list of "personal preferences," it's clear that, as a people in love with a culture of death, we're no longer fit for the one form of government that is the least-worst of them all. The worst of them, history tells us, are as fearsome and wretched as anything ever conceived in the wayward heart and deluded mind of man.

But we are a moral and religious people, most of us; a streetwise yet excruciatingly tolerant one, too. We now have our work cut out for us. Would that this generation would apprehend its inspiration, before the lock on power that the uninspired aspire to becomes absolute.

They can put a man on the moon but...

Two milestones have been reached this week; actually, one milestone and the anniversary of another. It was 40 years ago this week that, astoundingly, America pulled off the incredible feat of putting a bunch of gutsy, brilliant guys into a carefully crafted explosive devise, aiming it at a great big moving target (the moon), and getting them there and back again. Incredible. Profound. Awe-inspiring. It conditioned the psyche of modern man to believe in the greatness of man, the power of the will driven by a cause, and the incredible chutzpah and overarching ability of those cowboy yanks.

This week, too, Pope Benedict XVI unleashed Caritas in Veritate, "Charity in Truth," upon civilization. It is his third encyclical.

As we are just beginning to digest it, we won't have a great deal to say about it in detail. But we've observed before that momentous events sometimes happen in pairs -- one secular, one sacred -- as if juxtaposing one another. We have marvelled at the fanfare given the former, and the neglect, if not outright malignancy, given the other.

In this regard, we're recalling the death of Princess Diana which was, perhaps, The Media Event of the Century (as the century ultimately became), and which occurred right around the time of the passing into eternity of Mother Theresa. As the century ultimately became a media century with celebrity icons, the latter could not be counted upon to boost ratings, sell records, advertising, T-shirts, concerts, or otherwise provide fodder for the insatiable appetite of commerce. In that sense, all was right in the universe.

If the chorus of media is any indication, the collective mind turned briefly (if narcissistically) philosophical, this week -- as philosophical as a collective mind can turn -- and berated itself for the lack of progress of the last 40 years, a condition it concluded could only be remedied by...another "moon shot." Not necessarily (though it's already been proposed) an actual "moon shot," but a Big Goal, something to lift man's collective gaze from his collective navel to the sort-of-transcendent. Not the actually-transcendent, mind you -- nothing deep -- but something more than that collective navel. Another Big Goal or Cause (global warming is looking like a bust). Something that can inspire hope (Obama has not delivered), awe, purpose, stimulate commerce, etc. etc. etc. A kick in the collective seat of the pants.

Putting aside for a moment the utter folly of trying to recreate, by will, the moments of magic past, let's take a bit of the inventory of man's progress, such as it is, 40 years on from that first Big Cause.

The end of the 20th century was a disaster for mankind by pretty much any measure except, perhaps, sheer technological wizardry. In the developed societies, crime was ubiquitous -- and not just people stealing to fill their empty stomachs, either. Gratuitous wickedness made our headlines. In both realms -- secular and sacred. People became nuttier and demanded the sanction of ever more self-destructive activities as "rights." Often, technological wizardry was the useful tool in the hands of the wicked as they imposed their wicked wills upon their victims. And war, too, even just war, became a science-fiction movie that was real.

In the lesser developed countries, dictatorships thrived despite the glaring example of the rise and fall of the Third Reich, the apparent, perhaps temporary, demise of the communist state's biggest bully, and Tienanmen Square. Wealthy nations grew wealthier, poor ones poorer. People still starved. Perhaps we didn't want to see bloated, dark skinned babies in TV ads anymore -- it was so '70's, and there were abundant pickings for fundraising right here at home -- because we were too busy turning our glances away from the faces of missing children on our milk cartons. "School Shooting" earned its place in the vernacular, as did the gruesome "partial birth abortion," the latter with its own, sinister debt to the progress of technology.

There's no need to go on, is there? In the 20th century, Technology was ascendant, and everything else went to hell.

The other event of this week, the Pope's letter, proposes a different kind of Big Cause: the cause of humanity. While that collective mind is gazing from its navel to the stars, the Pope seems to be saying, "love your neighbor. give to the poor. don't cheat in business." Things we all know, and sometimes -- maybe even all the time -- did and yet, if we did, how did we come to this deplorable condition of moral and now even financial poverty? Maybe we didn't really, collectively, do it at all.

The Pope is urgent in this message: Globalization is here. It's a new ballgame and this is no time for cheating and shortcuts. We've seen what these have produced. The old rules no longer apply. The linking of the corners of the globe by information technology has raised the stakes tremendously. The formation, from those corners, of unheard-of power -- capital and influence -- with blinding speed demands diligence in the moral issues because is it only moral fitness that can manage power. Technology cannot. The sheer volatility of the collective sentiment requires the steadiness of virtue to keep the ship aright.

The old rules no longer apply, but the oldest ones still do. Like that first moonshot, the Pope's letter is a sort of carefully crafted explosive device filled with gutsy and brilliant things, and aimed at the moving target -- that spacey habitation -- of the modern mind. And like that moonshot, it has hit its target. The question is, is there anybody home?

It would be a shame if the Pope's message was missed. Its truth is not going away. Either we learn to really love our neighbors in all we do or we're doomed to ever increasing tyranny and technological bondage. B-XVI is the antidote to Orwell. The first moon shot didn't save us from ourselves, why would we expect another one to? And why the dickens would we shoot for the moon when we can't even [insert persistent, unsolved problem of choice].

The Pope has rearticulated and put before us The Big Cause, the Real Cause. We confess that it's not easy to love people who are already so head-over-heels in love with themselves. Compared to this cause, moonshots are a walk in the park.

Note: Please, if you're going to borrow these ideas -- and we know you are -- do the right thing and cite the source.

Dear God:

Please, no more rock-star presidents.

Amen.

The $65 Billion Lie

The occasion, recently, of Mrs. Bernard Madoff's using the subway, and being ridiculed for doing so by the New York Post, is the inspiration for this little bit of rhetorical virtuosity.

Let's begin by putting things in perspective, something the for-profit media seemingly cannot do. Because Bernard Madoff's crime is, according to the headlines at least, running a "$65 billion Ponzi Scheme," a review of what a "Ponzi Scheme" is would be a good start.

Charles Ponzi, of Boston, recruited investors by, as all investment recruiters do, offering attractive returns. When he was unable or unwilling to actually produce those returns in fact, he did so by the sleight-of-hand device of using the subscriptions of later investors to provide the returns for the earlier ones. If this practice sounds familiar, it's because governments do it all the time, but they call it "Keynesianism" and it's perfectly legal, for them anyway.

At some point, however, later investors couldn't be found to pay off the earlier ones, and so ground the merry-go-round to a flaming halt. And since then, this age-old scam has been called a "Ponzi Scheme."

The principle of cognitive consonance requires an acknowledgement of the fact that the Ponzi-schemer doesn't simply take in money from gullible investors and salt it away in a Swiss Account for himself. No, he returns it -- redistributes it, really. And while redistribution schemes by any name are morally questionable, they are the stock-in-trade of progressive governments everywhere. But they claim the monopoly on the practice so that, if anyone else does it, it's a crime.

In fact, Mr. Madoff deposited his receipts in interest-bearing accounts and never exposed them to market risks. He never, for example, promised double-digit returns to pensioners and then buried them in vaporous derivative securities, as many hedge funds -- which still enjoy status as legal entities -- have. If anything, he did the opposite: he put his investor's hard earned assets in the safest possible places: bank accounts. Not much of a big, greedy scam, if you ask me.

Perhaps an accounting of the Madoff funds would show that Mr. Madoff skimmed the interest income. Or that he used the credit balances as backing for cheap capital for his own, successful, and legitimate businesses. I don't know what it would show, because I've never seen one. And I gather that it's because what it would reveal would be a terrible disappointment to the public. But one thing it would certainly show is that Mr. Madoff, however much he might have skimmed, did not steal -- could not possibly have stolen -- anywhere near $65 billion.

If Mr. Madoff recruited something on the order of $65 billion in investments, it follows -- by the very definition of "Ponzi Scheme" -- that he returned, or redistributed it to his investors. In either case, he certainly didn't steal it. His crime, therefore, is a technicality, not a theft. He also apparently had difficulty saying "no" when people accosted him to manage large sums of money for them. And for that, of course, they hate him.

Ever on the lookout for a sensational Public Enemy, the media can't acknowledge the facts. I say "sensational," because the true public enemies are simply seldom newsworthy. Imagine pitching the headline, "Government Redistributes Wealth Again Today" to your editor. It just wouldn't sell.

Mr. Madoff did do something so unusual, and so extraordinary, that it is worthy of a story: he got up one morning, and disclosed his illegal activities to the authorities. He wasn't being investigated -- in fact, the SEC ignored evidence that cried out for an investigation of him. Instead, he presented himself to the legal system fully ready to cooperate, and he did so of his own initiative.

I think it's a safe bet that there are lots of people riding the subways in New York City who would never confess their crimes to anyone. They're probably riding in limousines, too. There are people sitting behind laptops, hammering out news stories, who would wilt under moments public scrutiny of their personal shortcomings, who will never have to endure the full heat of a trial by public opinion.

As it takes a measure of integrity to confess ones wrongs, so it takes a measure of character to endure a public excoriation for it. The Madoffs, at least, will wake up better people for having done so.

Media Reports Story Accurately and Impartially.

Ha! Just kidding.

That would be blogworthy, though, if it actually happened.

Happy Father's Day, President Obama

Father's Day is the day that fathers everywhere celebrate being "punished with a baby," Mr. President.

Let's Play Connect the Dots

The following are some observations we've made concerning the current administration:

• The president has been pushing mandatory, national healthcare with an obsession from his first days in office.
• Bills mandating national healthcare are now being drafted; it's highly likely congress will fall into line and pass them and it's highly unlikely the president will veto them.
• The campaigning Hillary Clinton vowed never to quit the presidential race, and then she did.
• The idea of mandatory national healthcare was, during the Clinton administration, such an obsession of Hillary Clinton's that it was once known as "HillaryCare."
  
  We've noticed some other things:
  
• The president has a noticeable number of pro-abortion, lapsed Catholics in key places in his administration, including Secretary of Health and Human Services -- the position that would oversee any national health care administration.
• The president, while campaigning, was a keynote speaker at a Planned Parenthood event and made assurances of his commitment to pro-abortion policies.
• Secretary of State Hillary Clinton was "honored" with the Margaret Sanger award, Planned Parenthood's highest honor, at a recent event.
• The president's nominal Catholic cabinet appointees support the agenda of Planned Parenthood and many have past ties to pro abortion groups.

The common link to all these observations is abortion. Planned Parenthood, which is supported by the government to the tune of $371,000,000 this year alone, has a direct, financial interest in seeing taxpayer-funded abortion become a reality. A healthcare plan mandated by the government, that provides coverage for abortion, would make taxpayer-funded abortion a reality.

We know Planned Parenthood has "honored" the president and the Secretary of State, and, even if we aren't privy to any money trails at the moment, it's a safe bet that PP has financed these and other candidates as well.

If you see leaves moving a certain way, you can tell the wind is blowing, even if you can't see the wind itself. We see lots of things all blowing in the same direction here. We cannot see the wind, necessarily, but we see what it's doing. We wonder:

Wasn't is so very tidy the way Hillary pulled out of race, endorsed Obama, and popped up as Secretary of State? And isn't it interesting how Obama has adopted Hillary's obsession for nationalized health care? Isn't it thought-provoking how Obama and Hillary both sound like nothing if not pitch-men for the abortion industry? Isn't it likely that these two, er, forceful personalities, when they team up to ram socialized medicine down the throats of Americans, will make good and sure "reproductive rights" are included in their plan for "healthcare?"

We further wonder who, in the final analysis, benefits from these personalities and their happenings?

• Obama got his Presidency.
• Hillary got a good shot at her "HillaryCare."
• Planned Parenthood's got good shot at a direct deposit from the taxpayers.

Though they would have you think they're standing on principal and doing what's best for you, we'd say they're angling for power and more power. About the only thing that can make people so ruthlessly pragmatic is either money or power, which are pretty much fungible. And since all the ingredients required to make a political machine hum are here, i.e. lust for power, lust for money, and, alas, somebody to pay the bill, this is what we're wagering on. We bet you're going to read about the smoking gun, eventually.

Tillers, Killers, and Turning Points

The blood was hardly mopped up off the floor of the Lutheran church in Witchita, Kansas where usher and late-term abortionist Dr. George Tiller was gunned down, when the pro-abortion press releases got full rotation in the national media; and before the pro-life spokespeople responded.

In less time than it takes to say "public relations blitz" the news of the abortionist's murder was followed by boilerplate declarations of outrage at "anti-choice" and "extremist" violence with a smattering of hero-worship for the prolific practitioner. So frantic was the output that editors were seemingly bypassed, at least in the case of the particularly logically-contorted remarks about vigilante "anti-abortion assassins," and the late Dr. "making the ultimate sacrifice."

Typically, the pro-life side released its "we do not condone violent acts" disclaimer. By now everyone knows this is true, but the essence of public communication is stating the obvious and stating it positively.

Dr. Tiller's specialty was late-term abortions -- loosely defined as abortions performed after the 2oth week following conception.

All this is very well known. And that's a problem for the pro-choice/pro-abortion side of the debate. It's a problem because, at 20 weeks, arguments invoking the "blob of flesh" device just don't work. At 20 weeks, it's clear to anyone who looks that a "late term abortion" elimates a person -- a little baby. Eliminates -- kills -- in the most sinister and painful of ways.

It is a problem for the pro-choice argument because by now, everybody knows (0r can know, after spending a few seconds on Google) that premature babies (those delivered before week 37) have survived when delivered at the 21 week mark. Nobody believes that what is a baby at 21 weeks was a "tumor" at 20.

It's a problem for the pro-choice side because so many of that persuasion -- NARAL, NOW, the other late term abortionist, even -- curiously -- the president of the United States -- have gone on record decrying "extremists" -- which of course means anyone who dares to object to abortion -- they've gone on record decrying this "heinous crime;" yet because the late Doctor's specialty was plainly, unmistakeably, gruesomely the violent torturous murder of viable infants, your average American, who might not have given the term "late term abortion" a second thought, can't avoid thinking about it now. And when they think about it, they will do what all normal people do: recoil in horror.

It was recently reported that the majority of Americans consider themselves "pro-life" (51%, as against 42% "pro choice). How can this be, when the rock-star, reportedly universally-loved near-messiah president who was just elected is so vehemently, unapologetically in favor of abortion without limit? No matter. It is.

This great majority, this Pro-Life America, is listening to NOW, to NARAL, to the rock-star president, to CNN and the ubiquitous media defend Dr. Tiller's livelihood as though were he a saviour of women, but they are fully aware that, as a practitioner of late-term abortions, he really was a dismemberer of their babies. They know the oracles of our age who rush to defend his trade have got this one wrong -- that, wait a minute, we're talking about tender little babies here, and did this guy actually kill them? They're not okaying vigilantes anymore than they are condoning the killing of babies, but the oracles have lost credibility.

Americans know that presidential protocol doesn't include an interruption of the Sunday routine to make a presidential announcement singling out one murder in America (they're all tragic) to denounce it unless the victim is some sort of national hero or dignitary. Or some great public enemy. And they know that, if Dr. Tiller was such a hero to president Obama, then there's something really wrong with the President. He's either not paying attention, and that's bad, or he's really in favor of this unspeakable procedure, and that's...almost unthinkable.

There are times in history when people's eyes are opened, when they are jarred conscious from media-induced myopia, when they finally notice an injustice, and their will is mustered against it. It's as natural a response as a crowd tearing down a statue of Saddam Hussein; or rallying to take sledgehammer blows at the Berlin Wall. Times when people say, "we see now. Enough is enough." And they act. And they speak. And they act. And they cannot be lulled into complicity of complacency any longer. People of goodwill might be temporarily convinced enough by high-falutin' discussions about "the beginning of life" or the definition of "viability," to be agnostic about abortion, but, please, everybody knows what a baby looks like, and everyone knows that a "late term" pregnancy means there's a baby well on its way.

There is a majority -- it's out of the closet, it's been reported and put into the public debate -- at odds with a very vocal, increasingly shrill and illogical sounding minority -- albeit a very powerful minority. And this minority is on record -- in the public debate -- as advocating with all its influence something the American people just won't tolerate. Something they know is not merely misguided, but sinister. Americans have been hearing about pro-life "extremists;" they know they aren't "extremists," they're just ordinary working people, raising families and trying to pay the bills. And they know -- we all do -- that there's something very "extreme" indeed about pulverizing an unborn infant.

This is a moment, a turning point. All the momentum is about to be reversed -- it can't happen all in an instant, but there is always an instant when the other side feels immovable resistance and irresistible encroachment, and it knows it can no longer dwell boastfully in the dominant position.

This America has seen its president defend a practitioner of procedures it now understands are abominable. Tolerance is no longer an option; tolerance of "violent acts" against the innocent never was.

Not that you can trust their ratings, but...

U.S.’s Aaa Credit Rating Is Stable, Moody’s Says...goes the Bloomberg headline.

No credibility issues with Moody's ratings though, right?

Clean Energy Jobs for Everyone

It was broadcast on some "news" network that "clean energy could add millions of jobs." The headline grabber was run under the authoritative mug of none other than Al Gore. Talk about "playing on our fears."

Anyway, since a picture is sometimes worth a thousand or so words, we offer the following commentary on the assertion:



The Wall Street Journal offers this discussion on this particular bit of Obama Nirvana.

"Loose Lips," Mr. President.

Some things are better left unsaid. It doesn't mean that they aren't true, at least partially, or couldn't be true: it means that categorical statements are privileged information in many cases and often obfuscatory without detailed and complex explanations. Just as often they are prone to misunderstanding and in some circumstances will cause disastrous behavior. There is probably an unwritten rule somewhere that says, the more influential you are, the fewer categorical statements you should make, because a) you're not omniscient and b) the nature of influence is that people are going to misunderstand, sensationalize, and overreact to anything you say about in proportion to the importance of your office.

For example, if you're the CEO of some entity that owes its existence to its credit rating -- say, Bear Stearns or Lehman Brothers, for example -- you probably won't go on national television and tell the world, "we're out of money." Even if the statement were strictly true, prudence would prevent such a farce. Does this really need to be explained to anybody? Given how fast the mere rumors of that condition drove those gigantic firms into dust and erased collective centuries of work and wealth, and then put taxpayers on the hook for the 11-digit losses, no CEO in his right mind would ever expose himself to the accusation of malpractice by being so loose-lipped.

What happens when the most powerful "CEO" of them all, whom "the whole world is watching" -- the president of the United States -- does exactly that?

Well, we're going to find out, because the President of the United States of America announced to the world, “we are out of money.” And in the next breath, as if to prove how disconnected from reality he is, he promised that he's going to continue spending (on socialized healthcare, for example) as if that doesn't matter. He goes on:

"I am absolutely committed to keeping this [national health insurance] process moving . . . "

That is, not only are we out of money, we're going to continue to make sure we're out of money. Just imagine [insert big Wall Street CEO's name here] saying such a thing. Let's consider the implications of such a statement.

When it is merely rumored that a business is having money problems, its lenders demand collateral, add risk premium to their lending rates, and/or disappear altogether. Every tradeable asset remotely associated with that entity is immediately sold and shorted, reducing the book value of the entity in a self-fulfilling downward spiral. When it was rumored, last year, that Bear Stearns was having a cash crunch, it’s lenders did all the above and within days a Wall Street mainstay was acquired in a sham transaction for a nominal sum.

When, shortly thereafter, the same rumors started circulating about Lehman Brothers, the lenders followed the pattern and within days, a Wall Street mainstay was but a memory. Gone. Billions of dollars in assets marked down to pennies on the dollar.

Recall that these events preceded the “world financial crisis” wherein we currently reside.

Enter the Chief Executive of the United States who, after ballooning the national debt to a record amount, turns to the nation’s creditors and says, “we have no money.” Had the Chief Executives of Bear Stearns or Lehman Brothers acted with such indescribable incompetence, they would have been lynched on national TV, rhetorically and legally. What about the Chief Executive of the United States? One can’t use terms like that when referring to him.

As we write this, we note that the US dollar, on world markets, is being heavily sold off, and it’s so obviously a panic sale based upon Obama’s national debt that even the financial press has noticed the connection. But instead of reassuring our creditors, the president tells them, effectively, “your worst fears are correct. The US is broke.”

We wager that the current selloff in the dollar is a “run,” a predatory short sale by speculators reminiscent of the same executed by George Soros on the Bank of England and its British Pound in the early 1990’s. For the president to announce that the US is out of money is to announce that the dollar is overvalued – it is, in other words, to tell the Soros’ of the world, “you’re right to sell.”

Currency speculators used to get ulcers fretting over the tiniest hint by a finance minister or central banker of impending intervention in support of their currency which would decimate the speculator's short position. But Mr. Obama has broken the unwritten rule that a nation's president is to always insist on a strong currency (regardless of the policy followed by the central banker). By admitting that the US couldn't intervene to support its currency even if it were inclined to do so, the community-organizer-in-chief has taken all drama out of the process of staging a run on a currency. The Soros' of the world must be grateful for the assistance. I know I would be.

The US Dollar is legal tender backed, as are all US debt obligations, by “the full faith and credit of the US Government.” Your president has told the world, “there presently is no basis for faith in our debt or our currency.” Your president, demonstrating a community-organizer's understanding of economics, has buried your country in debt and then turned and told the world, “we’re broke.” As debt financing is dependent on confidence, when the Chief Exec is so clearly devoid of the latter, why would anyone engage in the former?

What remains to be seen is just how swiftly the Chinas and Japans of the world will be spooked into dumping US Treasury bonds and driving interest rates through the roof, at exactly the time when they need to be lower. If you thought nobody was borrowing before, image how much nobody will be borrowing when interest rates skyrocket. If the economy was stalled then, just imagine how stalled it will be when nobody lends to the US.

Contemplate this with us for a moment. How will government function, if there’s no money to finance it? Will our lenders, upon whom we are so heavily dependent, demand collateral? The market will drive up rates, that much is inevitable. Will creditors disappear? Will the US follow in the footsteps of Bear Stearns? What will the IMF demand in order to float us an emergency loan? What will the nations, which are currently so hostile to all things American, but especially to "American" financial crises, demand in order to pony up some cash and/or renegotiate our debt?

The next week, and the weeks following, will begin to show the effects of the words that might well be known as “the words that destroyed America.” He may not (or may, how would we know?) be the antichrist, but he’s definitely the anti-Washington, the anti-Hamilton, and the anti-Bush. And he’s manifestly anti-American, Barack Hussein Obama is.

“Oh, pooh-pooh,” you say. “Everyone knows the US has been broke for ages.” No, not so. Everyone likes to cynically remark that it is so, but everyone has also winked at the “deficit spending” that has long been a mainstay of ever more left-leaning policy. Technically speaking, because of the value of the "full faith and credit of the US government," it’s not likely that the nation has ever been truly “bankrupt” -- and never so officially. In any event, no president would ever dare utter such a thing publicly, even in the unlikely event he himself actually believed it. But this is the Presidency of Firsts, and this president is the first to tell the world financial markets, which have just trashed some of world’s largest and oldest financial institutions for insolvency, that the US is, indeed, insolvent. Because, apparenly, he sees the US as insolvent.

The best possible next event would be an orgy of backpedalling on Obama’s unfortunate comments by the administration to the heady music of spin-doctoring by the media. This is the best we can hope for. But not matter how zealous that effort, or how cacophonous a spectacle, the markets have heard the president, who has confirmed their hunch in an unmistakable way. In doing so, he has given them the ammunition they need to bring this already vulnerable nation to its knees, financially, weakening its reputation further, demolishing its bargaining position in the capital markets, and possibly forcing it “out of business.”

The worst possible events would be a panic selloff of the dollar and US treasuries on world markets. That would naturally crash equities markets as well, and what you thought was a “financial meltdown” last year will be merely a bad day compared to what must follow.

The party is truly over for America. Ironic, isn’t it, that America’s party president is the one who killed it?

3/4 Of The Truth (is still a lie).

Obama recently went to New Mexico to tell the people there that the U.S. Long-Term Debt Load [is] ‘Unsustainable’, according to Bloomberg News.

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

It's true that what is "economic stimulus" in Washington, DC is "mortgaging our children's future" in places like Rio Rancho, but you wouldn't expect someone who spent the last 100 days writing trillion dollar checks, backed by "our children's future" tax payments, to financial institutions, assuming the debt of enormous, failing private companies and such to plainly say so. Why, he even sent his secretary of state to China to tell Wen Jibiao, effectively, "No worries, you can keep buying our debt."

The article read like von Mises, but was quoting Obama. Something was definitely fishy. I continued reading, and wondering, "what could possibly motivate this two-bit Machiavelli to speak such a truth?" Then I came across the punchline:

“Most of what is driving us into debt is health care, so we have to drive down costs,” he said.

So, are you saying, Mr. Obama, that Americans went into debt to pay for...healthcare? Not for toys and vacations? Not for second homes, SUV's, big-screen TV's and The Good Life in general? And not, especially, because your administration has socialized the losses of the largest business failures in history?

Perhaps it depends on what you mean by "most." In any event, It will be interesting to see what this presidential obsession with healthcare and cost cutting is all about, and how it's going to impact the lives of everyday people in a nation where said president's regard for human life is of such a quality that he can refer to an infant as "punishment."

Just wondering...

How can a country that is bankrupt possibly afford to give healthcare services to all its citizens?

It can't, of course. But that won't prevent the powers that be from promising it anyway.

Bad ideas have consequences, as witnessed by the seizing up of financial systems globally. The primary cause is understood to be leverage -- buying now, hoping to pay later -- enabled and hyperleveraged by "financial engineering."

Suffering, as so many are, through the consequences of the wedding of bad policy with powerful technology, people ought to be forgiven for wondering what sort of Frankenstein a nationalized healthcare scheme might create.

One can't help what sorts of creative ways quants being prodded by bureaucrats might come up with to balance books that cannot in reality be balanced. What sorts of cost cutting measures might they dream up. Might they run complex models that the cost of healthcare to the taxpayers might be reduced by X-millions of dollars per year for each day that X infirm citizens life-spans are shortened?

Is it not inevitable that there will be whiz-bang genetic tests that "prove" that a certain baby is bound to have this certain infirmity and therefore will be too costly to allow to be born?

Too bad we can't put the "fiction" back into "science fiction."

New York, you ARE A-Rod.

Self absorbed? Check.
Adulterous? Check.
Ambitious? Check.
Insecure? Check.
Vain? Check.
Gifted? Check.
More money than sense? Check.

There's a principle in pop-psychology that, if something somebody does really bothers you, it's probably because you can't stand the same trait in yourself. Valid or not, it would certainly explain New York's pious disgust with Alexander Rodruiguez' high-visibility dysfunction.

Oblivious to it all, he walks up to the batter's box and belts out a 3-run home in his first at-bat this season. He is Mr. New York.

Throw the Bum Out

A long time ago, in a galaxy far, far away, the national media made a headline out of every niggling trip a corporate CEO took in the company jet. The flames of public outrage were stoked as one editorial after another demanded to know how they could be so audacious, so wasteful, so negligent of shareholders' interests, when the companies they were supposed to be running were bleeding red ink, reaching out to the government for bailouts, etc. etc. ad infinitum.

Remember the outcry to "throw the bums out?"

But when the entity is the United States government, and the irresponsible party is the president, and interests being betrayed are those of the citizens and taxpayers of the country, well, somehow, that's different.

Different in at least one way. If Obama had gotten drunk, stolen a tank and gone joyriding through the streets of Washington, DC, that might have been more egregious than the spectacle of Air Force One buzzing Lower Manhattan the other day. But not much else really comes close.

In one colossal blunder this president has made a mockery of the symbols of his office, a mockery of the American people, a mockery of sacredness of Ground Zero, a mockery of the memory of 9/11 and the people of New York, a laughingstock of the office of President of the United States before its citizens and before the world.

This story may be buried once somebody is fired, but it will never die. If abuse of corporate assets is cause to "throw the bums out," how much more is abuse of national assets?

Throw the bum out.

A[nother] New Day of Infamy

The last time an airliner flew so close to downtown Manhattan, it was “a New Day of Infamy” and “evil was unleashed upon the world.”

A New Day of Infamy

This time, irresponsibility of the worst kind was unleashed as the President's 747, Air Force One, in the company of a fighter jet escort, took a joyride down the Hudson River, zipped around the Statue of Liberty, and went on its merry way.

There was no warning to the people working in skyscrapers, and since there was no reason not to fear the worst, several buildings were evacuated. Lower Manhattan, you see, has learned to take the threat of wayward jets seriously.

Eventually, an excuse was disseminated through the national news media: it was a photo-op.

A what? The White House sends a 747 down the Hudson River with an F15 in tow and it’s a “photo-op?” For what?

Air Force One "buzzes" the Financial District

Anyone who’s ever been a parent, or who has ever been a child, knows an evasive answer when he hears it. “Junior, what were you doing tearing up the neighborhood in your car?” “Oh, ma, it was a photo-op.” Translation: “It was anything but a ‘photo-op,’ and don’t bother asking again.”

So it’s a safe bet that the American people, who own that jet and employs its staff, will never know for what purpose it was used on Monday, April 27, 2009, or why our peace was disturbed with such disregard for the eerie likeness it had to that morning on the New Day of Infamy, when evil was unleashed upon the world.

Whatever the truth is, it was a ridiculously irresponsible thing to do. We trust we aren’t the only ones left with an uneasy feeling in the gut when attempting to comprehend the depth of the void of sense in the highest office in the land that could have resulted in such a careless, irresponsible prank.

We can’t get the image of the President of the United States in his Panama Jack hat, smoking a joint, surrounded by floozies, taking the American people’s nice big jet out for the ultimate joyride. Even that's more plausible than a "photo-op." After all, Bill Clinton had his oval office, his cigar and his intern. Why should Obama be outdone?

Put on Your Overcoat

...and play Columbo for a moment. What is up with the Obama-Planned Parenthood-Nominal Catholic (Pelosi, Biden, Sebelius, et al) axis? What's the link here? We think the oh-so-clever Obama strategists (Axelrod, you magnificent bastard) have decided to charm every Catholic that can be charmed, buy the ones that can't, and ignore the rest. When the good detective rubs his chin and asks, "but who benefits?", it's clear that Planned Parenthood is the one cashing the biggest checks.

National Health Care, the obsession of Hillary Clinton (and therefore very on-the-plate of her lapdog, Barack Obama) that provides expanded taxpayer funding for abortions is something that Planned Parenthood must be drooling over. Perhaps even engineering. We don't doubt that their ominous boast of playing a "unique role in the Obama administration" is related to some such strategy. Unique indeed. When was the last time a corporation played any role in a presidential administration?

Even if, somehow, you remain "pro-choice," are you pro-choice about your president being in some corporation's pocket? You weren't when they were talking about "Halliburton."

We think these development suggest a strategy, and one that indicates unequivocally just how important it is to neutralize the significant Catholic presence in the marketplace in order to install abortion as a taxpayer-funded "right." A diabolical manipulation of the political system and an unthinkable abuse of executive power, no doubt. But also quite a revelation on the formidable essence of the Catholic vote, needing, as it apparently does, such top-priority containment by the Axis of Death.

We also think it likely that this strategy will backfire by uniting genuine Catholics in America and worldwide to finally insist upon the overthrow of the death-mandate in public policy.

Too Strange to Be Fiction

A few ideas that are still in the oven:

Virtual Village. A nation is many things, but viewed through the lens of a pragmatist, it can be reduced to a contract of sorts between people and government. A pragmatist will see obligors and obligees, even employer and employees. A really pragmatic pragmatist will see it less as a contract, which implies (and may even require) the free will of both parties to be validly entered into, than a master-slave relationship. After all, while it's nice to think in terms of liberty and other lofty ideals, the bottom line is that, if you live on earth, you belong to some nation or another.

And while few like to admit it, if you're compelled to pay taxes, you are a slave of sorts. You have a very long leash, granted, but ultimately, if the Man wants you, he knows where to find you and make your life miserable. Conditional liberty, at best.

The pragmatist -- you know, the visionary, assured problem solver so desperately sought in our troubled times -- will view people, ultimately, as tax revenue to some national (or, alluding to our point, "supranational") authority. It matters little to a pragmatist where within the borders of that authority you reside, or what you do with your time, so long as, come April 15, you're paid in full.

When the pragmatic essence of citizenship is stripped down to the tax authority/taxpayer relationship, the physical definition of nationhood ceases to be relevant.

Imagine, then, if inch by legislative inch, some sort of supranational authority is created to tax financial transactions executed on the Internet. All sorts of laudable and, well, pragmatic, sounding reasons can be conjured up to justify such a thing.

Now, in order to consider possible future outcomes, we have to invoke the principle of the "slippery slope," along with its cousin, the dictum that "absolute power corrupts absolutely" -- which we might rephrase thusly: "power corrupts in proportion to its absoluteness." With these time-tested principles in view, considering things like global financial "meltdowns," G20 resolutions to create a "supranational currency," and high-minded calls for "global solutions" and "New World Orders" might add a bit of feasibility to the context.

In light of the realities of these sentiments and the popular delusions that support them, we put on the table (before anybody else, we'll wager) the proposition that national citizenship, in its current form, will be subordinated to "supranational citizenship" -- a compulsive contractual relationship with that "supranational taxing authority."

"Impossible," you snort. "Democracy is on the march worldwide. 'Compulsive governments' are dictatorships and those are so 20th century! People will never part with national citizenship..." Well, there are lots of progressive minded people who'd be in favor some fun sounding experiment like "global citizenship." But there are lots more sane, responsible citizens who'd never countenance such a notion. It's OK, they don't have to. It can happen anyway, finally. And there are, as history rushes on, decreasing odds that it won't, in some fashion.

Think of national citizenship as your underwear, supranational citizenship as the suit you wear to work. You don't need to remove the former to put on the latter. A global taxing authority can be "put on" over your national one in the right political climate (one, say, that traffics in terms of "global solutions," "world presidents," and "global currencies") with the right economic justifications (world financial crises, for example). From there, with a little of the Slippery Slope and Power Dictum effect, you're a citizen of the world, for tax purposes! Sure, you're a citizen of your country, too, but so what? That's just a small part of the world.

So, you'll grant this as a possibility, but stop short of connecting it with "citizenship" and global authority. No worries. It needn't be explicit. It needn't be subjected to a referendum. Was the fact that you cannot conduct any business through any financial institution without disclosing your Social Security Number ever put to a referendum? You cannot even obtain a library card without it anymore.

The point is that absolute authority can be de facto. And it frequently is. No social security number, no bank account. If you start spouting off about your right to privacy and the fact that there is no explicit provision in the Social Security Act that requires you to disclose your unique personal identifier to anyone other than the federal government, the clerk at the library will call security to have you ushered out before you finish the sentence. You might even be hauled in on suspicion of being a "right wing extremist."

Put in these terms, it seems almost inevitable, doesn't it?

We live in very confused times. Not long ago, people were using the term "messiah" and Barack Obama in the same sentence. The press invoked images of "president of the world." There was a time, not too long before they did, when such blather would have been unthinkable, or about as thinkable as, say, gathering in a park and waiting for the Mother Ship to come for you. But it's not possible to rid the public mind of even that sort of delusion anymore. In times like these, it seems almost anything is possible, and little of it looks like fun.

Nor is to fun walk around think about stuff like this, but somebody's got to do it.

The Margaret Sanger Reader

Since the Federal government has increased the amount of our tax funding to Planned Parenthood from $337 million to $350 million annually, we thought your investment in that organization merited something more than the occasional soundbyte handpicked for you by public relations experts. So here's a quote by Planned Parenthood's founder, Margaret Sanger, we found at NRO:

‘We want fewer and better children . . . and we cannot make the social life and the world-peace we are determined to make, with the ill-bred, ill-trained swarms of inferior citizens that you inflict on us.”

That ghastly message appeared in the introduction to Margaret Sanger’s 1922 book, The Pivot of Civilization.

This begs the question, is world peace, in Sanger's mind, for the children or in spite of them? A rare bit of truth in advertising, nonetheless. What's more effective at ridding the world of "ill-bred" children than Planned Parenthood's cash cow, abortions? Oddly, we don't detect that a "woman's right" is of any moment in Ms. Sanger's vision, save, perhaps, as a means to its end.

Given President Barack Obama's curious (we're being charitable) carrying of Planned Parenthood's water and cashing of their checks, one can't help but wonder, is the goal of "fewer and better children" one the current administration shares?

Surely our readers have seen the endless media coverage of Secretary of State Hillary Clinton receiving Planned Parenthood's "Margaret Sanger Award," whereupon she declared that she is “really in awe” of the organization's founder. What's that? You haven't seen the media deluge? Perhaps it's because there was none. Our Google search found all of four references, each from a somehwat obscure Christian website. Apparently the role "conscience of the people" has been delegated by the legacy media to online upstarts.

We mused, in an earlier post, about the irony of the Secretary of State of America's First Black President exchanging gushing endorsements with Planned Parenthood, whose founder is depicted in this curious situation:

We thought this is the very sort of thing the media was empowered to expsose. We suspect that if some executive in the previous administration was being lauded by a group whose founder basked in the KKK salute, you'd hear about it.

Why didn't you hear about this?

Obama Saves Captain Phillips from Pirates!

The President is indeed a hero. While circling the globe building much needed unity among all nations, and restoring the almost-unrestorable reputation of the US at the same time, and while saving his country and the rest of the world from economic Armageddon, Obama managed to shoot three Somali pirates simultaneously at exactly the right moment, freeing Captain Richard Phillips.

Earlier news reports mistakenly identified Navy Seals as the recue heros, and Captain Phillips as a hero for his willingness to exchange his life for the safety of his ship and crew.

Asked how, given his peace-loving ways, he was able to make the difficult decision to take another human life, Obama responded: "That was difficult at first. As you know, I'm a praying man. You have probably seen pictures of me at various churches, at the Wailing Wall in The Holy Land, praying, praying, praying. So I did what the American people elected me to do: I prayed. As I was praying, Rahm came to me and said, 'Mr. President, I have a strategy: think of these as very late term unwanted pregnancies.' After that it was easy. I just thought of them as fetuses, and I chose to abort them! Rahm has signed off on this, so it's all legal."

A Primer on the Coming Global Currency

Having spent the last century teaching the rest of the world how to function in a civilized, productive economic order, and having enriched much of it by outsourcing container-loads of our productivity and going into massive hock [not hawk], is the US now about to be, in a moment of mortal weakness, relieved of its role as benefactor of the world?

The G20 has agreed to capitalize the IMF with $250 billion in SDR’s -- “special drawing rights” – a composite currency, prototyped by the Euro.

Details are by no means in abundance on this. If few things are more opaque and mysterious than derivatives, the IMF is one of them. Understood, if at all, only by initiates, one secret world is being invoked to remedy the faults of another. The media, as we will see, are spinning the story in real time. What hope is there of grasping this for us mere mortals? The best we can do is make educated guesses. To wit:

Think of the IMF (or some surrogate entity), in this capacity, as acting on behalf of the world as the Federal Reserve acts on behalf of the United States. And, please, by all means, don’t stop there: exercise your imagination and contemplate the implications for national sovereignty once a supranational body controls the purse strings. If you’d like an analogous situation to help you picture it, think of Citi, GM, and AIG on the dole and under federal control. The media jokes about the “Autocrat” in the White House, put in the driver’s seat, as it were, by federal bailouts to these businesses. Do you like having Obama running GM? You’ll love having some Eurocrat running your healthcare system, then.

Alarmist? What you will have, dear reader, is the lifeblood of a market economy -- credit -- being controlled by an entity that isn't subject to your constitution and, in fact, probably has been nursing a grudge about it for generations. Undoubtedly the US will have representation in such an entity. But representation isn't control. Perhaps it's right to be alarmist.

Think of a committee of foreigners deciding how much of the US debt gets refinanced by SDR’s, were the market to trash the dollar. How might that go? Probably about as well as any other smoky back room power-play, only instead of good old boys deciding the terms, a bunch of self-righteous UN types does it. National salary caps? International “rich” tax? Reparations for historical “wrongs?” Social engineering covenants? If that doesn’t scare you, then think about moral hazard writ global: everything for which Alan Greenspan has been excoriated on national television by the morons in congress, brought to you instead by a mealy-mouthed panzy from Brussels. To whom will the world turn for a bailout then? If aliens don’t exist, they will have to invent them, along with an intergalactic currency with an intergalactic central bank to refinance the debt. It is, after all, all about confidence. Which might be another way of saying, it’s a con.

But things can’t happen all at once. The media, during the G20 meetings, dutifully passed along its emissions, and dutifully back-pedaled and qualified its reporting once the reaction to said emissions was expressed in markets. First, from Russia, the call for a global currency. Then, as if on cue, a paper from the governor of China’s central bank, supporting the idea. Not long after this, Tim Geithner’s historical, drooling endorsements on the creation of SDR’s: “we’d love to see that.” Indeed.

By the time Giethner opened his mouth, the markets were getting the drift of the G20’s Big Idea. That single utterance was the straw that broke the camel’s back: it had such an immediate and destructive effect on the price of the dollar in foreign exchange markets (it dropped over 1% within moments) that he was forced immediately to recant. As things are currently being spun by the Financial Times, everyone misunderstood all this SDR talk; the G20 resolutions are “unlikely to threaten the dollar,” and nobody meant what we told you they said a couple weeks ago, especially Timothy Geithner.

We propose the following translation: “If the dollar crashes, the whole world goes to smash, so forget all that SDR stuff.” Meantime, of course, the IMF is capitalizing SDR’s, and we’re betting on seeing a drip of international debt financings denominated in them, just as if the SDR were a regular currency, and the IMF was its Central Bank.

Just a drip, at first, until the public mind has been made to forget the G20 comments; lest the natives get too restless. But the drip will turn into a stream, etc., as the world decides its has outgrown its need for the United States to be its big brother now that its heretofore bottomless, benevolent pockets have finally come up empty. It is painfully clear that the Unites States is bankrupt, and that future generations must be taxed to repay our massive outstanding debts.

This, naturally, concerns our debtors. The SDR is a clever shot at a fix: create a new, fiat currency and use it to support an economy as the dollar once did. The cost, of course, is the United States’ position of economic leadership in the world. Oh, we’ll still be the workhorse. We just won’t own all the stock. In this round of poker, we’ve folded, but the house may extend us some margin in order to make whole our competitors. Instead of the US working its way out as it always has, it’s being subsumed into a socialistic international financial order that will hinder its ability to be productive and will likely worsen our debt picture. Think of the tail wagging the dog. It’s a very sophisticated form of slavery, debt is.

Now that the world understands central banking, and a singular moment has come, it’s stepping up to seize it; now, while there are still international markets that function because of the status of the dollar as reserve currency -- now is the time to piggyback upon it and launch its international supplanter. “Global solutions are needed,” they say. “A new world order,” they cry. Even the president of the US thinks his country has seen its better days, and won’t shut up about “European leadership in the world.” About the only thing that can delay or interrupt this development is a disruption on par with a world war. Or, however unlikely, the holy wrath of the American people who, the last time we checked, were actually responsible for the decisions their government makes.

China and Russia are two elephants on the world stage that seem to be good and ready to hedge their reliance upon the dollar. From a purely academic viewpoint (which, unfortunately, is the viewpoint of many policymakers) hedging anything makes sense. It makes sense to hedge your portfolio if you’re investing. It’s not likely that selling a bit of one stock to buy another is going to cripple the future of that company. But a worldwide rejection of the US dollar will decimate US national sovereignty. And this is in the offing, just as the administration has announced historic cuts in its military budget.

You might as well put away your flaky novels, dear reader, ‘cause you’re living in the flakiest novel of them all: post-modern reality. Contrary to press releases claiming otherwise, this is the official launch of a global currency that will very likely supplant the US dollar as the world’s reserve currency. You may not (or may) ever buy a cup of coffee with an “SDR,” but no matter – it’ll be at work behind the scenes, behind the dollar in your pocket.

Baseball Speaks

Apologies in advance, for I don't have time to polish this and am just going to lay it down as it comes to me. Not that "polishing" has ever helped...

Today I had my first iced-coffee of the season. That means spring is officially here, in my universe. The other sign is, of course, baseball. I find something new to love about baseball each and every season. And something new to disdain, like the ridiculous salaries these guys get. But it's mostly love -- and it's appropriate that Baseball is America's national sports pastime. It's deep and beautiful and quirky and accessible to everyman all at the same time; a game for the simple and the sage alike. This also makes it, somehow, quintissentially New York.

Today I was reading about some things Joba Chamberlain said when he was stopped for drunk driving last year. How do these unflattering videos find their way into the media, incidentally? Bored, meddling cops peddling them? I digress...

It occurred to me that baseball has a tradition of plain-spokenness. Think of Yogi Berra: "it ain't over 'til it's over." Has any mortal utterance ever been more unequivocally true?

Joba fell prostrate before the New York media for observing to a Nebraska State Trooper that "New Yorkers are rude and don't have manners." Can anyone argue that this is indeed true of most of the people one encounters in New York, even if they aren't all New Yorkers? How can a kid from Nebraska who just arrived here be expected to know the difference? You could add that most of the people here are self-absorbed, insecure, shallow, and a little on the dumb side, too. Everyone thinks it. They just won't say it.

Joba also remarked, probably in answer to a trooper's inquiry, that Yogi Berra "might not be as tall as the front of my car." Yogi acknowledges this, and even the most politically correct New Yorker realizes that spinning this into an offense is non-starter.

It is only natural that my thoughts would drift to John Rocker the way a line-drive drifts into the cowhide-clad paw of a shortstop. He was excommunicated for daring to utter that -- news flash -- gay people get AIDS, ride on subways, and, what' s more, he might not want to sit next to them. Is there anything factually inaccurate in this statement, and doesn't he have the right to not want to sit next to someone? Just about everyone you meet on the subway acts like they don't want to sit near anyone of any race, creed, color or taxonomy. But again, you just can't say it, because everyone knows that doing so is like putting sand in the social lubricant. Which is a nice way of saying, most people are afraid of getting their asses kicked.

Rocker's infamous and candid remarks in response to a reporter's question about whether he'd ever play for the Yankees -- surely there is tremendous satisfaction in simply being asked -- include citations of nasty things fans had said and done to him. The sorts of things only drunken suburbanites out for a Big Night at Yankees Stadium would find entertaining, if unprovoked. But if provoked, then all bets are off. A New Yorker who’s been goaded has much in common with a woman scorned.

Even Rocker himself said, essentially, "I'm a baseball player. Why would anyone care what I say?" Mull this over a bit. Some big lug from Macon, Georgia talks about his experiences in Gotham, the self-proclaimed Capitol of the Universe, and suddenly the very fabric of civilization itself hangs upon his every drawl. Who's simple and who's the sage here? Even a career ERA of 3.42 doesn't imbue one's non-baseball sentiments with as much moral force as say, the Pope has. Or vice versa.

And yet, according to AP, Bud Selig, who has presided over the most-asterisked -- the most dirty, drug-laden, unsportsmanlike and overpaid era in baseball history -- actually ordered Rocker to undergo psychological testing because...well, because some people are offended that he doesn't like them. This is what happens when you tell it like it is in New York. Somebody calls the thought police.

Is this world turned completely upside down or what? Selig can't police baseball, but he can imply a player has a mental illness for daring to speak his mind.

Yes, it is true: baseball is the perfect national sports pastime for America today; and baseball is quintissentially New York... in a "best of times/worst of times" sort of way. It's not their respective virtues that are shining through much any more.

Yet in the midst of this nonsense baseball remains magical. And so does New York. The game itself is so pure, so fascinating, so joyful. Nothing clears the air like the crack of a Louisville Slugger kissing a white, red-laced, leather-skinned hardball goodbye...going long....going deep...it's OUTTA HERE! The sport itself is so virtuous, such a product of unearthly genius, that - like America - it might just have within itself the miracle-mettle to survive the insanity that has recently visited it.

It's called a market, Einstein.

"We do need a methodology that can discover fair pricing for atypical assets, which will be held to maturity..."

Thus spake former Securities and Exchange Commission Chairman Harvey Pitt, as reported recently by the New York Post.

With bright lights like this running the SEC, it's no wonder people like Bernard Madoff can carry on gigantic schemes for a decade without being detected -- depsite several promptings for the SEC to scrutinize him.

About those atypical assets: it's called a market, Mr. Pitt, something a securities and exchange regulator ought to be at least casually familiar with. Even if the assets themselves are held until maturity, they have components and/or proxies that are tradeable. Just ask the financial engineers about it.

Months ago, we proposed that the government invest in the infrastructure of exchanges, in order to bring a market value to the assets that seem to be ruining everyone's lives.

Instead of throwing money into a void, the administration could incentivize creativity in the formation of derivatives exchanges, and then cash out. We suggested that it would be a cleaner, more productive "intervention" -- and one they'd probably turn a profit on for the taxpayers (take a look at the values of exchanges that have gone public in the last decade), while upholding the foundations of world economies -- markets -- instead of replacing them by legislative fiat (i.e. the administration cutting deals with giant pools of capital in order to buy loans at a nickel on the dollar).

Perhaps after they have thrown a few trillion into the money pit they'll give it some thought. More likely it will take an administration that isn't a thinly veiled dictatorship to really get behind the concept of "markets," and the creativity of free people, the engine of all prosperity.

Obama outlines sweeping goal of nuclear-free world.

Only believe!

AP reports...

"PRAGUE – Declaring the future of mankind at stake, President Barack Obama on Sunday said all nations must strive to rid the world of nuclear arms and that the U.S. had a "moral responsibility" to lead because no other country has used one." Yadda yadda, blah blah blah.

If this is as effective as, say, "Gun Free Zones"' like the University of Virginia then you might want to start spending quality time with your loved ones.

The Endless Ironies of the First Black President, continued

Surely this one tops them all:

Hillary Clinton is the Secretary of State -- number four in line for the presidency in emergency succession. She was appointed by Obama for God only knows what sort of Faustian quid-pro-quo. He is black. The first black American president, in case you haven't heard -- no, Bill Clinton was not, despite his much-publicized claims to the contrary.

So here we have this high-ranking executive in the administration of the first black president of the US, and what's she about to do? She's about to receive the "Margaret Sanger Award," for her tireless efforts to boost Planned Parenthood's business throughout the world by legislative subterfuge.

Listen to this quote by the infamous Ms. Sanger -- a quote you're not likely to read on any plaque any time soon -- better yet, since a picture is worth a thousand words, check this out:


So, it's not as if Hillary is on her way to a KKK meeting, but it's awfully close. If you want to learn more about the history Margaret Sanger, just google "The Negro Project." And maybe you could send the link to President Obama and see what the thinks about it.

I wonder, parenthetically, why we don't read about this story in the New York Times, Washington Post, or any other organ of the vaunted "free press" in the United States -- why is there a virtual news-blackout on this event? Sometimes what they don't tell you speaks louder than what they do. I tell you, these are ironic times. And apparently the distinction between irony and insanity is not an easy one to discern. Ditto the distinction between irony and sheer evil.

We found the photos here.

A previous irony.

Geithner's Freudian Slip Roils FX Market

It went down sort of like this: Mr. Geithner, apparently wanting for a sense of protocol during a recent press conference, says, in effect, "SDR's? International currency? We'd like that!"

After the dollar descends like a jet that's just sucked up a flock of geese in each engine, Roger Altman nudges him and says, in effect, "Ahem. On behalf of the market [which is crashing, you blithering idiot], would you like to, ahem, change your remarks?"

Geithner emits invisible question marks, so Mr. Altman kicks him under the table. "I said, would you like to change your remarks, on behalf of the market!?"

Geithner discerns the clue and backpedals appropriately. But the world can never forget what he just said.

Gold has never looked better.

Bloomberg reported it this way.

The Endless Ironies of the First Black President

An administration of "firsts" can be counted on for being a wellspring of ironies, it seems.

Consider this one: America's first black president, a direct heir of the all-out war for the right to life, liberty, the pursuit of happiness, and full equality as citizens that was tirelessly, selflessly waged by Abraham Lincoln on behalf of black American slaves, one for which a life of sacrifice was the preparation and one for which his life might have finally been sacrificed, appoints as his Secretary of State a woman who says that the human rights of Chinese peasants are, in effect, not as important as the economy, or global warming, or security and are someone else's problem.

Granted, China runs its own show and Hillary Clinton is not an executive in its government (although she might be a consultant). Yet it is undeniably disengenuous to represent a black man who represents America and declaim a wholesale disregard for the rights of the oppressed anywhere. Even more so (if it is possible to be more so) that a measurable portion of American prosperity, and that of the ruling class in China, has come from the blood, sweat, and tears of that particular mass of oppressed peoples.

Adding insult to irony, this black president can't even muster the moral courage to rebuke her. How many future presidents will live and die as slave labor in China?

The Clinton Doctrine

Referring to China's notorious disregard for human rights, Secretary of State Clinton stated recently:

Successive administrations and Chinese governments have been poised back and forth on these issues, and we have to continue to press them. But our pressing on those issues can't interfere with the global economic crisis, the global climate change crisis, and the security crisis," she told reporters in Seoul, South Korea.

Whatever you say, Mr. Wen!

We submit that this position can be distilled to the following without any logical torture: Political expediency rules. The only issue that matters is the one that serves that end. Power matters. The peasants of China can't give me a stitch of power or influence, but legislative fiat contained in global warming legislation can. The peasant slaves of China cannot finance my insatiable political ambitions, but a well-distributed windfall can. I'm about to score trillions-with-at-T dollars of taxpayer money -- that's unheard-of clout -- and I'm not about to piss off Wen Jiabao and jeopardize that. Screw them.

We suspect there were many who held to this view during the awful era of slavery. But economic well-being has never been a pure or strong enough motive to carry a people through the tortuous task of overcoming some greivous evil, like slavery. Fortunately, a visionary president, one Abraham Lincoln, was imbued with a conviction quite the opposite of that espoused by this administration: that nothing is as important as human rights, and government has no purpose whatsoever if not protecting them. He was willing to risk the Union to establish those rights here.

On the contrary, Madame Secretary, one might argue that a statesman worthy of the title would recognize the uniqueness of the moment and leverage it to insist that China begin to officially recognize all its citizens as equal human beings. A statesman who valued the sanctity of human life would seize the historic chance to press the issue in favor the poorest and the weakest, not regardless of them. When she was telling the world "it takes a village," she apparently envisioned a village with lots of peasants living like slaves in order to keep the ruling classes in opulence.

This, readers, from the champion of government controlled health care: human rights don't matter as much as money, and damn the powerless and silent. What sorts of scenarios might that result in when czars and consultants decide who gets treatment for what medical ailment, and for how long?

This administration may broker deals to get the mechanisms of money working again so that the market indices make new highs, but morally, they're making record lows daily. And we hold that moral short selling brings down financial markets, too.

If only the cockroach could talk.

I crossed paths with a cockroach
And asked him to my table
I bade him, “Tell me a story,
That is, if you are able.

“What sorts of things are discussed
Among your peers and the like
In the days and hours
Before the earthquake strikes?

“Do you seek out cockroach therapy
And pour out in words your angst?
To which the doctor says, ‘I understand;
That’s two hundred dollars, thanks.’

“Do you charge en masse headlong
Into leveraged speculations
That make you instant millionaires
Then bankrupt entire nations?

“Do you defraud, betray and brutalize
Your neighbors, kin, and babies
Do you lie, cheat, steal and manipulate
To pay for that Mercedes?

“Do you congregate in cults
Of unconscious dread
To deny the signs of earthquakes
And decry hurricanes instead?

“Do you rush more eager
Into mindless, brute distractions
and spin the simplest ideas
into intellectual abstractions?

“Do you, in other words
Live for ‘circuses and bread’
And submit with blind devotion
To the one who keeps you fed?

“Tell me, won’t you please
my shiny brown friend:
Do you all lose all your marbles
just before the end?"

Though attentive and robust
He gave me not a clue
So I smashed him with the Times
And flushed him down the loo.

wen2ben: pwn3d!

Wen Jiabao and His Shadow

Big shots in China state, for publication, that they're nervous about holding so much US debt (if I recall, that's money we sent them for cheap toys and electronics but that's beside the point) and less than a week later, the Fed announces its plan to buy a third of a trillion dollars in bonds.

The Chairman of The Federal Reserve

Bloomberg attributed the "bold plan" to the "Rambo Fed." Oh, Ben, you're so decisive with that dragon on your back.

We attribute it to something more like China whining about being short on cash and insinuating it might have to dump some bonds since the US isn't buying all its crap anymore.

Madame Secretary

But the plot is actually a bit thicker than even this. Recall, if you will, that our illustrious and capable Secretary of State, Hillary Rodham Clinton, recently visited China. Right after all this TARP nonsense was OK'd by congress, as a matter of fact. Recall that it was on this visit of urgent state business that Mrs. Clinton made her famous [we paraphrase] "civil rights matter, but money matters more" declaration, something that might come to be known as the Clinton Doctrine.

It might be best to dramatize what likely went on during that meeting with an account of a telephone conversation, that might be "fake but accurate," or not.

[Madame Secretary and The Premiere (and, presumably, his shadow) are tossing back Mai Tai's or whatever they drink on the shores of pristine mountain lakes in China. In a synagogue in a tony suburb of Boston, a cellphone buzzes.]

Chairman Bernanke: "Madame Secretary, I'm meeting with my rebbe. I cannot talk to you now."

Madame Secretary: "Benjamin, shut up and listen. Wen needs some money, and can't be bothered with that little snot Timothy Geithner. What we can do for him?"

Chairman Bernanke: "Madame Secretary, I've already told you, we don't have enough TARP funds as it is --

Rebbe: "Benjamin, the time!"

Premiere Wen overhears and begins to protest, pushing his lips tightly together to keep his mouthful of Mai Tai in his mouth. The outburst sounds like a man being electrocuted while humming.

Madame Secretary: "Benjamin, if Mr. Wen starts selling his Treasuries, the collapse of the financial system will be all your fault. Surely you know how hard it will be for you to find work..."

Chairman Bernanke [resignedly]: "I get the picture. What do you want me to do, Madame Secretary?"

Madame Sec: "That's better. Let's say we set aside a third of a trillion -- how's that, Wen? [looking at Wen, who nods vigourously] -- right, a third. Mr. Wen will do some footstomping for the Times, so you'll have your cover. Wait a few days, then announce your bold and brilliant plan. You'll look like a hero, I promise."

Chairman Bernanke: "Yes, Madame Secretary."

Buy! Buy! Buy!

Madame Sec [winking at The Premiere]: "...And then, Chairman, you get in there and buy! buy! buy! Just like Trading Places! [voice becoming animated] You buy some muthahf*ckin' bonds [standing, swinging her fists, and spilling her Mai Tai all over a shocked and disgusted Premiere] and rip out the throats of those shorts, you hear me!! Oh! I'd better let George know...adios, Benjamin" [Click.]

Credit

Before the Moody's building downtown was demolished, this plaque graced its entrance:

"Credit: Man's Confidence in Man", begins the inscription, follwed by:

Credit is the vital air of the system of modern commerce. It has done more, a thousand times, to enrich nations, than all the mines of all the world. It has excited labor, stimulated manufactures, pushed commerce over every sea, and brought every nation, every kingdom, and every small tribe, among the races of men, to be known to all the rest. It has raised armies, equipped navies, and, triumphing over the gross power of mere numbers, it has established national superiority on the foundation of intelligence, wealth, and well-directed industry...

...which is, in turn, an excerpt from a statement by Daniel Webster, which continues:

...Credit is to money what money is to articles of merchandise. As hard money represents property, so credit represents hard money; and it is capable of supplying the place of money so completely, that there are writers of distinction, especially of the Scotch school, who insist that no hard money is necessary for the interests of commerce. I am not of that opinion. I do not think any government can maintain an exclusive paper system, without running to excess, and thereby causing depreciation.

Moody's has come a long way since Mr. John Moody, a man of extradorinary character, launched the firm over 100 years ago. It has, as Mr. Webster might say, undergone a severe "depreciation." Perhaps it's no coincidence that the old Moody's building has been demolished, and the plaque no longer appears in public view (only a replica of it in the new corporate offices).

In the midst of a Financial District demolished by terrorists and the abuse of credit, one would think the words of Webster might be a helpful reminder of, among other things, the sorts of things that men think about in a time when it's reasonable to have confidence in them.

There's a bit of irony in the image, though: a Native American shaking hands with a Settler. What's this, the deal to sell Manhattan? Confidence, indeed, with the emphasis on "con." But that's legend. Less legendary is the telling ommission of the very last line of Webster's wise words: I do not think any government can maintain an exclusive paper system, without running to excess, and thereby causing depreciation.*

* Senator DANIEL WEBSTER, remarks in the Senate in favor of continuing the charter of the Bank of the United States, March 18, 1834.

Imagine a supranational reserve currency...

It's easy if you try. Moscow has, according to The Moscow Times. And China, according to the Financial Times.

Regarding a supranational reserve currency, or even a national reserve currency, any such animal will likely need a nominal gold tie in order to establish credibility...which is why we remarked to a friend (some time ago) that gold is to be owned at all costs, even if it sells down to $5, in which case an opportunity to reduce its average cost would be present.

But why would such a thing even be feasible? Well, let's see how all this new debt - what are we up, $3 trillion so far? - and the taxes that will be of necessity be levied to pay for it - affect the economy. And see how that affects our leverage with current and prospective purchasers of our debt. And see if there isn't a massive loss of confidence in "the full faith and credit of the U.S. Government" -- and why shouldn't there be? -- and let's see if the dollar doesn't get trashed or otherwise abandoned.

The "merged currency" mechanism was employed effectively in creating the Euro -- the pitiful condition of the underlying economies notwithstanding. And we all know that global problems and global egos call for global thinking -- BIG thinking. (And we all know just fallible BIG thinking is).

Hey, we're in the age of messianism -- of sweeping solutions to all our "problems." People won't settle for less...

(Seeking Alpha provided the link to the Moscow Times).

Honor Among Thieves

Bernard Madoff has admitted his wrongs, detailed his illegal activities, and expressed his remorse in a convincing manner.

This makes him about the most honorable of disgraced former Wall Street titans.

It also makes him an easy target for the collective bile of the age. If he'd gotten away with it, of course, or if he'd never admitted anything, they'd idolize him. But repentence and remorse are like red meat to the lions. You're only a loser if you're stupid enough to admit anything. They love you until they hate you.

Mr. Madoff started his legitimate businesses in 1960 with $5,000 he'd saved from summer jobs. Not exactly the sort of thing a "pig" would do. He worked hard and smart for three decades and ran two successful businesses in a very tough, competitive industry.

What happened after that is detailed in his statement, below. We all know that a bunch of rich people got tagged. Somehow I can't understand the righteous indignation of the New York media at this -- I just don't believe that they're in sympathy with the folks in the 'hood, who probably just started believing in Divine Justice again.

Mr. Madoff's statement to the court:

March 12, 2009 --

Plea Allocution of Bernard L. Madoff

Your Honor, for many years up until my arrest on December 11, 2008, I operated a Ponzi scheme through the investment advisory side ofmy business, Bernard 1. Madoff Securities LLC, which was located here in Manhattan, New York at 885 Third Avenue. I am actually grateful for this first opportunity to publicly speak about my crimes, for which I am so deeply sorry and ashamed. As I engaged in my fraud, I knew what I was doing was wrong, indeed criminal.

When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme. However, this proved difficult, and ultimately impossible, and as the years went by I realized that my arrest and this day would inevitably come. I am painfully aware that I have deeply hurt many, many people, including the members of my family, my closest friends, business associates and the thousands of clients who gave me their money. I cannot adequately express how sorry I am for what I have done. I am here today to accept responsibility for my crimes by pleading guilty and, with this plea allocution, explain the means by which I carried out and concealed my fraud.

The essence of my scheme was that I represented to clients and prospective clients who wished to open investment advisory and individual trading accounts with me that I would invest their money in shares of common stock, options and other securities of large well-known corporations, and upon request, would return to them their profits and principal. Those representations were false because for many years up and until I was arrested on December 11, 2008, I never invested those funds in the securities, as I had promised. Instead, those funds were deposited in a bank account at Chase Manhattan Bank. When clients wished to receive the profits they believed they had earned with me or to redeem their principal, I used the money in the Chase Manhattan bank account that belonged to them or other clients to pay the requested funds. The victims of my scheme included individuals, charitable organizations, trusts, pension funds and hedge funds.

Among other means, I obtained their funds through interstate wire transfers they sent from financial institutions located outside New York State to the bank account of my investment advisory business, located here in Manhattan, New York and through mailings delivered by the United States Postal Service and private interstate carriers to my firm here in Manhattan.

I want to emphasize today that while my investment advisory business - the vehicle of my wrongdoing - was part of my firm Bernard L. Madoff Securities, the other businesses my firm engaged in, proprietary trading and market making, were legitimate, profitable and successful in all respects. Those businesses were managed by my brother and two sons.

To the best of my recollection, my fraud began in the early 1990s. At that time, the country was in a recession and this posed a problem for investments in the securities markets.

Nevertheless, I had received investment commitments from certain institutional clients and understood that those clients, like all professional investors, expected to see their investments out-perform the market. While I never promised a specific rate of return to any client, I felt compelled to satisfy my clients' expectations, at any cost. J therefore claimed that I employed an investment strategy I had developed, called a "split strike conversion strategy," to falsely give the appearance to clients that I had achieved the results I believed they expected.

Through the split-strike conversion strategy, I promised to clients and prospective clients that client funds would be invested in a basket of common stocks within the Standard & Poor's 100 Index, a collection of the 100 largest publicly traded companies in terms of their market capitalization. I promised that I would select a basket of stocks that would closely mimic the price movements of the Standard & Poor's 100 Index. I promised that I would opportunistically time these purchases and would be out of the market intennittently, investing client funds during these periods in United States Government-issued securities such as United States Treasury bills.

In addition, I promised that as part of the split strike conversion strategy, I would hedge the investments I made in the basket of common stocks by using client funds to buy and sell option contracts related to those stocks, thereby limiting potential client losses caused by unpredictable changes in stock prices. In fact, I never made the investments I promised clients, who believed they were invested with me in the split strike conversion strategy.

To conceal my fraud, I misrepresented to clients, employees and others, that I purchased securities for clients in overseas markets. Indeed, when the United States Securities and Exchange Commission asked me to testify as part of an investigation they were conducting about my investment advisory business, I knowingly gave false testimony under oath to the state of the SEC on May 19, 2006 that I executed trades of common stock on behalf of my investment advisory clients and that I purchased and sold the equities that were part of my investment strategy in European markets. In that session with the SEC, which took place here in Manhattan, New York, I also knowingly gave false testimony under oath that I had executed options contracts on behalf of my investment advisory clients and that my firm had custody of the assets managed on behalf of my investment advisory clients.

To further cover-up the fact that I had not executed trades on behalf of my investment advisory clients, I knowingly caused false trading confinnations and client account statements that reflected the bogus transactions and positions to be created and sent to clients purportedly involved in the split strike conversion strategy, as well as other individual clients I defrauded who believed they had invested in securities through me. The clients receiving trade confinnations and account statements had no way of knowing by reviewing these documents that I had never engaged in the transactions represented on the statements and confirmations. I knew those false confirmations and account statements would be and were sent to clients through the U.S. mails from my office here in Manhattan.

Another way that I concealed my fraud was through the filing of false and misleading certified audit reports and financial statements with the SEC. I knew that these audit reports and financial statements were false and that they would also be sent to clients. These reports, which were prepared here in the Southern District of New York, among things, falsely reflected my firm's liabilities as a result of my intentional failure to purchase securities on behalf o fmy advisory clients.

Similarly, when I recently caused my firm in 2006 to register as an investment advisor with the SEC, I subsequently filed with the SEC a document called a Form ADV Uniform Application for Investment Adviser Registration. On this form, I intentionally and falsely certified under penalty of perjury that Bernard L. Madoff Investment and Securities had custody of my advisory clients' securities. That was not true and I knew it when I completed and filed the form with the SEC, which I did from my office on the 17th floor of 855 Third Avenue, here in Manhattan.

In more recent years, I used yet another method to conceal my fraud. I wired money between the United States and the United Kingdom to make it appear as though there were actual securities transactions executed on behalf of my investment advisory clients. Specifically, I had money transferred from the U.S. bank account of my investment advisory business to the London bank account of Madoff Securities
International Ltd., a United Kingdom corporation that was an affiliate of my business in New York. Madoff Securities International Ltd. was principally engaged in proprietary trading and was a legitimate, honestly run and operated business.

Nevertheless, to support my false claim that I purchased and sold securities for my investment advisory clients in European markets, I caused money from the bank account of my fraudulent advisory business, located here in Manhattan, to be wire transferred to the London bank account of Madoff Securities International Limited.

There were also times in recent years when I had money, which had originated in the New York Chase Manhattan bank account of my investment advisory business, transferred from the London bank account of Madoff Securities International Ltd. to the Bank of New York operating bank account of my firm's legitimate proprietary and market making business. That Bank of New York account was located in New York. I did this as a way of ensuring that the expenses associated with the operation of the fraudulent investment advisory business would not be paid from the operations of the legitimate proprietary trading and market making businesses.

In connection with the purported trades, I caused the fraudulent investment advisory side of my business to charge the investment advisory clients $0.04 per share as a commission. At times in the last few years, these commissions were transferred from Chase Manhattan bank account of the fraudulent investment advisory side of my firm to the account at the Bank of New York, which was the operating account for the legitimate side of Bernard L. Madoff Investment Securities - the proprietary trading and market making side of my firm. I did this to ensure that the expenses associated with the operation of my fraudulent investment advisory business would not be paid from the operations of the legitimate proprietary trading and market making businesses. It is my belief that the salaries and bonuses of the personnel involved in the operation of the legitimate side of Bernard L. Madoff Investment Securities were funded by the operations of the firm's successful proprietary trading and market making businesses.

Your Honor, I hope I have conveyed with some particularity in my own words, the crimes I committed and the means by which I committed them. Thank you.

Word Association

What do The New York Times, the Apocalypse, Banks, and Starbucks all have in common, besides the fact that they all appear, in unrelated comments, in this post? Probably lots of things, none of them of any concern to me at this moment. All I needed was a way to tie them together in the same paragraph.

I rarely read the Times, for the same reason, I suppose, that I don't read the Enquirer: I don't trust it. But I do concede that the Times has a bunch excellent craftsman churning out really delightful, if dubious, pieces.

However, I spied a headline in the neighbor's Times this morning as it lay on the stoop, and made a mental note to look into it later. The story is about how HSBC took a hugh-mongous beating on its 2002 acquisition of Household Finance and Beneficial, America's big subprime lenders. That's no news flash, but the angle of the piece was that this acquisition was The Deal That Fueled Subprime; and while it may be, the story won't convince you. (I don't know how long that link will be good; you may have to hunt the NYT site if you want to actually read it, in the event it expires.)

It's really "Business Lite," but that's not why I'm writing about it here. I'm doing that because the piece makes the following assertion:

Securitization was based on the fiction that financial engineering could turn risky loans into risk-free securities.

Bosh! This is itself a fiction. I can't recall ever seeing, in any official document or any commentary, the claim that any securitized assets were "risk-free." That's probably because claiming they are would be like claiming cars could be made to run on seawater. All "financial engineering" (a term I've never, ever agreed with, even when I was studying it), did, with the aid of computer power that wasn't available a few short years ago, was allow financial instruments to be created from pools of assets, and enable the clever attribution of the characteristics of such aggregates.

The characteristics of the loans -- their terms, risk profiles and cash flows -- are aggregated (it is a pool, after all) and then re-arranged and divvied-up again in a way that is entirely customizable, within the parameters of the pooled characteristics. Like all things designed to appeal to the "sophisticated," the sliced-up assets were given a french name: "tranche," meaning, of all things, "slice." In this, at least two notable things occured: Wall Street prefigured Starbucks by at least a decade, and a high-water-mark in truth in advertising was reached.

Some of the slices were first in line to receive their prorated cut of the cash flows from the underlying loans. Some were last, and some were in-between. Where the slice fell on this hierarchy determined it riskiness with regard to the rest of the slices, and hence, its debt rating. This isn't engineering so much as it is high-powered, labor intensive accounting. But the computers make the intensiveness of labor a moot point. And computers do things mathematically. And engineers speak "math." So high-powered accounting became known as "financial engineering." This can be likened to the pencil and ledger opening up accounting possibilities that were simply too labor-intensive in a world dominated by the abacus. Nothing new under the sun, indeed.

To some extent, all accounting is "fiction," but it's very useful fiction. The accounting one does doesn't affect reality, it only does bold things to one's perception of it, semantically. The loans that are pooled didn't change, but their characteristics are micro-managed.

Nobody would ever say such pools were "riskless," but the pro's and con's of this micro-management are perhaps both misunderstood and misrepresented, at various times, willfully and not so willfully.

In that environment, with the help of a little grease to the skids, bond insurers found they could do a pretty good business by selling insurance on these asset pools. Insurance is a business of averages -- statistics -- and we all know what they say you can do with statistics. In any event, the purchase of a misguided rating -- Triple-A, for example -- from a government-sanctioned rating agency might go along way to overcoming, in the mind of the manager of large pools of investment capital, any visceral trepidations regarding such newfangled instruments. It might, in other words, fog one's judgment. In any case, a rating ensured that someone was on the hook financially in the event that one of these nifty financial robots went berserk and started killing the pilots of the great spaceship that Wall Street had become.

And, of course, the transformation of a pool of loans into a synthetic "bond" can, by commoditization, encourage a new flow of capital to wash into the asset class (which it did, even if it can be argued by supply-side logic that the availability of all that capital spawned the creation of something else for it to flow into, after all known rivers and tributaries had been submerged); and it did replace bankers with pensioners as risk takers on ever-more ill-conceived mortgages. The move of a giant like HSBC into that market would certainly increase the volume of such transactions. This much of what the article floats makes some sense.

The term "riskless" is a theoretical, financial-math term (referring to government agency debt issues) that is roughly analogous to the term "frictionless" in physics. In high-school you learn that "frictionless" is a convenient myth, that it's factually, but not relatively, untrue. Nobody builds buildings by making any assumptions about frictionlessness being a fact. And nobody -- n.o.b.o.d.y, especially Wall Street sharpies -- takes the term "riskless" literally.

Now, about this Times piece. Admittedly, there's a great deal of misconception (willful and otherwise) surrounding all things finance, and the volume of misconception is proportional, surely, to the area of newsprint (or airtime, or book titles, or Internet links, etc) that is devoted to any particular topic. Considering how many column-inches have been spent on reporting the "financial crisis," this indicates the presence of a great deal of misconception, indeed.

We humbly admit to a small amount of this here. The comments on how CDS's sink protection-sellers still need some fleshing-out. But the operative word here is "admit," and, by the way, in case you haven't noticed, this is not the New York Times. I don't get paid six figures for writing this, I don't get invited to posh parties in Manhattan, and I don't have a cool business card. The upside of this is at least twofold: I can maintain a clean conscience when I write and nobody will ever call this blog the "Gray Lady."

Mojo Nixon wasn't a fan of banks. And I'm not a fan of Mojo Nixon or banks, but I'm glad he wrote a song called "I Hate Banks." Parenthetically, I wonder what it says about us culturally that it takes (what used to be) a character from the outer fringes of the edges of mainstream to say what we all feel: banks are probably really just fronts for little satanic outposts.

I say this as one who has worked for, interestingly, a bank that was concurrently the world's largest (by assets) and its smallest (by market capitalization). Continuing the theme of opposites, banks have been, for most of my lifetime, places of arrogance (on their part) and humiliation (on the customer's part). How many times has the teller smirked at you while refusing to cash the check you brought in, because you don't look like the person on your license, or some such inanity? Banks are the roach-motels of finance: money comes in, but it doesn't go out.

How many times have you been late making a deposit (even if you weren't stalling) and gone to the ATM to get a few bucks for a date and found out that you bounced twenty checks and are now in the hole $510 ($500 in NSF fees, and ten bucks for the lousy check you wrote at the grocery store). Chastened, you enter the bank on Monday, to find the manager has installed a limbo-pole in his office that he expects you to grovel under, while the staff watches with glee, doing shots of tequila and placing bets on "how low you can go."

Yeah, banks are not often associated with happy memories for most of us. Yet I've discovered something so rare -- a bank lobby that has really nice people working there -- that I had to comment on it. Sure, it's Wachovia, the same bank that surprised (and temporarily bankrupted) an acquaintance by illegally seizing and freezing his account, just because some bill-collecting lawyer sent an official looking (and fraudulent) fax to them. But when the pickings are slim, you take the bad with the good. It's Wachovia on 42nd and 1st, and the usual lobby staff is beyond stellar. They act like real people. Not all of them, of course, but enough, and often enough, that it's noteworthy.

If you had to start the apocalypse, how would you do it? Here's one suggestion: start refashioning your administration, if you're president of the United States, as anti-Israel. It's that simple. You don't come out and say that, of course, but if you start appointing in strategic roles the sorts of people who espouse that particular insanity that expresses itself as an irrational hatred of Israel, you'll get the ball rolling. Because what that does is it shows all those countries that have institutionalized the hatred of Israel into law and policy that the US is no longer going to stand behind the tiny, eternal hotspot at all costs, like a great, big brother staring down bullies.

The deterrent to bullies, once removed, invites all manner of mischief. Bullies push, and test, and torment, and they never stop, until and unless they're stopped. And if the bullies have stated perennially, repeatedly, and unequivocally, their longing for the complete and utter destruction of your little sibling, there's no reason to expect them to stop, until....

If you're Israel, a) you're not stupid and b) you're not weak and c) you're gonna prepare to kick some serious ass because your tormentors are emboldened by the absence of meaningful reality-checks to their insanity.

Now, if you manage to do this in a time when one particularly loony regime is known to have the ability to make nuclear weapons, you just might get your Apocalypse.

It's easy, really.

Finally, in solidarity with the multitudes who have recently "downsized" their lives (especially myself) I have not only moved to more reasonably priced digs, but I didn't bother to subscribe to an Internet provider there. Sure, my inner sloth reasoned that I'd find a wireless network in the building that wasn't password-protected (it was wrong; they're getting harder to find than solid-silver quarters); but the better part of me relished the idea of having to discipline and organize my Internet access, planning for outings to some public access point.

As it turns out, there's a Starbucks right around the corner, and since I was recently gifted with a Starbucks gift card, the decision about where and how to do things online was pretty much made for me.

I'm a Dunkin' Donuts man all the way, at least pre-corporate Dunkin' Donuts. But I'm also open to having my horizons expanded, and accordingly I've actually imbibed in that caustic brew known as Starbucks coffee. One mid-morning I went crazy and had a refill, and I did not get to sleep that night. They do, however, sell a great Plain bagel.

I may say more on the Starbucks culture, later, but just now I'm overdosing on the caffeine. I would like to observe, in closing, that the place is frequently jammed with online jobseekers, and that can't be bad for coffee sales.

I guess that's a good thing for all those poor farmers in Brazil, eh?

[this piece is a work in progress, which means I'm my own editor. This ain't the Times, remember?]

Death by Credit Default Swap

How can CDS and naked short selling be employed to destroy publicly held companies for profit?

Put your thinking cap on and read this ...Thwarting Debtors with Credit Default Swaps. Then ask yourself that classic question, "cui bono?"

The players: hedge funds who buy the CDS, short the stock, and hope to score; their enablers in the media and pools of foreign capital; the investment banks, who sold "protection" to the hedge funds thinking it was easy money-- after all, these big companies wouldn't default in isolation, in a thousand years, let alone all together: never happen! -- plus, bankers can prop them up (now you know why they're dropping like flies, sports fans); and various and sundry accomplices, both witting and un-.

In that last category, we have to mention the US regulatory agencies who appear to be as focused as the proverbial blind pig, the Treasury for taxing all future generations of Americans to raise trillions of dollars to meet the margin calls the banks need to make on their CDS contracts (that is, payments to their counterparties, the hedge funds, et al).

The subject is complex and, given the average person's inability to balance his checkbook, it's unlikely that the truth will ever be understood widely, even if it ever is ultimately discovered and reported.

Dead Cat

The Dow Jones Industrial Average has fallen about 8000 points from it peak last summer -- over 50%.

At its high so far today, the Dow Jones was up 70 points; it is currently up about 11 from yesterday's close.

And Bloomberg News calls this a "rebound."

Granted, a short covering rally could ensue -- why not? Not only do shorts have some profits to take, even beginning technicians are familar with Elliot Wave ideas on bounce points (50%, for example). A few good headline might just induce the expected bounce.

But still, while it may be hopeful or even prescient to call a 0.14% move a "rebound," is it sound journalism?

Addendum: Scratch that last -- who really cares if it's "sound journalism?" Everyone knows Bloomberg is just a story-mill. What I really meant to express was my amazement that the collective psyche is at the point where an ankle snapper is described as a big mama.

This brings to mind other things, like does the Treasury (or some other entity with an interest) employ a consultant who says things like, "It's down 50%, Elliot Wavers think a bounce is coming, start peppering them with positive headlines to scare the shorts and you'll get a rally..."

Or maybe, "Blue Horseshoe loves Teldar Paper...."

Ahh, well, who knows...

The Anti-Stimulus

Imagine you’re unemployed – that shouldn’t be too difficult. You’re unemployed, or perhaps you own a business and business is very, very slow. Negative-cash-flow slow, and every indication is that this isn’t you grandmother’s cyclical downturn. Would this be a good time to go out and buy a bunch of new equipment? Remodel the house? Maybe you decide you want to borrow money to give rebates to your customers. Good idea?

Hardly. Most business owners, when faced with such a slowdown, will cut back. Unless they are really cash fat, and there are compelling bargains to be had in the employment of capital, they’re going to cut every expense possible, hold off on capital expenditures as much as possible, and carefully manage their resources by investing in ways to generate revenue. That’s sound business.

The bad news is that the Stimulus Package we’re all paying for takes the first approach: it doesn’t invest in growth; it spends on maintenance, and dubiously at that. Worse, it borrows money to do it – money that you and I and our children will have to pay back. In business, this approach would be considered a dicey bet at best and suicide at worst.

This would be bad business even in good times. In times of economic crisis – negative GDP and wholesale debt deleveraging – it’s deadly. The only way a business (or an economy) can grow out of a recession or depression is to grow: innovate, invest, cut costs, dispose of useless assets, and generate business. The absolute worst thing that can be done to a business in crisis is to drain its capital on maintenance of its outmoded plant and business model, and dubious expenditures. But this is what the stimulus package does to the American economy.

Of course the government is not a business owner. It has no real accountability to anybody, and it makes the laws that we all must obey. It therefore cannot be expected to make sound business decisions, either for itself or – much more importantly – for anyone else. This is another way of stating the myriad dangers of government.

Government is not an entrepreneurial animal, nor will it ever be. It is a servant, and the sort of servant that needs to be kept in chains with a gun trained on it. The founders understood this. It is not, therefore, an engine of economic growth. In fact, it is the opposite – it is and always will be a prime inhibitor of economic growth – the enemy of innovation, efficiency, creativity. Government is a necessary evil, and the less of it, the better. Would you hire a rogue to manage your investment portfolio? You do when you entrust the government with such duties as it’s not and never will be fit to carry out: managing an economy.

The sorts of things that make a vital economy are done at the individual level. Creativity, innovation, task-specific management. The profit mandate built into all legitimate businesses ensures this. It follows, then, that the way for a government to “stimulate” economic health, vigor, growth, and innovation – and hence, employment and tax revenues – is by, first and foremost, getting out of the way of the entrepreneur. Is the entrepreneur having a hard time getting credit? Then let him keep more of his income to invest in his business. Is he forced to lay people off? Then give him meaningful tax breaks for innovation and investment, for generating revenue. Why would you suppose that taxing him and his customers and his children – reducing the capital base of the economy – would “stimulate” anything except malaise?

It won’t, of course. It could, however, be the shark infestation that dooms the survivors of the shipwreck. Sucking capital from a struggling economy is going to “stimulate” it about as well as a baseball bat to the kneecaps would stimulate someone who’s just been hit by a bus. The picture is no exaggeration: a recession can be bludgeoned into a depression, and the way to do it is to usurp capital for nonproductive spending and inhibit individual business activity. It only puts you further in the hole, and does nothing to bring in any income. It leaves you worse off than you were before.

Moreon Dodd

Since I posted about this earlier (and earlier, and earlier), I felt I should update with this.

As much as we all like it when the bad guys get what's coming to them, I admit to a bit of pity as this guy publicly squirms in very slow, embarassing motion.

But just a little.

Shamefully audacious stimulus.

Bloomberg reports: "Obama Calls Bonuses ‘Shameful’ as Dodd Vows to Reclaim Money." Surely this is audacity we can believe in, considering Dodd's "VIP client" status at Angel Mozillo's defunct mortgage firm, a firm that was under Dodd's supervision as Chairman of the Senate Banking Committee and which was bought by another bank that was, of course, a recipient of TARP megadollars.

Not to be outdone in audacity, President Obama trumpets repeatedly through the media that he's "fuming" over Wall Street's "shameful" bonuses. Pity he used up all his fumes and shame and righteous indignation and time allotments on national media outlets on the $18 billion in private sector bonuses, because the orgy of pork that he's pushing as "economic stimulus" makes the bonuses on Wall Street look like a donation to Mother Theresa's order.

From the Wall Street Journal Online:

We've looked it over, and even we can't quite believe it. There's $1 billion for Amtrak, the federal railroad that hasn't turned a profit in 40 years; $2 billion for child-care subsidies; $50 million for that great engine of job creation, the National Endowment for the Arts; $400 million for global-warming research and another $2.4 billion for carbon-capture demonstration projects. There's even $650 million on top of the billions already doled out to pay for digital TV conversion coupons.

In selling the plan, President Obama has said this bill will make "dramatic investments to revive our flagging economy." Well, you be the judge.

Apparently a sharp operator after all, Obama's repaying political favors and banking for some future ones, telling us it's "job creation." It may not be "stimulus," but it is a screwing.

What if...

What if, as postulated in a previous post, the social mechanism for moderating Islam is the Judeo-Christian culture?

And what if, as is growing increasingly difficult to deny, the Judeo-Christian culture is seemingly being weakened by licentiousness, bad law, and sloth?

And what if, as is also growing increasingly difficult to deny, Islam is emerging as if from a long hibernation, asserting anew its insatiable demand for universal submission?

Would this confluence of circumstances be a cause for alarm?

Noonan swings, misses.

On his way to hitting 714 home runs during his career, the Sultan of Swat struck out 1,330 times. From such statistics, positive thinkers naturally conclude, "every strikeout brings me closer to a home run!"

And so, soon, maybe in her next at-bat, the Princess of Newsprint will deliver something that replenishes the energy required to read it. But this time around, whoooosh....thud!...awwwwww.

" '''' '' ''' "

I am referring to her recent piece in the Wall Street Journal (I read it in the NY Post, where it is entitled, "Nobody Home.") The long and short of it is actually a sound discussion on the apparent vacuum of leadership in our institutions, or many of them, at least. I say "apparent," but she didn't. She said there is no leadership to be found. I say, there are leaders everywhere, just like there always have been, but nobody wants them. Or everybody is being told that nobody wants them. And so they languish in obscurity, dutifully leading in their given spheres, however small.

I think it would be more accurate to describe the phenomenon that is the subject of Ms. Noonan's plaintive dirge as the perception of a leadership vacuum supported entirely by the organs of popular culture. Their message has been, at one and the same time, "we don't need no stinkin' leadership," and, "oh, where are the leaders this world needs!!??"

One of this republic's greatest leaders is finishing up his statutory limit as a public servant in the White House, where his resolve, decisiveness, unimpeachable character, unalloyed patriotism, and subtlely brilliant tactics have been misunderstood and villified in the popular mind almost since the beginning. The people were given unparalleled leadership, and have rejected it. More accurately, the media, behaving as our unelected representatives, have rejected it on our behalf.

In its place, they have told us we wanted an empty suit, and we have dutifully put one there.

There is no absence of leadership, but there is a surrogate rejection of it, which is much more disturbing.

The Subprime Presidency

The "subprime mortgage" phenomena has, by meeting its inevitable end, triggered a world financial crisis of historic proportions, having heretofore incalculable consequences.

It is a product of political and legislative abuse of bad policy for personal gain -- recall: A very ill-conceived federal mandate to lend money to the undeserving led to collusion by Fannie Mae and Freddie Mac to purchase trash mortgages from the burgeoning mortgage lending business, which Wall Street then relieved them of (making them liquid and free to repeat the cycle) , packaged, and sold to pension funds and other institutional investors worldwide. Along the way, the Angel Mozillo's of the world gave "V.I.P." treatment to the Sen. Chris Dodd's and the machine rattled and hummed until...until it blew up with nuclear force leaving a crater in the world economy and a mushroom cloud that will linger for generations.

Emergency bailouts of the financial system will ensure that taxpayers worldwide will work overtime to pay the bill and freedom itself (as manifested by free markets) will be blamed and "fixed." Let me compress that sentence: Freedom will be "fixed," as if it's broken. That ought to scare the bejezes out of everyone. And this is where the Subprime Presidency comes in...

Dumb and Dumber.

...Well, it hasn't come in quite yet. It's only the Subprime Presidency-Elect, but already it's shaping up to be a winner. The cast of characters makes Angel Mozillo and Chris Dodd look like the petty thieves they are, against the real professionals like William Ayers and Tony Rezko.

Still weeks away from inauguration, this Presidency-elect is already embroiled in an historic scandal: the governor of the state of Illinois has been arrested for seeking payments to assign the Senate seat vacated by the President Elect, who has been conferencing with the governor on the assignment of the seat for some time.

It's only the Subprime Presidency-Elect, but already it promises the be the mother of all Subprime Presidencies.

With heretofore incalculable consequences.

(Who wouldn't love to know what Hillary and Bill Clinton are thinking right now?)

Train-wreck of thoughts.

If there's one thing we can be counted on to provide, it's a perspective from somewhere decidedly "outside of the box," wherever that might be. And we don't do so simply for the sake of doing so. Nay, we think it's good to know what's going on inside the box, too. But the only way to keep that in context is to look at it from somewhere outside. The zeitgeist, after all, is transitory by definition.

Having offered that disclaimer, we're going to rattle off a few things inspired by current events and some of our current posts about current events.

First off, a bit about "the religion of peace" mentioned below. It would be easy for a reader to conclude that, since we dare associate Islamic terrorism with Islam, we must be religious bigots. Not so. Two of the kindest, humblest men we know in this City are devout Muslims (though, to be fair, we've come across a couple of really obnoxious and rude hyper-devout ones). Yet the reality of Islam is that, where it is also the law of the land, women are treated like animals, other religions are persecuted, and terrorism is bred. It's impossible to separate the two (Islam and Islamic terrorism) and before you start parroting the litany about the Catholic Church and the Crusades we humbly suggest an effort to "think outside the box" on this topic.

The simplest conclusion we can come to about our two dear friends is that they act like typical, salt-of-the-earth Americans. They may do the outward things associated with their nominal religion, but their personalities have been formed by the best tenets of the pre-Muhammedan monotheisms -- in other words, by western civilization. Presumably, they live here because they couldn't live like they do here, elsewhere. They wouldn't have the freedom or opportunity to do so. That's instructive.

Concerning the interminable dirge about organized religion having too many enslaving rules and somehow failing to be "authentic" -- a complaint levelled at the Catholic Church, with its Canon Laws and Liturgy -- G.K. Chesterton observed what is really obvious but missed by most: that the religious impulse in the human race is so powerful, so passionate, and so prone to grotesque extremes (you don't need any proof of that besides the testimony of history, especially of recent history, do you?) that a church that brings authority and order to it is rather a liberator than an enslaver.

This begs the question: what authority is there in Islam to restrain that awful tendency toward wanton religious fervor, to prevent it, for example, from spawning a sect that is an evil cult of death, laughing as it slaughters babies, women, innocents, anything and everything including civilization itself?

In civilized western countries, the culture restrains. But the culture is unquestionably Judeo-Christian in its traditions, mores, and laws. Thus it must be acknowledged that Islam is moderated by Judeo-Christianity, its two older siblings. Enough on that for now.

Next, laying around in the "Drafts" folder is something with the working title, "The Rhetoric of Power." We hope to make a typically witty, incisive and cohesive if somewhat eclectic literary collage the slogans that have gotten the most airplay in the recent presidential campaign, slogans that seem to both lay claim to power and to elevate doing so to a virtue, which we will argue it is not.

For the moment, however, let us just say anecdotally that our inner skeptic has one eye cast warily upon this age when there are so many "messianic" references to a certain sketchy political leader, references he seemed quite comfortable to let people indulge in because they helped pave the way for his rise to...power.

We simply cannot let it slip by unremarked upon that history is not without precedents to show the downside of entering into economic catastrophes with messianic figures on the scene. How much more so given, in this current version of the theme, the magnitude of a) the economic catastrophe and b) the level and acceptance of messianic rhetoric.

At some point in the near future we expect to post a brief commentary entitled, "Four Heartbeats Away," or something along those lines, if/when the Secretary of State Designate is confirmed.

Did they mean, "Obama's job?"

Finally...can you believe it? She's that close?! And already prying in the back door is the old man, who was quoted by Yahoo! News the other day as being willing to take a post in the administration, if offered. Apparently his latest press release was a little too gauche for even for Hillary, because, when attempting read the details at the link, we found the story had been pulled. Guess maybe we should include references to media and propaganda in that post about the Rhetoric of Power we have cooking...

The Religion of Peace Strikes Again

This time in Mumbai.

And in case you've ever wondered what the eyes of the devil look like, here they are:


No, this isn't going to stop the bullets and bombs:


I don't know about where you went to school, but where I did, appeasement never stopped a bully. But an ass-kicking did.

Better hope they're stopped while they only have Kalashnikovs.

Of Hubris and Moral Hazard.

Suppose you lived in a nice neighborhood. Suppose further that anyone, friend or foe, could buy fire insurance on your house. Suppose even further that they did buy it, and that there was no limit to how much they could buy -- even up to multiples of the value of the home -- as long as someone was willing to sell them a policy. In fact, you even bought a little fire insurance on your neighbor's houses.

And let's suppose you and your neighbors are in the fire insurance business. Why would you sell so much insurance? Well, for one thing, your neighbors didn't really talk much about who was buying policies from them, and neither did you. But you all were pretty sure you were fireproof, being experts in the business. So you kept selling policies and collecting those big premiums.

Then say over the spring and the summer a half a dozen houses in your neighborhood did burn down. Wouldn't you have to wonder what caused all those fires, one after another, in the same neighborhood? How are you going to pay all those claims?

Crazy, isn't it? It would never happen! The insurance industry is regulated; the bright guys in the suits at City Hall would never allow such a thing.

Well, it is crazy, and it's not regulated, and it has happened. The "homes" in question are broker dealers and big banks; the insurance policies are CDS contracts, and it's anyone's guess who bought all the protection. But the "insurance companies" -- the sellers of protection -- are also among the ones whose homes are on fire, so it's a downward spiral for them, and with each fire they are less adequately capitalized to pay the claims.

That's why the taxpayers being called on to bail them out.

Talk about a perfect storm.

Somebody had to bring it up.

Considering the action in the financials of late, we thought it might be a good time to finally get around to posting these.

As had been our habit for so long, and one we are glad to say we now make every effort to be rid of, we hinted at, waxed metaphorical about, and otherwise danced around the topic of financial terrorism for weeks. For example, we had spoken out against naked short selling, and observed, "markets do not crash one name at a time;" yet the broker/dealers were falling like targets in a sniper's crosshairs, as their stocks were relentlessly pummeled into single digits, clearly being shorted to death.

Finally, when it was to us so obvious a potential explanation for and yet so absent from any public discourse we had seen on the name-by-name unravelling of the financial system, we decided to speak up about our hunches.

On September 17, 2008, we were the "guest" who posted the following on Dealbreaker:

Link here.

The very next day, Mr. Jim Cramer said this:

Link here.

Chalk up another one for the new media.

Incidentally, the correlation between lifting the moratorium on naked short selling and the collapse of giant US financial institutions is as close to a perfect 1.0 as it gets. Limitless shorting of the stock of a company whose survival is predicated on the stability and level of its share price -- a company, in turn, upon which the financial system is in a large or small way dependent, is a systemic flaw so egregious that it defies analogy. Soldier without a helmet? Knight without a breastplate? No problem in peacetime. But this is not peacetime, is it?

We trust you can come up with your own metaphors. Perhaps we could have a contest to see whose is best.

101 Ways to Give the Market a 10% Haircut, part 36

Have the designee for White House Chief of Staff (the one they call "Absolute Enforcer") "call on business leaders to help push universal health care" (Wall Street Journal, Wed, Nov 19, 2008, page A6). This helped take 872.46 points, or 10.63%, off the collective wealth of the free world in two short days.

They don't get it. They don't understand that talk like that is kryptonite to capital. Even though Mr. Obama said that "government stands ready to do whatever it takes to revive the economy," he – more importantly, those whose strings he's attached to – simply won't fathom that all the government need do is concentrate on limiting its own interference in private enterprise and the pursuit of happiness, and stick to legislating what is just, protecting the innocent and defending the country.

The market, left alone, will do what markets always do: price things rationally, enable prosperity, and get things from where they are to where they need to be.

Security, economy are priorities, Obama tells CBS

Gee, that's some change.

Or did I miss something?

You can read it here, if you want. But why bother?

B-movie From Hell.

Have you ever seen a really, really bad movie? The kind with a plot so bad it that makes you bemoan, "do they think we're idiots?"

Imagine "Night of the Living Dead," "Attack of the Killer Tomatoes," that movie about giant tarantulas taking over the world, and, say, the worst episode of "The Partridge Family" all rolled into one. Oh, and let's toss in "Brazil" for a sub-plot. Wouldn't having to sit through that be torture?

Never seen something that bad? No worries, just open your eyes -- you're living in one. We're all extras in The B-Movie from Hell.

That's what I said when I saw the headline "O eyes Hill for Secretary of State" -- "do they think we're idiots?" And this, after months of getting my head around the fact that some nobody with absolutely no history at all can come from the bowels of American politics -- that's Chicago -- and become President of the United States; after having to endure the whole "messiah" theme, the utterly absurd campaign gimmicks, the whole underbelly-of-Hollywood feel of it.

I mused in a previous post about how glad I am for the separation of powers in American government. I suspect the cast of characters that will ultimately assume authority here will render that concept a sentimental artifact of a time when men had backbones and people thought for themselves.

What's next, Elliot Spitzer as Attorney General? It would be hilarious if it weren't probable. Am I the only person who wondered why the powers that be let him off without a single criminal charge after paying a young prostitute lots of money for his pleasure? Mr. Spitzer, the degenerate abuser of power, makes Janet Reno look like The Church Lady. He can be touted as "the man who cleaned up Wall Street." How's that for a stock character? [I see I have inadvertently made a bad pun, and, in keeping with the theme, I've decided to leave it in.] Anyway, you read it here first.

This movie is shaping up to be really, really bad already. It makes me long for reality. I think a Great Depression might be more bearable than this. Oh, wait, that's probably the double feature.

At least the soundtrack is good. Right now I hear the line,

"...and I get on my knees and pray
we don't get fooled again..."

President Bush and Miss Market Take Obama to School.

Today, President Bush came to New York to tell the seething socialists from across the pond and south of the border, and especially the one that's packing up to move into 1600 Pennsylvania Avenue NW, that they fool around with free markets at their own peril.

Apparently he made a compelling case because, after touching its market-meltdown low, the market inexplicably rallied 10.86% off its Obama-fearing low to close up 552.59 points or 6.67% on the day. This, dear readers, is the rally that Obama coveted. It is also the rally that George Bush got.

This is what markets do when they see a light at the end of that long, dark tunnel of socialism. Flip the chart over (or refer to my Nov. 5th post) if you want to see what they do when socialists get themselves elected

Mr. Obama, you've just been schooled. Hope you were paying attention.

On the first Black President of The United States

Well, the thing is, he's not exactly black, is he?

Both readers of my blog will no doubt be aware that I am no fan of Barack Obama or his friends. So waking up on November 5 was not the usual joyful experience that it is on other mornings. But something interesting did happen as the day wore on.

I found myself picking up the genuine elation that seemed to be radiating from many of my black coworkers. Not arrogance, not gloating, but just...elation.

I wrote these words to a friend in an email during the day:

However, I also recognize that black Americans must [be] -- and probably can't help being -- elated that someone who understands (or at least that might understand) the black experience is in the highest office in the greatest nation in the world. I pray he will not disappoint any American, especially black Americans. Of course, I believe that, apart from a miracle, he will disappoint. I also thank God for the separation of powers...

I am happy for black Americans -- not that Obama is president, but that a black American is. I try to imagine how they must feel, and have felt before and after. They may have a sense of being American now more than any forced busing or affirmative action legislation could ever make them feel.

Don't be put off by the pronoun "they," it's simply correct grammar when referring to a particular group of individuals.

So, instead of being overcome with a sense of impending doom -- which really isn't too extreme a sense to have when someone like Barack Obama gets a whole lot of power -- I was gracefully transported to a place of peace and joy, in sympathy, I suppose one might say, with my fellow American citizens of color, whose histories have been so difficult.

I am thrilled that the American experiment works that much. I was thrilled to see record turnouts, and people so engaged in the process of electing their president.

But as to the man himself as president, I'm certain that -- apart from that miracle or series of miracles -- he will be a political, economic, and administrative disaster.

The stock market is starting to tally the cost of his idea of hope and change. Miss Market is not a fool for long. She can hear the rumblings of every half-baked socialist, environmentalist, victim-creating-and-exploiting scheme being hatched by the leftist morons in congress and elsewhere.

She understands how, coming as it does in the midst of a market crash and credit hibernation, the bill for such waste will be borne by the taxpayer, and any business that happens to turn a profit, and she knows that will hinder growth. She knows it will exacerbate the problem, perhaps bring on that feared depression. Miss Market rightly feels threatened.

She marked this brand of Hope and Change down another 443.48 points, or 4.85% today, the second day in a row. That's about 10% in two days. This market will test the ultimate bottom, before it's all said and done. As in, cut in half, from here. Unless...

...there is one mitigating circumstance, and it's not small, but it's not a no-brainer, either. There is still a half or so of the civilized world that needs to move into the 21st century economically and infrastructurally. Lots of people need to be fed, clothed, have transportation and the stuff of the business of life. There's a huge, ongoing demand for commerce to meet these needs. But as commerce requires credit, therein lies the rub.

How fast can the global credit machinery can be primed, put in motion, and stabilized? And, incidentally, at what cost to individual liberty? Will things get so bad that any price will be paid to put a chicken in every pot?

Commerce also requires markets, so if Barack's socialist tendencies get shoved down our throats, it will drive capital further into hiding. All bets are off for a very long time, both here and abroad. Capital, being a smart thing, may discover another, more market oriented center from which to base. But that wouldn't be so good for America, would it. And, the reader should understand, what's good for America is good for the world.

Back here at home, with Barack Obama as president, and a leftist, activist congress at his side, look for the biggest shakedown of the taxpayer in modern times. If they're smart, they'll keep the body alive while they parasitically exploit it. But, they're not smart, are they? At least not in the best sense of the word.

Hopefully the marketplace of ideas won't be annexed by the powers that be and this Brave New Administration can be kept from doing too much damage to America.

Maybe somehow Obama will come to understand markets; maybe he'll understand what it really means to be an American, and how America stands with Israel, or fails to at its peril. Maybe he'll have that Damascus Road experience that will show him the difference between "being punished" and being pregnant. Maybe the hard-edged arrogance I heard in his voice was only my imagination. Maybe he'll trade in his mantle as "messiah" for one of "public servant."

I believe in miracles. I'm just not presumptuous enough to bet on them.

Welcome to Wall Street, Mr. President Elect

That had to be the shortest honeymooon on record, hunh?



Hope and Change marked down another 486.01 points, or 5.05% today.

Trick or treat.

Freak.

I don't know about anywhere else, but in New York City, every day is Halloween.

When I was a kid, Halloween was that one day a year when people -- children, actually -- toddlers with parents, adolescents, juveniles, the yet-to-mature -- dressed as freaks, ghouls, and other scary things, went up to complete strangers and asked (with assured expectancy) for stuff. Granted, one group does the dressing and another the asking, but, still, this happens every single day here.

Freak, Jr.

Back in the day, skeletons and skulls adorned houses and costumes one day a year. But here, every manner of stylized skeletons and skulls adorn just about everything all the time. In the fashion capital of the world, I see the most imaginative renderings of skulls woven into clothing, on backpacks, tattoos, and graffiti (of course). I even saw one on a baby's pacifier recently. Is it safe to say I've seen everything?

We don't need to know when Halloween falls this year. What we need to know is, when's it going to end?

Can you say "Arkancide?"

Do they have Teamsters in Arkansas?

The New York Post reports that "Cops Eye "W" Role as Possible Motive" in this brutal attack:

The cameo role of a bubbly, blond TV anchorwoman in the controversial movie "W." is being looked at as a possible motive in her bloody beating inside her Arkansas home, authorities said yesterday.

It's now a murder. This lovely young woman passed away on Saturday, October 25, 2008. But why would her cameo role be a "motive?" The Post:

She had a small role in the new Oliver Stone movie "W.," which was filmed in Shreveport, La. She appears briefly as a conservative commentator who speaks favorably of President Bush's "Mission Accomplished" event on an aircraft carrier shortly after the start of the Iraq war.

Anne Pressly, R.I.P.

Whether it's art imitating nature or the other way around, or just a long line of concatenated coincidences, tragedies like this call to mind some things that simply refuse to let themselves be forgotten: Only one state has a cause of death named after it in the popular lexicon; only one former president -- former governor of said state -- representing one political party distinguished by its radical left-wing elements, has been associated by history with something called a "Clinton body count" (it returns "about 273,000" results when entered as a search keyword in the Google search engine).

Does every poor innocent who crosses these folks wind up going the way of Jimmy Hoffa? That's a useful segue into the Chicago politics connection, which went national when William M. Daley, the seventh son (it's true) of the late Chicago Mayor Richard J. Daley, became Al Gore's campaign chairman in the 2000 Presidential election -- and sought to overturn the entire election process in the courts, after they'd lost. He's currently "a prominent supporter" of the latest offspring of the Chicago Political Machine to go nationwide, Barack H. Obama.

Who in their right mind would suggest such things are anything more than a series of unfortunate, but striking, coincidences? But who in their right mind could reckon themselves with such impossible odds for misfortune?

Who has paid any attention to the bloody trend in world politics in our lifetimes? Rigged elections, body counts... suspicious bouts of mortal bad luck befalling numerous individuals whose proximity to them is the one thing they all have in common -- such things do not constitute a good omen when they characterize a political cabal.

And if there's no fire, how come there's so much smoke?

Memo:

Anna Schwartz, in an interview published in the WSJ October 18, got me thinking...

What say we take what's left of that $700 bn and dream up some kind of incentive to get an exchange set up to transparently price the structured OTC inventory (or at least its major parts) ASAP?

All assets that impact statutory capital have to be priced without any further delay (wasn't that the spirit of FASB 157?).

Then let the market do its thing. It's going to anyway, eventually. The sooner, the better.

Instead of bailing out the banks which were rather poor stewards of the money they had, why not invest in the market infrastructure? Some of the bright lights at the NYMEΧ, for example, are making some headway. If a deal can be struck, then take a position in the solution instead of the cause of the problem.

If the government has to be involved, let it be in a way that upholds markets, not supercedes them.

You'll probably still have to bail out the banks, but at least the problem will be on its way to being solved. And getting an exchange working properly will very likely speed the process and reduce its cost to taxpayers. Oh, and it will create value and wealth in the process.

The market will fix the problem if it has the tools.

Wouldn't it be cool if America leveraged this situation into a leadership position in these new markets, like it had once in equities, options and futures?

I feel a crude bounce coming, boys and girls.

More later.

But be warned: if you see an idea here in the morning, you'll see it on Bloomberg by the afternoon.

No God but Caesar

For well over a decade, I've been saying that Florida is a police state, that its sheriff's deputies are the creme of the crop of insecure, power-hungry, steroid-pumping, gender-identity-challenged thugs who would make Brownshirts look enlightened, and that its judicial system reeks of putrid corruption.

If you need more proof than the fact that a Florida court ordered a man to jail for failing to re-sod his lawn, and that, in fact, deputies arrived at his home, shackled him as though he were a violent threat to society and hauled him to jail, trust me, it's out there.

In The Constitution State -- that's Connecticut, in case you don't know -- the Constitution is no longer needed, because the supreme court makes all the decisions now. So don't worry about anything. They'll take care of you. Just get to work and pay your taxes.

And speaking of idolatry -- hey, I'm not the one who calls him "messiah" -- the oldest trick in the book is to tell people who they're going to vote for before they do. It is reported that "traders say that Obama could win 364 electoral votes to McCain's 174". Two things about this. No, three.

First, the operative word is "could." Lots of things could happen. Monkeys could, as the saying goes, fly out of my butt. Second: "traders." Online information exchanges are just like any other market: they're fickle and can go to extremes of extremes. Traders --those Wall Street types --it's not like they ever get enamored of a bad idea, right? Do you really want them picking your next president?

Third: if the traders are right, you can bet it's because they've done the math on how many bogus voter registrations there are.

The Issue

There isn't a presidential candidate anywhere who can "fix" the "crisis." Either one of them can make it a great deal worse than it is.

Americans fool themselves if they think the issue of this election is the markets. The groundwork for the markets' current upheaval was laid...some time ago (the debate about "when" obscures my point).

In this way, the candidates are homogeneous. Neither can fix the crisis, neither is really remarkable in meaningful ways. Obama's silver tongue is undone by his shady friends and an at-best unremarkable past. McCain is barely a republican, apparently. They net out to mediocre.

Where the candidates differ -- and therefore, the issue at hand in this election -- is this: One candidate is against abortion, and the other, is not. One candidate adopted a discarded baby into his home, the other thinks of an unplanned baby as "punishment." One honors innocent life, the other feels free to discard it if its arrival seems inconvenient. Would any candidate hold that position if fetuses could vote?

With regard to the VP candidates, again: one could have aborted a baby diagnosed before birth with Downs Syndrome, but did not. The other one ignores the teaching of his professed faith on the matter of abortion in his policies.

The difference: how they view human life -- not necessarily their own, but innocent, silent, defenseless baby human life. In this way, the candidates could not be any farther apart.

America ought to concern itself with this question: is a candidate who cannot grasp the value of any and all human life fit to lead it?

Like it or not, that's the decision you're making this election.

Fashion

Pelosi's Encore

After conferring with her cohorts in congress and seeing the virtually unlimited amount of money that's being thrown at the financial system, Speaker of the House Nancy Pelosi has announced that more money is needed to buy favors for Barack Obama in this election cycle, and that a second bailout bill is the ideal way to get it.

Soros says...

In the Financial Times, Soros has offered some ideas on how to fine-tune the Emergency Liquidity Provisions and implement them practically. It's an action plan, really, and it appeals in that sense.

Especially on point, he suggests what should be obvious (he often does that, but because he's Soros, it is received as though it's inscribed on a tablet of stone):

The Fed would also guarantee interbank borrowing by banks eligible for recapitalisation. This would reactivate the interbank market and return the spread of Libor over Fed funds to normal and reduce the abnormally high interest rates on business and mortgage loans linked to Libor.

Of his action-plan, he estimates with characteristic modesty:

It would help restart the economy and likely produce returns for taxpayers comparable to my fund’s.

This will undoubtedly appeal to Barney Frank and friends, who tried to get the government into the hedge fund business via Fannie and Feddie.

Not a big fan of the big man, but, given his stature and experience, even his utterances of the obvious have a certain authority.

Something that should be obvious, but was omitted from his to-do list is, "Get the government the heck out of the markets as soon as possible thereafter."

Nothing New Under the Sun

Sometimes wisdom is needed but, if it is being uttered at all, it is drowned out by the cacophony of yapping "experts." One need only reach back for some saner perspective.

To that end, I will relate these words from the best book I have read in years:

An immense change in manners and morals had been slowly creeping through society since well before the war, and was now reaching its fruition. Moral standards especially were changing -- or were going out altogether. This was evident in business as well as in social circles. The old business ethics were well nigh shot to pieces -- especially in big business -- during that era of greed. All sorts of practices which would have been utterly taboo a quarter century before, were now becoming commonplace. The question, "Is it honest?" became more and more overshadowed by the other question, "Can we get away with it?"...I have told of an instance where, many years ago, a large corporation was ready to hand me a substantial bribe to help them fool the government...such methods seemed as common in big business as snowflakes in Labrador, and were scarcely questioned as being illegitimate...

...Such had become our modern temper; and with it life was speeding up. Though the whole world was bankrupt and none of the major...problems had been settled; though racketeering, bootlegging, business rascality, and political corruption flourished as never before; though morality between the sexes was more and more being laughed to scorn -- yet we all thought we were living in an era of splendid progress and great spiritual awakening...

...Yes, it was a golden age while it lasted. We did not know how speedily we were riding for a fall; how we were heading, ever faster, toward an economic cataclysm such as the modern world had never dreamed could be.

-- John Moody, The Long Road Home, 1933

If you read this blog you ought to get that book.

Aluminum has crashed.

I don't trade aluminum. The last I heard, it was near all-time highs. But I learned today from the most unlikely aluminum trader that, no, it's crashed.

The weather in Manhattan is beautiful. And as the trains downtown are on their spotty, weekend schedule, I have ample opportunity to walk across the gaps in service. One of these brings me through City Hall Park and past the tourist-saturated Ground Zero before getting home a couple of blocks to the south.

Making my way there, right in front of Ground Zero, I noticed a man struggling with an overloaded shopping cart full of junk nearly in the middle of the very busy street. Some of the junk, which was piled high on the cart, had shifted, and some had fallen off into the street. He looked like a particularly obsessed homeless person -- scruffy beard, unkempt hair, shabby clothes, and of course, the cart full of junk. I thought he looked too young to be so destitute. For some reason, maybe it was to see if anyone would help him (nobody did), I stood there and just watched him wrestle with his cart load of junk.

I watched with what I later realized was a misplaced pity, as he pushed, pulled, and tied over and over, a load of discarded metal. I had decided that, no matter what it looked like, I was going to offer to at least help him get out of the street. As I walked over, the pieces of the puzzle came together, and I realized that everything he was lugging was aluminum. He wasn't destitute as much as he was industrious.

I asked him, "would you like some help with this?" "No, no thanks," he replied, in broken english that was otherwise lucid. No, he wasn't a street person. "Are you taking this to the scrapyard," I asked? "Yes." "How much do you think you can get for all this?" "Maybe about thirty dollars, now," he answered. "The price has come way down." "When," asked the man who works on Wall Street? "All this week," replied the aluminum trader.

So I looked up the price of aluminum and, sure enough, it had.

Odds and ends.

I'm going to indulge myself a monologue of loosely related observations.

First, Friday's market action: Without a doubt the most volatile equities session I can remember in 22 years -- years that have been peppered with various and sundry financial upheavals. (Yes, of course the VIX hit another peak -- it reached over 100, in fact).

Friday's action was inhuman in character. That is, it bore the marks of robotic trading, and that in the form of a professional wrestling event. A cold, mechanical, zany, lightning fast contest of machines. One does not simply blink, when he sees the market down by seven hundred, only to see it down by three hundred by the time he has opened his eyes, unless large orders are being generated, sent and executed at or near the speed of light.

One thing robots lack is subtlety, which was always the mark of the capable trader. And lack of subtlety can be telling. Does Friday's robotic twitching tell us anything? It does suggest that reasons to buy were found, along with reasons to sell. If nothing else, some fleeting, historic arbitrage trades were made.

Wall Street -- I mean the real Wall Street, not the dog-feces reeking runway of overpriced condos where the neo-rich, the weird, and the arrogant come to strut -- is a treasury of time-tested wisdom. The old timers used to say that extreme volatility suggested (not "guaranteed") an impending trend change. Think of a damsel torn between the suitor she had been pledged to for so long (the existing trend) and the one she really wants. If you could chart her sentimental machinations, it might look like Friday's market action.

We'll have to wait and see which one she chooses. This kind of fickleness is the very thing that trading ranges are made of, as we indicated in previous discussions.

Speaking of Wall Street's treasury of wisdom, there's another favorite that says, "Money always returns to its rightful owners." If you want proof of that, just ponder this turn of events: Abramovich, Deripaska, Oligarchs Lose $230 Billion.

And another thing. What to say about this bit of incredible nonsense? During an emergency G-7 meeting in the throes of the most volatile day in world equities markets history, the prime minister of a European nation says, for quotation by the media, "The idea of suspending the markets for the time it takes to rewrite the rules is being discussed."

It is hard to outdo this remark in terms of sheer arrogance, not to mention folly, in which it lacks nothing. Its implications for the geopolitical structure are mind boggling. It calls to mind the word "apocalypse" in its fuller meaning. Fortunately the market, long since jaded to the inane utterances of grandstanding politicians, ignored this irresponsible remark at first, pending a reality check. Can you imagine the absolute rush for the exits that would have ensued, if the market really believed the doors were about to be barred with everyone locked inside? I trust any trading range would be bounded on the lower end by a significantly reduced value, should the idea be taken seriously.

Soon thereafter, the bright lights in the media began emitting stories with headlines like, "Market rebounds on Berlusconi comments," as if a global dictatorship over markets is somehow a good thing for asset values. Sheer nonsense. Fortunately, reality did indeed check in as saner heads in Washington announced, "White House denies plans to close markets."

Finally, a chastened, quite foolish looking old fat Italian billionaire "reverses himself, says no discussions were held to close markets." Oh, wait: he was a billionaire. He'll have to wait and see what this month's brokerage statement says he is now.

Do you need this translated for you? It means the fat socialists in Europe wanted to close the markets and get on with their plans for the long weekend. It means the idea was floated as if it were a done deal, telegraphed by a compliant media. Thankfully there's still enough backbone left in America that we said, "Get lost. Markets stay open." Let's hope we keep it up, because there is a meaningful possibility that we may not be able to, unless the supply to the markets abates.

Right now, America is the cool head on the scene, as it has been in one world crisis after another. America is the father that bails the wayward brats of the world out every time they get themselves into another pickle.

"Tulipomania."

Quit saying this is America's fault, by the way. That's a tired old rant. We didn't create your asset bubble, any more than we created the tulip bulbs that ruined your economies a few centuries ago. But you can be sure we'll have to help bail you out. Not because we like you, but because we always seem to do the right thing for the common good.

Europe's drag on this mess is going to be a whole lot heavier than the US's, and Europe doesn't have the collective economic sense to grow out of it the way we do. We'll be the engine, you can be all the cars we drag along.

And finally, speaking of dead weight, may I please head off the flood of bleating for "global regulation" and "global market control" and all the associated idiocy that's going to be unleashed by saying, if antitrust applies to business, it also applies to government?

Enormous and ubiquitous.

If I talk about a market at all, I prefer to talk about its state or mood, rather than make price predictions. I don't hold myself out to have any better idea about the market than anyone else, necessarily. But sometimes, often during times of extremes, things become quite clear: like the VIX thesis presented a few posts ago. I still haven't gotten around to posting my crude oil thesis from this summer, but I may.

In my last post I said I thought equities were going into a trading range. Well, since the market sold off extremely hard today, I had to think about that thesis. It was in a trading range, of course, for most of yesterday and half of today. Then it broke like thin ice under a pogo stick.

I suppose the reason I think the 9-11 era lows fit is that they are crisis lows -- extremes. The low of the market of the week of Sept 17,2001 was 8235.81. Just a year and two weeks later, the week of Sep 30, 2002, the market hit a low of 7528.40. This is the range I mean, where I suspect we might hang for a while. This is an educated guess. Today's low was 8579.19 -- still a ways above the 9/17/01 low, but near enough. Also, glancing at a chart today, a trading range between 8000 and 10000 seems arguable, but contingent upon many things, not least of which is holding the 8000 area.

It was an interesting news day. One thing I noticed on Bloomberg was a story, early in the day, that quoted a bunch of experts on the VIX as saying that, once the short-selling ban was lifted, the VIX would come right down. These boys actually tried to make their readers believe that the short-sale ban was the cause of the VIX spike. This was such an inane premise -- exactly the reverse of reality -- that I felt it was my duty to the cause to truth to email the author and editor and tell them so. I said, among other things, exactly this:

And I think I can say with the utmost assurance that, had there been no short selling ban, the VIX would have explored much, much higher territory than it has in the pasty [sic] 20 years.

Of course, today there was no short selling ban, for the first time in 3 weeks. I sent the email at 10:53 am EST, when the Dow, at 9199, was 59 skinny points below the previous close. By the end of the day, the VIX made a 22 year high and the Dow was down 678.91 points. So much for the short selling ban causing VIX spikes.

In rereading the article looking for a representative quote, I see it is so full of educated ignorance that I could probably write a book just on it. But as the masthead says, "too many ideas, too little time..." Here's a quote that sums up the premise:

Since the Securities and Exchange Commission started the [short-selling ban] rule Sept. 19, volume on the New York Stock Exchange dropped 35 percent and the Chicago Board Options Exchange Volatility Index surged to 57.53 yesterday, its third straight record. Options on the VIX, as the volatility gauge is known, imply it will fall 44 percent in the next two weeks after the rule expired last night.

Can the VIX fall 44% in the next two weeks? Anything's possible. The article contains a liberal helping of quotes from "experts," some of whom allegedly manage deci-billions. Well, at least they allegedly did when they were interviewed this morning. But if they shorted the VIX like they were yapping about doing, well, I trust they're managing a bit less now. While I don't wish ill on anyone, I can't say that I don't like being proven so right so dramatically, and so fast. It was a ridiculous premise for an article and I really pity everyone involved.

Both Bloomberg and CNN continued being ridiculous by claiming, incorrectly, that the VIX had made all-time highs, later in the day. Check out CNN's graphic faux-pas:

I'm not going to waste my time with CNN, but I did email Bloomberg, after reading this headline:

VIX Options Index Advances to Record Above 60 on Credit Freeze

As pointed out in previous posts, in order to advance to a record, the VIX would have to register a reading greater than the high on October 20, 1987, and, indeed, for the entire CBOE VIX data set.

Bloomberg responded as follows:

hi charles,

bloomberg uses the new vix.

jeff

I think anyone would be confused by the nomenclature, myself included. In order to clarify, I revisited the CBOE site, and this is what I learned (white paper here):

The VIX was based upon OEX (S&P 100) options, from 1986 - 1993. Then, a new methodology was launched, based upon the SPX (S&P 500), with a different methodology that gives basically the same results. Then, in 2003, the original VIX was renamed the "VXO," while the new VIX was...still called the VIX.

Note: The data from Jan, 2004 - Aug 2007 has, in fact, an average difference (VXO-VIX) of -0.327 (2.4% of the average index value) and a standard deviation of that difference of 0.550. From July, 2008 - Oct 9, 2008, the average difference is 2.758 (9.0% of the average index value), with a standard deviation of 2.394 (CBOE seems to be missing VXO data from Aug 2007 - July 2008). The difference between the two, for determining trend and magnitude, is irrelevant. For this reason, it can be safely said that the all time high of the VIX, which is what it was called before it became the VXO, is, indeed that of October 20, 1987. While the then-current VIX high on that day was 172.79, the new methodology will undoubtedly result in a different nominal amount, but surely we can expect something relatively close in order to be considered a "record high."

Finally, the CBOE continues to publish current VXO data, and has a history available from 1986. So, determining an all-time-high of the fear index needn't be such a complicated issue. Enough about this.

We refer to our previous discussions about the VIX/VXO for some context, and, if you'll pardon our saying so, we said explicitly and repeatedly that, at 36, and then at 42, the VIX was not reflecting the gravity of the financial situation and must go higher, meaning equities must go lower. On Sept 17, the Dow closed at 10,609.66. We said, "Lower." On Oct 2, the Dow close at 10,482.44. We said, "Lower." Today? 8579.19 The VIX has been very useful in putting things in perspective.

We've also been saying, "Lower, ultimately." And we still are. No, we're not setting time frames and, no, we can't rule out bounces. In fact, we might be due for a biggie.

But this problem is not only enormous, it's ubiquitous.

***

[edit] we've just checked the Nikkei. In the two hours it's taken to write and edit this, the Nikkei has opened and dropped a whopping 13.25%. Enormous and ubiquitous, indeed.

Separately, IBM has just completed a $4 bn bond offering, priced to yield 387-400 bps over similarly dated US Treasuries. This is investment grade. Unless the world falls apart, someone's going to do really well on these.

Respite

The markets are exhausted. People are exhausted just thinking about them. I know I am.

I have thought (for years) that when the asset bubble burst the market would test the 9/11 era price range. I still think so. As of this writing I am looking for a trading range -- a regrouping -- until the next definitive event/revelation/whatever. Perhaps sometime after the election, but not sure about that.

This would be a very good thing, because there are issues more important than asset values that are on the table in this election. There is, for example, the value of a human life, which it will be given you, your neighbors, and I, to weigh. We get to decide if some life is unfit for life just because it seems to present itself at moments when we are preoccupied with ourselves, our dreams, our assets, or even the consequences of our own misfortunes or bad choices.

As for the market's fate, I believe lower, ultimately. Way lower. But, I could be wrong.

10 weeks after conception.

Of far more enduring consequence is the fate of mankind -- determined one tender, innocent life at time. It is in our hands each and every day, but especially so as a matter of public policy during this presidential election. The verdict we render on it will be the verdict we render on ourselves.

If you knew your Jewish neighbors, business associates, classmates, friends, were being herded into trains by the millions and sent to torture camps and gas chambers, and you could cast a vote on the practice, would you shrug your shoulders and say, "I wouldn't do that, but who am I to force my views on someone else," or would vote in favor of saving their lives?

There are worse things than an asset crash. There are more important things than liquidity. Maybe we'll have some time now to think about these, to inform our consciences, and to act courageously in accordance with them. Future generations will either thank us, or be mute.

re: Wachovia/Citi -- Cui Bono?

What could explain the sudden change of heart Mr. Steel had after agreeing to sell his company to Citi last week?

Referring to the $700 bn rescue package recently signed into law, Gary S. Becker opines in the Wall Street Journal (emphasis added):

Partly because many consumers are repelled by the intention to bail out companies and their executives who made decisions that got the companies into trouble, the new law includes income and severance pay limits for executives whose firms seek government help.

It was widely (and ambiguously) reported that the deal Wachovia signed with Citi invoked "government help." (One report made it crystal clear that Citi granted the FDIC warrants for upside participation; and one reported correctly that the Wells Fargo deal is a far greater burden on the taxpayer owing to the tax benefits of buying Wachovia's losses that Wells would enjoy. Citi would not, because the deal was signed before the tax benefits were enacted as law).

The premise offered for consideration, then, is thus: Robert Steel, Wachovia's CEO, exposed his company to substantial liability by wantonly breaching an exclusive contract executed with Citi. What reason could possibly be given for such bizarre and irresponsible behavior? Maybe he was just trying avoid those "income and severance pay limits" in the new bill. Maybe he was trying to save his bonus.

Memo to Wachovia:

Not only did your CEO [bury your company under a mountain of the most poorly priced California real estate in history, have to check my facts on this -- apparently he came on after Golden West was bought] he also breached a contract with Citi and exposed your company to untold liability in the process. Oh, and he also sold your company at the bottom but, hey, there were no other bidders and he was obviously desperate.

And then there are the consequences for the markets at large and the FDIC's attempts to stabilize them, which suffer as a result of the CEO's disregard for his commitments. He has singlehandedly set an example of how to demolish what little confidence is left in the asset markets.

He may think he's shrewd, or badass. But he looks like a complete ass who's caving in under the enormous pressure he must be facing. You really ought to ask him to step down.

The Lawyer from Hell

Bloomberg reports that David Boies is at it again.

Wachovia Bank signed a merger agreement with Citigroup a little over a week ago. They signed the agreement -- indicating their intention to merge at the negotiated terms. All that remained to complete the deal was regulatory and shareholder approval, and a closing.

The last time I checked, a signed deal is deal.

Maybe it just depends on what you mean by "is." Wells Fargo has come along and offered more money for WB - a lot more.

No matter that a deal was done with Citi; Wachovia has retained David Boies -- the notorious shark who argued the sham case for Al Gore when his attempt to rig the Florida presidential vote failed in 2000. The esteemed counsel is arguing, once again, that rules change when enough is at stake. In Boise's world, rule of law and signed contracts are meaningless when political favors can be called and public opinion can be manipulated to nullify them.

His tack in this, his most recent attempt to decimate the legal foundations of western civilization for a nice, fat fee, is to argue something about the "bailout bill obliging Wachovia to seek a higher bid." But Wachovia relinquished its freedom to seek a higher bid when it signed off on the deal with Citi. And the "bailout bill" simply does not apply to banks that don't need to be bailed out.

Surely Boies' main value-added here is that Chris Dodd, Barney Frank, Chuck Schumer, Nancy Pelosi, et al, are kindred spirits and speak the same language, making bargaining a foregone conclusion. It doesn't hurt that the new legislation probably gives him lots of gray area to exploit, along with popular sentiment. Count on much grandstanding by Boies' fellow travellers in congress about "doing what's best for the taxpayer," when the taxpayer has nothing whatsoever to do with Wachovia's merger or its unholy attempt to squirm out of it.

The only upside to this is that Boies might be too busy trying to nullify Wachovia's contract to help Barack Obama hijack the presidential election.

The lesser of the evils if there ever was one.

Fear's Silver Lining

Here we dig a little deeper into the idea of "Moral Hazard," which we really only alluded to in the post that bore its name.

Before the dot-com bubble was acknowledged to be a bubble, James Grant, whom everyone should read, wrote a book entitled, "The Trouble With Prosperity." Insofar as all asset manias share the same blueprints, the book was a perfect forewarning of our day: the perils of plenty, bringing as they often do sloth and poor judgment in places high and low. The foolishness of excess capacity that results. And the inevitable deleveraging and downward repricing of assets that follows.

There's a useful converse to the idea that prosperity can be troublesome, and that would be that want can be beneficial. How so? By preventing the perils that times of plenty seem to repeatedly bring.

Referring to the VIX chart below -- that's the "Fear Index" -- we commented that not since the 1987 stock market crash has the index had a really powerful spike. In spite of events greater in magnitude and in threat to security, including an incalculably destructive attack on the very heart of finance, fear, as measured by the VIX, has never really been manifest since that Black Monday 21 years ago.

And this is where "moral hazard" comes in. We argued an obvious point: that after the Fed decisively and effectively provided emergency liquidity to the financial system during those trying days in October of 1987, the market concluded, "Oh, we won't have to worry about that happening again." In other words, there was no need to fear, for the Fed was here.

This the lack of fear brought about that disregard for the consequences of the bad side of risk (and perhaps that presumption that risk could be socialized through Fed intervention) that invariably renders many people silly. And dangerous. People who should be habitually and especially sober and self controlled, because of their fiduciary responsibility or the influence they have in the economy.

No, we're not saying the Fed was wrong to intervene on Black Monday, or on any other day, necessarily. Only that doing so seems to have implied a precedent that market disasters will henceforth be prevented, which has been received as an incentive to play more aggressively than one might without the benefit of taxpayer-subsidized disaster insurance ("The Greenspan Put"). And what will prove the precedent to be broken, except...a market disaster? What will offset the tendency to disregard risk, other than the fear of loss? If enough people had just enough of the right kind of fear in them, a whole lot of this particular peril could have been avoided. This is why the issue isn't simply econometric; it's moral: it demands wisdom and self control to avoid the perils of excess.

We said, back in those VIX posts, that the market just isn't scared enough about what it's facing; that it just hasn't registered the magnitude of the problem. We said the VIX argued that stocks must go lower still, and they have. Even Bloomberg picked up on the idea.

Now, as to how high the VIX will go -- that is, how much more real fright is on the way, as manifested in turmoil in the equities market -- I suppose that could be argued, depending on one's assessment of the magnitude of the financial system's difficulty. Ours? Maybe we're in the third inning. Hopefully it's not the first game of a seven game series; hopefully we're wrong.

We said that our problems right now are structural -- that is, that they are caused by market mechanisms like structured-asset-valuation accounting regulations linked to statutory capital requirements that are prone by their configuration to downward (and upward) asset spirals. Structural things are usually fixable, if caught in time (which is why congress' little stalling gambit this week caused a 9+% selloff in world markets and may have caused incalculable damage going forward). But we've only just begun to recognize the economic problems these structural problems have finally ignited.

The unwinding of folly with the reinstitution of the right kind of fear doesn't have to be terrible. It could be, but it doesn't have to be. But hopefully, like that generation that passed through the Great Depression, we and our children will have learned the right lessons.

The great peril on the other side of this is that we fail to learn the lesson; that we place our faith in more ill-conceived regulations and simply don't take our lumps and strive to be smarter and more disciplined and more responsible with our risk taking; that we fail again to recognize the debt we owe to our progeny to keep our houses in order.

Pelosi's Hustle

Living in the big city, one often has experiences that raise the question: is that person malicious, inconsiderate, or just stupid? It's a recurring cause of wonderment.

And so are the actions of congress, at times. Take this week, for example. The US (and world) financial markets are in a historic meltdown. The lender of last resort, the Fed, appeals to congress for authorization to take some really drastic and necessary measures. And what does congress do? It says, "nah."

By the following day, the world's stock indices register an across the board decrease in wealth on the order of at least 7%-9% as a rough guess of the value of the House's signatures. Suddenly, the House has found a ready market it can mark the value of its assets to (meaning, they know they can fatten up the provisions of the rescue bill in myriad self-serving ways, because we're over a barrel). It does so, and the buyer (that's us) acquiesces because it has no choice.

Malicious, inconsiderate, or just stupid?

Former Fed Chairman Alan Greenspan has been making utterances to the effect that the current crisis is one that "occurs once in a century." The math guys say, no, it will only occur once every 10^257 years. In any event, we can all agree that it's a rare day when Congress holds all the aces from all the decks -- those above and those under the table. To their credit, they recognized that much.

Perhaps our esteemed representatives were caught up in a little bubble of their own. Surely some of them have taken on far too much leverage, and it's impaired their judgment. Unfortunately, I'm not aware of any statutory limit on how many times a Congressman can sell his soul.

Pelosi's Panic

Pelosi's Panic

Market Suffers Worst Single-Session Selloff in History as House of Representatives Fails To Pass Emergency Liquidity Measures.

World Markets Post Record-Breaking Losses

Faced with the choice of serving her country's best interests or stoking class warfare, Speaker of the House Nancy Pelosi chose the latter yesterday, letting loose a tirade of pent up anti-Bush non-sequitirs as the House of Representatives voted to let the financial system twist in the wind. The Speaker of the House of Representatives is its highest ranking and most influential member.

Deluded by the notion that they are somehow above consequences, and apparently infuriated that their biggest Wall Street benefactors will be unable to favor them with fat checks and "VIP" mortgages after losing their jobs, bonuses, and companies, democrats in congress threw them, the American people, and world markets under the bus rather than authorize a daring Federal intervention that would have prevented the largest single-session sell off in Wall Street history. At the close Monday, the Dow Jones Industrial Average was down over 777 points or 7%. World markets, desperate for US leadership that failed to materialize, posted historic losses.

``It was a failure to step up and exercise the will,'' lamented Chairman of the House Banking Committee Sen. Christopher Dodd, when asked how he and his colleagues failed to seize an historic opportunity to prevent the second Great Depression. His comments were an apparent reference to the custom in the Democratic party of the male members depositing their balls in the lock-box in the Speaker's office for the duration of their tenures.

Fortunately for the House of Representatives, its members cannot be sued for malpractice.

Citizens concerned about the Speaker's failure to act in their best interests and her irresponsible remarks can send her an email expressing their views.

Feedback Loop

Not long ago, I mused on whether or not history rhymes, as the saying says it does. Actually, the saying, is, "history may not repeat, but it sure does rhyme."

At times it has struck me that history echoes, or that it sings backup. Today, however, I came across something that led me to conclude that history actually creates a feedback loop which leads to ear-splitting, window shattering, crowd-maddening distortion.

Just to set up the illustration, let me use my favorite instrument, the guitar. When a guitarist strikes a note, the string vibrates, creating sound waves, the pickup (through the amazing principle of piezoelectricity) turns that vibration into electrical energy, and the amplifier amplifies that energy, so that you hear an energized collage of vibrations. If the instrument is close enough to the amplifier's speaker, the sound coming out of it that was just amplified will in turn vibrate the strings some more, which the pickups will turn into more electrical energy, and the amplifier will amplify again. With all this happening at something between the speed of sound and the speed of electricity, the effect can build on itself so fast that the result is an exponential increase in wave density (my colloquial analysis) -- a sonic mushroom cloud known as distortion or "feedback." If it weren't controlled, it would probably blow out the speaker (even if there weren't any eardrums left to hear it).

There are similar phenomena in all of nature, including in societies. The Salem witch trials, for example, can be considered a sort of "feedback loop" of paranoia. It reached its crescendo in the execution of numerous innocent and decent people. We have recently lived through a great feedback loop of real-estate asset prices.

A further example of a social feedback loop presented itself to me today in the words of the great Fr. George W. Rutler, Pastor of the Church of Our Saviour on Park Ave. I'll excerpt a bit of the piece that appeared in today's bulletin:

To bury the dead is one of the seven corporal acts of mercy. The human body is to be treated with respect from conception through death...

At the South Street Seaport, there currently is a display of 22 whole bodies and 226 additional organs and partial body specimens. "Bodies -- The Exhibition" is a version of "Body Worlds," which in recent years has exploited prurience in the name of scientific edification. The corpses are skinned, and the blood replaced with silicon polymers. These plasticized bodies are shown in various poses, sometimes whimsically. Dr. Thomas Hibbs, professor of ethics and culture at Baylor University, has called it pornographic.

The founder of "Body Worlds" is Gunther von Hagens, who invented the "Plastination" method at the University of Heidelberg. He is not culpable for his father having served in the Nazi SS in a perverse age when lampshades were made of human skin. That horrified people then. A generation later, more than 20 million people around the world have paid to view "plastinated corpses" for the thrill of it. Von Hagens moved to China in 1996 where bodies were more easily obtainable, some of them rumored to be the bodies of homeless or mentally ill people or executed prisoners. In 2004, bullet holes were found in two of the exhibited "sculptures." The anonymous bodies on display in Manhattan were taken from the Dalian Medical University in northern China. The New York State legislature this summer passed a bill requiring a declaration of the cause of death of the exhibited remains. Is it possible that if you visited this exhibition, you were looking at a Christian martyr?

Do you see the feedback loop idea? Any parent (that is, any parent with any sense) knows that what the parents tolerate, the children will embrace. We don't know, I suppose, if Mr. Von Hagens' father, in his capacity as a Nazi, was involved in making lampshades out of the skin of his Jewish neighbors, or something more or less unspeakable. But we do know that his son has fully embraced cold, utilitarian view of the human body that the Nazis had; that he treats not just the image of man but his very body as raw material to be exploited, as Fr. Rutler put it, and apprently to do so with the sort of success that those who pander to the base motives have from time to time enjoyed.

He may even view certain members of the human race as mere matter, and others as somehow superior to them. Would he want his father's or mother's corpse in one of his displays to help generate revenue? If not, why not?

The proposition is simple: either people -- all people, not just this or that race or nationality -- are material or they're more than that. Here's a clue how you can tell: if people were mere matter, something inside of all of us wouldn't wretch at the idea of human lampshades. Or human sculptures. Nor would morbid fascination be an effective marketing appeal.

In that post called "History Rhymes, " referring to Nazis, I asked, "have we become like they were?" In keeping with the theme of this post, I'll ask, "have we become an exponentionally dense version of them?"

***

I had a few things to say about the burial of the dead a couple of years ago. I'm sure I was not capable of having envisioned human-corpse sculpture when I wrote them. On the other hand, knowing that human lampshades are a historical fact, I might not have been surprised.

I dare you to think about it.

Moral Hazard for Dummies

Let's talk a little bit more about the VIX.

In the last post, when the VIX was at 36 or so, I said it wasn't high enough and indicated more shock was to come to equities.

Today, once more, the market eventually gave up and began its third major selloff of this week. Sure enough, the VIX spiked over the very significant 40 level mentioned yesterday. You'll note that it did so right around 1 pm est. Just then, two significant headlines scrolled onto everyone's Bloomberg screens.

The first was a release from Sen. Schumer that said, essentially, "The government has a plan." This was later elaborated on as a new Resolution Trust type entity to purchase mortgages from banks. The next was a story about the decision by the nation's three largest pension funds, Calpers, California Teacher's, and New York State Common, to no longer loan shares of major investment banks to short sellers. Either of these stories would have been a red flag to short sellers. The action taken by the funds may have forced a short covering scramble in the financials.

In the last discussion I alluded to the fact that, while it has certainly seemed like The Financial Apocalypse during the last week (and may have been), the VIX had been loitering in "ho-hum" territory. Until today, when it broke into "crisis" territory as the market sold off hard around mid-session. This, and the news releases, amounted to a clear signal to buyrightnow, and the VIX finished the day back in merely "tense" range.

It's conceivable that the Fed observes the VIX and has chosen 40 as its action level. As stated before, the VIX is a "fear index." A reading of 150+ was associated with the level of panic in the markets on October 19, 1987, and 40 is clearly crisis level. Whether by design or coincidence, action was taken before it had a chance to push into extreme territory, and an escalation of fear was avoided.

Observing the historical VIX chart below shows that no reading has begun to approach the extreme of October 19, 1987. And yet, in terms of fearful events, 9/11 dwarfs that day. And all the other ones, for that matter. What has prevented the VIX from making such a dramatic move in times of market crisis?

I believe the answer is what is colloquially called "The Greenspan Put." In a nutshell, the term refers to the Federal Reserve's commitment, under the direction of then Chairman Alan Greenspan, to decisively inject liquidity into the financial system in times of crisis. It happened so often in his tenure (1987, Gulf War, Mexican Crisis, Asian Crisis, Russian Default/Long Term Capital, Y2k, Dot-Com Crash, 9/11 terrorist attacks) that it earned a nickname.

Mr. Greenspan became Chairman of the Fed just a few months before the crash of 1987, and stayed there until his succession by Ben Bernanke in January, 2006. Their combined tenure as Federal Reserve Chair comprise all but a sliver of the left-hand portion of the time series depicted in the VIX chart. The policy of being ever-ready with liquidity in times of crisis has continued under Mr. Bernanke, and is likewise referred to as the "Bernanke Put."

The reason the VIX hasn't since hit that early extreme is that the market learned that the Fed was, under Greenspan, and still is, under Mr. Bernanke, serious about preventing any kind of panic that would cripple the financial system. In other words, just as the chart indicates, panic has been mitigated by the Fed; the market has confidence that the financial system will not be allowed to collapse.

Or at least, it has thus far. As alluded to previously, we're still in early innings. What's happened so far has been largely systemic. By that I mean, the inability of the market to objectively price risk, coupled with a well-intentioned but disastrously flawed accounting requirement (FASB 157) , has forced a devaluation of assets by fiat -- an approach akin to saying, "if they can't be priced they must be worth a quarter on the dollar, a dime on the dollar, or worthless." This of course is ridiculous.

However, it has led to the current de-leveraging of banks and brokerages, resulting in huge and unnecessary business failures and mergers, and massive evaporation of wealth, loss of confidence, and demand for what capital is available. To call it an historic dislocation of markets is no overstatement.

But what still remains to be experienced is the writedown of assets that occurs not because of some market mechanism, but because indeed a recession has come -- spending shrinks, jobs are lost, GDP growth diminishes. When people have a hard time making ends meet, they have a hard time paying their credit cards. And there is a lot of leveraged credit-card debt in bank portfolios. And those assets resemble the mortgage-backed securities we just watched drive the VIX to crisis levels. One key difference is that credit-card structures aren't backed by anything as sound as real estate -- even overpriced real estate. Credit card assets are backed by pawn-shop fare.

And, too, are the $1 trillion in "Alt-A" mortgages in various portfolios. These are the so called "liar loans," interest-only teasers, and those facing interest rate resets. The Fed currently has control over about half of these, via Fannie and Freddie, and so these will surely be absorbed by this year's version of the Resolution Trust Corp. The good news is that, being backed by real property -- albeit overpriced real property -- they will retain a meaningful fraction of their value. It's even possible, though not likely, that the assets will appreciate, net to the taxpayer (by that I mean, using the cost basis incurred by agencies who bought them).

It will be imperative that the credit markets begin operating normally, and the mortgage assets now irrationally priced become properly priced, before the effects of recession are manifest. A recession severe enough (and is there any reason to believe a recession under current conditions will not be severe?) could trigger another round of mortgage and then credit card asset defaults, resulting in more of what we just lived through. The Fed has acted very wisely, in my opinion, by creating a vehicle to purchase troublesome assets until they can be priced fairly, thereby removing them from the markets temporarily.

There is one more nagging issue. When the VIX hit "Panic" in 1987, the Fed acted decisively, and calm was restored in amazingly short order. Presumably, the Fed hadn't exhausted all its resources in that action. Most likely, its very willingness to act inspired enough confidence in private capital to get back in the game.

This time, however, is different. Private and public capital has been coming into the game in substantial amounts for months. Fed loans this quarter to banking institutions amount to $194 billion, versus a historical average of $16 billion, in constant dollars, per quarter. Banks have raised $352.9 billion of capital (may overlap the Fed loan amount). If the VIX creeps back into "crisis," say, perhaps, if Alt-A's or credit-card master trusts start defaulting en masse, will there be capital enough to inject? And, if not, will the payments system lock up? Let's hope not.

In summary, then, today the VIX hit "crisis" territory, and was brought back by the Greenspan/Bernanke Put, just like it has been for the last 18 years. If it tests "crisis" again, will lack of Fed and private capital force it into "Panic?" As of this writing, I do not believe the action of the VIX has fully registered the magnitude of the current crisis. While I hope the Fed Put did its job, I am not yet convinced we've seen all the market fear we're going to see. Preparing the removal of troublesome assets from the books of publicly held banks until they can be rationally priced by the market, as done by the Fed today, is a wise move. It prevents a massive, systemic drain of wealth from the market. It is essential that real assets are rationally priced in the event of a recession, which will surely test capital adequacy with regard to defaulting credit card master trusts and Alt-A mortgage assets.

Putting Market Mayhem into Perspective

We talked briefly about CDS. We might mention them a bit more here, for there is a great deal to say about them, and their role in the current credit/equity crisis. We'll go on to discuss our opinions on what the next-next big thing might be. But for now, let's get the current equity picture into some perspective. This is instructive, because a "debt crisis" is a crisis ultimately because of its impact on equity.

Allow me to reintroduce the CBOE VIX Index. The VIX is a measure of expected near term market volatility, as implied by the S&P Index options market. Because volatility is a proxy for uncertainty, and uncertainty, in large enough doses and especially in matters financial, is synonymous with fear, the VIX is affectionately known as the "Fear Index."

Here's a chart of all the VIX data there is, from January 1986 through today, September 17, 2008. Every spike in the index is associated with an adverse market event. The spikes over 40 in the recent past are still familiar to us all. The grandaddy of all spikes is the one that occured on October 19, 1987, when the S&P 500 lost over 20% in a day.

Now, to where we are, and aren't, today.

We are in the midst of a major turmoil. In their efforts to describe it, the best and brightest in markets and economics have taken to using terms like "credit market seizure," and "once in a century event (Alan Greenspan)." Yet the VIX is still in ho-hum territory.

I think the VIX is highly instructive because, beginning with Bear Stearns, the financials equities have collapsed. In the case of Bear, the question of whether or not a "bear raid" took place -- that's predatory short selling with the aim of driving a stock as far down as possible -- led to the discovery of massive options trading on the stock just before and during its collapse. This options activity is what keeps the VIX so relevant. Even if by some as yet inexplicable mechanism the volitility is somehow distributed through derivative markets, the ultimate effect on US equity as measured by the S&P 500 Index will register in the VIX. And right now, it's just not showing a "once in a century" reading. This suggest some more shock to come.

Cause and Effect

Purchasing put options (a bet on the decline of a stock) causes the market-maker of the option to hedge his short option position by shorting the stock. In the normal give and take of market activity, there's nothing in that to be concerned about. The market maker will hedge the sale of a call with a long position, and things remain in a sort of balance. However, a large purchase of puts (a sale of them by the market-maker) will entail a large short sale of stock for hedging purposes. And if the stock declines substantially, his hedge ratio will increase and he'll need to sell more. In extreme cases, a self-reinforcing decline can take place.

There's been much talk about predatory short selling being responsible for driving firms' equity prices down. A collapse in equities prices can cause a firm's trading counterparties to question its ability to post more capital or rollover existing debt, something that would threaten its very ability to endure in a capital intensive business. Lenders may therefore balk putting more capital into what they see as an increasing risk. At the very least, they will charge far more to do so, which can have a substantial adverse impact on earnings expectations and therefore, equity values. The credit question then becomes a self fulfilling prophecy, and that's what kicks the CDS effect into gear.

A CDS is a position on the health of a company's debt. A CDS transaction occurs between a seller of protection and a buyer of protection. The seller is insuring the principal of the debt for the buyer. If the company defaults on the debt issue in question, the seller must pay face value of the debt to the buyer. The buyer, in turn relinquishes ownership of the defaulted note to the seller. The buyer pays the seller a premium for the "protection." So, the seller sees cash flow, the buyer sees safety of principal.

There is no limit to the amount protection that can be bought and sold. A firm may have $100 million in debt outstanding, but many multiples of that amount may be bought and sold in protection on that debt. The effect is to leverage the risk and returns in the CDS market.

There is much to say about this fascinating market, but what we wish to focus on at the moment are the incentives for the buyer of protection. A conservative fund with a portfolio of corporate debt is a likely buyer of protection. Often, the sellers have been the major investment banks; when mortgages began defaulting, sellers of mortgage CDS protection were forced to post additional capital as collateral on their obligations. In the case of major banks, the assets were written down in order that the balance sheet would reflect actual values as much possible -- they were marked to market. The problem there is that the CDS market is both negotiated and illiquid, and therefore marking to market is often an excercise in futility: the market may simply not reflect real value. This doesn't necessarily mean that the securities have no value, only that their value is temporarily impossible to objectively ascertain.

But we've been through that part, at least for the worst of the mortgages, and for the biggest of the banks. On the horizon, of course, are the "less worst" mortgages, and credit card securites, too. But that's another post.

Getting back to incentives, if a firm's equity value starts detiorating markedly, either because of predatory short selling or legitimate selling or overall market conditions, the firms debt risk increases. The CDS market, being frequently highly leveraged, realizes a multiplied effect from the debt risk. Certainly, the buyer of protection stands to gain, but only if the seller can pay the buyer's claim. The seller realizes losses that must be written down, creating a demand for capital -- in a highly leveraged market, lots of capital. Hence the "credit crisis."

As a CDS portfolio at one firm loses value, its credit condition is affected, and the seller of protection on that firm's debt is also faced with writedowns, creating the need for capital. Counterparties to those trades will get cautious, and that firm may be left without refinancing capabilities in a capital intensive business, and the cycle repeats.

To complicate matters, the buyers of debt protection have an incentive to see the reference firm default -- and the sooner the better. If they are in a position to influence that eventuality, would they be tempted to? We've already seen how naked short selling can cause just such a downward spiral. Fortunately, the SEC finally reinstated restrictions on it today. But in between August 12, when the previous restrictions came off, and today, Fannie Mae, Freddie Mac, Lehman Brothers and AIG have entered some kind of massive reorganization, thier equity value has dropped to pennies per share, Merrill Lynch sought a merger, the bond and commodities markets have been in the paroxysms of a flight to quality. The horse is a long way out of the barn.

And we haven't even gotten to the seventh inning stretch yet.

source data: CBOE VIX Website

CDS: the next big thing

How big are the Credit Default Swap haircuts going to be? Well, you can't say, because it's Over The Counter (as opposed to exchange listed). The market is a negotiated one (as opposed to an advertised one), and with the basis as volatile as it is, nobody commits a real price until they're ready to deal, because fair value is very much a moving target.

In fact, with trades driven by necessity rather than value, "fair value" is basically a nice concept, but not necessarily where a trade will be done. When the market is Volatile (capital "V"), and so many underlying pieces have values contingent on so many unknowns, it can't be easy to know what anything is truly worth. Markets can price any amount of bad news. But nothing torments a market like uncertainty.

With regard to the CDS market, buyers of protection are probably, by and large, happy clams. But for every buyer, there is a seller, and they are the unhappy clams. How many clams will be lost when the trades are settled? It depends on..what things are worth. And we're not too sure about that. But if they lose enough clams, there'll be another round of protection sellers who are unhappy clams, because they sold protection on the first bunch of clams.

It's a reactionary, defensive, back-against-the-wall kind of thing. One might say that it seems as if capitalism itself were under some sort of attack, if one had a poetic bent.

Today was not a good day in the market. It's never good when the stock market closes on its lows. It's really not good when the lows it closed on were the result of a single-session decline that is larger than all but the one between 9/11 and 9/17, 2001.

There we go with the terrorism theme again. Just keeps rearing its ugly head. It's that time of year. Financials crumbling like clockwork. Sworn enemies with mega-tons of cash, and world markets now connected by networks, arbitrage, and funky securities called "derivatives." But I digress.

Where was I...oh, yes. Not a good day. Closed on the lows. If this were just a bad day, someone could announce a merger, or the Fed could make some comments about interest rates, or something, to calm the markets and assuage fears. But what can the Fed say now? "We'll loosen up money?" That's all they've been doing all summer. That's not going to restore anyone's confidence.

And this is no ordinary bad day. This is, according to the statisticians, the worst day in years, by one measure. But the measure doesn't communicate the context: this is also one of maybe a half-dozen really, really bad days in a really bad year. And the professionals are walking around saying really unprofessional things like, "we don't know what to do, we've never been here before," and, "we have no idea what the CDS market will do." There's a very large "herd" contingent in this business; people studying one another from the corner of their eyes, trying to anticipate the other guy's next move. True leadership is rare, indeed.

This is the bad side of leverage, everyone's figured that out by now. And of course, everyone in the game was supposed to know better. Leverage is marvelous in a liquid, transparent market. But tip an inverted pyramid a bit too much, and....

So, the next thing we need to get our heads around is the CDS liability. The non-bank CDS liability. Banks have had to attempt to value these securities and taken huge writedowns associated with them. But hedge funds, who very often hold the aggressive other side of the trade, haven't. At least, not publicly. Watch the hedge funds. Maybe they can dodge a bullet. But there won't be any bailout for them.

Wall Street has many sayings. One of them is, "Money always returns to its rightful owners." That's what happens in a credit contraction. All that money that came out of nowhere goes right back there again.

Bank of America acquires Merrill Lynch

so says CNBC.

$29 per. A large (70%) premium to the close of Friday. The world apparently will not end this week.

So, the south rose again, after all. Meanwhile, did John Thain tapdance on Dick Fuld's fingers, as he clawed the rocky ledge? Perhaps, more likely, when Lehman was left without a partner, the Fed leaned on Merrill to shore itself up (suggested by Rich Yamarone of Argus Research).

I say the deal legitimizes Lehman's value, unless they are underwater in toxic assets.

Let's hand it to John Thain (yes, of course, a Goldman Sachs alumnus). He's the guy that woke up the NYSE to the reality of electronic exchanges and merged them with ARCA, before it was too late.

Today he pulled off a shoring up of Merrill Lynch at a premium to market. This might just be the turning point for Wall Street. Not that the pain is over, but that the wolves are on the run.

Nice work, Mr. Thain.

If the deal gets signed, that is.

Change partners again.

It's speed dating from Hell.

Bloomberg is now reporting (a euphemism for "rumormongering," apparently) that, in a huge smackdown to Lehman Bros, Merrill Lynch is in merger talks with BofA, who only last night was reported to be the likely lead buyer for Lehman Bros. in a consortium that also included JC Flowers and CIC:

Sept. 14 (Bloomberg) -- Merrill Lynch & Co., the third- biggest U.S. securities firm, began merger talks with Bank