Thursday, May 31, 2012

Wednesday Lunch After 25 Years, Or So

I've been having lunch once a week with the same bunch of six or eight guys for I don't know how many years.  I'll estimate twenty-five.  The Lunch was first launched when a close buddy of mine told me he was having marital problems, and needed an ear to bounce stuff off.  (Mine.)  We met weekly, and while his marriage unfortunately didn't last, he and I decided that we liked our Wednesday $4.95 steak sandwich tete a tete.  We vowed to keep them up.  In fact, we decided to invite the other guys we skied and golfed with.  Twenty-some years later here we are.  The Lunch has become an institution, second nature to all of us.  Not everyone can always make it, in fact some of the original cast have moved away from the area.  But it's a testament to the friendships we've made that, after all these years - though our jobs, schedules, and circumstances have changed - everyone still makes it a priority to "do lunch" every Wednesday if they're in town.  I can't remember the last time our weekly lunch didn't happen.  It gives us an opportunity to discuss, argue, and learn from each other, find out what's coming up the next week (and more importantly, next weekend), and meet guests who happen into town.  Once in a very rare while we'll even have our ladies join us (for example, the week before Xmas).  Venues and menus change - that steak sandwich is now $16.95, and is often replaced by heart-healthy salads, without croutons, please - but just like the Energizer bunny, we keep going and going.  Yesterday was a case in point, a "special" routine lunch.  One of our regulars who had long ago moved to the city, and has been battling a particularly pernicious form of cancer, road his motorcycle out to have lunch with us.  He probably doesn't know how often his name comes up at our weekly get-togethers (until he reads this), but to see him in remission yesterday, hair and Harley back, was truly something special.  And guess what?  He's going to try to make it out here for our weekly lunch as often as he can from now on.

Wednesday, May 30, 2012

Fukushima "Fallout": California Bluefin Tuna

Future can of flaked white tuna?
Tuna is, and always will be, absolutely one of my favourite fish.  Tasty, cheap, plentiful, and it comes out of a can.  It might still be number one if west coast wild salmon hadn't won me over several years ago.  Now I suppose both might be endangered as candidates for my plate and palate:  “Absolutely Every One” (15 Out of 15) Bluefin Tuna Tested In California Waters Contaminated with Fukushima Radiation: Fish don’t stay still. For example, The Telegraph notes that scientists tagged a bluefin tuna and found that it crossed between Japan and the West Coast three times in 600 days. That might be extreme, but the point is that fish exposed to radiation somewhere out in the ocean might end up in our waters. CNN reports: Low levels of radioactive cesium from Japan’s Fukushima Daiichi nuclear accident turned up in fish caught off California in 2011, researchers reported Monday. The bluefin spawn off Japan, and many migrate across the Pacific Ocean. Tissue samples taken from 15 bluefin caught in August, five months after the meltdowns at Fukushima Daiichi, all contained reactor by-products cesium-134 and cesium-137 at levels that produced radiation about 3% higher than natural background sources. The Wall Street Journal quotes the studies’ authors: 'The tuna packaged it up and brought it across the world’s largest ocean,' said marine ecologist Daniel Madigan at Stanford University, who led the study team. 'We were definitely surprised to see it at all and even more surprised to see it in every one we measured.' 'We found that absolutely every one of them had comparable concentrations of cesium-134 and cesium-137,' said marine biologist Nicholas Fisher at Stony Brook University in New York state, who was part of the study group. The bad news is that is is only going to get worse. As Reuters points out: 'Unlike some other compounds, radioactive cesium does not quickly sink to the sea bottom but remains dispersed in the water column, from the surface to the ocean floor. Fish can swim right through it, ingesting it through their gills, by taking in seawater or by eating organisms that have already taken it in.' As CNN notes: 'Neither [of the scientists who tested the fish] thought they were likely to find cesium at all. And since the fish tested were born about a year before the disaster, “This year’s fish are going to be really interesting,” Madigan said. “There were fish born around the time of the accident, and those are the ones showing up in California right now,” he said. “Those have been, for the most part, swimming around in those contaminated waters their whole lives.” In other words, the 15 fish tested were only exposed to the radiation for a short time. But bluefin arriving in California now will have been exposed to the Fukushima radiation for much longer.
As KGTV San Diego explains: 'The real test of how radioactivity affects tuna populations comes this summer when researchers plan to repeat the study with a larger number of samples. Bluefin tuna that journeyed last year were exposed to radiation for about a month. The upcoming travelers have been swimming in radioactive waters for a longer period. How this will affect contamination remains to be seen." One of the studies’ authors told the BBC: "The fish that will be arriving around now, and in the coming months, may be carrying considerably more radioactivity and if so they may possibly be a public health hazard." Japanese and U.S. officials, of course, are pretending that the amount of radiation found in the bluefin is safe. But the overwhelming scientific consensus is that there is no safe level of radiation, and radiation consumed and taken into the body is much more dangerous than background radiation." (by George Washington, ZeroHedge)  The Fukushima disaster will haunt us for years to come.

Tuesday, May 29, 2012

How Facebook Could Destroy The Market

Too-big-to-fail mentality replays the dot-com bubble. (By Paul B. Farrell, MarketWatch) "Facebook (FB) just joined a “troubled club,” warns The Economist. Now it’s just another “endangered public company.” Yes, endangered. What’s going on? Facebook’s in trouble, that’s what. The Facebook mystique is so powerful today that in our minds it is too big to fail. FB will just keep growing indefinitely, at rates that remind us of the old dot-com mind-set of 1999. And that’s exactly why Facebook is the ultimate economy killer. Could Facebook really bring down the economy? Be a global economy killer? Yes. Facebook has now been added to my list of global macroeconomic triggers that the denial system driving the collective brain of American investors will simply tune out until it’s too late. Until a crash takes the economy down again. Yes, folks, Facebook is that dangerous to not only our economy, but the global economy. FB is now one of my top 12 economy-killing triggers, any one of which could ignite a firestorm: euro-zone ills, overpopulation, China, climate crisis, peak oil, the Fed’s cheap money, the 2012 elections, austerity vs. growth, high-frequency trading, extreme capitalism, and the black swan nobody ever sees coming until it hits - you know, like the 1914 assassination of a relatively unknown archduke that ignited WWI. In behavioural economics, extreme denial creates an illusion that misleads us by minimizing risk in our brains. Remember Treasury Secretary Hank Paulson’s classic remark before the 2008 meltdown, that he was witnessing the “best economy in my career.” But seriously, does our beloved too-big-to-fail Facebook really have that kind of economy-killing power? You bet. Our too-big-to-fail banks like J.P. Morgan have trillions in hard assets, hundreds of billions in capital, and huge leverage with the Fed and Treasury. But Facebook is just the opposite: it is too big to succeed. Its cash value is now in the pockets of the insiders who are cashing out with the IPO. The “value” is in the minds of a billion "friends", a collective illusion that must be kept alive with future cash. There’s a huge possibility FB will lose big in the aftermarket, and eventually our love affair will evaporate. When the euphoria wears off, please remember the following remarks from Andrew Stoltmann, a Chicago lawyer and investor advocate: "The Facebook IPO poses huge risks for retail investors. FB may have millions of users worldwide and plenty of investment sex appeal, but beyond the sizzle I can virtually promise you there will be thousands of small investors that get burned bad on Facebook. How? Market orders like the ones so many investors made back “in the early 2000s “ by “people who made that error in hot tech stocks.” Stoltmann sees through the dark veil of denial that shields most of America: “Virtually any slip-up in performance by Facebook and the stock will crater.” Yes, “crater,” as in bottom, crash, meltdown. “If Facebook is valued at $100 billion, its valuation would be 33 times its advertising revenue, compared with 5.5 times for Google. To sustain its value, Facebook would need to grow its revenues by 41% percent per year for the next five years. That is very hard to do for any company, especially one of Facebook’s size. Even a minor hiccup in the business model could lead to significant losses for purchasers. Facebook operates in an extremely competitive industry with many major, deep-pocketed rivals, including experienced, well-financed rivals like Google.” Remember 2012’s hot dot-coms, Groupon and Pandora? Their shares fell 48% and 41%, respectively, from their IPO prices. Now that Facebook has a thousand new millionaires, Stoltmann’s expecting “thousands of retail clients with significant losses in Facebook in the next three months ... This could get very ugly.”

Monday, May 28, 2012

Quebec and The Fairy Godmother

The Spoiled Children of Canadian Confederation
By Lisa Corbella of the Calgary Herald. "Today, let's have some fun and play Fairy Godmother to Quebec. Let's grant the province the wish it articulated in Copenhagen. Wave the magic wand and poof, wish granted. Shut down Alberta 's oilsands, except, since it's Quebec making the wish, we have to call it tarsands, even though it's not tar they use to run their Bombardier planes, trains and Skidoos. Ah, at last! The blight on Canada's reputation shut down. All those dastardly workers from across Canada living in Fort McMurray, Calgary and Edmonton out of jobs, including those waitresses, truck drivers, nurses, teachers, doctors, pilots, engineers, etc. They can all go on Employment insurance like Ontario autoworkers and Quebec parts makers! Closing down Alberta 's oil industry would immediately stop the production of 1.8 million barrels of oil a day. Supply and demand being what it is, oil prices will go up and therefore the cost at the pump will go up, too, increasing the cost of everything else. But lost jobs in Alberta and across the country along with higher gas prices are a small price to pay to save the world and not "embarrass" Quebecers on the world stage. Not to worry though, Saudi Arabia, Libya and Nigeria can come to the rescue. You know, the guys who pump money into al-Qaida and help Osama bin Laden target those Van Doos fighting in Afghanistan. Bloody oil is so much nicer than dirty tarsands oil. Shutting down the oilsands will reduce Canada 's greenhouse gas (GHG) emissions by 38.4 Mt (megatonnes). Hooray! It's so fun to be a Fairy Godmother! While that sounds like a lot, Canada only produces two per cent of the world's man-made GHGs and the oilsands only produce five per cent of Canada 's total emissions or 0.1 per cent of the world's emissions. By comparison, the U.S. produces 20.2 per cent of the world's GHG emissions, 27 per cent of which comes from coal-fired electricity. The 530-square-kilometre piece of land currently disturbed by the oilsands (which is smaller than the John F. Kennedy Space Center at Cape Canaveral, FL, at 570 square kilometres) must be reclaimed by law and will return to Alberta's 381,000 square kilometres of boreal forest, a huge carbon sink. Quebec, of course, has clean hydro power, but more than 13,000 square kilometres were drowned for the James Bay hydroelectric project, permanently removing that forest from acting as a carbon sink. But Fairy Godmother is digressing all over the place. While the oilsands only produce five per cent of Canada's GHGs, it contributes much more to Canada 's economy. After all, oil and gas make up one-quarter of the value on the TSX alone. Alberta is also the largest net contributor per capita by far to Confederation (and there are only two more - B.C. and Ontario). Quebec hasn't made a net contribution to the rest of Canada for a very long time. This is not to be critical (after all, Fairy Godmothers never criticize), it's just a fact. In 2009, Albertans paid $40.46 billion in income, corporate and other taxes to the federal government and received back just $19.35 billion in services and goods from the Feds. That means the rest of Canada got $21.1 billion from Albertans or $5,742 for each and every Alberta man, woman and child. In 2007 (the last year national figures are available), Alberta sent a net contribution of $19.49 billion to the Rest Of Canada, or $5,553 per Albertan - more than three times what every Ontarian contributes at $1,757. Quebecers, on the other hand, each received $627 net or a total of $8 billion, money which was designed to help "equalize" social programs across the country. Except, that's not what is happening. Quebec has more generous social programs; like (nearly) free university tuition (paid for mostly by Albertans) and cheap provincial daycare (paid for mostly by Albertans). But in this Fairy Godmother world, poof, those delightful unequal programs have now disappeared! Quel dommage! The July 2009 Canadian Energy Research Institute (CERI) report states that between 2008 and 2032, the oilsands will account for 172,000 person-years of employment in Ontario during the construction phase, plus 640,000 for operations over the 25-year period. For Quebec, the oilsands will account for 84,000 person-years of employment during the construction phase, plus 292,000 for operations over the 25-year period. In total, the oilsands are expected to add $1.7 trillion to Canada 's GDP over the next 25 years. Wave wand and Poof! Jobs gone! So, now that the oil industry has shut down and left Alberta, Alberta has become a have-not province and so has every other province. Equality at last! Hugo Chavez will be so pleased. Meeting our Copenhagen targets suddenly looks possible, as most of us can't afford to drive our cars or buy anything but necessities, so manufacturers have closed their doors and emissions are way down. The dream of many Quebecers to form their own nation and separate from Canada has died at last. Alas, in Alberta, separatist sentiment has risen dramatically, citizens vote to separate, and the oil and gas industry returns. Albertans start to pocket that almost $6,000 for each person that used to get sent elsewhere and now their kids get free tuition. Fairy Godmother's work is done. Wish granted. Quebecers must now sign up for a foreign worker visa to work in Alberta to send their cheques back home so junior can start saving up to pay for college."

Sunday, May 27, 2012

Ignorant People Are ... Well, Ignorant

"Ignorance is bliss." How wonderful it must be to be blissfully unaware of how ignorant you are in the eyes of others.  Take the earnest bible-packing youth I saw who challenged passers-by to become "born again", and then spat on the sidewalk (awkwardly at that) when he thought no one was looking.  Or the otherwise efficient and attractive airline stewardess who, once finished servicing her charges and on a well-deserved nutrition break herself, proceeded to chew with her mouth open and smack her lips in plain view of the passengers.  (I nearly gagged.)  Or the dim-witted pair of twenty-year-old basketball fans seated behind my wife and I on the same plane from Chicago to Calgary whose every second word was f@#k.  All four of these young people obviously were clueless that their behaviour instantly marked them as ignorant of the most basic common courtesies, and that they are doomed to remain lower echelon employees all their lives because they are ... well, ignorant.

Saturday, May 26, 2012

On Tax Code Simplicity/Complexity

Yesterday I posted - without comment - a list of countries ranked according to the simplicity of their tax codes, more specifically termed the "ease of payment of taxes" in those countries, according to a study by the IMF and Price Waterhouse Coopers. My thoughts:  Most of the countries with the top ten (simplest) tax codes are a) tiny, b) oil-rich, and/or c) not democracies - all of which make taxation simpler, if not unnecessary altogether.  Ireland stands out from the others in the "top ten", its streamlined tax system possibly due to the country's dire need for tax revenue after the global financial meltdown of 2008.  Frankly, I was surprised to see Canada ranked 11th.  Our tax code has never seemed that simple to me.  If the Canadian tax code is anywhere near "the gold standard" for simplicity, I can't imagine how baffling some of the lower-ranked schemes must be.  The U.S. tax code (at #69) is, by all commentary, an abomination in drastic need of an overhaul - so much so that I believe its complexity is actually stifling badly needed tax revenue.  The UK's system at #18 is understandably close to Canada's, and the Scandinavian countries - ex-Sweden (#44), plus Switzerland - are all ranked in the top twenty-one.  New Zealand (#27) and The Netherlands (#34) apparently need to pull up their socks a bit.  Australia, at #52, really surprises me, but their immense resource revenue of late must have made their tax code more complex.  The fact that France, Iraq, and Afghanistan have simpler tax codes than the U.S. is not encouraging for our friends south of the border, and just as telling is the American tax code's proximity to Greece (#79), a total disaster about which much has been written in this space.

Friday, May 25, 2012

Which Country's Tax Code is Simplest?

Presented without comment, from a 2011 study by the International Monetary Fund and Price Waterhouse Cooper that ranked 183 total economies by "Ease of paying taxes":
Maldives 1
Qatar 2
Hong Kong, China 3
Singapore 4
Ireland 5
United Arab Emirates 6
Saudi Arabia 7
Oman 8
Kiribati 9
Mauritius 9
Canada 11
Kuwait 12
Bahrain 13
Luxembourg 14
Denmark 15
Switzerland 16
Kazakhstan 17
United Kingdom 18
Norway 19
Macedonia, FYR 20
Finland 21
Brunei Darussalam 22
Timor Leste 23
Vanuatu 24
Botswana 25
Seychelles 26
New Zealand 27
Malaysia 28
Jordan 29
Solomon Islands 30
Malawi 31
West Bank and Gaza 31
Rwanda 33
Netherlands 34
Tonga 35
South Africa 36
Cyprus 37
Suriname 38
Georgia 39
Spain 40
Lebanon 41
Zambia 42
Kosovo 43
Korea, Republic 44
Sweden 44
Croatia 46
Estonia 47
Ethiopia 48
Iceland 49
Chile 50
St. Lucia 51
Australia 52
Belize 53
Bahamas 54
France 55
Swaziland 56
Lithuania 57
Afghanistan 58
Cambodia 59
Iraq 59
Tunisia 61
Bhutan 62
Latvia 62
Lesotho 64
Djibouti 65
Mongolia 66
Taiwan, China 67
Samoa 68
United States 69
Dominica 70
St. Vincent and the Grenadines 70
Madagascar 72
Belgium 73
Portugal 74
Turkey 75
Fiji 76
Azerbaijan 77
Austria 78
Greece 79
Peru 80
Israel 81
Trinidad and Tobago 81
Slovenia 83
Bulgaria 84
Ecuador 85
Germany 86
Ghana 87
Grenada 88
Micronesia 89
Uganda 90
Dominican Republic 91
Colombia 92
Marshall Islands 93
Palau 94
Liberia 95
Comoros 96
Bangladesh 97
Thailand 97
Sudan 99
Namibia 100
Cape Verde 101
Russia 102
Papua New Guinea 103
Mozambique 104
Sierra Leone 105
Mexico 106
Syria 107
Morocco 108
Moldova 109
Puerto Rico 110
Nepal 111
Guyana 112
Yemen 113
Hungary 114
Montenegro 114
Haiti 116
Czech Republic 117
Bosnia and Herzegovina 118
Japan 119
Eritrea 120
China 121
Lao PDR 122
Guatemala 123
Burundi 124
Iran 125
Zimbabwe 126
Poland 127
Tanzania 128
Slovak Republic 129
Indonesia 130
Paraguay 131
St. Kitts and Nevis 132
Italy 133
Antigua and Barbuda 134
Philippines 135
Guinea-Bissau 136
Sao Tomé and Principe 137
Costa Rica 138
Nigeria 138
Honduras 140
Gabon 141
Niger 142
Serbia 143
Argentina 144
Egypt 145
El Salvador 146
Burkina Faso 147
India 147
Angola 149
Brazil 150
Vietnam 151
Albania 152
Armenia 153
Romania 154
Nicaragua 155
Belarus 156
Uzbekistan 157
Pakistan 158
Cote d'Ivoire 159
Uruguay 160
Togo 161
Kyrgyz Republic 162
Mali 163
Algeria 164
Congo, Dem. Rep. 165
Kenya 166
Equatorial Guinea 167
Tajikistan 168
Panama 169
Benin 170
Cameroon 171
Jamaica 172
Sri Lanka 173
Senegal 174
Mauritania 175
Guinea 176
Central African Republic 177
Gambia 178
Bolivia 179
Chad 180
Ukraine 181
Congo, Rep. 182
Venezuela 183

Thursday, May 24, 2012

A NY State End Run At Zero Hedge?

First Amendment be damned!
From CNet yesterday: "Proposed NY Ban on Anonymous Posts Comes Under Fire (by Greg Sandoval). Add anti-cyberbullying advocates to the growing list of critics who don't like proposed New York state legislation that would strip some people of their online anonymity. In an attempt to combat cyberbullying, some New York state legislators want people who post online to be prepared to identify themselves. A resulting bill, known as the Internet Protection Act (IPA), wouldn't stop with cyberbullying. If it became law, the legislation would also prevent people from posting anonymous criticism of local businesses or making "baseless political attacks," wrote James Conte, a member of New York's state assembly and one of the bill's sponsors. "With more and more people relying on social media and the Internet to communicate and gather information," Conte wrote in a statement, "it is imperative that the legislature put into place some type of safeguard to prevent people from using the Internet's cloak of anonymity to bully our children and make false accusations against local businesses and elected officials." IPA was introduced in the New York state legislature earlier this month. The bill would require authors to identify themselves when asked or else have their posts removed. IPA follows the earlier introduction of a separate anti-cyberbullying bill in the NY legislature. Dave Kravets over at, who first wrote about the issue, is skeptical that the bills can stand up to a First Amendment challenge: "Unless the First Amendment is repealed, they stand no chance of surviving any constitutional scrutiny even if they were approved," Kravets said. Even some advocates of stronger cyberbullying laws are critical of IPA. Parry Aftab, an Internet privacy and security lawyer and founder of advocacy groups Wiredsafety and Stopcyberbulling, said stripping people of their Web anonymity would likely create more problems then it would solve. "One of the beauties of the Internet is that you can post anonymous comments," Aftab told CNET. "It allows kids who may be abused to reach out and get help and it enables people with unpopular political views to be heard ... we've been through this before. These are well-intentioned people looking for easy answers but who may not understand the unintended consequences." Aftab said that there are already laws on the books that allow people to learn the identities of people who post anonymously if they believe they are victims of crimes. People can also file civil suits and ascertain someone's identity from an Internet service provider as part of legal discovery."  And we all KNOW this is just a thinly-veiled attempt  to silence ZeroHedge, Out Here Too, and other anonymously-written blogs, don't we?

Wednesday, May 23, 2012

Their Royal Highnesses, The Adulterers

"How soon Canadians seem to forget, Cammy, you old cougar."

Tuesday, May 22, 2012

Lobbyists Are a Scourge of Democracy

"Professional lobbyists try to influence legislation on behalf of whoever hires them. Lobbying is often spoken of with contempt, the implication being that people with inordinate socioeconomic power are corrupting the law in order to serve their own interest. However, minority interests too are defended against the "tyranny of the majority" by lobbying. At heart, the effort to influence legislation is a power struggle, with motives that range from predation to self-defense to fighting for justice. The "Revolving Door of Influence" has been described by UK Conservative leader David Cameron as "the next big scandal waiting to happen" and that lobbying had "tainted our politics for too long, an issue that exposes the far-too-cosy relationship between politics, government, business and money". The ability of individuals, groups, and corporations to lobby the government is protected by the right to petition in the First Amendment to the United States Constitution. Since 1998, 43 percent of the 198 members of Congress who left government to join the private sector have registered to lobby. In 2009 U.S. President Barack Obama signed two executive orders and three presidential memoranda on his first day in office governing how former lobbyists can be employed in the government, and restrictions on lobbying once leaving the government. Lobbying has become a political fact of life around the world, and is now endemic in local, state and federal governments everywhere. In Australia, lobbyists must not only register, but a Parliamentary Pass must be signed by two parliamentarians. It is administered by the Department of Parliamentary Services (DPS) and has the enforcement of the Criminal Code Act 1995."  (Wikipedia)  Unfortunately the pass is valid for 2 years, when it should be for two hours.  That way statistics could be kept about the relative frequency of various lobbying efforts and which politicians are spending the most time having their ear bent by paid interests instead of the voters who elected them.  Australia at least seems to be dealing with the cancer of paid lobbyists.

Monday, May 21, 2012

Ten Principles of a Free Society

by Dr. Ron Paul:
1. Rights belong to individuals, not groups; they derive from our nature and can neither be granted nor taken away by government.
2. All peaceful, voluntary economic and social associations are permitted; consent is the basis of the social and economic order.
3. Justly acquired property is privately owned by individuals and voluntary groups, and this ownership cannot be arbitrarily voided by governments.
4. Government may not redistribute private wealth or grant special privileges to any individual or group.
5. Individuals are responsible for their own actions; government cannot and should not protect us from ourselves.
6. Government may not claim the monopoly over a people's money and governments must never engage in official counterfeiting, even in the name of macroeconomic stability.
7. Aggressive wars, even when called preventative, and even when they pertain only to trade relations, are forbidden.
8. Jury nullification, that is, the right of jurors to judge the law as well as the facts, is a right of the people and the courtroom norm.
9. All forms of involuntary servitude are prohibited, not only slavery but also conscription, forced association, and forced welfare distribution.
10. Government must obey the law that it expects other people to obey and thereby must never use force to mold behavior, manipulate social outcomes, manage the economy, or tell other countries how to behave.

Sunday, May 20, 2012

The Wisdom of Thucydides Part 2

"The Wisdom of Thucydides" by gojam (The Needleblog): "... Human nature, it seems is immutable. I bring it to your attention in the vain hope that those who have blindly pursued the policies which have brought Greece to the brink, and risks plunging the whole of Europe into the abyss, might consider more keenly the consequences of their actions and change course before it’s too late.": "Love of power, operating through greed and through personal ambition, was the cause of all these evils. To this must be added violent fanaticism which came into play once the struggle had broken out. Leaders of parties in the cities had programs which appeared admirable - on one side political equality for the masses, on the other the safe and sound government of the aristocracy - but in professing to serve the public interest they were seeking to win the prizes for themselves. In their struggle for ascendancy nothing was barred; terrible indeed were the actions to which they committed themselves, and in taking revenge they went farther still. Here they were deterred neither by claims of justice nor by the interests of the state; their one standard was the pleasure of their own party at that particular moment, and so, either by means of condemning their enemies on an illegal vote or by violently usurping power over them, they were always ready to satisfy the hatreds of the hour. Thus neither side had any use for conscientious motives; more interest was shown in those who could produce attractive arguments to justify some disgraceful action. As for the citizens who held moderate views, they were destroyed by both extreme parties, either for not taking part in the struggle or in envy at the possibility that they might survive. As the result of these revolutions, there was a general deterioration of character throughout the Greek world. The simple way of looking at things, which is so much the mark of a noble nature, was regarded as a ridiculous quality and soon ceased to exist. Society had become divided into two ideologically hostile camps, and each side viewed the other with suspicion. As for ending this state off affairs, no guarantee could be given that would be trusted, no oath sworn that people would fear to break; everyone had come to the conclusion that it was hopeless to expect a permanent settlement and so, instead of being able to feel confident in others, they devoted their energies to providing against being injured themselves. As a rule those who were the least remarkable for intelligence showed the greater powers of survival. Such people recognised their own deficiencies and the superior intelligence of their opponents; fearing that they might lose a debate or find themselves out-manoeuvred in intrigue by their quick-witted enemies, they boldly launched straight into action; while their opponents, overconfident in the belief that they would see what was happening in advance, and not thinking it necessary to seize by force what they could secure by policy, were the more easily destroyed because they were off guard. Certainly it was in Corcyra that there occured the first examples of the breakdown of law and order. There was the revenge taken in their hour of triumph by those who had in the past been arrogantly oppressed instead of wisely governed; there were the wicked resolutions taken by those who, particularly under the pressure of misfortune, wished to escape from their usual poverty and coveted the property of their neighbours; there were the savage and pitiless actions into which men were carried not so much for the sake of gain as because they were swept away into internecine struggle by their ungovernable passions. Then, with the ordinary conventions of civilised life thrown into confusion, human nature, always ready to offend even where laws exist, showed itself proudly in its true colours, as something incapable of controlling passion, insubordinate to the idea of justice, the enemy to anything superior to itself; for, if it had not been for the pernicious powers of envy, men would not so have exalted vengeance above innocence and profit above justice. Indeed, it is true that in these acts of revenge on others men take it upon themselves to begin the process of repealing those general laws of humanity which are there to give a hope of salvation to all who are in distress, instead of leaving those laws in existence, remembering that there may be a time when they, too, will be in danger and will need their protection.”

Saturday, May 19, 2012

The Wisdom of Thucydides Part 1

"The Wisdom of Thucydides" by gojam (The Needleblog): "Thucydides was probably born about 460 BC and was for a time a General on the side of democratic Athens against aristocratic Sparta in what is known as the Peloponnesian War. After being exiled he wrote his famous History. The passage that I’ve quoted in full below is, in my opinion, one of the finest passages of classical antiquity. It describes the breakdown of civil society, and in doing so it perfectly describes every civil war and revolution that has taken place in the almost two and half thousand years since it was written. Human nature, it seems is immutable. I bring it to your attention in the vain hope that those who have blindly pursued the policies which have brought Greece to the brink, and risks plunging the whole of Europe into the abyss, might consider more keenly the consequences of their actions and change course before it’s too late.":  "So revolutions broke out in city after city, and in places where the revolutions occurred late the knowledge of what had happened previously in other places caused still new extravagances of revolutionary zeal, expressed by an elaboration in the methods of seizing power and by unheard-of atrocities in revenge. To fit in with the change of events, words, too, had to change their meanings. What used to be described as a thoughtless act of aggression was now regarded as the courage one might expect to find in a party member; to think of the future and wait was merely another way of saying one was a coward; any idea of moderation was just an attempt to disguise one’s unmanly character; the ability to understand a question from all sides meant that one was totally unfit for action. Fanatical enthusiasm was the mark of a real man, and to plot against an enemy behind his back was perfectly legitimate self-defence. Anyone who held violent opinions could always be trusted and anyone who objected to them became suspect. To plot successfully was a sign of intelligence, but it was still cleverer to see that a plot was hatching. If one attempted to provide against having to do either, one was disrupting the unity of the party and acting out of fear of the opposition. In short, it was equally praiseworthy to get one’s blow in first against someone who was going to do wrong, and to denounce someone who had no intention of doing any wrong at all. Family relations were a weaker tie than party membership, since party members were more ready to go to any extreme for any reason whatever. These parties were not formed to enjoy the benefits of established laws, but to aquire power by overthrowing the existing regime; and the members of these parties felt confidence in each other not because of any fellowship in a religious communion, but because they were partners in crime. If an opponent made a reasonable speech, the party in power, so far from giving it a generous reception, took every precaution to see that it had no practical effect. Revenge was more important than self-preservation, And if pacts of mutual security were made, they were entered into by the two parties only in order to meet some temporary difficulty, and remained in force only so long as there was no other weapon available. When the chance came, the one who seized it boldly, catching the enemy off his guard, enjoyed a revenge that was all the sweeter from having taken it, not openly, but because of a breach of faith. It was safer that way, it was considered, and at the same time a victory won by treachery gave one a title for superior intelligence. And indeed most people are more ready to call villainy cleverness than simple-mindedness honesty. They are proud of the first quality and ashamed of the second."

Friday, May 18, 2012

Iran Attack Decision This Weekend?

"Iran attack decision nears, Israeli elite locks down." By Michael Stott (Reuters) "The inner sanctum at the end of a corridor between Netanyahu's private room and the office of his top military adviser, is where one of the decade's most momentous military decisions could soon be taken: to launch an Israeli attack on Iran's nuclear program. Time for that decision is fast running out and the mood in Jerusalem is hardening. Iran continues to enrich uranium in defiance of international pressure, saying it needs the fuel for its civilian nuclear program. The West is convinced that Tehran's real objective is to build an atomic bomb - something which the Jewish state will never accept because its leaders consider a nuclear Iran a threat to its very existence. Adding to the international pressure, U.S. ambassador to Israel Daniel Shapiro said this week American military plans to strike Iran were "ready" and the option was "fully available". The central role Iran plays in Netanyahu's deliberations is reflected in the huge map of the Middle East hanging by the door of his office. Israel lies on one edge, with Iran taking pride of place in the centre. Experts say that within a few months, much of Iran's nuclear program will have been moved deep underground beneath the Fordow mountain, making a successful military strike much more difficult. As the deadline for a decision draws nearer, the public pronouncements of Israel's top officials and military have changed. After hawkish warnings about a possible strike earlier this year, their language of late has been more guarded and clues to their intentions more difficult to discern. "The top of the government has gone into lockdown," one official said. "Nobody is saying anything publicly. That in itself tells you a lot about where things stand." "I think they have made a decision to attack," said one senior Israeli figure with close ties to the leadership. "It is going to happen. The window of opportunity is before the U.S. presidential election in November. This way they will bounce the Americans into supporting them." Those close to Netanyahu are more cautious, saying no assumptions should be made about an attack on Iran - an attack with such potentially devastating consequences across the volatile Middle East that Palestinian President Mahmoud Abbas even went so far as to predict in an interview with Reuters last week that it would be "the end of the world". Israelis particularly fear retaliation from Iran's proxy militias - the Hezbollah guerrillas in southern Lebanon and the Hamas fighters in the Gaza Strip. Both are believed to possess large arsenals of rockets which could hit major Israeli towns and cities. Hezbollah's deputy leader Sheikh Naim Qassem told Reuters in February that an Israeli attack on Iran would set the whole Middle East ablaze "with no limit to the fires". "Gone are the days when Israel decides to strike, and the people are silent," he said. But behind the carefully evasive language of top officials, basic facts are clear. Time is running out. Iran's nuclear program will soon be buried deep enough underground to render an Israeli attack impossible. The Jewish state's options are narrowing. "I think they've gone into lockdown mode now," the senior Western diplomat said. "Whatever happens next, whatever they decide, we will not find out until it happens." Some military experts openly doubt how much damage Israel could inflict. The risk of a fiasco is big." (Additional reporting by Samia Nakhoul and Crispian Balmer; editing by Ralph Boulton)

Thursday, May 17, 2012

Krasting's Latest Conversation With Athens

"If you read me on a regular basis you know that I speak with a fellow in Athens who is connected to the shipping industry and the government. I called him to discuss the fact that there is no new government and elections will take place in June. What he said completely blew my mind. He started with the well-documented fact that 70-80% of Greeks do not want to give up the Euro. They are afraid for their future, and their ability to survive if that link is broken. The following are his words, not mine: 'The results of the May election are in conflict with the people's desire to stay with the Euro. The people voted in anger. They voted against those they had voted for in the past. Now they see who they have elected. Every day on TV the extreme right is interviewed. They are Nazi’s. People are frightened by this. On the left you have Alexis Tsipras (Syriza). This man is an uneducated thug. The people understand that. They don’t want this man to be their leader. When the next election comes, Greeks will not vote in anger and they will not vote for the idiots on the fringes. The centrist parties will rebound. A National Salvation Government will be formed. Can Greece be saved? This up to Germany. Most of the debt is now with Germany and France. France’s Hollande would agree in one minute to reset the interest on the debt to zero for the next five years. If Germany agrees to do the same, there is a chance. The IMF would support Greece under these conditions. The restructured bank debt would get paid interest.' Does he really believe that Greece can achieve a long-term recovery with this? 'Not a chance. Everything will blow up again in less than one year.' [However] the thrust of this conversation runs counter to what I believed likely to happen next in Greece. There is a six-week period before the election. Anything can happen. The scenario my friend outlined is not out of the question. If this fellow is right that the Greek elections are going to produce a surprise result, one that will create another “Kick the can down the road” opportunity, then it's not in the market today. The exact opposite is."

Wednesday, May 16, 2012

Obama's Smallpox Vaccine Shenanigans

Smallpox: terrorism's future weapon?
I've been doing a lot of reading lately about that most perfect terrorist weapon of mass destruction, Smallpox, and was disappointed to run across the following story.  By David Willman, Los Angeles Times:  "Cost, Need Questioned in $433 Million Smallpox Drug Deal: A company controlled by a longtime political donor gets a no-bid contract to supply an experimental remedy for a threat that may not exist. Over the last year, the Obama administration has aggressively pushed a plan to buy an experimental smallpox drug, despite uncertainty over whether it is needed or will work. Senior officials have taken unusual steps to secure the contract for NY-based Siga Technologies Inc., whose controlling shareholder is billionaire Ronald O. Perelman, a longtime Democratic Party donor. When Siga complained that contracting specialists at the Dept of Health and Human Services were resisting the company's financial demands, senior officials replaced the government's lead negotiator for the deal, interviews and documents show. When Siga was in danger of losing the contract, the officials blocked other firms from competing. Siga was awarded the final contract in May 2011 through a "sole-source" procurement in which it was the only company asked to submit a proposal. The contract calls for Siga to deliver 1.7 million doses of the drug for the nation's biodefense stockpile. The $255 per dose is well above what the government's specialists had earlier said was reasonable, according to documents and interviews. Smallpox was eradicated worldwide as of 1978 and is known to exist only in the locked freezers of a Russian scientific institute and the U.S. government. There is no credible evidence that any other country or a terrorist group possesses smallpox. If there were an attack, the government could draw on $1 billion worth of smallpox vaccine it already owns to inoculate the entire U.S. population. The vaccine, at $3 per dose, can reliably prevent death when given within 4 days of exposure. Siga's drug, called ST-246, would be used to treat people who were diagnosed too late for the vaccine to help. Yet the new drug cannot be tested for effectiveness in people because of ethical constraints - and no one knows whether animal testing could prove it would work in humans. The government's pursuit of Siga's product raises the question: Should the U.S. buy an unproven drug for such a nebulous threat? "We’ve got a vaccine that I hope we never have to use, how much more do we need?” asks Dr. Donald A. "D.A." Henderson, the epidemiologist who led the global eradication of smallpox for the World Health Organization and later helped organize U.S. biodefense efforts. Dr. Thomas M. Mack, an epidemiologist at USC's Keck School of Medicine, battled smallpox outbreaks in Pakistan and has advised the FDA. He called the plan to stockpile Siga's drug "a waste of time and money." Negotiations over the price of the drug and Siga's profit margin were contentious. In an internal memo in March, Dr. Richard J. Hatchett, chief medical officer for HHS' biodefense preparedness unit, said Siga's projected profit at that point was 180%, which he called "outrageous." In an email earlier the same day, a department colleague told Hatchett that no government contracting officer "would sign a 3 digit profit percentage." In April, after Siga's chief executive, Dr. Eric A. Rose, complained in writing about the department's "approach to profit," he was assured that the "most senior procurement official" would be taking over the negotiations."  Hmmm ...

Tuesday, May 15, 2012

How Did JPMoron Lose $2 Bn in 6 Weeks?

Bruno Iksil aka Whale
Tim Kiladze, Globe and Mail Blog: "In April, Bloomberg News reported that Bruno Iksil, a trader in JP Morgan's Chief Investment Office (CIO), had placed massive bets on the health of certain companies. His positions were so big [he was nicknamed The Whale] that rival hedge funds said they were starting to distort the market. CIO, based in London, is supposed to hedge the bank's risks, but many say that its 'hedges' are in fact risk trades designed to duck the proposed Volcker Rule that bans proprietary trading. The first explanation for the losses relates to what is known as the basis trade. Assume you own a bond. If the issuer goes bankrupt, you never get your principal back. To protect yourself, you purchase a credit default swap (CDS), an insurance contract. Just like your car insurance, you pay a premium, and in return, if you car gets stolen, or in this case the company goes bankrupt, you get paid a lump sum. But for this hedge to work, the corporate bond spread must match the CDS spread. Think of this as the interest rate paid to you matching the insurance premium that you have to pay. If they line up, your net exposure is nil. Historically, this held up. If anything, investors had to pay just a smidgeon more in premiums than they received in interest, and this small difference was known as positive basis. Every once in a while 'negative basis' would appear for random reasons, creating risk-free profits because interest payments received amounted to more than the insurance premium doled out. When this happened, big name hedge funds and proprietary trading desks would pile in and exploit the anomaly. To them, it was free money. The problem, though, is that this trade is predicated on bond spreads remaining equal to CDS spreads. The market is currently very screwy, and many CDS spreads are blowing out while the bond spreads hold tight. Mr. Felix Salmon believes this dislocation is what got JPMorgan in trouble. The way he sees it, the bank was selling insurance protection, betting that CDS spreads would go down rather than up. Ultimately, they went up, and the corresponding spreads didn't. Think of it this way. If JPMorgan was using this trade as a hedging strategy, it means the company was probably short corporate bonds. (By going short, the bank benefits when the bonds do badly, while in the CDS market it suffers because has a higher chance of paying out.) But because JP Morgan was selling insurance protection, the lower CDS value from wider spreads wasn't offset by any bond spread movements. The second theory is much more complex. But the main idea is that JP Morgan may have tried to hedge a position by placing various trades on CDX Series 9, an index of liquid credit default swaps. As the market rallied over the past few months, it forced JP Morgan to increase its position with this index. This resulted in massive mispricing because the bank made the index more expensive than the sum of its constituents. “This is akin to looking at the 500 names in the S&P 500 - weighting them and seeing the S&P 500 index should trade at 1,200 but it is trading at 1,400...” Zero Hedge noted. If this played out, hedge funds would have tried to short the index because they knew it was too expensive. After they did, the index should have fallen right away, yet JPMorgan kept supporting it because it needed the hedge. The longer this went on, the more questions the hedge funds asked, and eventually Mr. Iksil was discovered. After building this position, JPMorgan could have gotten in trouble because the market stopped rising. The problem is that it couldn't unwind its position because its rivals have figured out what it's up to. That's why Jamie Dimon said that more losses could come. If he's stuck with these trades, hedge funds are going to do everything they can to make sure JPMorgan can't get out of them."

Monday, May 14, 2012

BBC: JPMoron's Dimon in the Rough

"Do as I say, not as I do"
I found the following BBC assessment of JPMorgan's shocking loss, announced last week, to be interesting for a couple of reasons. First of all, the trades in question took place in London, which is heavily reliant on its financial sector - one of the world's oldest and largest.  Second, England has been extremely resistant to outside trading authorities and their rules, and it is speculated that is exactly why these failing trades took place there, out of reach of American regulators.  (And if JPM is doing this offshore, you know the rest of 'em are too, probably adding exponentially more risk to the system.)  "JPMorgan Chase, the biggest US bank, revealed a trading loss of at least $2bn on complex investments made by its traders. CEO Jamie Dimon blamed "errors, sloppiness and bad judgement" for the losses and warned "it could get worse". The risky hedging strategy could cost the bank an additional $1bn, he added. The strategy taken at the Chief Investment Office (CIO) unit had been "riskier, more volatile and less effective" than previously believed, Mr Dimon said. "These were egregious mistakes," he said. "They were self-inflicted and this is not how we want to run a business. "It could get worse", he warned. "This could go on for a little bit." It is the surprise factor - the shock evinced by Mr Dimon - that will re-ignite the debate about whether regulators need to take more decisive action to curb investment banks, to better prevent this kind of accident”, wrote Robert Preston, BBC Business Editor. "The CIO is an arm of the bank used to make broad bets to hedge its portfolios of individual holdings." Hedging is an investment practice used to reduce the risk of price fluctuations to the value of an asset. Attention has focused on the activities of Bruno Michel Iksil, a London-based JPMorgan trader known as the London Whale. But a source close to the bank told the BBC: "We're not talking about a rogue trader here. His was one trade in a big portfolio of trades. It was a global hedging strategy known by the bank but executed poorly." (Hedging is making an investment to reduce the risk of price fluctuations to the value of an asset. Airlines often hedge against rising oil prices by agreeing in advance to to buy their fuel at a set price. Thus a rise in price would not harm them - but nor would they benefit from any falls.) Mr Dimon said the type of trading that led to the loss would not be banned by the so-called Volcker rule, designed to [curb] certain types of trading by banks. But he acknowledged that the errors would be particularly embarrassing, given his public criticism of the Volcker rule. Prof. Mark Williams from Boston University, and a former Federal Reserve regulator, said taxpayers should be concerned about these trading losses. "Taxpayers ultimately have to bail out these 'too big to fail' banks. And that's what JPMorgan is - it is too big to fail," he told BBC. "How could a bank that's supposed to be the premier bank allow such risk taking?"

Sunday, May 13, 2012

Mother's Day 2012

Born Katharine Margaret Mason Strong (1925-1990):  Proud Calgarian, Sometime Bank Teller, Diehard Stampeder Fan, Purveyor of War Bonds, Gentle Soul, Tentative Skier and Camper, Rose Aficionado and Enthusiastic Bridge Player, Gardener, Gourmet Cook, Occasional Poker Player, Loving Daughter, Sister, Wife, Sister-in-Law, Daughter-in-Law, Mother-in-Law, Grandmother, Cancer Victim, Graceful and Dignified, Devoted Mother whose time on this earth was too short.

Saturday, May 12, 2012

"Jewel Of The Canadian West" Launched!

This weekend marks the launch of "Jewel Of The Canadian West", the sister site to "Out Here 2"- but with a decidedly different slant on things.  JOTCW is for those less interested in politics, economics, and world events, and more interested in southwestern Alberta history, culture, and people.  Its a folksy, homey, personal place that lets me explore "regional stuff" in depth, and at a slower pace (roughly once a week, I figure).  A place, kind of like our acreage, where you can sit on the deck with a drink and relax in silence alone on a warm summer evening, watching and listening to nature, or in conversation with good friends.  It can also be a place to let loose, kick back, throw some horseshoes or play pool with familiar tunes serenading (?) y'all in the background after a day spent fixing fences or skiing.  I don't expect it to be all things to all people.  I love this area, and welcome visitors to it, but I also have strong views about preserving it.  I happen to think today's world spins a little too fast sometimes, and that - even if we can't turn the clock back - we can draw on our western Canadian roots for solace.  As you can tell, I see JOTCW encompassing a lot (perhaps even tempting a couple of former OH2 authors to tell a few stories!).  The blog, like The Jewel itself, is a slowly evolving work in progress, and who knows where we'll end up, but I hope you'll check it out.

Friday, May 11, 2012

Krasting "Unscrambles the Euro Eggs"

With Greece openly thinking of exiting the euro, and the Eurozone actively considering Athen's ejection, I found the following analysis of a complete return to a euroless Europe interesting.  See Bruce's site for the gory details.  "Germany will no longer support Greece, neither will the IMF. If the Euro were to be broken back into its original pieces, the old legacy currencies would trade around the Deutsche Mark (DM). It is a very safe bet that if there was a free float of the currencies, the DM would increase in value versus all of the other EU members. It’s an equally safe bet that the USD/DM of ~1.67 that was posted on 12/31/98 (last day of the DM) is going to also be much weaker (DM strength). If the DM is going to make a comeback it will create a very nice new reserve currency. Money will migrate from both Switzerland and Japan to a different “safe” place. It will end up in Frankfurt. The issue is how long it will it take and how violent the markets will be. On that score, I would estimate that it would take at least a year for these adjustments to take effect, the process of making these adjustments will be very violent indeed. One thing is clear to me, Germany is going to take the brunt of the adjustments that must follow. The Germans are going to get hit from all sides. Its currency will rise against all the EU countries, it will rise against the Dollar and the Yen. This reality is the reason that Germany has done what they have to avoid a breakup of the Euro. I don't think they can avoid the consequences much longer. Germany is now stuck between a rock and a hard place." -

Thursday, May 10, 2012

China Quietly Builds Its Gold Reserves

"... as Bloomberg reports, 'Mainland China's gold imports from Hong Kong surged more than sixfold in the first quarter, to 156 metric tons, adding to signs that the country may displace India as the world's largest consumer of the precious metal on an annual basis.' And the punchline: 'The purchases through Hong Kong may signal that the mainland is accumulating reserves, London-based brokerage Sharps Pixley Ltd. said in February.' Yep ladies and gents: the PBOC is very grateful that it can add hundreds of tons of gold to its reserve holdings in a stealthy operation which it will announce only after its conclusion, at which point, like true lemmings, retail will send gold soaring. But in the meantime, dear hedge funds worried about your margin calls and 1-month performance reports, please proceed calmly along with the lemming herd, and keep pushing gold lower and cheaper for our new Chinese overlords, and for everyone else who, without P&L timing constraints, takes delight in such brief arbitrage opportunities. Shipments in March rose 59 percent from February, data showed. The geopolitical implications are obvious: the prospect of China becoming the largest bullion user reflects the country's economic ascendance." (Tyler Durden at ZeroHedge)  Consuming gold is one thing, but accumulating gold reserves is quite another.  China is ever more secretive about its bullion holdings as time goes on.  The nation last made its reserves known more than two years ago, stating them at 1,054 tons at that time.  Two other items you may have missed along the way: China has strongly advocated a new international reserve currency (other than the tired old USD), and is increasingly insisting (successfully) on pricing deals directly in Yuan, bypassing the greenback.  If you were an emerging economy would you rather be paid in gold-backed Yuan or hot-air-backed U.S. dollars?  But of course, according to Warren Bufffett's second-in-command Charlie Munger, that would be "uncivilized", wouldn't it?  Make no mistake, folks, China is the biggest threat to our North American way of life.

Tuesday, May 8, 2012

Bill C-309 Unmasked

Bill C-309 is Canadian legislation criminalizing the act of protesters covering their face during demonstrations, with a 5-year prison sentence for the offence.  The proposal was introduced in the context of "Occupy Canada" (a peaceful but technically unlawful assembly), and the riot following the 2011 Stanley Cup final game in Vancouver.  The bill would not apply to those with "lawful excuse" to conceal their identity and wear masks, such as riot police.  There is an existing law in Canada entitled "Disguise With Intent" which already criminalizes the wearing of a disguise during a criminal action with a jail sentence up to 10 years, but it has a "higher burden of proof", ie. the wearer must commit, or intend to commit, a crime.  The new bill would grant police the authority to arrest anyone who is wearing a mask not only after there is evidence of rioting, but merely after police declare a peaceful demonstration to be an "unlawful assembly".  Critics of the new law have said that it takes away an individual's right to demonstrate anonymously, that an individual is not necessarily going to commit a crime just because he or she is wearing a mask - it is reasonable to think that the person just wants to remain anonymous and protect his or her identity to avoid recognition causing personal or professional problems.  Activist groups have stated that the bill poses a threat to the freedom of assembly.  Others have pointed out that the behaviour one partakes in is the illegal factor and that the act of wearing a mask in and of itself should not be considered a crime even during unlawful assemblies and riots.  (with help from Wikipedia)  This is a tough one for me.  I am a law-and-order guy, and have argued in this space for more video surveillance cameras, and against facial coverings when voting, going through airport security, flying on a regularly-scheduled aircraft, entering a bank, rioting, and at citizenship ceremonies.  Yet last week I argued for anonymous free speech, and well remember wearing an old gas mask myself in an anti-pollution march in the '60s, to make a point rather than avoid recognition.  In the end I have to be against this proposed law. Peaceful assemblies should never be unlawful (unless on private property), and this law is just a reaction to police bungling in Vancouver and at the G-20 meetings in Toronto.  I always give the police the benefit of the doubt, it's a tough job and I admire the men and women who put on a bullet-proof vest everyday to go to work.  (Just think about that for a second.)  But I am against this law.  Besides, there's already one on the books.  Perhaps it needs some work.

Monday, May 7, 2012

Lost: The "Occupy Wall Street" Focus

The "Occupy" movement that swept through major cities of the world last summer is about to heat up again, and -  as the temperature rises, and the global economy continues to tank - could get a lot uglier this time around.  I get that the Occupy Movement is now generally about the disparity between rich and poor but, frankly, some people are poor because of their own bad choices in life, dammit.  To me, the Occupy "cause" has been hijacked by every disaffected nut case group under the sun.  In fact, the biggest weakness of the protests last year was the fact that there was no clearly delineated set of demands.  Every man and his dog showed up protesting their own number one pet peeve.  So, what do I mean when I refer to the "1% versus the 99%" in this space?  Well, first of all, my 99% doesn't include animal rights activists, rastafarians, anarchists, eco-freaks, and the other assorted dreadlocked deadbeats of Zuccotti Park.  It does include America's unemployed and increasingly homeless middle class - hardworking intelligent folks who were scammed by Wall Street hotshots and let down by government regulators.  Let's harken back to how it all got started.  The original protest was called "Occupy Wall Street", not "Occupy Calgary" or "Occupy Los Angeles" or "Occupy Timbuktu".  The original protest was about the Wall Street excesses that led to the financial meltdown and the current economic state of affairs.  In my opinion, OWS was all about nailing those responsible (both regulators and banksters) who got away with impoverishing a nation while enriching themselves - the 1% who through their incredible avarice and greed nearly brought the global financial system to ruination.  That's the 1% the Occupy movement should be after, not those successful entrepreneurs who earned every cent they've got producing goods and services while employing legions of Americans.

Sunday, May 6, 2012

10 Reasons Why I Read Zero Hedge

Because: 1. I learn a lot.  From CDS's to synthetic CDO's, and forex to Libor, and much more complex stuff that I'm still trying to figure out.  2. ZH often scoops the mainstream media. Try its Twitter feed for breaking market news and commentary - priceless.  3. ZH is well-written and "always brief, never boring" (like Out Here 2), although not always grammatically correct and not always brief (and I thought I was the master of the run-on sentence) but obviously that is because "the Tyler Durden mind" is racing way, way ahead of the word processor - as it often does with genius.  4.  ZH links to some of the best economic and political bloggers on the planet.  I would never have found Bruce Krasting, Testosterone Pit, Jon Hussman, etc. otherwise.  5. I believe Wall Street is in need of reform.  WS got away with murder in the financial crisis of 2008.  To save itself from irrelevancy (public trust and trading volume has vaporized since '08), "The Street" needs to be cleaned up.  6. ZH is not afraid to be self-deprecating.  And the ability to laugh at oneself is always an excellent gauge of character.  7. ZH is irreverent, and edgy.  Yeah, I'm from the 60's.  8. ZH advances freedom of the press.  Mainstream media in the U.S. has become Jerry Springerized; ever more trivial, excited, sensationalized, spin-doctored, and politically polarized.  The real news is online at sites like ZH.  9. ZH makes a cogent argument for anonymous free speech - something I, as "The Balf", appreciate. "It thus exemplifies the purpose behind the Bill of Rights, and of the First Amendment in particular ... "in general, our society accords greater weight to the value of free speech than to the dangers of its misuse." (McIntyre v. Ohio Elections Commission 514U.S.334 (1995), Justice Stevens writing for the majority) ... anonymous speech has a long and storied history in the U.S. Used by the likes of Mark Twain (aka Samuel Langhorne Clemens) to criticize common ignorance, and by Alexander Hamilton, James Madison and John Jay (aka Publius) to write the Federalist Papers, we think ourselves in good company in using one or another nom de plume. Particularly in light of an emerging trend against vocalizing public dissent in the U.S., we believe in the critical importance of anonymity and its role in dissident speech. Like The Economist magazine, we also believe that keeping authorship anonymous moves the focus of discussion to the content of speech and away from the speaker - as it should be. We believe not only that you should be comfortable with anonymous speech in such an environment, but that you should be suspicious of any speech that isn't."  And finally, 10. ZH warns you upfront not to take them seriously (unlike Goldman Sachs, who may be saying one thing and doing another).

Saturday, May 5, 2012

Friday, May 4, 2012

Who and What is Zero Hedge?

"Zero Hedge is an American financial blog. It reports on Wall Street and the financial sector and is credited with bringing the controversial practice of flash trading to public attention in 2009 via a series of posts alleging that Goldman Sachs' access to flash order information allowed the firm to gain unfair profits. The blog is written by a group of people who write under the pseudonym "Tyler Durden". Though derided by the mainstream press as being fraught with conspiracy theories, the blog grew quickly and has been called a "blog sensation". Zero Hedge was founded in January 2009. Posts are signed "Tyler Durden," a character in the Chuck Palahniuk book and movie Fight Club, reflecting the blog's activist posture. Despite speculation that "Tyler Durden" is a pseudonym of Daniel Ivandjiiski, Ivandjiiski denies being a founder of Zero Hedge. Rather, he says he is one of several writers contributing to the site under the pseudonym. In an interview, "Durden" said there were four contributors to Zero Hedge but another contributor says there are up to 40. Contributors have experience in various areas of finance and operations, differing from journalists who become experts about finance as they write about it, but have no practical work experience in the sector. The blog is anonymous to protect the contributors from retaliation for dissident speech. Durden maintains this protects its integrity, objectivity and independence, as well. Durden cites the First Amendment to the United States Constitution and a 1995 U.S. Supreme Court case, McIntyre v. Ohio Elections Commission, which upheld anonymity as a right of free speech. By September 2009, Zero Hedge had begun drawing more traffic than more established financial websites with 333,000 unique visitors a month, impressing even those who say the blog is full of conspiracy theory and an "apocalyptic world view". Durden says two-thirds of its readers are from Wall Street. Under the name Tyler Durden, Ivandjiiski was interviewed on Bloomberg Radio and Zero Hedge has been quoted in the Columbia Journalism Review. Zero Hedge is credited with bringing flash trading to public attention in 2009 with a series of posts alleging that Goldman Sachs had access to flash order information, allowing the firm to gain unfair profits. It used New York Stock Exchange (NYSE) data to detect Goldman's flash trading advantage. The blog contends that Goldman Sachs alumni are at the center of a powerful cabal and that the solution is "a purifying market crash that leads to the elimination of the big banks altogether and the reinstatement of genuine free-market capitalism" - "Dow Zero." The blog drew the attention of the mainstream financial media and became a source for reporters. Bloomberg News published stories based on Zero Hedge’s blog posts, such as “Goldman Sachs Loses Grip on Its Doomsday Machine,” by columnist Jonathan Weil. The New York Times ran a front-page story on the high-frequency trading, detailing how it translated into billions of dollars of profit for Goldman Sachs and hedge funds. The NYSE has since made a rule change and no longer releases the data used by Zero Hedge. Matt Taibbi, in his book Griftopia, cites Zero Hedge in the last chapter as accurately assessing the level of corruption in the banking industry and credits its inside advantage. He questions why the mainstream financial media did not earlier detect the corruption at Goldman Sachs. Taibbi writes: “ Right around that same time, there were three media stories that helped focus a swirl of seriously negative attention on the bank. My piece was one, New York magazine's Joe Hagan wrote another, and the third was a series of stories by a heretofore little-known blogger who went by the nom de plume of "Tyler Durden" on a blog called Zero Hedge. Durden's blog was written in an impenetrable Wall Street jargon, and the man himself - later outed by nosy reporters as an Eastern European trader who had been sanctioned by FINRA - was intimidating even to Wall Street insiders. "Zero Hedge, man, he makes my head hurt" was a typical comment from my Wall Street sources. Beginning in early 2009 Durden had been on a jihad about Goldman, having sifted through trading data to make what he insisted was an airtight case proving that the bank's high-frequency or "flash" trading desk was engaged in some sort of large-scale manipulation of the New York Stock Exchange. Durden drew his conclusions by scrupulously analyzing trading data the NYSE released each week. So what happened? Naturally, the NYSE on June 24 changed its rules and stopped releasing the data, seemingly to protect Goldman from Zero Hedge's meddling. ” - Matt Taibbi, Griftopia" (Wikipedia)  (Balf's  Note: "... In May 2005, Ivandjiiski became employed by another firm, Miller Buckfire & Co. Nevertheless, before the financing deal for Hawaiian Holdings was announced, he obtained confidential documents that his former firm had prepared concerning the impending deal. On March 14, 2006, while in possession of that material, non-public information, Ivandjiiski bought 1000 shares of Hawaiian Holdings for $4.75 a share. On March 15th, when the new financing was publicly announced, the share price of Hawaiian Holdings increased 6%, to close at $5.30. On March 21, 2006, Ivandjiiski sold his 1,000 shares of Hawaiian Holdings stock for $5.53 per share, for a profit of $780." - FINRA insider trading judgement.  $780?  Sounds to me like he wanted to see if FINRA was functional or not. $780?  Come on.  No wonder he's ticked at Wall Street banksters who got away with billion$.)

Thursday, May 3, 2012

Effectiveness of Fed Intervention Diminishes

To me, the above Bloomberg chart shows pretty starkly that the Federal Reserve's interventions in the stock market (er ... economy, that is) are becoming less effective each time they're tried.  The three Fed programs to date (Quantitative Easing 1 in 2010, the green line, Quantitative Easing 2 in 2011, the black line, and now Operation Twist, the orange line), and their effect on the S&P 500, look like nearly perfect overlays, except for two things; QE2 crashed more precipitously and earlier than QE1, and ultimately recovered to a lower level than QE1.  This begs the question "will Operation Twist run out of steam this month, and lead to a market crash of its own?"  Of course, this is an election year so the Plunge Protection Team will be pulling out all the stops to prop up the market legally and otherwise, but it's hard to see how they can continue to do so (without actually falsifying manipulating government data releases) with the Fed apparently losing its effectiveness.  And for all you QE3ers out there, beware - there is a declining cost-benefit relationship to these interventions.  Be careful what you wish for (especially if you own equities), you might just get it.  Get ready for another "buying opportunity".

Wednesday, May 2, 2012

The Plunge Protection Team

"The Working Group on Financial Markets (colloquially the Plunge Protection Team) was created by Executive Order 12631, signed on March 18, 1988 by Ronald Reagan. The Group was established explicitly in response to events in the financial markets surrounding October 19, 1987 ("Black Monday") to give recommendations for legislative and private sector solutions "enhancing the integrity, efficiency, orderliness, and competitiveness of [U.S.] financial markets and maintaining investor confidence". The Group consists of the Secretary of the Treasury, the Chairperson of the Board of Governors of the Federal Reserve System, the Chairperson of the Securities and Exchange Commission, and the Chairperson of the Commodity Futures Trading Commission. "Plunge Protection Team" was originally the headline for an article in The Washington Post on February 23, 1997. Initially, the term was used to express the opinion that the Working Group was being used to prop up the markets during downturns. Financial writers for British newspapers The Observer and The Daily Telegraph, along with U.S. Congressman Ron Paul and writers Kevin Phillips and John Crudele, have charged the Working Group with going beyond its legal mandate. Charles Biderman, head of TrimTabs Investment Research, which tracks money flow in the equities market, suspected that following the 2008 financial crisis that the Federal Reserve/U.S. government was supporting the stock market. He stated that "if the money to boost stock prices did not come from the traditional players, it had to have come from somewhere else.” Moreover, several officials have suggested the government should support stock prices." Claims about the Working Group, which are labeled conspiracy theories by some writers, generally include that it is an orchestrated mechanism that attempts to manipulate U.S. stock markets in the event of a market crash by using government funds to buy stocks, or other instruments such as stock index futures - acts which are forbidden by law. In August 2005, Sprott Asset Management released a report that argued that there is little doubt that the PPT intervened to protect the stock market. However, these articles usually refer to the Working Group using moral suasion to attempt to convince banks to buy stock index futures. Former Federal Reserve Board member Robert Heller, in the Wall Street Journal, opined that "instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thereby stabilizing the market as a whole." His statement has been used to claim that the Fed actually did act in that way. Some mainstream analysts call those claims a conspiracy theory, explaining that such claims are simplistic and unworkable. Author Kevin Phillips wrote in his 2008 book Bad Money that while he had no interest "in becoming a conspiracy investigator," he nevertheless drew the conclusion that "some kind of high-level decision seems to have been reached in Washington to loosely institutionalize a rescue mechanism for the stock market akin to that safeguard major U.S. banks from exposure to domestic and foreign loan and currency crises." Phillips infers that the simplest way for the Working Group to intervene in market plunges would be through buying stock market index futures contracts, either in cooperation with major banks or through trading desks at the U.S. Treasury or Federal Reserve. On 06 October 2008, the working group issued a statement indicating that it was taking multiple actions available to it in order to attempt to stabilize the financial system, although purchase of stock shares was not part of the statement. The government may wind up owning shares in the firms to which it has provided loans, as they will receive warrants as collateral for these loans."(Wikipedia)

Tuesday, May 1, 2012

800: "What's It All About, Balfie?"

Time for a new photo?
Today's post apparently is #800 since I started Out Here 2 over two years ago, so possibly a brief pause for reflection is in order here.  I know that some of my oldest and most loyal readers at times fail to see any common thread in these scribblings, but in general I would describe my effort as trying to present little snippets of the world as it really is, ie. what I know or believe to be true - rather than the spin-doctored version of events we are spoon-fed everyday by Wall Street, big government, big business, big unions, big media, big shots, etc. - particularly as viewed from rural southwestern Alberta, in the foothills of the Canadian Rocky Mountains.  Hopefully, all these snippets add up to a world view (mine) of relevance to some ("but on the weekend ... well, you never know ...").  If not, I hope you will at least find the odd (sometimes really odd) post here and there that will entertain you for a few minutes.  There seem to be about 200 of you who read this space everyday (thanks, by the way), and that number can reach 500, 600, even 1000 a day if I happen to address a hot topic or accidentally use a hot search term in the title.  (I don't play that game on purpose though, it's just so tedious.)  The truth is that I write this blog for myself - and to a lesser extent, for my wife, my children, and my friends.  (When I'm long gone, they can add an "s" to my usual password, print it off and pretty much show the g-g-kids how crazy the old man was.)  Writing has always helped me clarify my thoughts, and priorize (prioritize is the nouveau term, I believe) things for me.  I try to do so without ranting and raving, and with some modicum of decorum.  Expletives are kept to a bare minimum here, and "proppa English" grammar observed throughout 99% of the time because it's important.  As may be obvious to the discerning reader, I read a lot.  The offshoot is that I'll often post the words of others verbatim, always with some reference to the original author.  This is not because I'm lazy (although I am), but because said snippets are sometimes controversial, and always important (or they wouldn't be presented in the first place).  Often these borrowings are longer than I'd like - brevity is next to cleanliness with me - and this epistle is itself getting too long-in-the-tooth.  (Another old saying for you, LEB.)  So, time for a few final words: Writer For Hire.  See ya'll tomorrow!