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Chronicle of the Conspiracy
Join us as we discover, document, expose and challenge the bad people, the bad institutions and the bad ideas that stand in the way of wealth creation -- and show you how to fight back!

Saturday, February 16, 2008

KUDLOW REPLAY   Here's the YouTube video. Check this out... another run-in with CNBC "on-air editor" Charlie Gasparino. This time Charlie was reduced to stammering, "That's the dumbest statement I ever heard. At the expense of getting on your website, that's the dumbest statement I ever heard." Then he called me a "jerk" -- twice -- on air.

Okay, Charlie: here, you get your wish -- you're on my website. What exactly is the "dumbest statement" Charlie "ever heard"? Watch the whole thing, below, but here is a transcript of the key exchange (this time I won't attempt a phonetic representation of Gasparino's Sopranos-esque patois). Here, after Gasparino had already interrupted me, Larry breaks in to try to make Charlie let me have my say:

KUDLOW: Charlie Charlie, Charlie, let him [Luskin] make his case then you make your case.

LUSKIN: Just because you take a write-off, just because an insurance company takes a loss...

GASPARINO: They didn't take a write-off.

LUSKIN: So shall we send in the police...

GASPARINO: They didn't take a write-off. What are you talking about?

LUSKIN: ...to take away Warren Buffett's insurance business because once in a while he has to write a couple billion dollars worth of checks because there was a hurricance somewhere?

GASPARINO: They didn't take a write-off. Get your, get your facts straight, sir.

LUSKIN: Insurance companies take losses, guy.

GASPARINO: Take your, get your facts straight. They didn't take a write-off. They insured CDOs.

Apparently in Gasparino's world of muck-raking yellow journalism, merely mentioning involvement with CDOs consigns a company to the ranks of the damned, and makes all other facts not necessary to consider or even know. But let's indeed get our facts straight. Here is Ambac's January 22 press release announcng a $5.2 billion write-off. Here's their October 24, 2007, press release announcing a $734 million write-off. Here's MBIA's January 31 press release annoucing a $3.5 billion write-off. Is it too much for this "on-air editor" to read earnings announcements of the companies he reports on? Or is all he can do pass on leaks from Eliot Spitzer?

What a collossal embarassment Gasparino is to himself and to CNBC. And what an insult to the expert guests on the show, to have to defer to this ignorant bully. I think this "on-air editor" owes the show's listeners an "on-air correction" of his egregious error about the write-offs, and he owes me an "on-air apology" for calling me a jerk.

Update [2/17/08]... Some readers have told me they aren't able to discern Gasparino calling me a "jerk" in the soundtrack of the YouTube video. Here is a transcript of that section:

KUDLOW: Charlie Gasparino, I can't believe you are defening Spitzer. Charlie Gasparino, I can't believe you're defending Spitzer. You have a whole journalistic, you have a whole journalistic...

GASPARINO: I'm not, I'm just saying this other guy's a jerk.

LUSKIN: Charlie Gasparino built a career at the Wall Street Journal leaking for Eliot Spitzer...

KUDLOW: Time out, time out, no cross-talk...

GASPARINO: I would never defend Spitzer. I'm saying this other guy's a jerk.

LUSKIN: This is an outrage. An outrage.


Posted by Donald L. Luskin at 2:44 PM | link  


Friday, February 15, 2008

GREAT -- EXPECTATIONS!   My DC-insider friend "Mick Danger" has some thoughts on Hillary, McCain and "expectations."
Bear with me. This is a little longer than usual.

“Beating expectations” is how the media often reduces complicated economic or political subject matter to sports-score style reporting. Obvious examples: “Company X beat expectations about earnings.” “Obama beat expectations in fundraising last year.”

Editors will say the audience needs the news dumbed-down. Maybe so, but “dumbed-down” seems to be the level reporters can reach. Let’s raise our own eyes and focus on two contests: Obama vs. Hillary and Obama vs. McCain. Let’s make the issue macro-economic policy -- taxes, spending, and free trade.

The Obama campaign is saying Hillary needs to beat Obama by 20 points or better in both Ohio and Texas to have a mathematical possibility of winning the Democratic nomination. This is true; it is also known as lowering expectations so you can beat them.

It’s possible that Obama could win either or both of those states. The media will love that story, clearly one of “beating expectations.” Hillary is trying to attack Obama as lacking in substance. So, in a bit of tactical genius, Obama lifts some pages from Hillary’s book of policies. His audiences seem to like those pages so long as he is the one reading them. All she can do is complain about the theft. In today’s episode, Obama is beating Hillary up over her early support for NAFTA.

As you pointed out earlier today, Peggy Noonan is right that Hillary is a reverse Sally Field. Soon, though, it may get worse. What happens to Hillary and Bill when no one fears them or needs them?

Can McCain “beat expectations”? Can he handle questions about the state of the economy? What will he say about what causes a job to be created or causes it to be extinguished? Romney tried beating McCain on this turf but couldn’t draw blood. He had great material but he could not connect with most Republican voters. Winning an issue is rarely decided by which candidate best grasps the substance of the issue or even by those who best articulate it. It is almost always about the substance of the person.

Obama might be buying his own mania too much. He’s dazzling audiences left, right and center with his cheerful optimism, his disdain for petty political spats and his convincing personal story. If he beats Hillary in Ohio by out-pandering her with the union-left, won’t he make himself look like just another last century Democrat? Does he think he can beat McCain as readily as he is beating Hillary?

McCain is most vulnerable if he can be painted as another Bush.

I’m beginning to think it’s possible for McCain to put together a compelling case on the economy and sell it. As you’ve pointed out, McCain has moved in the right direction on taxes. He’s an ardent free-trader. His greatest credibility, though, is on spending. He has always been stingy with the public’s money and can run against Bush’s free-spending ways. Obama is promising new spending programs every day. Obama will be trapped by House and Senate Democrats who are bitching that Bush isn’t spending enough. (As I’ve observed before – and haven’t seen others do so -- Bush had a devil’s deal with Hastert, Delay and Stevens: you fund my war without looking closely and I’ll sign all your pork barrel bills. That bad deal helped kill the Republican Congress. McCain is the remedy for that virus.)

I do not think a campaign against spending will capture the White House. Instead, I think it captures credibility for McCain on the macro-economic issues. More importantly, a debate over spending could trap Obama too far to the left to hold his current appeal in the center.

Time to look at who is advising McCain; one of them is Kevin Hassett of AEI. He’s not shy, see this recent piece.


Posted by Donald L. Luskin at 1:05 PM | link  

SNAPPY COMEBACK OF THE DAY   When asked about Hillary Clinton's statement that Vladimir Putin "doesn't have a soul," Putin replied, "At a minimum, a head of state should have a head."

Thanks to Tom Demas for the link.

Posted by Donald L. Luskin at 11:10 AM | link  

CLASS ACT   From the Columbia Journalism Review:
Last summer, Barron’s published a tough story last summer on Jim Cramer, concluding that the manic and popular star of CNBC’s Mad Money program did not, for all his bluster to the contrary, beat the broader market with his stock picks.

While the story didn’t make much of a splash at the time, it sparked a quiet but surprisingly fierce feud between the two business-news organizations, one that seems out of proportion to the story that caused it. Within days of publication, for instance, CNBC officials told Barron’s reporters who had appeared as on-air guests for years that their presence was no longer desired.

Ed Finn, Barron’s editor and president, says no one told him so, but he believes CNBC banished his reporters from on-air appearances in response to the disputed August 20 piece, “Shorting Cramer” by senior editor Bill Alpert.

“They stopped putting us on pretty much from the day after that story ran,” Finn says.


Posted by Donald L. Luskin at 10:58 AM | link  

METAPHOR OF THE DAY   Peggy Noonan on Hillary Clinton in the Wall Street Journal:
The dread Republicans she is used to hating, whom she seems to pay no psychic price for hating, and who hate her right back, are not doing this to her. Her party is doing this.

Her whole life right now is a reverse Sally Field. She's looking out at an audience of colleagues and saying, "You don't like me, you really don't like me!"


Posted by Donald L. Luskin at 9:27 AM | link  

KUDLOW REPLAY   Technical difficulties sidelined me till the last minute -- but I got my licks in...


Posted by Donald L. Luskin at 12:02 AM | link  


Wednesday, February 13, 2008

KRUGMAN FOCUSES HIS HATE ON THE WRONG GUY...   The New York Times has never been especially vigorous about publishing letters from conservative readers complaining about the outpouring of hate, slander, innuendo and other species of satanic sputum from the mouth of Paul Krugman, as long as its target was George W. Bush and the Republican party. But when his column criticized Barack Obama's campaign for being a "cult of personality" based on "Nixonland" tactics -- in other words, when Krugman focused his hate on a liberal Democrat -- the Times has room for letter after letter after letter. Here is a sampling:
...Mr. Krugman, a consistent critic of Barack Obama, did not produce a shred of evidence for his categorical statement that the “venom” being displayed in the Democratic campaign comes from Obama supporters, “who want their hero or nobody.” And it seems to perpetuate the same bizarre bitterness that he derides in his column....

...I don’t have to give Mr. Krugman or anyone else my strong assurances that I will support the Democratic nominee, and I don’t have to apologize to Mr. Krugman or any Democratic Party apparatchik for passionately opposing Hillary Rodham Clinton. ...

...To top it all off, Mr. Krugman compares Mr. Obama’s ability to inspire and organize to George W. Bush’s demonstrated penchant for conceit and self-indulgence in Operation Flight Suit. Who’s perpetuating “Nixonland” now?...

...The fact that many Democratic voters would simply stay home in November rather than vote for Hillary Clinton is not a sign of “hate” or “venom.”...


Posted by Donald L. Luskin at 11:43 AM | link  

UH, OOPS...!   Too bad about all those laws they passed and all those billions they spent. Turns out that ethanol is bad for global warming.
Prior studies had never credited the carbon-dioxide emissions that arise when virgin forests, grasslands and the like are cleared to grow biofuel feedstocks. About 2.7 times more carbon is stored in terrestrial soils and plant material than in the atmosphere, and this carbon is released when these areas are cleared (often by burning) and the soil is tilled. Compounding problems is the loss of "carbon sinks" that absorb atmospheric CO2 in the bargain. Previous projections had also ignored the second-order effects of transferring normal farm land to biofuels, which exerts world-wide pressure on land use.

So, incredibly, when the hidden costs of conversion are included, greenhouse-gas emissions from corn ethanol over the next 30 years will be twice as high as from regular gasoline. In the long term, it will take 167 years before the reduction in carbon emissions from using ethanol "pays back" the carbon released by land-use change. As they say, it's not easy being green.


Posted by Donald L. Luskin at 11:33 AM | link  


Tuesday, February 12, 2008

NOW THIS IS REALLY BEARISH   From this morning's Wall Street Journal, a report on Matthew Simmons' fearsome research on the subject of "peak oil":
What he has found, he says, “is so unbelievably scary you can’t believe it.”

Posted by Donald L. Luskin at 8:56 AM | link  


Sunday, February 10, 2008

KRUGMAN QUOTES CLINTON ADVISOR WITHOUT DISCLOSING HE'S A CLINTON ADVISOR   Paul Krugman loves Hillary Clinton's plan for universal health insurance, because it points a gun at your head and requires that you buy the insurance whether you want it or not. Krugman believes, like Chairman Mao, that you have to break a few eggs to make a socialist omelette -- indeed, to think otherwise is "naive," as he has called Barack Obama's mandate-free plan. So in his Monday New York Times column, we have Krugman citing an academic study that purports to objectively back up his (and Hillary's) view on this:
So the Obama plan would leave more people uninsured than the Clinton plan. How big is the difference?

To answer this question you need to make a detailed analysis of health care decisions. That’s what Jonathan Gruber of M.I.T., one of America’s leading health care economists, does in a new paper.

Mr. Gruber finds that a plan without mandates, broadly resembling the Obama plan, would cover 23 million of those currently uninsured, at a taxpayer cost of $102 billion per year. An otherwise identical plan with mandates would cover 45 million of the uninsured — essentially everyone — at a taxpayer cost of $124 billion. Over all, the Obama-type plan would cost $4,400 per newly insured person, the Clinton-type plan only $2,700.

What Krugman doesn't tell you is that Jonathan Gruber is no objective academic. He's an adviser to the Clinton campaign. What -- couldn't Krugman find an appropriate quote from Hillary herself? No matter... looks like (once again) Krugman is betting on the the wrong horse.

Posted by Donald L. Luskin at 10:59 PM | link  

GOVERNMENT: PRAISE IT WHEN THINGS GO RIGHT, EXONERATE IT WHEN THINGS GO WRONG   Our friend Bob Ferguson points to two interesting examples. The first is from a terrific speech by Michael Chricton on how environmentalists are blind to the importance of the complexity of the physical world when they make their doom-and-gloom projections. Along the way he quotes United Nations reports on the succesful passage through the risks of Y2K. First the UN warned,
History offers no example of a parrallel threat on a global, national or even local scale.
And the scare rhetoric heats up from there. Then, a UN report after the event:
The governments...can congratulate themselves for passing the Y2K challenge.
Chricton notes,
So governments can congratulate themselves! The only problem is, they have no reason to congratulate themselves, because governments didn’t solve this problem. The US government spent 6 billion dollars. But Citibank alone spent nearly 1 billion. And total US expenditures were on the order of 100 billion, which means the government spent 6% of the total needed to fix the problem.
Then in the New York Post, economics professor Stan Liebowitz writes that the subprime mortgage problem is in large part due to government mandates on lenders to lend money to poor people:
In the 1980s, groups such as the activists at ACORN began pushing charges of "redlining" - claims that banks discriminated against minorities in mortgage lending. In 1989, sympathetic members of Congress got the Home Mortgage Disclosure Act amended to force banks to collect racial data on mortgage applicants; this allowed various studies to be ginned up that seemed to validate the original accusation.

In fact, minority mortgage applications were rejected more frequently than other applications - but the overwhelming reason wasn't racial discrimination, but simply that minorities tend to have weaker finances.

Yet a "landmark" 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic.

That study was tremendously flawed - a colleague and I later showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination.

...No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: "discrimination may be observed when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants."

Some of these "outdated" criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant's ability to manage debt.

Sound crazy? You bet. Those "outdated" standards existed to limit defaults. But bank regulators required the loosened underwriting standards, with approval by politicians and the chattering class. A 1995 strengthening of the Community Reinvestment Act required banks to find ways to provide mortgages to their poorer communities. It also let community activists intervene at yearly bank reviews, shaking the banks down for large pots of money.

...Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find CRA loans available via ACORN with "100 percent financing . . . no credit scores . . . undocumented income . . . even if you don't report it on your tax returns." Credit counseling is required, of course.

Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed "the most flexible underwriting criteria permitted." That lender's $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003.

Who was that virtuous lender? Why - Countrywide, the nation's largest mortgage lender, recently in the headlines as it hurtled toward bankruptcy. In an earlier newspaper story extolling the virtues of relaxed underwriting standards, Countrywide's chief executive bragged that, to approve minority applications that would otherwise be rejected "lenders have had to stretch the rules a bit." He's not bragging now.


Posted by Donald L. Luskin at 10:36 PM | link