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Media Infiltrations: Republicans and the Populist Temptation  Wall Street Journal February 9, 2010 Why Taxing Stock Trades Is a Really Bad Idea Wall Street Journal January 6, 2010
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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!
Friday, July 25, 2008
PICTURE OF THE DAY
Thanks to our friend Marge Illich for the pic.
Posted by Donald L. Luskin at 11:21 PM |
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WE'RE ALL HEDGERS! Another good note from a reader, this one from Manny Mendelson in response to "Mick Danger's" earlier post about outlawing commodity speculation:
The government is seeking to separate “legitimate” from “illegitimate” hedgers. They are classing as “legitimate”, those commodity producers and consumers who purchase or sell the physical commodity.Update... Reader Patrick Duggan adds,It seems clear to me that most everybody is a legitimate hedger.
1.We all consume oil and gasoline.
2.Even the “illegitimate” individual investor in a commodity fund is actually a hedger. No, not hedging the price of oil against delivery, but hedging against the adverse price movements of other instruments: stocks, bonds, etc.
In short: we are all legitimate hedgers. The CFTC and Congress need to read a bit of Modern Portfolio Theory and admit that we are all legitimate hedgers.
The government ought not to mess with oil speculators now that they are clearly playing the short side (as if they weren’t all along!)I am sure the left will claim credit for the price drop as a reaction to their threat as opposed to Bush and Republicans leading the charge for drilling.
Posted by Donald L. Luskin at 7:53 AM |
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SUBPRIME HAZMAT An anonymous reader makes a scary point concerning my post yesterday on Bill Gross's idea for the housing market:
Lead paint, radon, asbestos, black mold -- these "scare" defects took a lot of houses out of the market in the past couple of decades. While these particular boogey-men are now old news, I expect some sort of new crisis health-hazard to be discovered any day now. Maybe fiberglass insulation will turn out to be an inhalation hazard -- microfibers scarring the lungs just like asbestos. All of sudden only homes with cellulose insulation will sell at full value, while millions with the pink batting will be discounted. Or maybe it will be PEX plumbing fixtures accused of contaminating the drinking water. Something. Anything. But it will scare people away from buying perfectly safe houses and drive a market for newer houses that are supposedly safer.Update [7/26/2008]... Well, maybe this isn't too far off. Reader Thomas Hobson points to a story in the Houston Chronicle:Sometime in the next year. Watch for it.
Some granite countertops...contain high levels of uranium, which, by generating gamma radiation and radon gas, can endanger human health."Most stones, in terms of radioactivity, are relatively quiet," [Rice University physics professor W.J.] Llope said. "But there are a couple I have found that are insanely hot."
Using a Rice University spectrometer, Llope has examined 55 stones, representing about 25 varieties of granite purchased from Houston-area dealers. Some, he said, could expose homeowners to 100 millirems of radiation — the annual exposure limit set by the Department of Energy for visitors to nuclear labs — in just a few months.
Posted by Donald L. Luskin at 7:09 AM |
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Thursday, July 24, 2008
KIND WORDS FROM EMAC Elizabeth MacDonald writes on the Fox News site, asking whether financial stocks have seen the bottom -- and she most graciously cites this blog:The problem is, as one of my favorite stock market and economics experts, Donald Luskin, has pointed out (his website “The Conspiracy to Keep You Poor and Stupid” is a brilliant, laugh out loud howler of a must-read, http://poorandstupid.com/chronicle.asp), is how these concerns make money down the road, given that the giddy subprime days are over, when Wall Street spat out its drunken daisy chain of cut and paste, mortgage-baced securitization jobs now sitting as landfill in portfolios from here to the Arctic Circle and beyond.
Posted by Donald L. Luskin at 11:26 AM |
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AREN'T THESE TWO HEADLINES REALLY THE SAME STORY? Reader Shawn Smith notes a pattern here:
"Minimum wage hike kicks in"And...
"Unemployment claims jump past 400K"
Posted by Donald L. Luskin at 9:23 AM |
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AND HOW MUCH MONEY DO WE LET THIS GUY MANAGE? Our correspondent "Irrational Exuberance" catches bond guru Bill Gross indulging in an especially virulent version of the "broken window" fallacy:
Make no mistake, the current conundrum that must be solved is: how to make the price of 120 million U.S. barns stop going down in price and then to make them go up again. That, however, is easier said than done. One of the wisest men I know has this serious but admittedly impractical solution: have the government buy one million new/unoccupied homes, blow them up, and then start all over again. Absent that, he’s not quite sure what to do, nor am I...
Posted by Donald L. Luskin at 8:35 AM |
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Wednesday, July 23, 2008
MAYBE ECONOMISTS AREN'T SO STUPID AFTER ALL From Reuters:The U.S. stock market would fare better in the first year after a victory by Republican presidential candidate John McCain than by his Democratic rival Barack Obama, according to a majority of economists at U.S. banks and research groups polled by Reuters....On a scale of 1 to 5, with 1 being "very good", 12 economists gave McCain's proposals higher marks, while nine rated the two candidates equally and eight preferred Obama's policies, according to the poll released on Wednesday.
...The survey, conducted this week, found that 21 of the economists polled thought McCain would be better for the stock market in the first year after the election, while six chose Obama and two gave no response.
The sample includes a cross-section of U.S. financial institutions, large and small, including several prominent Wall Street names.
Posted by Donald L. Luskin at 9:35 PM |
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Tuesday, July 22, 2008
KUDLOW REPLAY Here's the video clip on CNBC's site. I think this is part one, and I think this is part two. I cross swords with Forbes columnist Quentin Hardy, one of these journalists who frequently appear on the show who, well, simply don't know what the hell they are talking about. Must be tough to fill five hours a week with knowledgeable people. Once you run out, the remainder are, of course, not knowledgeable. Maybe there should be fewer guests?Posted by Donald L. Luskin at 9:38 PM |
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AH, FOR THE OPEN ROAD ...and a GPS system when you need it. Richard Ridgeway sends along this photo taken outside of Hillsboro, Texas.
Posted by Donald L. Luskin at 3:10 PM |
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JUST FOLLOW THE MONEY... ...as usual in Washington. Here's Tim Carney:
Follow the divergent treatment recently of four different financial companies suffering from the mortgage crisis, and you begin to detect a pattern: The well-connected — with big lobbying budgets and generous campaign contributions — get special favors from Washington, while the others get special abuse. Government-backed mortgage companies Fannie Mae and Freddie Mac are collapsing, and so Congress and the Bush administration are rushing to save them, insisting to the investing public that everything is OK.Thanks to Jameson Campaigne for the link.Lehman Brothers is upset about negative rumors hurting its stock prices, and so Uncle Sam is investigating who is badmouthing the firm. But IndyMac, a commercial bank and mortgage lender, was pushed over the edge this week by a U.S. senator, Charles Schumer, D-N.Y.
The difference: Fannie, Freddie and Lehman are all famously well-connected to Washington, with high-priced lobbyists and burgeoning political action committees; IndyMac, meanwhile, had no PAC at all and only a tiny lobbying budget.
Posted by Donald L. Luskin at 7:58 AM |
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WHY DOES EVERYONE SAY OBAMA IS SO ARTICULATE? Or for that matter, why do they say he's a different breed of politician? Read this fragment from an ABC News interview from Iraq. This stumbling and evasive response by Obama isn't exactly a signal of "change," now is it? Anyone frustrated with George W. Bush's failure to speak clearly and intelligently isn't going to get any relief from Obama, if this is a sample.
TERRY MORAN: If you had to do it over again, knowing what you know now, would you -- would you support the surge?Never mind that the surge is a huge success -- which is an independent notion from whether we should have been in Iraq in the first place. Would he now support it? Nope -- because the "political debate" took precedence. Rather like Obama's view on low capital gains taxes, isn't it? Never mind that demonstrably, addmittedly, lower capgains tax rates lead to higher government revenues. Those rates are "unfair," and must be raised. Just what world is this guy living in? Is there any reality other than politics?SEN. OBAMA: No, because -- keep in mind that --
MORAN: You wouldn't?
SEN. OBAMA: Well, no, keep -- these kinds of hypothetical’s are very difficult. Hindsight is 20/20. I think what I am absolutely convinced of is that at that time, we had to change the political debate, because the view of the Bush Administration at that time was one that I just disagreed with.
Posted by Donald L. Luskin at 7:41 AM |
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STEELE ON JACKSON AND OBAMA We hang on every word by Shelby Steele when it comes to the emergence of Barack Obama as a social/political phenomenon. His book A Bound Man is indispensible. And an op-ed in this morning's Wall Street Journal explicates the recent outburst against Obama by Jesse Jackson:
Mr. Jackson was always a challenger. He confronted American institutions (especially wealthy corporations) with the shame of America's racist past and demanded redress....Mr. Obama's great political ingenuity was very simple: to trade moral leverage for gratitude. Give up moral leverage over whites, refuse to shame them with America's racist past, and the gratitude they show you will constitute a new form of black power. They will love you for the faith you show in them.
So it is not hard to see why Mr. Jackson might have experienced Mr. Obama's emergence as something of a stiletto in the heart. Mr. Obama is a white "race card" -- moral leverage that whites can use against the moral leverage black leaders have wielded against them for decades. He is the nullification of Jesse Jackson -- the anti-Jackson.
And Mr. Obama is so successful at winning gratitude from whites precisely because Mr. Jackson was so successful at inflaming and exploiting white guilt. Mr. Jackson must now see his own oblivion in the very features of Mr. Obama's face. Thus the on-camera threat of castration, followed by the little jab of his fist as if to deliver a stiletto of his own.
Posted by Donald L. Luskin at 7:37 AM |
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"ILLEGITIMATE" TRADING So now Congress will decide which market transactions are "legitimate" and which are "illegitimate" -- all in the name of curbing "speculation" in the oil market. It won't matter what you buy and sell. What will mater is your state of mind when you do it. How will that be known? Perhaps it will be judged by the pattern of your previous behavior, especially your political behavior. From the Wall Street Journal:
...Congress's legislation, introduced by Majority Leader Harry Reid, aims to cut down the volume of futures transactions. Instead of merely increasing funding and manpower at the U.S. Commodity Futures Trading Commission, it vastly broadens the CFTC's regulatory purview. It also orders the CFTC to distinguish between "legitimate" and "nonlegitimate" traders. Legitimate firms are those trying to manage their price risks; the nonlegitimate are "speculators" purely in it for the money.Those that happen to fall in the latter category will face position limits that restrict the contracts they can hold at one time. In the words of Senate ringleader Byron Dorgan, the bill will "wring the speculation out of this market." He's probably right, but that means the bill will drain off liquidity from U.S. futures exchanges.
Traders with exclusively financial purposes take the other side of options when the goals of "legitimate" short and long hedgers don't match up. Arbitrarily discriminating between commercial and financial investors is not only pointless -- price risk is price risk -- but destructive. In an increasingly integrated global marketplace, investment banks and clearing firms will merely do their business through affiliates in London or other less regulated exchanges, in Dubai or elsewhere. So will pension funds and other institutional investors trying to hedge legitimate inflation risks with energy-related contracts. "Legitimate" traders will follow them.
Posted by Donald L. Luskin at 7:30 AM |
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Sunday, July 20, 2008
THANKS FOR THE WARNING But can you believe the kind of risk they take with the health of consumers? Paul Krugman is right about how food processing should be more regulated! The very idea -- packaging peanuts in a factory that handles peanuts.
Posted by Donald L. Luskin at 8:47 AM |
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WRONG, BUT RIGHT ANYWAY (THIS IS THE TIMES, AFTER ALL) New York Times "public editor" Clark Hoyt reviews the paper's coverage of the government's proposed contingency rescue plan for Fannie Mae and Freddie Mac. The story that the government was considering emergency measures spread panic, and Hoyt admits caussed the stocks of the two companies to fall by half. And as it turned out -- which Hoyt also admits -- everything the paper reported as under consideration for a rescue plan was not included in it, and what it did finally include was not covered in the paper's reporting. No matter. Hoyt follows that great tradition of Times financial reporting and finds an "expert" who whom he can quote agreeing with what he had already concluded before he called the "expert." In this case it's bank analyst Richard Bove:
“Whether the specifics were correct, the thrust was correct,” he said.Rather like the Times' coverage of the scandal concerning Dan Rather's fake evidence of George W. Bush's avoidance of combat service. "Fake but accurate."
Posted by Donald L. Luskin at 8:27 AM |
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