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May 15 2012

Not Capitalism

Modern economic philosophy is generally considered to have started with Smith and Hobbes who were reacting against a system of monarchal merchantilism where favored courtiers were rewarded with monopolies in a planned economy enforced by a state claim of exclusive authority on violence.

Read that again because it’s important.

Their groundbreaking contribution was the concept that markets (individuals) could more efficiently allocate resources (capital) than corrupt cronyism.  You know, free market capitalism.

Compare and contrast-

End of the Affair?

The Editors of The New York Times

Published: May 14, 2012

There has been less buying and selling of stock, and there have been huge outflows of investor dollars from domestic stock mutual funds, as detailed recently by The Times’s Nathaniel Popper. If the trend continues, the result could be a less robust market, with fewer companies opting to raise money by issuing shares and fewer investors willing to put their retirement savings into stocks.

…

Policy makers should pay attention. Evidence suggests that investors are not merely reacting to tough conditions, but rather are staying away because they do not trust the market. Restoring trust is crucial to restoring the market.

American stocks have doubled in price since the market hit bottom three years ago. But trading in the United States stock market has not only failed to recover since the 2008 financial crash, it has continued to fall. In April, average daily trades stood at 6.5 billion, about half their peak four years ago. By comparison, after the market busts of 1987 and 2001, trading recovered within two years. In fact, going back to 1960, trading had never declined for three consecutive years, let alone four and counting.

Investors haven’t just hunkered down, they have headed for the exits. Since the start of 2008, domestic stock mutual funds, a common way for individuals to invest, were drained of more than $400 billion, compared with an inflow of $52 billion in the four years before that.

…

There is also the feeling that the market has become increasingly unfair to investors. For example, Mr. Popper also reported recently on rebates to brokers from stock exchanges. In general, brokers are required to find the best prices for clients who pay them to buy and sell shares. But with the nation’s 13 exchanges now paying brokers for sending them business, brokers may have an incentive to search for the biggest rebate rather than the best price. A new study has estimated that rebates could be costing mutual funds, pension funds and individual investors as much as $5 billion a year.

Also known as “maker-taker” pricing, the rebates have caught the attention of market researchers and investor advocates, including two former economists for the Securities and Exchange Commission who issued a report in 2010 saying that “in other contexts, these payments would be recognized as illegal kickbacks.”

I realize citation of major media outlets is considered but a quaint remnant of irrelevant reality by sycophants and ‘bots, but I thought I’d draw this to your attention.

May 15 2012

DocuDharma Digest

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May 14 2012

Off with their heads!

The Atrios school of blogging.

JPMorgan Unit’s London Staff May Go as Loss Prompts Exits

By Dawn Kopecki, Bloomberg News

May 13, 2012 8:45 PM ET

The entire London staff of JPMorgan Chase & Co. (JPM)’s chief investment office is at risk of dismissal as a $2 billion trading loss prompts the first executive departures as soon as this week, a person familiar with the situation said.

May 14 2012

Umm… When your bartender cuts you off…

Maybe it’s time to go to another bar.

No more bets for Greek euro exit

Athens News

10 May 2012

Want a flutter on Greece leaving the euro zone? It may already be too late. A surge in bets has forced Britain’s biggest bookmakers William Hill Plc and Ladbrokes Plc to suspend betting on the odds of Greece dropping out.

…

“It is safer for us to suspend betting than to keep cutting the odds,” a spokesman for Ladbrokes said. “We have been slashing the odds repeatedly over the last few days.”

Ladbrokes is still taking bets on the Greek stock market losing more than 25 percent of its value in a single day’s trading by the end of 2012.

And if you fear Greece is just the beginning of the end for the European single currency, Ladbrokes is offering odds on the euro ceasing to exist by the end of 2012, which would make punters 33 times their original stake.

Ladbrokes is offering odds of 5/6 that the euro will cease to exist by the end of 2015 and 4/1 on two or more states to leave the euro by the end of the year.

William Hill, however, has closed betting on the euro still being in existence by the end of 2015 – a possibility it sees as closely linked to what is happening in Greece – with the latest odds before suspension at 4/6 in favour and 11/10 against.

(h/t Calculated Risk)

(h/t Matt Taibbi, 991 views)

Jamie’s Cryin: Dimon, J.P. Morgan Chase Lose $2 Billion

Matt Taibbi, Rolling Stone

POSTED: May 11, 10:48 AM ET

This incident is certain to reignite the debate about Dodd-Frank and may undermine the broad effort to roll back the bill, which we wrote about in the latest issue of the magazine. Staffers on the Hill started mobilizing the instant the Chase news hit the airwaves yesterday, and you can bet we’ll hear more debate in the next few months about not only the Volcker Rule but the Lincoln Rule, which was designed to wall off risky swaps from the federally-insured side of these banks. I’ve heard from all sides today, with some thinking the Chase trade was Dodd-Frank compliant, and others saying it probably violated both the Volcker and the Lincoln rules.

Either way, the incident underscored the basic problem. If J.P. Morgan Chase wants to act like a crazed cowboy hedge fund and make wild exacta bets on the derivatives market, they should be welcome to do so. But they shouldn’t get to do it with cheap cash from the Fed’s discount window, and they shouldn’t get to do it with money from the federally-insured bank accounts of teachers, firemen and other such real people. It’s a simple concept: you either get to be a bank, or you get to be a casino. But you can’t be both. If we don’t have rules to enforce that concept, we ought to get some.

212 views.

China’s Big Banks Look More Like Paper Tigers

By Jonathan Weil, Bloomberg News

May 10, 2012 7:00 PM ET

After spending time combing through the financial reports of China’s biggest publicly traded, state- owned banks, I now understand what Jim Chanos, the famous short- seller, means when he keeps saying they are “built on quicksand.” He’s definitely on to something.

…

In a Bloomberg Television interview last week, Chanos said “the Chinese banks ought to be sending a thank-you note to Greece and Spain every month for keeping them out of the limelight.” It’s anyone’s guess how long they will stay this way.

May 14 2012

DocuDharma Digest

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May 13 2012

Formula One: Catalunya

Ok, on the Irony Board (like that?  I just made it up) this doesn’t sir pass (look, another punny) Colin Powell, Village Liar defending his UN/WMD speech, but Schumacher didn’t even bother to go out in Q3 so he could save tires.

Or you could call it the courage of his convictions.

Does it sound early to you?  I actually kind of hate the European starts more because I have to get up instead of going to bed late and it interrupts my nightmares about people behaving in un-professional manners.

Like you’ve never had one.

Any who today’s grid is full of surprises and it’s likely to end the same way because Circuit de Catalunya is not renowned for passing opportunity which is good for Lewis except for Team McLaren’s history of abject failure when in positions of advantage.

Remind you of anybody?

Oh man, more coffee- let’s bury the lede not praise it.  Hamilton starts from the back because of a fueling violation.

Formula One: Hamilton stripped of pole for Spanish Grand Prix

Daily Times, A New Voice For A New Pakistan

Sunday, May 13, 2012

“A team member had put an insufficient quantity of fuel into the car thereby resulting in the car having to be stopped on the circuit in order to be able to provide the required amount for sampling purposes,” a statement said. “As the amount of fuel put into the car is under the complete control of the competitor the stewards cannot accept this as a case of force majeure. “The stewards determined this is a breach of article 6.6.2 of the FIA Formula One technical regulations and the competitor is accordingly excluded from the results of the qualifying session,” the FIA statement read. “The competitor is however allowed to start the race from the back of the grid.” No driver has won in 21 years of the Spanish Grand Prix being held in Barcelona from lower than third place on the grid. A McLaren spokesman said the team accepted “the stewards did not agree with our interpretation of force majeure. Our aim is now to maximise the points we can score tomorrow.”

Force Majeure.

Scrambled tables below-

May 13 2012

Happy Mother’s Day

A DocuDharma now on The Stars Hollow Gazette

clip flowerI tease my mother by calling her Emily after Emily Gilmore both because overall my family reminds me very much of the Gilmores and because she’s never met a brand name she didn’t like whereas I’m perfectly content to buy generic.

I thank her among many things for a thorough grounding in the domestic and other arts.

Mom teaches first grade and is actually famous in a quiet sort of way.  The kind parents brag about and angle their kids for though she’s won national awards too.  Of course I owe everything I know about educating to her and among my own peers I’m considered an asskicking trainer.

She also insisted we learn to perform routine self maintenance, little things like laundry and ironing, machine and hand mending. basic cooking.  Of course she always indulged us with trips to museums and zoos, made sure we got library cards, did the usual bus driver thing to swim practice, had this huge second career as a Brownie/Girl Scout Leader for my sister.

At one point when I was old enough for it to make an impression she took her Masters of Fine Arts in Art of all things, so I know a little Art History with Far Eastern.  I understand how to bang out a copper pot and make silver rings because she took me to class once or twice.  She liked stained glass so much that she and dad made several pieces (you use a soldering iron and can cut yourself pretty bad so it’s a macho thing too).  They also did silk screening which taught me a lot about layout and graphic arts.

But she always liked fabric arts and in addition to a framed three dimensional piece in the living room, there are Afghans and rugs and scarves and pot holders and wash cloths and hats and quilts and dolls.

And the training kits and manuals for her mentorship programs, and the adaptations and costumes for the annual first and fifth grade play.  Did I mention she plays 3 instruments, though mostly piano?

She touch types too.

So to Emily, a woman of accomplishment and refinement, Happy Mother’s Day.

May 13 2012

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May 12 2012

Formula One: Catalunya Qualifying

Richard (my Dad) tells me that McLaren sending out their test drivers instead of their race drivers means big changes, not mere tweeking and I suppose we shall see.  They come to Barcelona with a new nose and most teams have made at least some changes though many are complaining that in-season testing is a huge waste of time.

Personally I think that attitude means your team is under-organized or capitalized or both.  If you don’t have the chance to react to innovation you might as well write off your season and if you choose not to…

Well, you’re the Washington Generals now aren’t you?

Teams and drivers are closely matched after 20% of the season with the biggest ‘surprises’ being Scuderia Marlboro (they suck and have a slow car too, the surprise is that they are doing as well as they are) and Lotus (which shouldn’t really surprise anyone since they’re the Renault team renamed).  Mercedes (Brawn) is incredibly unhappy with the new Concorde which leaves them out of the $50 Million bribe club (Red Bull, McLaren, Marlboro) and has scheduled a vote on their participation next year even though they’re showing improvement.

Schumacher is also upset with Pirelli, complaining that so much attention is going into tire wear that that it’s like “driving on raw eggs” and there’s no opportunity to test the other aspects of the cars or the aggressiveness of the drivers.  This week we are using Hards and Softs with a 1.3 second per lap differential between them and no indication yet how long they will last on track.

After the Bahrain avalanche I suppose any amount of news would seem slight and I’ll try to delve a little deeper for the race tomorrow, but they’re still fussing with setups in Practice and we won’t actually know anything until after Qualifying.

Repeat tonight at 1 am.  The actual race is a 7:30 am start tomorrow on Speed with a repeat at noon Monday.  GP2 starts at 6 am.

Surprises below.

May 12 2012

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