Archive | September, 2008

Quote of the Week

Quote of the Week

Posted on 30 September 2008 by Ed Z

Looks like I picked the wrong week to quit amphetamines.

The week has just begun and it’s already too long.

Comments (0)

This Financial Crisis Has Been Brought to You By…

Posted on 26 September 2008 by Ed Z

I saw this video over at Hot
Air
, and while Ed Morrissey’s point, that laying
all the blame on Democrats is a bit misleading, the most important aspect of the
video is the philosophies that brought us to this crisis are alive any well with
Obama.  Oh and he was also a major beneficiary of these programs.

 

 

Comments (0)

Economic Terrorism

Posted on 24 September 2008 by Ed Z

On September 19, 2008, the SEC banned short sales in almost 800 financial
stocks. The list is growing daily and is now pushing one thousand names.

For those of you unfamiliar, shorting a stock is when an investor sells a
stock that they do not own with the intention of buying it in the future at a
lower price. The basics of this strategy is you are expecting the price of the
stock to go down, therefore selling it now at a higher price allows you to keep
the difference when you buy it at the lower price. That is your profit. However,
if the stock rises, a purchase at a higher price will leave you on the hook for
the loss.

You also have to borrow the stock before selling it. Since someone on the
other end of your transaction is buying, you need to have stock to deliver to
them. Shorted stock with no borrow is called naked shorting.

A free market demands the ability to make money on both sides. So when the
government banned shorting of particular stocks I was concerned that maybe it
was an overreaction. I mean what’s next, replacing all sell pads with buy pads?

But maybe it wasn’t an overreaction. Maybe something else is going on behind
the scenes we don’t know about yet. Over the last few weeks, I’ve heard the term
Economic Terrorism used with more frequency, specifically in relation to what
eventually came to a head early afternoon Thursday, September 18. Then
today I read this
:

Over the weekend, I
discovered there might have been more to that decision than
initially met the eye. There was chatter on the beltway that we
may have been the victim of economic terrorism, a coordinated
short raid that originated in London and Dubai.

While the legitimacy of that
remains to be seen, my source is well respected. Further, as the
goals of terrorism are economic destruction and social upheaval,
it makes intuitive sense. The stock market is the world’s largest
thermometer and breaking the capital market construct-as some
would say they did last week-would effectively achieve both goals.

Is it possible that terrorist could take advantage of our weakness?
Systematically shorting financial stocks with intentions of creating panic,
adding energy to a down market, and making money of their own. Possible.

Everyone remembers the stories of massive shorting of airline stocks prior to
9/11. The stories became popular enough to become a major plot element in the
most recent Bond movie, Casino Royale.

The 9/11 commission has since concluded pre-9/11 trading activity to be a
matter of coincidence, and
if you read Alexander Rose’s NRO piece from 2004
, you can see that a broader
market picture revealed a trend that made shorting airline stocks, among other
securities, a sound strategy at the time.

I suppose I am guilty of looking for the outside villain, sinister forces
planning our demise. It is much easier than blaming ourselves, but I’m not
blaming our financial mess on terrorists, just considering that they’re always
looking to take advantage of our weaknesses and profit from our loss. It is
win-win for them; we suffer and they make money. I’m curious to find out what
more comes of his story.

Comments (0)

To Hell and Back

Posted on 22 September 2008 by Ed Z

I know I’ve been MIA for a while, but it took me weekend of solitude to
recover from the mayhem that was the stock market last week.  In the short
12 years I’ve been in this business I’ve never seen anything like what happened
Wednesday through Friday.

When you’re in the middle of the fray, it’s sometimes hard to see the
magnitude of the battle.  I haven’t had a chance to think about the
ramification of the bail out.  However, I am aware of the blame game that’s
in full effect.  So while popular belief will blame Bush for all our woes
take this into account from an article today by Kevin
Hassett of Bloomberg
.

The clear gravity of the
situation pushed the legislation forward. Some might say the
current mess couldn’t be foreseen, yet in 2005 Alan Greenspan told
Congress how urgent it was for it to act in the clearest possible
terms: If Fannie and Freddie “continue to grow, continue to have
the low capital that they have, continue to engage in the dynamic
hedging of their portfolios, which they need to do for interest
rate risk aversion, they potentially create ever-growing potential
systemic risk down the road,” he said. “We are placing the total
financial system of the future at a substantial risk.”

What happened next was
extraordinary. For the first time in history, a serious Fannie and
Freddie reform bill was passed by the Senate Banking Committee.
The bill gave a regulator power to crack down, and would have
required the companies to eliminate their investments in risky
assets.

Different World

If that bill had become law,
then the world today would be different. In 2005, 2006 and 2007, a
blizzard of terrible mortgage paper fluttered out of the Fannie
and Freddie clouds, burying many of our oldest and most venerable
institutions. Without their checkbooks keeping the market liquid
and buying up excess supply, the market would likely have not
existed.

But the bill didn’t become
law, for a simple reason: Democrats opposed it on a party-line
vote in the committee, signaling that this would be a partisan
issue. Republicans, tied in knots by the tight Democratic
opposition, couldn’t even get the Senate to vote on the matter.

That such a reckless
political stand could have been taken by the Democrats was obscene
even then. Wallison wrote at the time: “It is a classic case of
socializing the risk while privatizing the profit. The Democrats
and the few Republicans who oppose portfolio limitations could not
possibly do so if their constituents understood what they were
doing.”

Mounds of Materials

Now that the collapse has
occurred, the roadblock built by Senate Democrats in 2005 is
unforgivable. Many who opposed the bill doubtlessly did so for
honorable reasons. Fannie and Freddie provided mounds of materials
defending their practices. Perhaps some found their propaganda
convincing.

But we now know that many of
the senators who protected Fannie and Freddie, including Barack
Obama, Hillary Clinton and Christopher Dodd, have received
mind-boggling levels of financial support from them over the
years.

Throughout his political
career, Obama has gotten more than $125,000 in campaign
contributions from employees and political action committees of
Fannie Mae and Freddie Mac, second only to Dodd, the Senate
Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked
recipient of Fannie and Freddie PAC and employee contributions,
has received more than $75,000 from the two enterprises and their
employees. The private profit found its way back to the senators
who killed the fix.

There has been a lot of talk
about who is to blame for this crisis. A look back at the story of
2005 makes the answer pretty clear.

Oh, and there is one little
footnote to the story that’s worth keeping in mind while Democrats
point fingers between now and Nov. 4: Senator John McCain was one
of the three cosponsors of S.190, the bill that would have averted
this mess.

 

Comments (0)

Seven Years Later

Posted on 11 September 2008 by Ed Z

I struggle to find the words that express how I feel about September
11.  In many ways I think I subconsciously reject finding those words,
because they may just bring back the pain that I’ve long struggled to cope with.

This quote though, reminds me of how I felt watching the horrors of the day.

We stand, as it were, on the shore, and see multitudes of our fellow
beings struggling in the water, stretching forth their arms, sinking, drowning,
and we are powerless to assist them.
  -Felix Adler

Comments (0)

Downtown 9/11/08

Posted on 11 September 2008 by Ed Z

Some sights from downtown and the Battery Park Memorial on the 7th
anniversary of 9/11.

 

 

Here is a short clip of people signing the Memorial
Steel Beams
.

On the eve of the seventh
anniversary of the 9/11 attacks, New Yorkers are being invited to sign
steel beams that will be used in the construction of a memorial and
museum.

Just blocks from Ground Zero, on the
edge of Battery Park, so-called "notes of hope" will be offered
on cold, hard steel. Those who witnessed the tragic attack almost feel a
sense of obligation to take part in the signing.

 

 

Comments (0)

Thought of the Day

Posted on 08 September 2008 by Ed Z

A pitfall of having your success built solely on a cult of personality is how quickly things can go south when that personality starts to sour. As quickly as the bandwagon fills, the fair-weather fans can leave it twice as fast. Oh, and they’ll leave that bandwagon looking like a frat house basement.

Comments (0)

Reap What You Sow

Posted on 06 September 2008 by Ed Z

From the Hot Air headlines: Wisconsin
McCain crowd turns on the media

On the first leg of the
"McCain Street USA" tour — which will take the
Republican presidential nominee and his running mate, Alaska Gov.
Sarah Palin, to small towns across the heartland — the 30 or so
reporters and crew were walking back to their buses to join the
McCain motorcade when hundreds of townspeople started yelling.

"Stop lying! You are
all liars! Tell the truth!" one woman yelled from the front
of the pack.

The crowd was not menacing
or threatening, but was clearly angry.

"You’re telling lies!
Stop the lies!" one man yelled. Asked why the crowd was so
angry, Linda J. Green of Mequon, Wisc., said: "I’m thinking
the press is very biased."

Amazing phenomenon.

When you continue to belittle us, treat us like idiots, pretend we don’t
matter, look down on us for our beliefs and then sit in your studio or behind
your computer and have the audacity to pretend you’re fair; watch out for the
backlash

I hope this becomes a major component top the campaign and as noted above
"not menacing or threatening", just peaceful demonstrations.

Comments (0)

Oh No Chicago!

Posted on 05 September 2008 by Ed Z

Chicago
is lost
. A quagmire. We had better pull our people out now.

An estimated 123 people were
shot and killed over the summer. That’s nearly double the number
of soldiers killed in Iraq over the same time period.

In May, cbs2chicago.com
began tracking city shootings and posting them on Google maps.
Information compiled from our reporters, wire service reports and
the Chicago Police Major Incidents log indicated that 123 people
were shot and killed throughout the city between the start of
Memorial Day weekend on May 26, and the end of Labor Day on Sept.
1.

According to the Defense
Department, 65 soldiers were killed in combat in Iraq. About the
same number were killed in Afghanistan over that same period.

In the same time period, an
estimated 245 people were shot and wounded in the city.

We’re relocating Chicago residents to Iraq.

Comments (1)

And the Sparks Come Raining Down

Posted on 03 September 2008 by Ed Z

Sarah
Palin, our next Vice President
.

 

 

Comments (0)