The Naked Dollar

Mitt Romney: the Last Republican President?

2012-01-26T07:29:00.000-08:00

There's a very provocative piece in the American Thinker about Romney (here) that suggests Mitt Romney may be the last Republican president, ever. Here's a takaway:

This is the last hurrah of the Republican establishment. The conservatives and libertarians will vote for Romney in November, but only because he is not Barack Obama. There will be no enthusiasm, which will hurt the down ballot contests for the U.S. Senate, the House and state governorships. Despite the factors weighing against Obama in this upcoming election, it will be a much closer contest that it should be; perhaps a razor thin victory for Romney.

If Romney were to lose the election, there will be a grass-roots revolt against the Republican Party which will spell its demise. If he wins and the nation, through the mis-directed policies of Romney and the Republicans in the Congress, continues on its current path of compromising and nibbling around the edges of the nation's problems, then Romney will be the last Republican president and the specter of the Democrats re-assuming power will be a reality.

So, here's a straight-up fact: there are more conservatives than there are Republicans. 40% of America is conservative, a number that holds quite steady over time. 30%, more or less, is Republican. This means many will hold their noses and hope for the best with Romney.

Conservatives have a very uneasy alliance with the Republican Party. Often, when Republicans make the mistake of nominating a moderate (Ford, Bush the Elder, Dole, McCain...), conservatives stay home and Republicans lose (giving lie to the conventional wisdom that Republicans need to win the middle to get elected). But this election may be different. Antipathy towards Obama's imperial liberalism runs so deep that conservatives will likely rally around anyone, even Romney.

The Tea Party is the manifestation of conservative displeasure with the Republican establishment. For now, they realize that splintering into a new political party would be self-defeating. But if Romney loses the general, you will either see a wholesale attack for control of the Republican party or, perhaps more likely, a wholesale defection. "Never again," they will cry. Never again will they trust the establishment.

If Romney wins, conservatives will be united in the hope that Romney is the conservative he claims to be. The problem is, all the evidence is that he's more of a George H.W. Bush, who, if you recall, pretended to be Reagan's conservative heir to get elected in 1988, and then was thrown out on his ass when he turned out to be the squishy moderate conservatives always thought him to be.

Temperamentally, Romney reminds one of HW, too. One of HW's great flaws was that he wanted everyone to like him, a very bad trait if one wants to be a great leader. Ronald Reagan went to sleep every night knowing a third of the country hated him, and he slept like a baby. Churchill was much the same.

Romney, on the other hand, wants to be liked, and here's the issue: the great problems that need fixing will require great wars to fix. The left will fight with everything they have to protect the status quo, and anyone who reaches for the big, game-changing fixes will be crucified in their circles as well as by their hand puppets, the media. Does anyone think Romney has the stomach for that?

Which leaves us with the second scenario: Romney wins and turns out to be HW, leaving conservatives feeling had. It is unlikely they give the the establishment any more chances. Look for a new party - the Constitution Party? - to be the result. This will consign the Republican Party to the ash heap and open the door for Democrats to run the table for years.

Not pretty either way.

Obama's Coming Debate Problem

2012-01-23T11:56:00.000-08:00

Many have commented on how they'd love to see Newt debate Obama. The Naked Dollar concurs, but not at the cost of having Newt as the nominee.

What has gone unremarked is how much of a problem Obama will have debating any of the Republicans.

Debating is a skill that comes with practice. The first time you're up there, it can be terrifying. Witness poor Rick Perry, who improved markedly, but not enough to overcome his opening night gaffe. Look at Mitt Romney, who is far more skilled and disciplined (if uninspiring) this time than four years ago.

Barack Obama has never really had to debate anybody. McCain? Sorry, no. He was terrified to lay a glove on Obama for fear of being labelled a racist or a mean old man. And Obama, at the time, was a complete unknown with virtually no legislative record in the Senate or the Illinois House, so he had nothing to defend. He could say whatever he wanted, attack without being attacked.

Now, he is the 100% owner of three years of miserable performance. It is a target rich environment, to say the least, and I don't think any of the Republicans will be shy about going after him. The racist charge won't hold water this time, and whomever the nominee is, he will have spent six months in the toughest debating boot camp ever. He will be ready.

But let's think further back. Can you think of a time in his life when Obama has ever been seriously challenged, about anything? His political races, pre-McCain, were largely cake walks, and his years in academia would have provided him with full immunity from argument, given his race and political persuasion. If a faculty member at Occidental, Columbia, Harvard, or Chicago had ever taken issue with him, concerns for political correctness would have been more than enough to ensure their silence.

No, Obama has spent his life in a pleasant echo chamber, one where conclusions can be glib and rarely challenged, where knowing nods are exchanged in the faculty lounge. In my experience, this makes for people who wilt easily when confronted with rational arguments that don't conform their belief systems. The result is usually petulance and name calling.

Looking for a good debater? Look for a conservative who went to a northeaster college (see: Ivy League) or a liberal who grew up in the South. When you're always on the defensive you learn that you must understand issues deeply. Take Bill Clinton. He spent much of his life negotiating the conservative waters of Arkansas, so he knows a thing or two about how conservatives think and what their arguments are. Obama? He still doesn't. In fact, he recently said he prefers watching the TV show Homeland to the Republican debates.

Does Obama have enough self-awareness to know any of this? No. The narcissism runs too deep. But The Naked Dollar predicts that his staff knows enough to be worried every time he speaks without a teleprompter. They will fight for the minimum number of debates possible. The other prediction: a flinty, defensive performance with at least one major gaffe.

Newt Has Lost It

2012-01-23T10:09:00.000-08:00

I love Newt as a debater, I really do. And I once loved him as speaker. And I can even hold my nose enough to believe he is a changed man. But I cannot forgive either his attacks on Bain Capital and the Ryan Plan. He has lost the Naked Dollar.

Newt was the one running a positive campaign, the happy warrior for for small government conservatism. But no more. Paul Ryan's plan was the best anyone's done to date in terms of solving the entitlement mess. Perfect or not, it took political courage to step on politics' "third rail." You expect to by demonized by Democrats, but other Republicans? As they say, with friends like these...

Then there's Bain. Does Bain Capital ever fire people? Of course they do, but these are ailing companies that they buy. The drill is you nurse them back to health so what's left can prosper and, yes, employ people. Bain and other private equity firms plays a vital in our free enterprise system. Would you rather these companies go under? Or be socialized? Once again, we fully expect Democrats to distort the facts in order to score cheap points with an ill-informed electorate (assist to teachers unions).

But Republicans? Newt? He was supposed to be free enterprise's most ardent defender. Instead, he comes off like a political hack looking for the easy score. Shame on him.

Is the Naked Dollar for Romney, at this point? No, not yet. There's still Santorum, whom people seem to overlook. He is reliably conservative and has blue collar appeal, having won many times in Pennsylvania. What he lacks is charisma and the "look" of a president. Right now, those deficiencies are far surpassed by the deficiencies of others.

Mitt Romney and the Threat to the Conservative Brand

2012-01-13T06:50:00.000-08:00

One recurring problem conservatives have is that the general public keeps getting them confused with the Republican Party. Oh, occasionally, the two act in concert, and this was most true during the Reagan years. But there's a reason the Tea Party exists, and a reason that 40% of the country calls itself conservative and yet only 30% call themselves Republicans. The alliance between conservatives and the Republican Party establishment is, and always has been, an uneasy one. Suspicion runs deep.

But the public, as we know, is not terribly informed about, well, anything. We don't need to see any more of Jay Leno's Man in the Street segments to figure this out. (My favorite...Jay, pointing to an American flag: "How many stars on that flag over there?" Woman: "I can't tell, it's waving.") The public tends to equate the Republican Party with conservatism, which is rarely the case. Thus, when a Republican president does something stupid and non-conservative, conservatives get blamed, too. This was a problem with Nixon, Ford, and both Bushes. (Think...wage/price controls, ADA, prescription drugs for seniors, Bush 1 tax hikes, etc., etc.)

What happens then is that a Democrat gets elected in response to the "conservative" mistakes, and then we really get screwed.

(A relative of mine, a Republican, voted for Obama based on the logic that McCain would have been a terrible president (true) and would have delivered Hillary unto us. The problem with this logic, of course, is that it delivered Obama unto us.)

And so Romney. I have several friends who know him, and there's always a wink and a nod; he has to pretend to be moderate to win, but when he does, you'll see, he's a good conservative.

I have a number of problems with this line of thought:

Moderate Republicans don't typically win, while conservative ones do. (See a piece I wrote on this here.) BUT, antipathy towards Obama runs so high that this might just be the cycle where it doesn't matter. Still...
When was the last time someone went to Washington and turned out to be more conservative than you thought? (See: never)
There is no evidence, anywhere, that Romney has conservative values.

I will count myself as happily wrong if Romney truly has been quietly harboring a conservative soul all these years. If I'm right, though, the potential consequences are disquieting:

The fundamental problems we face - entitlements, the tax code, public sector unions - will require an enormous amount of leadership to solve. A president without core convictions, a president who wants everyone to like him, won't get it done, and this may be our last chance to get these things right before we turn into Greece.
As things get worse, "conservatism" will get blamed, and we won't have a chance to elect a real conservative for a long, long time. So long, in fact, that a socialism will be the permanent state of affairs.

Looks like Mitt has a lock on things, so here's hoping I'm wrong.

Which Candidate Fits You Best?

2011-12-15T06:54:00.000-08:00

This a simple but clever concept. Give your view on a variety of issues and then weight the issues by how important they are to you. At the end, find out which candidate most perfectly fits your view of the world.

My 1-2-3 were Ron Paul, Newt Gingrich, and Rick Perry. The Ron Paul part surprised me. Jon Huntsman and Barack Obama brought up the rear. No surprises there.

You can try it out here:

h ttp://www.usatoday.com/news/politics/candidate-match-game

Let us know what your results are by commenting!

Do You Have a Clue?

2011-12-14T11:44:00.000-08:00

Hopefully, as a Naked Dollar reader, you do.

I received the following over the transom out of Pew Research:

Can You be Trusted to Vote Intelligently?

This is a terrific multiple choice 13-question test. And it shows results in a number of ways. It clearly indicates that the majority of Americans don't have a clue about what's going on in the world. No wonder our politicians take such advantage of us. It's astonishing that so many people got less than half right.

These results say that 80% of the (voting) public doesn't have a clue, and that's pretty scary.

There are no tricks here - just a simple test to see if you are current on your information. This is quite good and the results are shocking.

*I believe it was Winston Churchill who opined that " . . . the biggest argument against democracy is a 5-minute conversation with the average voter . . ."

Test your knowledge with 13 questions, then be ready to shudder when you see how others did!

Test your news IQ - Pew Research Center

http://pewresearch.org/politicalquiz/quiz/index.php

Is It Right To Call Obama a Marxist?

2011-11-28T06:27:00.001-08:00

Liberals love to throw around the word "fascist," so much so that it retains all the impact of calling someone a "poopy head." I've always found the word a peculiar epithet for liberals to adore, as fascists believed in top down, government-led control of the economy. If fact, the word "Nazi" stands for National Socialist Party. As economic systems, the only difference between fascism and true socialism is that fascists would allow for private ownership of industry - as long as the politicians called all the shots. Industrialists were allowed to enrich themselves as puppets of the state.

Socialism, fascism, communism...it's all splitting hairs. Socialism is nothing but communism light, with free elections, some tenuous property rights, and less cult of the state. Fascism has the tenuous property rights of socialism but also the cult of state of communism. But ALL believe in centralized control of the economy, with government consuming inordinately large chunks of a society's economic output.

There, I just cut through the confused clutter of a thousand poli sci classes.

Conservatives, of course, like to do their own name calling, with "socialist" and "Marxist" being their favorite zingers. And while these terms are often applied too loosely, they are at least generally applied to those who believe in large and dominant central governments, so unlike the liberal use of "fascist," at least conservatives are getting their insults right.

And often, it's not an insult, it's just a statement of fact. Words like "socialist" actually mean something, they're not just vague putdowns. To be precise, someone who believes an economy should be controlled by a dominant centralized government must be one the big three: socialist, communist, or fascist. I know of no other model for big government. If one of my readers does, please inform us. Liberal is not a model, for the record, it's a characterization, mostly for those who believe in the socialist model. And for those who are going to write me and say, "theocracy," I would argue that economically, these are socialist societies. With a sharia twist, perhaps, but socialist still.

So, I ask you for a moment to separate allthese words from the silly insults they have become. No one, outside of thecomical characters of the Occupy movement, likes to be called asocialist, because the word has been sullied. Same with the others, fascism andcommunism. All three have become epithets. This happens sometimes when aconcept becomes thoroughly discredited by history. It's kind of like howliberals everywhere now call themselves "progressives," even thoughthere's not a whit’s difference between the two. "Liberal" doesn'tpoll well anymore.

So, if we were going to describe President Obama - as opposed to insulting him - what label best applies? I think we can safely rule out labels like "capitalist" and "libertarian." Clearly, Obama is a big government guy, so he must be one of the three, but which? As I said, as economic models the differences between the systems are not enormous, but there are a few.

A thought experiment is sometimes helpful in these exercises. A few weeks ago, I asked Naked Dollar readers to imagine Steve Jobs in a different time and place. My thinking was that the results would not have been quite so glorious (you can read it here).

Let's reverse the game. Let's take a historical figure, Lenin, and place him in modern America. What would be the result? I pick Lenin because more than any, he was responsible for the implementation of communism. Marx was an isolated theorist holed up in the British Library. Lenin was a man of action.

Well, let's start with what Lenin wouldn't be doing today: leading an armed revolt to assume power. This strategy is only effective when you are revolting against a tyrannical and corrupt power like the tzars or Fulgencio Batista in Cuba. So how to achieve Marxist ends within a benign democracy, where there are no trodden masses to support a revolt?

The answer is from within the system, for unlike 1917 Russia or 1958 Cuba, our system allows anyone to accumulate power if they play their cards right. In the U.S., growing government power is a game best played slowly, but also faster when the opportunities present. Lenin would have understood this. Do it in a way that few notice what's being imposed on them, like the proverbial frog in pot of water that slowly boils. You boil to death before you realize there's a problem.

In short, the entire liberal movement has operated by this playbook for the last 70 years, to great effect. Obama is merely the movement's apotheosis. So, intellectually, it's safe to call Obama either a socialist or a communist. The constructs of these ideologies are what he believes to his core.

But what about in practice? Communist? Sorry, no. I don't doubt Obama would like very much to rule without the inconvenience of Congress, the Supreme Court, or even voters. In a rare moment when he allowed a thought bubble to escape, he professed envy on the Chinese leadership that could just do whatever it wanted, without messy democratic constraints. But the fact is he can't, so we can't call him anything more than a communist wanna-be.

Socialist, perhaps? This is certainly closer to the mark, and Obama is especially animated by the class warfare aesthetic that adorns socialist movements everywhere. But socialists, like communists, want the government to own the means of production, particularly the biggies like banks, airlines, car companies, and so on. (Communists, on the other hand, want all those and the corner deli, too.) Interestingly, we haven't seen Obama, even in the midst of crisis, move to take over any industries. He merely wishes to control them. His levers of power are Obamacare, Dodd Frank, the EPA, and so forth. Not textbook socialism.

Which brings us to fascism. Obama certainly doesn't embrace any of the weird eugenics of fascists-past, nor is he quite so militaristic, so labeling him a fascist wouldn't be entirely accurate. But we are discussing economic models here, and, ironically, fascism may be closer to the mark than the others. Obama is willing to allow the appearance of private property but the reality is that an army of technocrats set the rules. Call it socialism by fiat.

Or perhaps we should call it Obama-ism, because anything so incredibly destructive probably deserves its very own ism.

Occupy Wall Street DOES Way In on B-Ball Strike, but...

2011-11-24T06:47:00.001-08:00

You can't make this up.

In my previous post, I asked why OWS wasn't protesting against rich basketball players who earn an average of $5.5 million, but are striking for more.

Well, it turns out the OWS crowd has weighed in after all - on the side of the players. Being in the top 0.01% isn't enough.

Happy Thanksgiving, everyone.

Occupy Wall Street - Selective Outrage

2011-11-18T12:55:00.001-08:00

The average person on Wall Street makes $300,000 per year. Nice, but not enough to put you in the top 1%. That takes $350,000. (Note, by the way, that you do not live like a rich person in New York on $300,000, either.)

The average NBA player, on the other hand, makes $5 million a year. This isn't just top 1%, it's maybe top 0.1%. And yet, they are on strike for more. That doesn't qualify as wild-ass greed? Shouldn't the OWS crowd be chanting and protesting outside the gates of their mansions? Shouldn't Obama be calling them out?

Also, by delaying the start of the season, they are depriving scores of everyday folk from earning a living: the hot dog vendors, the ticket takers, maintenance men, etc. 99 percenters all. Where's the outrage?

I suspect the NBA is exempt since:

They are unionized (even if they are the richest union in the world)
They play a sport officially liked by Barack Obama
They aren't known to vote Republican
They are largely minority, rendering them untouchable

As I ponder also why OWS has not encamped outside George Clooney's house, I note that 1, 2, and 3 also apply.

We're All Lucky Jobs Was Born in America

2011-11-04T11:31:00.000-07:00

Like anyone, I love Apple products, and I agree that Steve Jobs is the Henry Ford/Walt Disney of our age. A corporate and a cultural hero.

But...you knew there was a "but" coming, right?

BUT. He was other things as well, like a complete tyrant. A belittling, abusive monster around the office and in his personal relationships. Not a nice guy.

What to make of this? Does all the adulation deserve an asterisk? My Psych 101 prof would have called it cognitive dissonance.

It was after I read the one thousandth fawning hagiography of Jobs that I recalled an op-ed piece I happened upon six or seven years ago. I wish I could remember who wrote it, but I found it an instructive way to view this. The thrust of it was this:

What a great country we live in that we can harness the incredible talents of a man like Jobs for the maximum possible social utility. If Jobs had lived in another time and place, 1930s Soviet Union, say, his talents might have been harvested in far different ways. Like organizing the gulags more efficiently. Or figuring out how to better terrorize the Kulaks.

You see, a man with talents as outsized as Jobs was not going to live a life of obscurity, no matter what circumstances of his birth. Steve Jobs, tyrant, lived a life of greatness thanks to the greatness of the system in which he lived. And while free market capitalism made Jobs rich, it created orders of magnitude more wealth for society in general, not to mention all the fun.

One wonders about the "what ifs" of those born to less fortunate political systems. What might Irwin Rommel have accomplished in America? Leni Riefenstahl? Or even, if I may be so provacative, a Josef Stalin? If you plucked Stalin from the USSR and gave him a life in, say, New York today, what might happen? He wouldn't kill millions, to be sure, and he likely wouldn't be lovable, but what would he accomplish? Something great? We'll never know.

Steve, nice or not, RIP.

Occupy This (Boston)

2011-11-03T11:43:00.000-07:00

So, a Naked Dollar reader was inspired by the last post to go visit the "Occupy" protest in Boston and report back. We'll call him "Charlie," since his name is Charlie.

Here's the scene...

Charlie said virtually no one was in any of the tents, but hey, it was a nice day...

And some pretty tasty food was being served...

A close up...

This made it fairly easy to count the number of people who were actually there. Charlie says this picture includes just about all of them...

I count about 20. But busy, busy. Things to do, free food to eat. First up, some consciousness raising. Somebody important to listen to. Meet CT Butler...

CT's big thing is "consensus," which is kind of funny because the Occupy folks don't seem to agree on a whole lot, other than they are generally pissed and they want more free stuff. Perhaps CT is building consensus in this picture? It could be, since his bio says he's built consensus in other places like "Eco-villages, anarchist networks, Native American tribes, and covens." What do you suppose the coven agreed upon? What to wear for Halloween?

The first line of CT's bio reads that CT has, "lived an alternative lifesytle (sic) since he left college at the end of the Vietnam War." Wonder how much in taxes he has contributed in all that time? Achh, what am I saying. Taxes are for the unenlightened. The grubbers. CT also spent some time as Chair of the "Cambridge Peace Committee." Also, his button has a panda on it, so he must like pandas.

Just in case you think I'm making any of this up, here's CT's website:

http://www.consensus.net/long_bio.html

Charlie listened to CT for a while and said he didn't really make a lot of sense and was actually kind of boring, which may account for why the guy in the yellow hat looks like he's sawing lumber.

So who was else was hangin'? Let's meet some folks, like this gal...

Dreadlocks are perfect for long camp outs because they're not actually meant to be washed. This next guy has a lot of flair on his hat...

Wish I could make out what they all say. And then there's this guy...

Maybe we'll let him just speak for himself.

So, Charlie's son goes to Andover. He tells me that Andover actually rents buses for it's students to go down and seek enlightenment at Occupy Boston. That's right, screw Chaucer and Shakespeare. We've got CT Butler!

Interestingly, Charlie had almost the same reaction to Boston that I had to New York. We were both amazed how few people are actually involved. You won't see that in the media. But we both also went girded for a fight, ready to take on any and all unreasoned arguments. What we found instead was a handful of pathetic lost souls, nothing worth fighting at all.

Occupy This

2011-10-27T14:05:00.000-07:00

The Naked Dollar visited Zuccotti Park today, site of the largest and now famous Occupy Wall Street protest. I am here to report what I saw. I will come back to the picture above, which was most definitely not an "Occupy" rally.

The approach looked like this:

Zuccotti park isn't a park at all, it's a plaza. I paced it off; the entire protest is about 100 yards long and forty yards wide. Okay, time to go in. The first thing I saw was the "library:"

Naturally, I was curious what books were inside. Adam Smith? Hmm. More likely lots of Alinsky and Marx. I couldn't find an opening so I unzipped one of the flaps (libraries are supposed to be welcoming, right?). Here's what's inside:

I think there's one bin of books there. The two people inside were passed out, so I didn't engage.

Here's "Legal," whatever that means:

And inside...

Some hard work going on, but hey, it was 9:30 in the morning. Here's the infamous "southeast corner," where the "infiltrators" are camped out...

The infiltrators are the homeless, ex-cons, druggies and the like who have sniffed out free meals and other handouts and have made themselves quite inconvenient. (The left only likes these people when they are an abstraction, a convenient revolutionary focal point. They don't actually want to see them at their fun camp out.)

And just in case you thought this was a mainstream movement, there's this:

And this...

This is a thoroughly Marxist crowd...but incoherent at the same time. Every protester seems to have his or her own priorites, like the owner of this sign...

These guys look comfy...

And unions seemed to dominate the crowd...

Another...

There's a trail of sorts that you can walk that loops around the entire affair...

Here's what I know, because I was there. It is a fetid place populated mostly by young, white kids who are apparently looking for meaning in their lives, but just don't have the education or intelligence to look in the right places. Incoherence and economic illiteracy was everywhere on display. (I didn't see it myself, but my favorite was a woman who had a sign that said, "Nationalize the Fed." When a journalist pointed out that the Fed was, in fact, owned by the government, she said, "Check your f**king facts!")

I counted perhaps 100 people who were up and about. There were around 120 tents as well. A random sample that I peeked inside of suggests that maybe half of these were occupied with about 1 1/2 people each. That's another 90 people, so let's call it 200 all together. Now, how many should we subtract for...

paid union workers
paid ACORN workers (that story just came out)
drug addicts, ex-cons, and homeless people just hangin'
media
tourists like me?

I'll bet the true activists numbered around 50. Granted, there are days when they get more.

And now, to my point. Go back and look at the first photo of the Washington Mall. That picture is of a Tea Party rally. The small circle contains enough space to fit not just Occupy Wall Street, but every other "Occupy" in country.

Get my drift? This is a small number of, frankly, pathetic people, and yet the media, and certainly the Democratic Party, for whom this is catnip, is in thrall of them. The day after the Washington Mall Tea Party rally the New York Times reported about it on page A21, but we get daily, breathless, coverage of this smattering of lost, incoherent souls in Zuccotti Park.

Enough.

Name that News Source

2011-10-27T07:24:00.000-07:00

(1) U.S. economy grew at a 2.5% annual rate in thirdquarter, nearly double the second-quarter rate, government says.

(2) New Weekly Jobless Claims Hold Steady at 402,000;Economy Shows Modest 3rd Quarter Growth

These are two different headlinesfrom CNN's and Fox's websites. Can you match them to the source - who posted (1)and (2)?

This is a rhetorical quiz. I wonder what CNN's phrasing might have been like if Bush were president? Hey, and whatever happened to the whole $4 gas story, anyway? When it hit $3 under Bush, it was all you could read about.

Corzine the Destructor

2011-10-26T13:57:00.000-07:00

Has anyone else noticed what a serial failure this guy is?

1998 - Loses piles of money for Goldman Sachs and gets forced out by Hank Paulson.

2000 - Buys a Senate seat for $65 million. Highlight of Senate career: engineering John Edwards as John Kerry's running mate.

2002 - Wife dumps him for cheating.

2003 - Decides it would be a great idea, as a public official, to shack up with Carla Katz, who happens to run a municipal employee union with whom he negotiates. Gives her major dough, forgives loans.

2005 - Jim McGreevey resigns in disgrace, Corzine buys Governorship. Raises already sky-high New Jersey taxes, escalates government spending, trashes economy.

2009 - Loses governorship to unknown lawyer.

2010 - Named CEO of MF Global, a money manager. Decides it would be a good idea to get into leveraged bond trading, stock drops 80%, Moody's cuts ratings. Rumor has it he's out.

What will Jon Corzine trash next?

Naked Dollar Is the First to Have Wayin "W"

2011-10-12T09:54:00.000-07:00

While I still toil in the financial industry, I have also recently co-founded an internet start up called Wayin with my golf buddy Scott McNealy (I knew golf would pay off some day!). Scott is the former co-founder and CEO of Sun Microsystems, so Wayin has good tech DNA.

This is a short video that describes the service.

You can also see Scott explain it here.

Basically, we are creating a unified, mobile solution for sentiment collection. It also makes possible interactive television. And it's just a fun way to share photos. Check it out, you'll see. It's a free app for iPhone and Androids, and it's a website: http://www.wayin.com/.

Incidentally, it's a great way to promote your business. Start a channel and start asking relevant questions. There will be a "box" soon on channels that you can use to drive users to your site.

As for the "W," we hope that will soon be ubiquitous, like the Facebook "F" or the Twitter "T." You will see it at the bottom of this and every post. Here's what happens when you click it:

You get the chance to "wayin" on the photo in that particular post. For instance, the last article generates a "thumbs up" or "thumbs down" for Herman Cain.
You can launch the photo/question into Wayin itself.

Soon, you will also be able to create your own question using the same image.

If it sounds complicated, it's not. We're in the start up phase now, so Scott and I could use all the help we can get. Give it a shot!

Herman Cain for President

2011-10-05T09:02:00.000-07:00

The Naked Dollar supports Herman Cain for president.

The others are wanting, and we all know why. But it isn't simply that Cain is the last conservative standing: I really, really like this guy. He's the opposite of Rick Perry. the more you know him, the more highly you think of him. And I have friends who know him personally who tell me he's the real deal.

I think Cain's ideas are spot on, and he articulates them brilliantly. I love the fact he came from nothing and achieved so much, but none of it on the back of racial preferences. He has fantastic private sector experience. He ran the Kansas City Fed. He has a degree in math and a masters in computer science. No dummy.

But more than that, he is the personification of the American Dream, and it's something he believes in to his core. He even won the Horatio Alger Award.

He has never held an elective office. So? You want another career politician? Cain has run things, big companies. This should translate well into running the executive branch, certainly better than some senator who's run a staff of thirty. He understands the economy and that government can't create jobs, only destroy them.

He has no foreign policy experience, that's true. But neither did Ronald Reagan, Bill Clinton, George W. Bush, or Barack Obama. The majority of our presidents have had no foreign policy experience. You trust that you're electing someone with intelligence who will figure it out. I have few doubts about Cain on this score.

Can he win the nomination? Yes. Conservatives have flirted with Bachmann and Perry and are largely dismissing them. Few will get comfortable with Romney. I haven't. That leaves Cain.

But here's the thing. Cain has the highest positive intensity score of any candidate by a wide margin. It's apparently the highest ever measured by Gallup. You can read about it here. His only issue is low name recognition, but the data suggest that as he becomes better known, his support will continue to grow. Just today, Cain pulled even with Romney in a national poll.

Can he beat Obama? Hell, yes. Obama enters the race in a weaker position than almost any incumbent in a century. He is hemorrhaging support from every quarter, and the economy won't recover in time to bail him out (because his own policies are keeping it down). And Cain will eat into the only strong support that Obama still has: the black vote.

Romney on the Stump

2011-09-27T11:01:00.000-07:00

I went to a Mitt Romney breakfast this morning...lots of heavy hitters in the room. I asked Romney the following:

Our tax code is a job-killing monster, and less well understood is that it is an enormous source of political corruption. I read you policy PDF, and while you make some tweaks to the system, you seem to leave the monster in place. Would you comment?

Romney's response was an very skillful dodge, a wink and a nod. He said he'll do a few things on day one, like lower the corporate rate to 25%, and that "longer term" he'd work towards a "flatter, fairer system."

Here are my problems with this approach:

Presidents don't have a mandate to do something unless they actually say they're going to do it (Obama has learned this).
As a new president, you have maybe 18 months to do the big things. If the real fix isn't part of the initial policy push, you miss the window.

Romney fears that if he's overly specific now, he leaves himself politically exposed (coddles the rich, etc.). Sure, liberals and the MSM will go nuts, but so what? They're going to eviscerate the Republican candidate no matter who it is and no matter what he or she stands for. Have no doubt that serious opposition research is being done right now into every deal Bain Capital ever did.

But also, as I've written before, Republicans only win when their base is fired up. "Trust me, I'll take care of it once I'm elected" - does this fire you up?

Having said all this, Romney is markedly better on the stump than four years ago. He speaks asperationally about America in a way that is very Reaganesque. You end up wanting to like him, which wasn't the case last time.

We'll see how this all develops. I have a crush on Herman Cain at the moment.

No Doubt

2011-09-12T06:24:00.000-07:00

I was with a friend the other day who knows Obama quite well - someone who spends a lot of time with him. I was genuinely curious about some things, but here was part of our discussion:

SJ: We took a man who wasn't even qualified to run a small division at General Electric and we decided that he could somehow be president of the United States. My question is, when Barack Obama is alone, when he is lost in his own thoughts, do you think he ever has moments of self-doubt, that maybe - just maybe - he's gotten in over his own head?

Friend: No.

There was no hesitation. Washington and Lincoln, our two greatest presidents, were famously plagued by self-doubt, and yet this just-turned-50 phantom who has never run anything, has never fought in a battle, who taught briefly and organized communities briefly, is supremely confident he is the right man for the task.

My friend did add that maybe Obama had some doubts about some of the people he had surrounded himself with, i.e. they aren't his equals.

The Hair Pair

2011-08-23T05:54:00.000-07:00

John Edwards, you are but a distant memory.

George Pataki Is Thinking of Entering the Race

2011-08-22T16:05:00.000-07:00

One question: Is he Nuts?

Separated at Birth?

2011-08-22T15:32:00.000-07:00

Private equity honcho Leon Black and Borscht Belt comedian Buddy Hackett.

Just sayin'.

The Best Tell That Dems Are Truly Panicked About 2012

2011-08-11T07:15:00.000-07:00

With everything else going on, no one talks about the Supreme Court much these days. But we all know how critical it is, particularly with major elements of Obamacare likely to be adjudicated upon in the next couple of years. Right now, the court has four conservatives (specifically, Consitutionalists) and four liberals (specifically, liberals). The ninth, Anthony Kennedy, is someone who's judicial philosophy at times seems guided by a random number generator, but lately he has tended conservative.

The court, in other words, is almost dead even with votes frequently hinging on Kennedy, whom no one understands. Now, consider the ages of the justices:

Ginsburg         78
Scalia              75
Kennedy          75
Breyer             72
Thomas 63
Alito    61
SotoMayor        57
Roberts    56
Kagan          51

The conservatives are going nowhere until at least after the next election. They will opine from hospital beds if they need to. On the liberal side, Sotomayor and Kagan will be with us until gravity forces the universe to collapse back on itself. Breyer and Ginsburg are more interesting, but particularly Ginsburg. At 78, she is the oldest member of the bench. She has also been fighting pancreatic cancer for some time.

Ginsburg is a proto-liberal. Her background includes time on the legal ramparts of feminism and the ACLU. Neither she, nor the Democrat establishment, will tolerate her seat falling into the hands of someone who thinks the constitution actually trumps social justice.

It is said that the Republicans have a weak field. As you know, the Naked Dollar believes that the Republicans could nominate a toaster and it will beat Obama, who may be the weakest incumbent of our lifetimes. Yesterday, for the first time, the prediction market odds on his re-election dropped below 50% for the first time. The scenarios for his successful re-election get fewer with each passing day and each new bit of horrible news.

Despite their capacity for self-delusion, these facts will seep into the liberal firmament. The necessary response will be for Ginsburg to yield her seat, probably around next spring. That's when you'll have confirmation that panic has set in. (Note: if Breyer resigns as well, the panic will have morphed into full-blown hysteria.)

Mark it on your calendars.

Will Obama Be Worth It?

2011-08-09T10:44:00.000-07:00

I have a friend who voted for Obama using the following logic:

McCain would be a terrible president, leaving the conservative movement in disarray as people continue to confuse Republicans with conservatives. Hillary then gets elected and our collective pain gets stretched far into the future.
Obama would be worse, but he would focus our thinking. The pain will be worth it. Carter gave us Reagan, after all.

Obama, in other words, is some sort of perverse medicine we need to take to crystallize our national thinking and banish collectivism forever into the intellectual wilderness.

Whether my friend was right remains an open question. About point one, there can be no doubt. While John McCain would not have been an O-style disaster, he would have been pretty bad, and since he's a Republican, people would have blamed - incorrectly - the conservative movement for the country's problems.

No doubt you know of this confusion. It's not unlike liberals saying, "You have no credibility criticizing Obama's spending because Bush spent a lot, too!"

Leaving aside the fact that Obama has ratcheted the problem to a whole new level, I don't know a single conservative who was pleased with Bush's spending habits, particularly with things like the prescription drug entitlement. But the public is frequently confused between the conservative movement and the Republican Party. That they grew far apart accounted for the birth of the Tea Party, a development that makes the Republican establishment highly dyspeptic.

So, there are reasons not to be too upset with the last election. The wrong Republican was nominated. Conservatism would have lost relevance for decades, potentially.

But will the damage be worth it? We can't know, at this point, but I grow increasingly optimistic that the answer will be yes - by a hair. I believe that in a year and a half the Republican party will control all the White House and both branches of Congress, and they will have a mandate for some long overdue, radical change. A new tax code. Entitlement reform. Repeal of the twin job-killing monsters Obamacare and Dodd-Frank. Big stuff, and much needed.

Whether Republicans will actually do these things is probably a bigger question than whether they will have the opportunity. This all depends on who moves into the White House.

Whether any of this will offset the incredible damage Obama has managed to inflict in a such a short period of time is still debatable. He is a wrecking ball. Can you imagine if the House hadn't shifted last year? We'd be dealing with things like cap & trade, too.

At least we have a definitive answer that Keynesianism doesn't work. Hopefully, that lesson, and all the others, will be internalized for at least a generation or two, at which point we'll be seduced into making the same mistakes all over again by some new group of charlatans.

Best Cartoon in a While

2011-08-05T07:41:00.000-07:00

Even the teleprompter approach isn't working anymore.

This presidency is in full meltdown. Not a single bullet left in the chamber.

What do You Mean, You Don't Want a Bridge?

2011-08-02T12:34:00.000-07:00

So, this guy Chuck Todd is a political analyst for NBC. I want you to read the following statement that he made on air last week:

"The old rules no longer apply. There are two more lessons we learned last night. First, the old rules to twist recalcitrant arms no longer apply. Tea Party and conservative House members don’t really care about important committee assignments. They don’t place a value on fundraising help. And earmarks and extra pork for their districts? Forget about it. As the Washington Post recounts, GOP Rep. Jeff Flake -- who opposes Boehner’s bill -- “praised the lack of horse-trading of the type that marred passage of Obama’s health-care legislation. ‘It is the most refreshing thing in the world to see what’s going on in there,’ Flake said. ‘This kind of negotiation a couple years ago would have cost about $20 billion.’” It is refreshing. But it’s also a curse if you’re trying to get things done."

You can hear the lament in Todd's voice. In the "good old days," i.e. a year or two ago, Boehner would have taken his difficult members into the smokey room and asked them what they wanted. Ways and Means? Maybe a nice bridge? Done. Thank you for your vote.

The Democrat definition of compromise is when Republicans do what they want. Compromise itself becomes the endgame, the virtue, but only when it needs to be. It wasn't much of a virtue during the Obamacare debate, when the GOP was roundly ignored. Todd and others loved the Republicans of old because, basically, they could be bought when it became necessary. The smokey room is all about doing out money and power in exchange for betraying the voters who put you into office. Bribery, in other words.

And now, here come a bunch of newbies who don't know how the game is played. Such insolence! Why, these people are, are....terrorists! Yes, that's it. Terrorists!

Compromise is not a virtue when the deal sucks. Decades of compromise have led us to where we now find ourselves.

Social Security - the Greatest Scam Ever Sold

2011-07-19T11:45:00.000-07:00

Today we have a guest blogger, a friend of mine who wishes to remain anonymous. Here are his thoughts on Social Security:

The myth of the Social Security Trust Fund is one of the most pernicious bald-faced lies in political and financial history.

The "Payroll Tax" has been spent in real time as normal revenue for generations, creating a debt--not an asset that can be drawn upon--that will not be paid or will be partially paid by taxing future generations. I have known this for 25 years, but very few people believed me when I tried to explain it. They trusted the lies about a Trust Fund that the government and the mainstream press were telling them, and they couldn't believe that I could be right when Al Gore said it was all true in a national campaign on national television.

Any attempt by financially responsible individuals, whether Republican or Democrat, to try to rectify the situation over the decades has been demagogued by the Democrats, who fraudulently scare old people by claiming that the reformers are trying to steal their money paid in over the years. In reality, their money had long since been stolen by a free-spending Congress. What the Dems didn't want was a cut in their own tax revenues, which are used to purchase re-election.

Yes, there have been Republican leaders complicit in this scheme over time, and Republican legislators have helped spend the money. But the attempts to reform have generally come from conservative Republicans and the absolutely dishonest scare-tactic propaganda has always come from the left.

It is inconceivable to me that only journalists from the Wall Street Journal editorial page, Forbes, and The National Review were able to stumble upon this truth over the last 30 years. All the investigative journalists at the NY Times, The Washington Post, The Boston Globe, etc. have chosen to ignore or soft pedal this very important and verifiable fact. Draw your own conclusions as to whether they are stupid and incompetent or committed to liberal orthodoxy.

It is not hyperbole to say that the myth of the Social Security Trust Fund makes Bernie Madoff look like a lousy three-card monte dealer on a street corner in Des Moines, Iowa.

Make sure you save your own money for retirement. Link to a good article about this below, which is what got me on my high horse this morning.

http://blogs.forbes.com/merrillmatthews/2011/07/13/what-happened-to-the-2-6-trillion-social-security-trust-fund/

The Latest Prediction Market Odds

2011-07-13T13:15:00.000-07:00

Those of you who have followed the Naked Dollar know we like prediction markets, which can be found at Intrade. These are continuously trading contracts where speculators make markets on the odds of certain binary future outcomes, e.g. the U.S. gets hit by a Cat 5 hurricane this year or not. If the contract trades at, say, 42, it means the "market" thinks there is a 42% probability of the event occuring.

Prediction markets are interesting because they give a "best available" probability on all sorts of events. They are particularly interesting for politics; since they involve actual money, they tend to be more accurate than polls.

Here are some current probablities and whether I am (hypotheitically) long or short:

Obama re-elected                                  57%   (short)

Romney nominated          34%   (long)
Bachmann nominated                            16%    (neutral)
Huntsman nominated        9%    (big time short)
Perry nominated            17%    (long)
Pawlenty nominated      8%    (short)
Cain nominated               2% (long)

Euro dropped by any nation by 2013 25% (long)

Note that the event doesn't have to actually happen to make money since the market is continuous. For instance, if the probability of Cain's nomination rises from 2% to 4%, one doubles their money (assuming the trade is unwound at that time).

Why Republicans Don't Need to Nominate a Moderate to Win

2011-07-08T08:16:00.000-07:00

Independents. That vaunted group that the politicos obsess over. Those discerning people who carefully weigh the issues and the candidates before descending from the mountain top to let know the "answer."

As readers of The Naked Dollar know, we think that's a total pant load. Most independents are such because they don't follow matters very closely and they never, ever want to be in a position where they have to defend their view on anything. If you are a Republican or Democrat, someone at a dinner party might say, "How can you defend tax cuts for the rich?" or "Do you really think the U.S. should cede authority to supra-national organizations?"

Rut-roh. Suddenly you have to defend positions you don't really have your arms around. Can't we talk about the Casey Anthony trial? Better to be bland, so know one exposes the fact you haven't read a paper in...how long has it been?

I wrote about this more expansively in this piece:

Elections and the Gravity of the Cocktail Party Middle

It is received wisdom that to win back the White House, Republicans must nominate someone who will appeal to "the middle," i.e. independents. Never mind that Reagan won by large margins twice. Never mind that Ford, Dole, Bush the Elder, and McCain - all moderates - all lost.

Bush the Elder won the first time running as a conservative, the heir to Reagan's mantle. When it turned out he was center-left, he lost.

Bush the Younger won twice running as a conservative (albeit a more marginal one than Reagan).

40% of Americans consistently identify themselves as conservatives versus 20% for liberals. It should be no surprise that conservatives win.

But back to the role of independents. About forty percent of the electorate does not affiliate with a party. Surely, this is the battleground, no?

No. An excellent new piece by Alan Abramowitz (here) explodes this myth. It turns out the vast majority of independents are closet partisans. In fact, according to the National American Election Study, in 2008 fully 87% voted for the party towards which they were clear leaners based on their views on various issues. This means that only 13% of independents were truly up for grabs.

Also, independents don't vote as often as party-affiliated voters. In 2008, despite being 40% of the electorate, they represented only 33% of the people who actually showed up on election day. This is consistent with The Naked Dollar's view that independents are the least engaged slice of the electorate. Some group to fight over!

(Note: as always, there are exceptions to rules. There are intelligent, engaged independents out there. If you are one of them, don't take it out on this blog. But you are not legion.)

Abramowitz also points out that presidential elections don't always go the way of independents, either. In fact, if you examine the last three elections that were decided by less than 5 points, none of the winners were supported by a majority of independents. Gerald Ford, George Bush (2000), and John Kerry all carried independents and all lost the popular vote.

So, what's the key to winning a presidential election if it's not winning over independents? Simple, you have to energize your base. In 2008, Barack Obama was highly successful at this while Republicans were dispirited and exhausted. In 2004, Bush was successful in turning out the base, especially in key states like Ohio. Over and over, it's the party with the more motivated base that wins. The important thing to remember is that only about half of eligible voters actually vote in presidential elections. You want to make sure it's your half.

So what does this mean for Republicans? It means they don't have to nominate a moderate (i.e. Romney). In fact, they shouldn't, if they want to win. While it's possible that white hot anger over the rampant radicalism and general ineptitude of the Obama administration will be enough to turn out Republicans on election day, it's not a given. The GOP should nominate someone who excites the base. That means that Michelle Bachmann should be taken seriously and Rick Perry should think about throwing his hat in. And it also means Herman Cain can't be written off as a novelty candidate. No one has excited the base as much as Cain thus far.

While the evidence on this is incontrovertible, it does not mean the GOP will embrace it. The Naked Dollar puts this down to timidity; simply, Republicans are frequently afraid to nominate someone they think will get mocked and belittled by the liberal elites in editorial rooms (read: Bachmann).

They should get over it, because the Republican nominee will get crushed by the media irrespective of his or her moderate credentials. Just ask John McCain, the media's best friend, right up until the day he got nominated. The same will be true for Mitt.

Greece Crumbles But U.S. Will Pay

2011-06-30T05:55:00.000-07:00

So roughly $8 billion of the IMF bailout of Greece will be paid for by the U.S.

One problem: we don't have the money.

Which means we will borrow it.

Which means our kids will pay tomorrow so Greek workers can retire at 50 today.

Actually, that's quite analogous to what's happening with public sector unions in the U.S. right now.

(Best recent SNL joke: "You know what Greece's #1 export is? Hard working Greeks.")

Keynes Schmeynes

2011-06-27T13:59:00.000-07:00

Note: the following was my rebuttal to a letter written to my local paper by one Robert Schewior, Ph.D., who took issue with my congresswoman's call to cut government spending in the name of economic growth. Dr. Schewior stated that every Econ 101 student knows - knows - that increasing government spending increases a nation's wealth. Uh huh.

Father of a Thousand Textbooks, All Wrong

Robert Schewior - Ph.D., Economics - wrote a rebuttal last week of Nan Hayworth's call to cut government spending to save our economy. It's a good thing Dr. Schewior told us about his credentials otherwise I'd have to dismiss his argument as tired academic tripe.

No wait, I'm going to do exactly that. His arguments are thoroughly discredited Keynesianism, the sort of nonsense no one takes seriously anymore outside of faculty lounges and the Obama administration. In fact, I went back to college to teach as an Adjunct Professor of Economics (there, slipped in my own credentials!) just to debunk this sort of nonsense, the sort of intellectual gruel that was force fed to me as an undergraduate. This edifice of 20th century economic thought fell to pieces the moment you left campus, but no one seemed to notice.

(Hey, wait, my parents paid good money for that degree! Well, I had a lot of fun, anyway, and I figured out pretty quickly that my economics profs would have trouble running a lemonade stand.)

Dr. Schewior, being a good Keynesian, believes that there's a simple, immutable formula that says the more money the government spends, the higher national income will rise. There's even a multiplier effect! If this were true, I submit that Greece wouldn't need a bailout and the old Soviet Union would have been the richest country on the planet. Hoover and Roosevelt boosted government massively and yet the Great Depression lasted a decade. Japan keeps spending and spending and remains an economic basket case. Even George Bush tried a dose of Keynes in 2001 and 2008 in the form of rebate checks, to no effect. And now Obama has tried one of the most massive Keynesian experiments in human history, the trillion dollar stimulus, and the economy has worsened. Doh!

The ever-dwindling number of Keynesians miss an obvious point: the money has to come from somewhere. The three options are print it, tax it, or borrow it. Printing it causes inflation. Taxing it means the private economy has less to invest and spend. Borrowing it, the most popular option, crowds out private borrowing and creates a liability our children must meet. Any way you slice it, government can't create wealth, and it can't stimulate the economy. "Aggregate demand," as the economists like to say, remains zero.

Actually, less than zero; government spending is a net drag on the economy. Think about it, when was the last time the government allocated money better than the private sector? The Obama stimulus is a great example. All that was stimulated was more government, not any sort of real investment. Government, at all levels, used the trillion dollars to go on a hiring binge, creating even more liabilities down the road in the form of pensions. How many bridges do you see being built? How many roads repaired? Government, remember, is run by politicians, and they never spend money without first considering its vote-buying potential.

Nan Hayworth has it exactly right: we need to decrease the size and scope of government if the economy is to grow again.

Don't let your kids major in economics if you value critical thinking.

What Happens When your Town Truly Runs Out of Money

2011-06-18T12:35:00.000-07:00

No more people to tax, no subsidies, no bailouts. Welcome to Central Falls, RI, also know as the Island of Mayor Moreau. A glimpse into our future unless public pensions - teachers, cops, everybody - are curbed. Misery for all, but mostly the teachers and cops.

Read about it here.

The Real Reason Anthony Weiner Had to Resign

2011-06-17T06:32:00.000-07:00

Bill Clinton and Anthony Weiner: compare and contrast.

Both were involved in sex scandals with young women, although Clinton's actually involved real sex, in the Oval Office no less
Both lied about their activities at some length, although Clinton lied under oath

Arguably, President Clinton's actions were more deplorable, if that's possible, than Weiner's, and yet only Weiner had to resign.

Here's why:

The pictures. Weiner making 80s porn-face. This is in-your-face ickiness, and there's no way to dance around it. The left can rationalize just about any sex scandal but they can never, ever, brook such an egregious violation of taste.

Bill Clinton is very fortunate to have lived his political life in the pre-digital era.

Why Political Sex Scandals Aren't Just About Morality

2011-06-12T14:18:00.000-07:00

The Digital Weiner

Let's say we lived in a world where there was zero personal judgment of others. Anything goes, particularly where matters of sex are concerned. (We could call this world "France," but we'll leave that for another day.) What we do behind closed doors is nobody's business, period.

Morality, is, after all, a relative judgment, and if no one is getting hurt, we shouldn't care.

One often hears this argument from people when a politician with whom they are sympathetic is caught with his zipper down. I remember this chorus was particularly loud during the Monica Lewinsky follies, but Republicans occasionally make excuses for their guys, too.

The problem is that when politicians fool around, people are potentially hurt, and those people are you and me. No, I'm not talking about the uncomfortable ickiness of having to explain what the headlines are talking about to your eight year old. No, I'm talking about hard matters of policy, because if we did live in this world, there would still be a reason that politicians, in particular, should be held to a different, higher, standard. A practical, non-moralistic standard, and one I have been arguing for years. Kyle Smith, in today's New York Post, was the first columnist I have seen mention it.

The reason is called extortion, for any politician who fools around, particularly when they are leaving a digital trail, has set themselves up for it.

Don't think it's likely? I argue that it's already happened. What else can explain why this person...

...didn't fire this person...

The Kennedys hated J. Edgar Hoover. Bobby, in particular, had strong feelings, and running the Justice Department, he was forced to work closely with Hoover. Hoover had actively supported Nixon in 1960 and was arguably a tyrant, having run the FBI as his personal fiefdom since its founding. Why didn't JFK simply fire Hoover?

The answer is one of two things. The first possibility is that Hoover, undoubtedly possessing evidence of JFK's and RFK's varied affairs, was blackmailing the administration. The second is that the Kennedys simply feared that Hoover had the goods. Either way, America had to live under an unchecked, tyrannical FBI director for longer than it should have, all because the Kennedys couldn't keep it in their pants.

There you have it, an actual real life example of why the personal behavior of politicians matters.

And now we are in the digital age, where evidence is so much easier to obtain. Think about it: ack in the day, someone had to sneak around with a camera and catch you in the act. That required real work.

Now, we have emails, texts, tweets, and digital photographs, each potentially damning and impossible to control once the "send" button is hit.

And how much easier, today, is it to set a "honey" trap. Even just ten years ago, the services of an attractive girl would have been necessary, and she would have had to be willing to bed the target. Today, all you need is a photo!

How? Simple. Just follow these easy steps:

Find a picture of a random hot chick on the internet.
Create a fake facebook or twitter account using the picture of the girl.
Start friending politicians and flirting with them online.
Steer the flirtation in a sexual direction (assuming the pol doesn't do it first).
Inform the politician that he will vote a certain way on a crucial bill or he will be exposed and his career ended.

Do you know how easy this would be to do? I'd be shocked if it wasn't happening already. Consider that a woman recently discovered that her ex-husband was trying to hire a hit man to kill her by creating a fake facebook account (as a slutty looking high school girl) and friending the ex. He's on his way to jail.

Don't get me wrong, I think character in one's personal life does matter, and there are plenty of politicians who manage to keep to the straight and narrow. Fidelity is not unheard of, and we should desire it in our leaders. But there are plenty of people, mostly liberals of a more libertine bent, who don't put much stock in this argument. Fine, that's their prerogative. But I can only assume that they don't think extortion is a desirable course of events. Extortion is not a moral position that one is for or against, it's just a dangerous potential subversion of the democratic process.

Here's to hoping we can start holding our leaders to a higher standard.

The Palin Fixation

2011-06-10T06:22:00.000-07:00

Thousands of emails from Palin's term as Governor are about to be released, and the media is swooning. The Washington Post and the New York Times are going so far as to enlist their readers' help so they can root out the good stuff faster. Rest assured, they will find quotes that will make her look bad, particularly if taken out of context. Think about it, how would you like your entire email history scrutinized by people who hate you and have a platform from which to project that hatred? None of us would hold up very well. Trust me, this will be the "big story" that knocks Weiner out of the headlines.

All this is quite fascinating. Sarah Palin has not announced she is running for office, nor will she. And yet the media feels they must traipse around the country following her every move. It's beyond a fixation, more of an obsession. Call it Palin-oira.

When Palin was selected as McCain's running mate, the mainstream media sent 40 full-time reporters up to Wasilla, Alaska to turn over every possible rock. How many reporters do you suppose were sent to Indonesia, Hawaii, or Chicago to vet the presidential candidate from the other party?

To my knowledge, none. Barack Obama was accepted as a matter of faith, and thus we elected a man with virtually no resume about whom less was known than any president in our country's history.

Frankly, this misappropriation of media assets is a gross dereliction of duty. The Fourth Estate is meant to play a vital roll in our democracy, one of skeptic and fact checker. That the mainstream media now only sees this roll as one meant to be applied in only one direction is as sadly obvious as ever.

With Palin, they desperately hope she will run, and they are getting played. That part, at least, I find amusing.

Bin Laden or Weiner - Burning Question

2011-06-07T08:56:00.000-07:00

A friend of the Naked Dollar has posed this question:

Which photograph will reach the public domain first, the x-rated Weiner shot or the Bin Laden death shot?

Please weigh in. My money is on Weiner. (For the record, I'm talking about the full monty shot, not the jockey shot.)

As an aside, the current odds on Weiner resigning on intrade are 39%. This strikes me as low since it is now apparent he was lying even yesterday at his press conference.

Will Anthony Weiner Resign?

2011-06-06T08:00:00.000-07:00

The short answer is not over his dead body. And, remarkably, there doesn't seem to be anyone out there suggesting he should.

Compare this, if you will, to the case of New York congressman Chris Lee. Remember him? It was only a couple of months ago he posted this picture on Craig's List:

And here is what Weiner sent out on Twitter:

So let's compare and contrast. Both men are married. Both were trolling for babes. Both showed remarkably bad judgment. And both photos make you throw up a little in your mouth. Weiner's photo is more pornographic.

When the Lee photo broke, there was instant pressure on him to step down from all quarters. Disgraced, he promptly did. It was the right thing to do, and it turned out to be costly for the Republicans as they lost the seat.

When the Weiner photo broke, the Congressman dodged, weaved, obfuscated, and lied. He continues to lie even now, thinking there is some magic escape if he can only find the right combination of words. Just today a story broke about another woman who apparently was exchanging x-rated photos with Weiner online. Does anybody think she's the last?

Weiner has committed a far greater sin here by lying, and continuing to lie. The cover-up is worse than the crime, or so the media always tells us. His picture is way more disgusting. Why is there no pressure on him to step down?

One side question for any women reading this: lots of guys seem to be sending around pictures of their pee-pees these days, specifically to women they are trying to bed. Has this ever, anywhere, anytime, actually worked? Don't you just say, "Eww, gross. What a pervert!" That would be my guess, but the sheer number of data points here would suggest it's working for someone.

Please weigh in.

3 PM Weinergate update: they're coming out of the woodwork now, and the pictures are getting tackier:

http://biggovernment.com/abreitbart/2011/06/06/deja-vu-another-congressman-bares-naked-torso-and-more-for-online-pal/

This is Tiger Woods now. They'll be a new girl every day. Wonder, now that his actual face is in some photos, if he actually fesses up. And if he does, how to explain the whole week of lying?

4:30 PM Weinergate update: After the evidence becomes incontrovertible, Weiner comes clean...but doesn't see a need to resign.

Wall Street's Image Problem

2011-06-02T08:05:00.001-07:00

What are these guys actually doing?

I was up at Yale a few weeks ago talking to some undergraduates, and they were taking pot shots at the financial industry. The gist of it was that Wall Street was filled with a bunch of greedy paper pushers who add no value to society. They looked down on their classmates who hoped to enter Wall Street training programs.

On the first charge - greed - there may be some merit. After all, a typical investment banking job has brutal hours (100 weeks not uncommon), requires a high level of education, has a high wash-out rate, and, when you get right down to it, isn't that much fun. I sure as hell would want to be well paid to do something like that. In point of fact, I DID do something like that right out of college. You had no life. You were a slave.

On the second point - value to society - my undergrad friends are dead wrong, and this is where Wall Street has a serious image problem.

Quick - what does Wall Street make? Nothing, right? Nothing you can touch, for sure. But it does do two things, and it does them very well, at least most of the time. These things are both vitally important. Can you think what they are? If you can't, don't worry, you're not alone. The undergrads had no clue, and here's the thing: most people on Wall Street don't really know, either. They understand the job in front of them, but not the bigger picture, the good they are doing, intended or not.

One of my colleagues suggests they don't have to understand for Smith's invisible hand to work. Indeed, this might be true in a truly free market economy, but that's not what we live in anymore. If an industry can't justify itself to the broader public - if the value isn't made clear - that industry will find itself at the top of every regulator's and politician's hit list. This, in turn, raises costs and decreases the net value of the industry to society. I'm sure you can see a vicious cycle in this.

Still working out the answers? The first is - or should be - pretty easy. Wall Street allocates capital, moving it where it sits, unproductively, stuffed into proverbial mattresses, to where it is most needed, thus fueling economic growth by funding growing companies to produce things people want. Capital flow is savings turned into investments -- the grease in the wheels of our enormous economy and creates jobs. Without it, things grind to a halt.

Bankers and lawyers structure the offerings, syndicate desks determine pricing and allocate the risk across diverse intermediary firms, and salespeople place the securities with investors around the world. That, in a nutshell, is half of Wall Street.

The second is a bit trickier: Wall Street provides liquidity. Put simply, if you buy something you have a reasonable expectation that you can later sell it. This expectation makes one willing to pay a far higher price, thus enabling companies to raise far more capital, and more importantly lowering the cost of capital. This is no small deal. The first part - capital allocation - doesn't work without the second.

All those traders - maligned by the Yale crowd as being mere paper pushers and screen gazers - they are the ones making liquidity possible (along with their banks' balance sheets, of course). The thing is, if you asked a typical trader what beneficial role they were playing in the larger economy, he or she would likely stammer over the answer. And if he doesn't know the answer, how can someone outside the industry reasonably be expected to know the answer?

This is a problem, because like any industry, Wall Street, from time to time, runs into problems of its own creation. It did not, contrary to popular belief, create the debacle of 2008 or the current recession, but it certainly played a role. In times like these the problem becomes no one comes to your defense because they don't see anything on the positive side of the ledger.

The inherent invisibility of the product will always be a problem, because it's harder to understand what you can't see. The oil industry, a frequent Washington target, is at least understandable. Oil makes my car go and heats my home. Without it, I am stuck at home in the cold. liquidity? What's that?

In part, I blame our schools like Yale, because they're not teaching anything relevant anymore. But I also blame Wall Street. Its training programs never say what I just said in a few paragraphs. I went through the Salomon Brothers program back in the 80s, which was thought to be the top training program at the time, and none of this was covered. I could price a bond blindfolded at 30 paces, mind you, but talk about my role in the economy? Cue the stammering.

So, all you Wall Street senior executives reading this, perhaps you might set aside a mere few hours one day and explain to your trainees that they are not just little money-making machines, but they're doing the world some good. They may not care, but it's a start.

The Teacher Compensation Debate

2011-05-26T03:21:00.000-07:00

In March I wrote a piece on how retiring teachers in my town are millionaires. It has become, by an order of magnitude, the most read piece on this blog. Last week, the New York Post ran it as an op-ed piece and this led a lot more readers directly to the blog. They appear to be mostly teachers union types, and they are angry! I get called lots of names.

This is because the game they play was not meant to see the light of day. Transparency is their enemy.

If you want to see the comment stream, it's here.

Tim Pawlenty Climbs a Notch

2011-05-24T07:28:00.000-07:00

T Paw, as he is known, just came out against ethanol subsidies. Bear in mind that Pawlenty probably has to win Iowa to have any chance at the Republican nomination.

So...wow. This is the sort of principled stand that conservatives are looking for, as opposed to the carefully modulated views that Mitt Romney seems to utter.

T Paw has earned a closer look.

Song of the Self-Entitled

2011-05-24T06:45:00.000-07:00

I hear it in lines at stores in the Hamptons. I hear as reservations are being argued over in tony New York restaurants. I'm sure if I lived in LA I'd hear it a lot.

But the fact is, sometime, somewhere, saying, "Don't you know who I am?" must have worked. Otherwise, why would we hear it so much?

Personally, I'd need proof that it worked, though, because every time I've seen the line used it resulted in every person within earshot thinking, what a douche.

(Pardon the language, but there was no other word in the English language that seemed to quite convey the proper meaning.)

So it comes is no surprise that Dominque Strauss-Kahn, who seems to already wrapped up the Self-Entitled Man of the Year award, (allegedly) barked "Don't you know who I am!" to the poor African cleaning lady as he attempted to rape her.

If it weren't so tragic it would be hysterical on multiple levels. The woman is poor immigrant from the obscure country of Guinea. The odds of her even knowing what the IMF is seem remote, let alone knowing which officious bureaucrat is currently running the place. Hell, I follow this stuff, and I couldn't have told you.

And what if she had known? Ah, yes, I know who you are. You are a very important man. Please rape me now.

And today it comes out that DSK's cronies are trying to bribe the woman's family back in Guinea to get her to drop the charges. Let's pray it doesn't work, because it just might.

Another Bad Idea, Courtesy of Dodd-Frank

2011-05-17T13:08:00.000-07:00

Dodd-Frank says banks should stop behaving like hedge funds, which means, in practice, that they should stop making "bets" with their capital and simply make loans and service customer transaction flow. Like many ideas from Washington, this sounds great to anyone not actually acquainted with the situation.
For starters, how can you tell? Any trader has a "book" which shows what they are currently long or short. Is this speculation or customer-driven trading?

Allow me to explain. Let's say I trade treasuries notes. I can't always have a zeroed-out book. If someone want a bid on, say, $10 million 10-years, I have to give them one. If the customer says, "done," I own them. Now, if I immediately sell them to someone else I assume the Fed will not think I am speculating. But what if I can't? What if I don't want to because I think the market will tick up this afternoon? What if I want to just carry them for customers who might (or might not) be looking for offers later?

The point is, where is the line between normal transaction business and speculation is impossible to define, and yet that is exactly what the Fed proposes to do. Their answer on how do accomplish this is to use the Sharpe Ratio.

For those of you not in finance, the Sharpe Ratio is a simple metric where you (basically) divide your returns by the volatility of those returns. High Sharpe Ratios are thought to be good because they mean you are getting good returns relative to the risk you are taking. (This assumes, of course, that volatility equals risk.)

The Fed would look at the numbers from each trading unit and say, "You are not speculating because you have a high Sharpe Ratio. Good boys." Or the opposite.

I have a number of problems with this idea.

First, high Sharpe Ratios don't necessarily suggest low risk. In fact, really high ratios actually mean the opposite: run away. Long Term Capital had an excellent Sharpe, for example.

Without going into excessive detail, high Sharpe strategies tend to fall into two categories. The first is arbitrage strategies (like Long Term) where one takes small pricing inefficiencies and exploits them with a lot of leverage. The other is illiquid lending strategies (commonly known as PIPES) where one loans money to micro cap companies that can't otherwise raise capital easily. Both strategies look great right up until they don't.

Second, the need to show a high Sharpe will drive all the trading desks to similar strategies, thereby increasing systemic risk. If everybody holds the same positions, what happens when they all run to the exit at once? This is guaranteed to happen.

Third, let's say the Fed decides your desk's Sharpe is too low. Then what? Do they order you to do something? If so, what? Does the Fed know better than an actual trader how to reduce risk? (The answer is no, in case you're dwelling on this.)

There is a better way, and a simpler one. What got us into the Big Mess of 2008 was, mostly, leverage. Too much of it, to be precise. Placing reasonable institutional-level limits on leverage make sense, and it doesn't require anyone to make qualitative judgments they're not equipped to make.

But leave it to Washington to find a more complicated way.

The Wonder That Is the IMF

2011-05-17T12:57:00.000-07:00

A friend just wrote me the following, and I don't know how it can be said better.

Please explain to me why it makes sense for the U.S. taxpayer to borrow $108 billion a year from the Chinese only to send the proceeds to the IMF, so that they (the IMF bureaucrats and politicos) can live like spoiled kings, and then pass on our money to socialist basket cases in Europe (Greece), Africa, and elsewhere. How can that possibly make sense? In effect, a worker in Ohio is paying taxes so that someone in Greece never has to work.

Socialist Man

2011-05-16T13:42:00.000-07:00

A friend of mine writes:

This man is innocent until proven guilty, BUT...

I have to admit. The thought of an elitist, multiculturalist, jet-setting, Frog-bureaucrat-snob ENA professor turned IMF President who was a likely Socialist candidate for President of France, sitting in the pokey in downtown Manhattan for jumping out of his hotel bathroom naked and trying to manhandle a chambermaid is a little too good to be true.

I had a good chuckle over that one. He writes, of course, about Dominique Strauss-Kahn, erstwhile IMF head. I continuously marvel at the enormous sense of entitlement guys like this seem to have, especially since most, like Strauss-Kahn, never seem to hold a real job.

Strauss-Kahn is a conspicuous consumer in Paris's fashionable quarters and he always flies first class for free on Air France. He stays in a $3000/night hotel room. You know who pays for that? Me and you. I love the fact that he asked the pilots to hold up the takeoff of his flight when he was waiting - he thought - for his cell phone to be delivered.

Women are apparently something he just takes when it pleases him, assuming they didn't kick too hard. A chambermaid, sure, I'll have that. Just an unimportant African girl whereas I, I am Dominique Strauss-Kahn, head of the IMF and future president of France! And, mon Dieu, it was only une fellation. Une petit chose!

What kills me is that these leftist elites are just that - elites. They supposedly represent the common man but would never actually be caught dead with one. And someone else always seems to pay their bills.

Don't get me wrong, the left does not corner the market in hypocrisy. The right will always have the occasional preening moralist who keeps a mistress or two on the side. The difference is this: a conservative philosophy recognizes man's fallacies, and as such seeks limits to power. Limited government limits the reach of avaricious politicians and officious bureaucrats. On the other hand, Obama, Soros, and all the other sherry-sipping globalists who hang out in Davos want to hand over the keys to people like Strauss-Kahn. He is, after all, the very embodiment of sophistication and certainly knows best how the rest of us should be living our lives. His moral trespasses come with the territory in any great man. The rest of us are unsophisticated rubes to expect such men to live by the pedestrian conventions of the middle class.

Monsieur Strauss-Kahn, enjoy the hospitality of the New York penal system. I'm sure your fellow inmates will revel in your bon mots and tales from the corridors of power. Just don't pick up the soap.

(Incidentally, for a great read on this general subject, I highly recommend Intellectuals by Paul Johnson.)

Next!

2011-05-16T11:19:00.000-07:00

Newt spits the bit.

Gingrich has apparently come out in favor of the insividual mandate to purchase health care insurance. I find this almost bizzare as Newt was supposed to be one of the principled conseratives in the race. That's it, I'm done.

You can read about it here.

Mitch Daniels, you're up!

One More Example of How We're the Most Taxed Nation on Earth

2011-05-11T08:54:00.000-07:00

I have written a great deal in the past on taxation, for instance Taxation and Morality. I have also suggested that people generally underestimate - vastly - how much tax they actually pay. This is because they focus on personal income tax rates to the exclusion of everything else - property taxes, sales taxes, state & local taxes, licenses, fees, etc., etc. The political/bureaucratic class is very efficient at spreading and hiding the pain so you're never completely aware of just how much you're sending their way.

A great example was handed to me just yesterday across the counter at the Enterprise Car Rental office at Denver International. I had rented a Jeep Grand Cherokee for two days for the all-time awesome rate of $7.43 a day. When I got the bill, it came to $98.50! Whatchoo talkin' 'bout, Willis!?

Let's break it down:

Basic charge           $14.86 (7.43 x 2)
Collision Damage Waiver      29.98
Accident Insurance                   10.00
Supplemental Liability             23.90
Road Safety Program Fee           4.00
Facility Use Fee                         3.20
Concession Recoup Fee        5.42
Sales Tax                                  7.14

Total                                      98.50

The bottom four items are taxes, plain and simple (the Denver Airport is a public facility). They total $19.76, which is more than the rental cost!

The other biggie was insurance, totaling a whopping $63.88. Yes, it's optional, but it really isn't. I would argue this is, at least in part, a tax as well. It is an artificially high number because of our completely screwed up tort system, a situation which exists solely because trial lawyers are huge political contributors. Your money goes to the plaintiffs bar, and then a chunk is forwarded to their buddies in the Beltway. From where I sit, I'm getting taxed, only this is even worse since with normal taxes there's at least a (small) chance that the money goes to something useful. Here, it goes into the campaign kitties of politicians that I uniformly detest.

(As an aside, no one should interpret this as a swipe at Enterprise, a company that has uniformly excellent service.)

Where Are the Howls of Outrage from the Left Today?

2011-05-04T09:54:00.000-07:00

It's awfully quiet out there, considering:

We sent these guys in to specifically assassinate Osama
No arrest, no trial, he was unarmed
The intel came from Guantanamo
The White House is not denying waterboarding was used (so it was)

Where is Seymour Hersh, saying we sent in a death squad and have blood on our hands?
Where is Keith Olberman, calling Obama a torturer and a murderer?
Where is Cindi Sheehan...where is Cindi Sheehan?

There has been nothing but praise for Obama from the right. Can you imagine the reaction from the left if this operation had been conducted by Bush?

Bin Laden's Death - What Kind of Bump for Obama?

2011-05-02T06:54:00.000-07:00

Osama...Dead Man

We can all rejoice this morning, because that bastard, Bin Laden, is dead. All of us in the New York area lost people we knew and the wound is still fresh. Congratulations to all who had anything to do with this operation, especially the Navy SEALs who put their lives on the line. I wish I could buy dinner for whoever made the kill shot and sent that stone-age coward off to his virgins.

(pause...composing myself...)

That Obama will reap political benefit from this is a given. That's the way it works, and he did give the order. The question is, how much, and how long will it last?

There is an interesting precedent, which is the Camp David Peace Accords, orchestrated by Jimmy Carter in 1978. I went back and looked at the numbers and Carter's approval rating was, at the time, quite near Obama's today: 42% vs. 46%. What ensued was a rapid 10-point bump. I'd guess we'll see about the same for Obama, which will put him well comfortably above the critical 50% level thought to be necessary to secure re-election.

But will it last? Carter's didn't. Four months later, he was back to where he was and then even lower. We can also remember that Bush 41's incredible 90% rating on the heals of his Gulf War triumph fell all the way to 30% in sixteen months. Bush 43 also hit 90% after 9-11 but fell steadily to 58% over a similar 16 months (and would later fall to 26%).

The election of 2008 was highly unusual in that its primary focus was foreign policy. (Yes, the market fell out of bed just before the election, but the lingering wars in Afghanistan and Iraq were the public's primary focus over the long election season.) Most elections are about the economy, and, barring something extraordinary like another 9-11, 2012 will be no different. Obama will live or die based on the unemployment number. And given that his economic policies - particularly his health and environmental initiatives - are massive job killers, I believe his prospects remain tenuous. (In this, I would part company with the prediction futures market which has his re-election odds at 60%.)

Obama should enjoy his moment, because history suggests he'll only be able to enjoy it for a few months.

2012 - The Early Going

2011-04-29T07:09:00.000-07:00

I have a remarkable number of friends who have solicited my support for Mitt Romney, here, a full nine months from Iowa. Another has asked me to help throw a Gingrich event. Things are heating up, but I have a policy that I never donate to more than one candidate for a given position. It makes no sense unless you're trying to hedge your bets and curry favor, a practice I find repugnant. (Perhaps overlooked in Atlas Shrugged is that Rand eviscerates the private sector favor-curriers as much as she does government socialists.)

I am at least six or seven months away from deciding on a candidate, and I am completely open right now. Normally, Republicans have this self-defeating habit of picking the "next-in-line," but this time feels different to me. I feel we need to let someone emerge from the crucible of the campaign, the way a relatively unknown Bill Clinton did in 1992. For instance, I plan to take a close look at Gary Johnson, the former Governor of New Mexico. He's a libertarian who favors legalizing pot, but he was also a complete ball-buster on spending while governor. I'm talkin' Dr. No.

I am not, strictly speaking, a libertarian. Historically, I have not favored withdrawing into ourselves, foreign policy wise. But unfortunately, being the world's policeman - pax americana - is no longer an option because we don't have the money. Legalizing pot? I don't favor that either, but there's far more that I like about libertarians than not. On economic matters, their agenda is highly compelling. And here's the thing: they are principled. I know where they stand. No flip-flopping or hidden agendas.

Can we say the same about Mitt Romney? Is he a principled candidate, or would he fall prey to the "sophisticated" and "nuanced" positions of Beltway panjandrums, become one more in a line of spineless purveyors of liberalism-lite like Ford, Dole, and McCain? We just don't know. His words say no, but don't they always during the primaries? His actions, historically, suggest otherwise. (I will say this about Romney: based on the calls I’ve been getting, he seems to have a substantial organizational lead at this point.)

I also plan to look long and hard at Michelle Bachmann and Newt Gingrich, and maybe Mitch Daniels. Bachmann has principles and balls, but can a congressman manage the executive branch? Maybe, but there just might be a reason it's never been done. Gingrich has principles as well, and I'd pay good money to see him mop the floor with Obama in a debate. But is he a manager? Many say no. We'll see how well he can manage a campaign. Mitch Daniels? He's got the management chops, but does he have the fire-in-the-belly? Seems bland. Too bad we can't splice him with Bachmann or Gingrich.

I'll say this, though: this is an election that must be won. A crazy amount at stake, including the Supreme Court.

In the meantime, I'll leave you with the current nomination probabilities, as shown in prediction markets:

Romney 25%

Pawlenty 16%

Daniels 10%

Trump 9%

Huckabee 8%

Bachmann 6%

Huntsman 6%

Palin 5%

Paul 3%

Gingrich 2%

Johnson 1%

Forgot to mention Trump or Palin, but that's because I don't think either is a candidate. If either becomes one, my views are this: Trump is a joke with no ideological consistency. Palin is nothing if not consistent, but the media has effectively - and unfairly - branded her in such a way as to make her election impossible. She's a dead end.

In the general, the market says Obama has a 60% probability of winning re-election. I view this as far too high for the simple reason that he’s going to have enormous difficultly with Ohio and Florida, and he’s not winning without those. Also, I believe 20% of America voted for him in 2008 as a fashion statement more than anything – sophisticated person on board – and buyer's remorse runs rampant through that group (many of them here on Wall Street). They have checked the “enlightened” box and don’t need to check it again.

I Love My Ford

2011-04-27T07:56:00.000-07:00

I have driven BMWs for years and always liked them. Every three years, I leased a new one. Most recently, I had an X5. I got the impression, though, that that quality gap was closing between American and German cars, particularly with Ford.

So, I did something I haven't done in 25 years: I bought an American car, a Ford Edge:

So far, remarkably, I like it far more than the BMW, and it's $320 less a month. Similar size, but the drive is less truck-like. And the technology is terrific. You can talk to the car like on Star Trek. (No, you can't say, "Tea, Earl Gray," but you can give it all sorts of commands.) The GPS guides you around current traffic conditions, which is nifty, and my iPod is permanently plugged in, hidden away. I can change the ambient interior lighting colors which come on at night (my kids, who constantly play with the touch screen, love this feature and my daughter currently has left it pink).

No, the tech isn't perfect. It's balky sometimes, and often it's easier using a button than talking. But it will improve and the cool factor is there. And I've never had so many people ask me about a car I've owned in my life. I was in a meeting the other day with about 25 people when a straggler walked in and asked, "Whose Ford is that outside? That's a great looking car!"

Ford's ears must be burning. When was the last time people said things like that about their cars? They had great earnings this week, and deserved it. Oh, and they didn't take a dime of bailout money.

Smartphones Speeding Up the Tech Cycle

2011-04-13T06:20:00.000-07:00

Flip video recorders were all the rage, what, a few months ago? Now, they are toast. The New York Times on it here:

http://www.nytimes.com/2011/04/13/technology/13flip.html?_r=1&ref=business

The story is quite remarkable. Flip was founded by two guys in San Francisco in 2007. In 2009, they sold to Cisco for $590 million. Now, in 2011, Cisco has shut the product down.

The reason? Smartphones. They are replacing one gadget after another. As I ponder my own iPhone, for me it has replaced:

cameras
video recorders
GPS devices
clock radios
white noise machines
kitchen weather stations
dictionaries (ok, not a gadget)

And it does a whole lot of things that no gadget ever did, like show me in an instant whether my flight's on time or show me discounts near my current location.

Not everybody carries a smartphone yet, but they will. Smartphone usage is supposed to hit 50% in the U.S. by the end of the year. Ten years from now - maybe five - teenagers will marvel that their parents ever lived in a time when they left home without a computer.

More Nuttiness From San Francisco

2011-04-05T05:47:00.000-07:00

A friend just put a house on the market in San Francisco and writes this:

In San Francisco, you must disclose to a potential buyer if a person has died in your house during the past three years. However, another law states that if someone has died of AIDS in your house you are forbidden to disclose this fact. Therefore, if indeed someone has died of AIDS in your house, you have to choose which law to break. Either way, a buyer can sue you!

Your Kid's Teacher, Millionaire

2011-03-30T06:17:00.000-07:00

It is becoming increasingly clear that the biggest threat facing our country is not Al Qaeda, the recession, or the Kardashian sisters. It is public sector unions. FDR and others warned us that they shouldn't exist, but we didn't listen. And now your kid's teachers are millionaires. No kidding, but more on that in a moment.

I would argue private sector unions no longer serve a purpose, either (other than slowly bankrupting industries), but at least there is an honest negotiation. Labor and capital. They both need each other to survive, and they can compromise from opposite sides of the table.

With public unions, there is no opposite side. This is something that was lost on 95% of the American public until the last year or so. I can still picture the odious Jon Corzine addressing a crowd of public employees. In full campaign mode, he hollered, "I'll fight to get you a good contract!"

Fight whom? Himself? He's the one who's supposed to represent you and me, after all. The taxpayer.

So you have politicians negotiating with unions, the same unions that will recycle their loot back to the politicians in the form of campaign contributions. And TV ads. And phone banks. And canvassing. And screechy rallies attended by the pliant media. This is completely legal, institutionalized corruption, and it's the kind of thing that, in the private sector, lands you in front of a public prosecutor. But then, we've never held our politicians to the standards to which we hold the rest of society...

Politicians have no incentive to do anything but give away the store. The diffuse interest of the taxpayer is not present at the table. I imagine that in the back of their heads, in a place they rarely allow their minds to wander, they all knew this would lead to disaster. But the odds of this happening on their watch always seemed small. Others could be left to clean up the mess on some other, distant, day.

Welcome to that day.

Many of our states, including my own, New York, are functionally bankrupt, and given the future promises they have made, it is not clear how to solve the problem. In New York, for instance, pension guarantees are protected by the New York Constitution. Good luck changing that.

How big are these promises? Let's get back to my millionaire claim about teachers, which on the face of it, should seem preposterous. Teachers are by far the biggest public employee category, and their contract terms are illustrative of what goes on elsewhere. In my town, a teacher retiring today gets 70%, give or take, of his or her salary for the rest of his or her life. That's about $84,000 a year (not taxed by the state, incidentally). Plus, they get health benefits for their entire family for life. That's worth another $16,000 a year, for a total of $100,000 a year. Live for 25 years and that's a total 0f $2.5 million. Discounted at 4%, it's $1.6 million.

To quote our president, "let's be clear": there is zero difference between this and having an IRA with a value of $1.6 million, except the rest of us didn't demand that taxpayers fund our IRAs.

But it's much worse than that. You see, I have done what few have ever done, something so unsettling I wouldn't wish it on my worst enemy: I have actually read all 115 pages of my town's teachers contract (which is a typical one, by the way).

Here are some of the highlights:

If you stick around a bit, you make six figures. That's for the 181 days you are contractually liable to work. Most of us work about 250.
But it's not really 181 days. You get 15 sick days a year. Who gets sick 15 days a year? No one, but that wouldn't be the point. If you don't use the sick days, they go into your "sick day bank," and you are paid for these days when you retire.
Automatic raises every six months irrespective of performance.
Five bereavement days a year.
Four personal days, no questions asked.
Three religious holidays, which don't include the Christian and Jewish holidays you already get.
Extra pay for the slightest effort beyond basic teaching duties. Coaching sports, helping with plays, overseeing recess; all the things private school teachers (who make way less) are expected to do for nothing. My personal local favorite: $1339 for overseeing the juggling club.

That's only a taste.

There is a reason all this is structured this way: to make it very hard for you and me to figure it out. I call it backdoor compensation. We are shocked enough to discover our friendly 2nd grade teacher scoring six figures; imagine how we'd feel if we knew the real number. Teachers unions are vile, but they are not dumb.

Many of us grew up with the Berlin Wall. Its existence seemed a simple fact of life, and few of us had any notion it would disappear in our lifetimes. Then, almost overnight, it was gone. This is the nature of unsustainable paradigms: their outward appearance can remain unchanged for years, but the pressure mounts underneath. When that pressure can no longer be contained, its release is sudden and shocking.

The Berlin Wall moment for public unions is fast approaching.

Rise of the Machines

2011-02-22T12:58:00.000-08:00

My family and I watched Jeopardy the other night, where the two greatest Jeopardy champions of all time were challenged by Watson, a really, really smart computer made by IBM. You've probably heard by now that Watson kicked butt. Silicon triumphs over carbon.

I was trying to impress upon my kids the historic nature of what they were seeing, as computers rapidly approach the intelligence level of humans. It won't be long until you won't know if you're talking to a computer or a human over the phone.

This point-of-no-return is sometimes referred to as the "singularity." Computers will understand the subtleties of human speech, even humor and sarcasm. They will make jokes themselves. We will interact with them the same way we interact with people, only the computers will have vastly superior memories, and they will keep getting smarter.

What really kicks things into gear is when computers can improve themselves, because, unlike biological improvement (i.e. evolution), which can take eons, iterations of technological improvement can happen very quickly. All bets are off when this happens, but it's a reasonable assumption that robots may become indistinguishable from humans at some point. Debates will flare up over what "rights" should be accorded to these creations. I see the ACLU getting fired up about this.

If all this sounds like the musings of a teenager who has been watching too much Star Trek, I know. It does. But it doesn't make it any less inevitable.

Is this all a good thing or a bad thing? Depends who you ask. Ray Kurzweil is perhaps the scientist/futurist who has given this the most thought. I highly recommend his book, The Singularity Is Near.

Kurzweil is very excited by the singularity. He says it will allow humans to transcend biology, which, as he points out, is already happening anyway. Think cochlear implants, pacemakers, and artificial hips. How much of us has to be artificial before we are...something else?

Computers are also augmenting our intelligence. Ever settle a dinner table argument by looking something up on your smart phone? There you go.

In fact, smart phones are a development worth pondering. I argue that people in the distant future would love to travel back and see today's world, just as we might love to travel back to see when some caveman learned how to make fire or when Gutenberg first fiddled with movable type. Why? Because this decade marks the first time in human history when essentially everyone started taking their computers with them everywhere. Computers have become an extension of ourselves. The other day I ran a short errand and forgot my iPhone. I had to restrain an impulse to run back and get it. A few years from now, it will be unthinkable.

There's no going back. From this point on, computers will be with us wherever we go, and they will become integrated with our daily lives to the point where going off-grid will be the equivalent of losing one's sight or hearing. Computers become a sixth sense, if you will. One that connects us to everything else.

The integration will start to become physical. For instance, instead of having to carry a device around, perhaps it projects on to the back of your retina. So imagine, for a moment, you're at a party and someone approaches. You know you've met him before but you can't place it. Damn!

Not a problem. A micro-camera implant scans the face and immediately recognizes it, having tagged it previously. Then you see an instant summary of who the person is and how you met them. Inside your eye.

I don't know about you, but I'd find that pretty useful. And I'd no longer have to grab my wife's elbow and whisper, who is this guy again?

Kurzweil, the optimist, predicts this will take us to some pretty cosmic places. Frankly, if I just blurted them out here, they'd seem ridiculous. If you let him build his case, though, most of his conclusions seem almost inevitable. He is nothing if not meticulous in constructing his argument.

Kurzweil's principle insight is that numerous technologies are advancing at exponential rates. Moore's Law, except not just for microprocessors. He argues that exponential growth can have some wildly profound implications, but we don't see them because our minds are programmed to project linearly. That, and exponential growth isn't so noticeable at first.

Consider the Chinese legend of the chessboard. Some clever fellow introduces the game of chess to the kingdom and the emperor is impressed. He is asked what the clever man would like as a reward, to which the man says one grain of rice doubled on each square of the chessboard until the board is full. No problem, says the emperor. One piece, two, four, eight...hey, this guy's not so clever, after all!

Probably somewhere around the middle of the third row it dawns on the emperor that maybe it is he who is not clever. By the end of the third row, he owes 16,777,215 grains of rice for a single square. By the end of the last row, he owes 2 to the 65th power, or more rice than there is in the world.

I think he chopped the guy's head off for making him look stupid.

But the point is, exponential growth can be extremely uninteresting for long periods of time. Then, quite suddenly, it becomes very interesting, indeed. According to Kurzweil (and others), we are at that point right now. Fasten your seat belts.

There are others in the uber-nerd community who have a dystopian take on this. Their godfather is probably Bill Joy. They believe that exponential growth is replete with dangers that can't even be imagined. A lone scientist creating a world-killing plague in his bathtub. Smart machines deciding they don't need us anymore. That sort of thing. (I call that last one the Terminator Scenario. I'll be back.)

I guess the main point here is that the nerds don't seem to be disagreeing on the basic point of exponential growth, merely on its implications. Either way, those implications are profound, and they are in our lifetimes, so it is important for anyone with even the least bit of intellectual curiosity to educate themselves on the basics. Listen to the nerds. Entirely new industries will be born in months and others swept away. It will pay to be on the right side of these trades.

I recommend starting with Kurzweil's book and also Andy Kessler's Eat People. And, to quote one of the vanquished Jeopardy contestants, "I, for one, welcome our new computer overlords."

Mixed Feelings About the "Billionaire's Pledge"

2011-01-28T09:09:00.000-08:00

No doubt by now you've heard of "The Giving Pledge." Founded by Bill Gates and the increasingly-irritating Warren Buffett, it is a public pledge to give the majority of one's wealth to charity. You can see who's ponying up here:

The List

How could I possibly have mixed feelings, you ask? It's all good, right?

Not exactly.

The question is not just how much social utility is created by the donation, but how much disutility is created by the extraction of the capital from our economy.

Let's examine both sides of this in the recent pledge by list member Mark Zuckerberg to give $100 million to the Newark public school system. How much utility is being created? Well, none. In fact, it's probably a big negative. Zuckerberg is demonstrably one of the smartest people of his generation, but this gift is one of the dumbest of all time, exceeded only by Ted Turner's $1 billion gift to the United Nations.

Both these gifts are examples of egregiously bad philanthropy, otherwise known as throwing good money after bad. New Jersey public schools are broken, and it's not a problem money can fix. In fact, money allows the problems to persist longer. The problem, in a nutshell, is the teachers unions, which have become a black hole of salaries, benefits, and bizarre work rules. Everything they do is antithetical to the interests of parents and students. $100 million thrown into this swamp will merely postpone the day of reckoning and allow students to be educationally abused that much longer.

Zuckerberg isn't, as we've established, an idiot. He either knows this, or could have figured it out. But that's hardly the point, is it? By some amazing coincidence, Zuckerberg was having some pr problems at the time of the gift, namely a movie called The Social Network that was making him look like a nasty piece of work. $100 million for the kids, a quick appearance on Oprah and 60 Minutes, and presto! All is well again.

The fact is, most philanthropy is accompanied by ulterior motives of some sort. Otherwise, it would all be anonymous, right?

Okay, I can hear you. You say big deal, a little ego-rubbing is a small price to pay. In some cases, I agree with you. Free markets will never solve every last social problem. In these cases, I prefer private philanthropy to solve the problem, because it will likely do a better job of it - and be more accountable - than the government. (In fact, one of the things I detest about big government is that it tends to crowd out effective private philanthropy. Just look at Europe.)

But, as with Zuckerberg and Turner, not all philanthropy solves problems. Sometimes, they make it worse. Philanthropy, poorly conceived, is replete with moral hazard.

It ain't always easy giving money away.

Ironically, I think it's Bill Gates who has his arms around this better than anyone. The Gates Foundation thoroughly analyzes where their money can create the greatest social utility for the dollar. The answer is often less-than-sexy things like mosquito netting in Africa and sewer systems in India.

But let's get back to the other side of the equation, the disutility created by removing capital from our economy. Our billionaires club presumably funds its charitable gifts by selling their company stock, or the stock of other companies. This capital creates jobs. the people that get those jobs pay taxes, buy homes, have families, and otherwise do things that create even more jobs. They even give to charity. It's a virtuous cycle, and there's no charity than can match the social utility of job creation.

For charity to be worthwhile, the social utility of a donation (not always positive, as I've mentioned) must exceed the disutility of the capital extraction from the private sector. This is not always an easy hurdle.

Mark Zuckerberg is in his 20s. He has created not just thousands of jobs at Facebook, but an entire new industry that is having profoundly positive effects. Silicon Valley is a boomtown again, and if our country is to find a way out of our current mess, the Valley will lead the way. But my point is, I don't want Zuckerberg thinking about charity. He's too valuable doing what he's doing. Later in his life, when his years of intense creativity are behind him, he can start giving it all away. I'm sure by then, when he has time to ponder the variables, he will make more intelligent decisions.

Comments on the Consumer Electronics Show

2011-01-13T12:55:00.000-08:00

140,000 people jammed this year's CES in Las Vegas. I'd never been before, so the scope was breathtaking. There had to be fifty football fields of exhibition space. It was easy to get lost. I'm told that some of the individual corporate exhibits cost $3-4 million to construct.

Overall, I will say that this was an incremental show. Everything was a little faster, a little bigger (or smaller), a little cheaper. There wasn't much I would describe as revolutionary, other than Looxcie, which I wrote about here.

General impressions:

Lots and lots of tablets - everyone wants a piece of the iPad market (50 million tabs will have been sold by the end of '11)
Cars, particularly Fords, are getting wired with all sorts of goodies
3D TV is being pushed heavily, but consumer acceptance is questionable
Internet-enabled TV will be the standard within a couple of years, whether people want it or not
I heard dozens of languages, but the Asian presence was particularly strong

Some specifically cool things:

A company is making a single, secured credit card with embedded electronics that can be used with any of your accounts, so you won't have to carry around six cards in the future. It's also rendered unusable if stolen.
There's now 3D television that doesn't require glasses. It was pretty cool, but the problem is it only works if you stand in certain places. A techie guy next to me said that this was a non-fixable issue.
Intel is now fitting a billion transistors on a chip the size of your thumb. The first transistor-based computers had 500 transistors and definitely not the size of your thumb.
Acer won the "Last Gadget Standing" with a laptop that had two touchscreens. The second one is where the keyboard is normally found. It was pretty bulky, but this problem will solve itself. The techies loved it.

There was so much going on at this show that I think they ought to split it into five or six separate shows. Like running a marathon, though, I recommend doing it once.

Is Paris Hilton Inciting Violence?

2011-01-12T11:47:00.000-08:00

Hmm. Has anyone told her she needs to dial back the rhetoric?

The Game Changer I Saw At the Consumer Electronics Show

2011-01-10T07:48:00.000-08:00

Just saw the first thing here at the CES that I think is a game changer with some profound implications. Not even sure the manufacturer has thought through all the societal implications.

A company called Looxcie is coming out with a bluetooth enabled camera that fits right on your earpiece. It films everything you see and can, with the push of a button, upload what you just filmed to YouTube, Facebook, or twitter. It can even do live streaming.

Here's the cool part. As these devices spread, you will be able to tune into just about anything, anywhere in the world. Riots in Jakarta? Watch it live. Springsteen at the Meadowlands? Watch it live.

Here's another development we can expect: celebrities or other self absorbed types will stream their lives to the world 24/7. Why should Ashton Kutcher simply tweet he is getting coffee when he could broadcast the experience? If your life is boring, you will tune into the lives of others. Reality TV to the tenth power.

People - and not just celebrities - will use streaming video to build out their personal brands. Product placements will become big business - the next advertising frontier of the digital age.

I also predict that in the not-too-distant future people will use these cameras to document their entire lives so that at any point they can retrieve archived footage of any moment of their existence.

Which gets me to the creepy part. As it is, these devices are small, but in a couple of years you won't be able to tell someone's wearing one. In other words, you could be getting filmed at any time and not know it. Lots of people will get filmed saying and doing things that won't play well on the internet. Social interaction will become guarded.

I predict this device will be ground zero for the privacy wars. Congress will get in the act (particularly since they're the ones always getting caught doing embarrassing things). Stay tuned.

America the Porky

2011-01-03T11:38:00.000-08:00

So I was at a theme park recently...the theme was, "Get in line, fatty."

-Zach Galafianikus

GDP Since Jesus

2011-01-03T11:33:00.000-08:00

Thought this was great, courtesy of the Economist. Here comes China:

The Malthusians Never Win

2010-12-28T09:36:00.000-08:00

Thomas Malthus, Doofus

One wonders how many bets they have to lose before they get it:

Economic Optimism? I'll Take that Bet!

What Will Happen Soon Enough All Over the Country...

2010-12-23T11:31:00.000-08:00

...if we don't look public sector unions (teachers union most of all) squarely in the eye and say:

You can not be paid the benefits that irresponsible politicians gave you in exchange for votes.

The New York Times, of all places, writes about a town where they just stopped the checks:

The Town That Stopped Its Pension Checks

The New Electoral Math

2010-12-21T12:53:00.000-08:00

The results are in, and there is new electoral math to consider. Gaining congressional seats are:

Texas                 +4
Florida               +2
Georgia              +1
Arizona              +1
Nevada              +1
South Carolina    +1
Utah                  +1
Washington        +1

Losing seats are:

New York           -2
Ohio                  -2
Illinois                -1
Iowa                -1
Pennsylvania      -1
Massachusetts    -1
Michigan            -1
Missouri             -1
Mississippi          -1
New Jersey         -1

The media today is focused on how many extra house seats this translates into for the Republicans. The answer is not insubstantial, maybe around 10 to 12 seats. But lost in the wash here is that this also changes the number of electoral votes from each state, and this will have a considerable impact on the 2012 presidential election.

The math is much more straightforward than trying to guess congressional outcomes because we don't have to see how redistricting plays out. Texas, for instance, is s slam dunk to produce an additional 4 electoral votes for any Republican.

The way I see it, Texas, Georgia, Arizona, South Carolina, and Utah are a lock for Republicans. That's a pickup of 8 votes.

Republicans also pick up seats - relatively - by losing less badly in New York, Illinois, Massachusetts, Michigan, and New Jersey. That's another 6 seats.

Democrats likely pick up single votes in Washington and Mississippi. Our total is now +12 for the Republicans.

That leaves Nevada, Ohio, Iowa, Pennsylvania, and Missouri. I figure out of that the GOP nets one more seat, so that makes the tally +13. That is no small deal, especially in our era of close elections.

I can't let one other thing pass without comment. Notice any patterns here? Perhaps that almost all the losers are Blue states and all the winners Red? This is clearly due to the rampant mismanagement of states like New York, New Jersey, and Illinois. Spending and taxation have driven citizens to more economically friendly environs. Can't we learn a lesson here?

P.S. Note Sarah Palin lookalike at the chalkboard!

The Coming State Apocolypse

2010-12-20T07:23:00.000-08:00

This 60 Minutes piece by Steve Kroft on the catastrophic position of state finances is well worth watching:

60 Minutes

I have been convinced for some time now that the single biggest problem our country faces is public sector unions. More on this soon.

Congressional Democrats and a Hong Kong Newsstand

2010-12-15T11:07:00.000-08:00

When we lived in Hong Kong in the 90s, each day my wife visited the same newsstand in the Citibank Building and bought the same exact thing: a Wall Street Journal and a cup of coffee. Each day, the proprietor would short change her. My wife would vigorously complain, and he would give her the rest of her change. It was a daily ritual.

What was striking, though, was the lack of embarrassment or shame. This guy didn't even pretend that it was an innocent mistake. He quite rationally calculated that the worst that could happen was that he'd have to give back the rest of the change. He also calculated that once in a while my wife would either not notice or be in too much of a hurry to care.

His plan was completely logical, but it only worked assuming he didn't mind being known as a thief.

As so you have today's Congressional Democrat. The pretense is gone - no more pretending that they are anything better than the thieving Chinese news vendor.

I speak, of course, about the new omnibus spending bill. It is the Mount Everest of pork. The kind of stuff voters quite specifically - loudly - rejected a month ago. It's like Democrats have been told to go on a diet but the diet doesn't start for a few days, so their faces are in the trough today.

Here are some of the highlights:

$277,000 for potato pest management in Wisconsin
$246,000 for bovine tuberculosis in Michigan and Minnesota
$522,000 for cranberry and blueberry disease and breeding in New Jersey
$500,000 for oyster safety in Florida
$349,000 for swine waste management in North Carolina
$413,000 for peanut research in Alabama
$247,000 for virus free wine grapes in Washington
$208,000 for beaver management in North Carolina
$94,000 for blackbird management in Louisiana
$165,00 for maple syrup research in Vermont
$235,000 for noxious weed management in Nevada
$100,000 for Edgar Allen Poe cottage visitor’s center in New York
$300,000 for the Polynesian voyaging society in Hawaii
$400,000 for solar parking canopies and plug-in electric stations in Kansas
$720,000 to compensate ranchers in Wisconsin, Minnesota, and Michigan whenever endangered wolves eat their cattle

They have no shame, and they reason, just like the news vendor, that they can wear down Republican law makers and the general public. After all, it's worked pretty consistently in the past. And it's the holiday season. Perhaps the tea partiers are busy with other things, or worn out from fighting a new front almost every week.

It's a good strategy, as long as you don't mind people knowing you're a thief.

Silicon Valley and the Two Americas

2010-12-14T12:52:00.000-08:00

Last week, Mary Meeker, famed Morgan Stanley internet analyst, decamped from Wall Street (Morgan Stanley) to Silicon Valley (venture firm Kleiner Perkins). I think this is indicative of a lot of things, particularly about the direction of our country and where our best hope lies: technology and the relentless drive of the entrepreneurial class.

I spent a few days last week in Silicon Valley. The atmosphere was crazy; a little like '99, but without the stupid valuations. The restaurants are humming. You can't hire good people unless you're prepared to get in a bidding war. Code writers can strut their stuff like peacocks. The VCs, who spent a few years doing, well, nothing, are once again as hot as a pistol. Kleiner Perkins raised $100 twice over a couple of weeks' time, both in a single day. Marc Andreessen's new venture firm raised $650 million in three weeks. Crazy stuff.

There are two trends and two companies that are driving Web 2.0, as it's been dubbed. The trends are mobile computing...

...and social networking...

A Friend of a Friend?

And the two companies are...

...and...

Mobile computing, which means smart phones, iPads, etc., is exploding beyond anyone's imagination. Apple has sold 8 million ipads since last spring at $500 a pop. It's hard to remember that last April, the iPad's success was hardly a foregone conclusion.

Instrumental in the success in mobile computing was Apple's creation of the "app," which is nothing more than bite sized applications designed specifically to work within real estate confines of mobile computing. Initially, all apps were self-contained programs that would run a utility or a game. Increasingly, though, and with remarkable speed, they have become the preferred way to access the internet as well.

Let me give you an example. I happen to love the Drudge Report, but if I wanted to view it on my iPhone a year ago, the process was:

1. Click on the Safari browser;

2. Scroll through my favorite places;

3. Click on Drudge;

4. Wait for it to download (slow);

5. Play with the screen size until I could read it.

All in, probably a 30-40 second process. A year ago, I was willing to put up with this, but 30-40 seconds might as well be forever in digital time. It's a non-starter now. But that's okay, because Drudge introduced an app for which I happily paid 99 cents which solves the latency problem. Now all I do is click on the icon and an optimized version of the web site downloads in seconds.

This is what's going on everywhere: retooling the web to make it a credible mobile computing experience.

Presumably I don't have to tell you about social networking. If you're under 30, it's akin to breathing. If you're over 40, you might want to figure it out, just to keep up with what's going on. 35% of America and a good chunk of the rest of the world is on Facebook. I strongly urge you to see The Social Network.

If you're not a buyer, ponder this: a company you've likely never heard of, Zynga, has a $5 billion pre-IPO valuation and it exists nowhere but inside Facebook. Imagine that: Facebook has become so pervasive that multi-billion dollar comapanies can exist entirely within its eco-system.

(If you're curious what Zynga does, it designs social video games like Farmville and Mafia Wars. 55 million people play Farmville, and the number grows by 300,000 a day. My wife and kids can't seem to get enough.)

We live in two Americas right now. No, not that ass turd John Edwards' two Americas. One is Obama's America is where we are hopelessly in debt at every level of government and unemployment will remain high as far as the eye can see. Where risk aversion informs every new policy and people viewed as helpless wards of the state.

The other is Silicon Valley's America, where the pace of innovation is relentless and the next revolutionary idea is knocking around someone's brain as we speak. Where risk taking is as natural as drinking water and failure viewed as an asset on your resume.

There will be a strenuous tug-of-war between the two Americas in the coming years, and it's not at all clear which side emerges victorious. The optimist in me sides with the angels.

The One Big Advantage the U.S. Has Over the EU

2010-12-06T06:00:00.000-08:00

A friend of mine just spent a week in Belgium on business. He was visiting a fast growing Belgian tech company. The thing is, all of its growth is outside Belgium. India and Brazil, mostly. The reason is simple: taxes and regulation.

For instance, if they want to fire a worker, the company have to pay that worker for another 10 years. I kid you not. So who would ever hire someone under these circumstances?

In the U.S., we have been heading down a similar path for some time, but we have one thing going for us that Belgium and other EU countries don't: our system of states. Not everything in the U.S. is run from Washington, and as a result, if you don't like the economic climate in, say, New York, you can always move to Texas or Florida. (Texas, in particular right now, is kicking ass.) This is the only thing that keep many states honest, our ability to vote with our feet.

This is why we need a rejuvenated states' right movement. The left, for years, has managed to cast states' rights as crypto-racist (i.e. it's supposed to remind everyone of slavery). What a load. Once upon a time, we were a collection of states that were only loosely bonded at the federal level. That model worked, because it promoted healthy competition. The propensity for bureaucrats and special interests to expand their own powers was naturally kept in check. We need to move back to that model. We are called as the "United States" for a reason.

Unfortunately, we have been moving like a freight train towards Belgium.

Qatar Awarded 2022 World Cup Over U.S.

2010-12-03T07:01:00.000-08:00

Wait, I thought the world was supposed to love us now that Obama, Citizen of the Planet, is president.

Of Smoke and Fire

2010-12-01T07:06:00.000-08:00

What, exactly, is insider trading? Do you know? I know what we all think it is, which is:

a. Trading on information of an unannounced impending takeover; or

b. Trading on non-public knowledge of an earnings announcement

Ivan Boesky. Bud Fox and Gordon Gekko, right?

The problem is, the government doesn’t seem to have the same clear-cut view of this that we all do. It could be that they are making it up as they go along. The key seems to be what constitutes “non-public knowledge,” and how it is one comes to possess it.

But before we get into that, let’s look at who they are targeting. Can we draw any conclusions?

I will say up front that I have no idea whether any of the firms that were raided by the FBI have done anything wrong, either by the standards above or the evolving standards of the government. Indeed, at least two of them, Level Global and Diamondback, are now saying they are not the targets of any government investigation, something the U.S. Attorney's Office has confirmed.

The odd thing here is that the FBI can't just raid a firm because they feel like it. A judge has to agree that there's probable cause that a crime has been committed. I have spoken to someone familiar with the ways of U.S. Attorneys, and the explanations for this can be any one of the following:

Level and Diamondback did nothing wrong but there could be evidence on premises of wrongdoing by others (this seems a stretch - there's evidence, but these firms weren't involved?)
The firms are not being targeted but the Feds are narrowly looking at one or two rogue employees within those firms. Diamondback has placed a portfolio manager on leave, which would seem to underscore this theory.
The firms are not "targets" of an investigation but are "subjects" of an investigation. That means that the Feds believe the firms have committed crimes, but they need more evidence to prosecute. An indictment is not imminent, but could come later. If this were the case, Level and Diamondback are engaging in some language parsing. However, the U.S. Attorney coming out and confirming that they are not "targets" suggests that they are probably not subjects either. The Feds were under no obligation to say this, and probably wouldn't if an indictment were in the offing.

Based on what we know, I'd say "2" is the likely explanation.

What all three firms have in common, though, is that they are all were spawned by Steven Cohen’s SAC Capital Advisors, a tremendously successful and aggressive shop that specializes in high turnover trading strategies. It doesn't take genius to figure out that SAC is the primary target here. The smoke is everywhere.

But is there fire?

The most curious thing, to me, about SAC is its track record: reputed to be about 30% average annual returns since 1998. I know what you’re thinking, 30% is outstanding but not impossible. Buffett’s is 21.5%. But here’s what you don’t know: unlike Buffett, SAC reputedly charges a whopping 50% incentive fee, which would mean they’ve averaged in the neighborhood of 60% gross returns. This is the part that’s a little hard to understand.

To further explore the comparison, Buffett makes his money by making significant long term bets on undervalued companies. He sees trends before most and has the stomach to make big bets when others are gun shy. It’s easy to understand that once in a while someone might come along who is just very good at this.

Or, it’s equally as easy to understand how once in a while someone is just very lucky. Buffett doesn’t make a lot of investments, after all. Maybe he’s just been on a multi-decade streak of sevens. While it’s improbable that any one person can do this, it’s actually highly probable that a random investor out of a large pool will.

If I had to say, Buffett's career has been the result of both skill and good fortune, not unlike most successful careers.

SAC reputedly trades on information flow and quantitative modeling. I know something about the latter, since it’s what I used to do. I got out of that business because I no longer saw an edge. Everyone now has access to both computational power and data, and everyone knows the basic approaches to use. It’s possible to occasionally find an edge, but it disappears quickly. This didn’t used to be the case.

It's hard to see where they get enough of an edge with information flow, either. Advantages here tend to be fleeting as well, and while a small fund might be able to meaningfully exploit meaningfully an edge, SAC manages a beastly $12 billion. Difficult to see how they can move that elephant around quickly enough. Also, $12 billion is a non-levered number. In reality, it's probably more like $25 or $30 billion.

How about luck? If Buffett’s lucky, isn’t it equally likely that Cohen could be lucky as well?

No, it’s actually far less likely (although not impossible). Two reasons for this. First, Cohen’s 60% gross returns blow Buffett away. Instead of being a five sigma event, as some have suggested of Buffett, Cohen represents a far crazier improbability.

Second, Cohen is placing thousands upon thousands more bets every year than Buffett. This matters because it increases the odds that his lucky streak will end. To understand this, it’s easiest to think in terms of flipping coins. How easy is it to flip heads once? Pretty easy. 50/50. How easy is it ten times in a row? One in 1,024.

Buffett doesn’t toss the coin too often. He makes large, infrequent bets. Cohen, on the other hand, makes lots and lots of smaller flips, making it far harder to beat the odds. Further, it wasn’t just Cohen beating the odds; his spawn were doing it as well, albeit for a shorter period of time.

So, while I don’t know of the specifics, let’s just say it looks circumstantially…interesting. Honestly, I don't know how you make 60% even with inside information. A whole lot of things have to be working for you to get to 60%. There are lots of smart people out there, and they don’t come close.

For the record, I doubt very highly they ever trade on what you and I think of as inside information. It doesn’t make sense on a number of levels.

The real question is the use of so-called “expert networks” and what sort of information is being obtained. The Feds are suggesting there that funds have pushed too far into this legally gray area.

On the other hand

I believe the government may be doing the same from the other direction. They want bad guys, and they want them now. That insider trading laws are poorly defined is highly convenient.

So, what is insider trading, exactly?

Case Study #1

You are sunbathing and you over hear a CEO say they have engaged Morgan Stanley to seek buyers of a subsidiary. You buy shares of the subsidiary and make a tidy profit. It just so happens, this is exactly what happened to Barry Switzer, former Super Bowl coach. Guilty? Yes, according to the government. No, according to a judge in that case.

Case Study #2

You are a rail yard worker and you see an unusual number of suits being given tours. You buy your company’s stock figuring someone’s looking to take it over. It turns out you're right. Guilty? The SEC thinks so. This case is still pending.

What if you have a friend who is a cashier at Staples and you ask them how back-to-school sales are going? Is it inside information? Unclear. The government may think so.

What if you sit in the Staples parking lot and count customers, and then make assumptions about how much people are spending? Isn’t that just good research? Hmm, maybe not. After all, not everyone has that information. You have an unfair advantage, even if you created it out of your own hard work and diligence.

The point is, when laws are poorly defined, overzealous prosecutors can use them to criminalize almost any kind of behavior.

And let’s face it, this administration needs villains. It’s Orwell 101, a state of perpetual war to justify every increasing incursions into domestic liberty. They have methodically rifled through other industries - oil, insurance, health, etc. – but Wall Street plays best, according to the polls. Mark my words, they will try to put faces on this, to make it personal. Nothing would make them happier than bagging Cohen. He is conveniently non-photogenic.

And there’s this:

The Cohen Spread

Yes, those are private golf holes in the back and a skating rink to the left. Hard to see the ice cream parlor from this altitude (it's there).

And:

This Is Art

Cohen paid a reported $12 million for a shark floating in formaldehyde. (Supposedly, it’s starting to decompose, but hey, he probably got a few good years out of it.)

It’s all fine, as far as I’m concerned. A little garish (okay, a lot), but people are entitled to spend their money how they please. It doesn’t mean I have to have them over for dinner. Problem is, that’s not how Obama sees it. He doesn’t understand how it’s possible to accumulate wealth like this legitimately, and bringing folks like Cohen down to size, through whatever means, is just another way to redistribute wealth.

This is why it doesn’t bother anyone in government that when they raid a financial firm’s office –particularly a hedge fund - they no longer even have to prove their case. They know full well they may have already destroyed the business. Investors are just too freaked out these days by reputational risk to hang around. All parties may have the comfort of being completely innocent, but it may be from the ruins of what they spent years building.

Lastly, there is Cohen's apparent political transformation. He gives a lot of money to politicians, and in 2006 it went exclusively to Democrats. In 2008, he spread things around roughly 50/50. For instance, he gave money to both the Democrat and Republican Campaign Committees (hate that!). He gave to Reid and Baucus but also Mitch McConnell and Eric Cantor. Interestingly, not a cent to Obama.

Like a lot of folks in the financial community, though, Cohen has been given pause, presumably by Democrat spending and regulatory excess. In this year's election cycle, he gave every last cent to Republicans. Is there a little retribution in the works? Make an example of Stevie so everyone else learns their place? With our current administration, there are too many examples of thugishness to rule this out as a possibility.

So, there you have my take on this from two different perspectives. If you had to pin me down, I’d guess that SAC and others on the government hit list didn’t commit acts of insider trading but that they were very aggressive about what they viewed as legitimate information gathering. But I also think that the government is being equally aggressive, maybe unfairly so, in the other direction. The question is where did the investment firms draw the line, and where is government now deciding to draw it.

In the end, perhaps some good will come out of this in the form of better understood law. One hopes it is not at the cost of the reputations and careers of the innocent.

Election Post Mortem

2010-11-30T10:54:00.000-08:00

It's old news at this point, but it wouldn't be right not to grade myself on the election results. As you recall, I built a model for predicting the house results. I assigned each race a probability and added them all up. The number I arrived at was a 71 seat pick-up for the Republicans. The actual number will be either be 63 or 64 seats, depending on the outcome of New York 1 (the Hamptons).

I will give myself a B+ most prognosticators were in the low 50s, so I was correct in assuming the tide would be bigger than most thought, but I overshot the mark. I believe Democrats waged an effective last minute get-out-the-vote effort that prevented an even bigger blow out.

In my view, Democrats should be happy, or at least relieved. There really weren't any big surprises that went against them. No Barney Franks or Steny Hoyers. No Dennis Kuciniches (sigh). And they held on to a lot of close ones. They won 23 seats with less than 52% of the vote and another 22 with less than 55%.

And now the real fun starts: handicapping the Republican field for the White House. But that can wait a couple months.

The Real Reason To Ban Earmarks

2010-11-08T13:19:00.000-08:00

Yesterday, Mitch McConnell said that banning earmarks won't save any money. By that, we are to assume "real" money, because earmarks only add up to $20-30 billion a year - remarkably, not much in the scheme of things.

McConnell is completely missing the point, and he was properly rebuked by Jim DeMint today. DeMint pointed out that earmarks - pork - are used to push bad legislation over the finish line. Obamacare would not have passed without the Cornhusker Kickback and the Louisiana Purchase. The odious Dodd Frank bill would not have passed without goodies carved out for Scott Brown.

Get rid of earmarks, and we make it that much harder for bad law to be born.

Update Soon

2010-11-06T13:56:00.000-07:00

Note: I will submit a final analysis of my ability as a prognosticator as soon as final numbers are in. There are still a number of races that haven't been decided.

Final Call - 71 Seats

2010-11-02T07:27:00.000-07:00

Here are the Naked Dollar's final predictions:

+71 seats for the Republicans in the House
+9 seats for the Republicans in the Senate
+13 governor seats for the Republicans

As predicted a couple of weeks ago, control of the Senate will likely come down to West Virginia and Washington. Republicans need to carry both.

National Pulse Index - November 1st

2010-11-01T18:31:00.000-07:00

The picture is clear now - Republicans have all the momentum heading into tomorrow. I will make final predictions tomorrow. Right now it looks like Repubs pick up 71 house seats, 9 senate seats, and 10 governorships. An epic meltdown for Obama, Pelosi, and over reaching liberalism is in the offing.

Year End Tax Suicides

2010-11-01T10:41:00.000-07:00

A while ago I suggested that people might actually commit suicide towards the end of this year to avoid the enormous hike in the estate tax at the end of this year:

See: Death and Taxes

It seems that more people are picking up on this: http://www.newser.com/article/d9j5lab81/wyoming-congresswoman-says-some-constituents-planning-to-die-before-dec-31-estate-tax-rise.html

National Pulse Index - Halloween Edition

2010-10-31T14:34:00.000-07:00

Until the last three or four days, the month of October was basically a wash between the parties. Now the late break towards the GOP is clear. Over the last three days, the Republicans have enjoyed an average of 25 net points of polling upticks nationally per day, the biggest three-day reading yet. Over the last six days, the have a total net of 118. That's a big number. This is happening despite Dems solidifying their races in places like California and New York. Given their isolation, there might be some softness in those states' numbers, though.

House model still at +71 seats for the Republicans.

National Pulse Index - October 30th

2010-10-30T14:42:00.000-07:00

Republicans continue to have the late momentum. Interestingly, all the back and forth for the month of October has been roughly even, with the Republicans netting a positive 17 points of polling upticks vs. Dems. Not much, in the scheme of things.

For an explanation, go here: National Pulse Index Explanation

House model steady at +71 for Repubs.

Elections and the Gravity of the Cocktail Party Middle

2010-10-29T14:56:00.000-07:00

Elections tend to swing on the whims of independents, that is, voters not affiliated with any party. The overall percentage of independents has grown dramatically over the last couple of decades, so politicians ignore them at their peril.

But who are these folks? It seems to matter, because the media gives us breathless reports on them almost hourly. The message I get is that they are the thoughtful voters, the ones who carefully weigh every candidate on the issues, and then come down from the mount close to election time, brows furrowed with the weight of all that cogitation, to deliver their verdict.

What a load of hooey.

Before I get into exactly why, I will say that there are smart independents out there. Many of them have grown weary of one party or the other and have thrown in the towel, and I am somewhat sympathetic of this decision. But on the whole, I don’t think they are the enlightened bunch they are made out to be. I am on to them.

Here’s why. Have you ever noticed that when two people sit opposite each other, they tend to copy each other's postures? One leans back, the other leans back. One crosses their legs, so does the other, without conscious thought. This is a well documented phenomenon known among psychologists as postural mirroring.

The same precise effect happens with preference sets. People tend to gauge the viewpoints and behavior of others around them and modify their own positions accordingly. Over time, certain viewpoints or behaviors will become acceptable that weren't previously. Blogger Glenn Reynolds once pointed out, by way of example, the sudden appearance of American flags across our landscape (particularly on cars) post-9/11. Were people suddenly more patriotic? Probably not, but opinions and behavior are highly contagious. Once a few opinion leaders started waving the flag, others took this as an "all clear" signal that they could overtly display their patriotism, and they did. This is sometimes called a "preference cascade."

A year later, the flags were gone as the process reversed itself. Investment bubbles and fashion trends come and go in much the same way.

Nowhere is this phenomenon more acute than in the realm of politics and political issues. The explanation is rooted in the fact that most people don't pay much attention, but they don't want other people to catch on to this fact. No one wants to appear uninformed.

This is where the cocktail party theory comes in. I know this doesn't describe anyone reading this, but let's pretend for a moment that you are that uninformed person, and you find yourself at a party. Suddenly, much to your horror, the conversation turns to politics. You very much don't want to look like an idiot. What to do?

The answer, assuming you are forced into the conversation, is to take a position as close as possible to those around you - the cocktail party center. No one will challenge you if you're agreeing with them. Disagree about anything and you might be forced to back up your opinion with facts or logical argument. That would be risky.

This ends up being self-reinforcing: the more you observe and mimic others, particularly from your own social milieu, the more you end up truly embracing their opinions, and the more you, in turn, tend to then influence others.

In my own hometown, this phenomenon was rampant in the last election cycle. Probably around 2005, it became unfashionable to voice support for George Bush. Not our kind, dear. Can’t even pronounce “nuclear.” I watched as the independents and more than a few Republicans quickly modified their views to reflect those of progressive opinion leaders, who were pumping up the volume at the same time that conservatives turned mute.

When Obama came along, the table was set. Supporting him was "enlightened" and "sophisticated." Nod your head and watch your social stock rise.

Now, the process has completely reversed. Progressives are dispirited and conservatives are making the most noise. The prevailing view is that Obama has been a disappointment. "I voted for him, but he hasn't lived up to my expectations," is now the precise cocktail party center. The preference cascade has flipped over, maybe in record time.

I don't begrudge the uninformed. Well, maybe a little. And maybe occasionally a lot. People want to live their lives and not spend hours figuring out the pros and cons of every issue and candidate. That's their prerogative. But hey, let's not pretend they're Stephen Hawking.

National Pulse Index - October 28th

2010-10-29T14:52:00.000-07:00

Modest comeback for Dems.

House model still at +71 for Repubs.