Bin Laden or Weiner - Burning Question

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?

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

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

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

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

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

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

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

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!

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!