Is Mary Schapiro Qualified to Chair The SEC?

CNBC, clearly understanding the significant implications of a proposed changes to high frequency trading rules brought SEC Chair Mary Schapiro on to get an idea of what she's thinking.

Please understand that I am by no means an expert on market trading practices and rules. However watching this interview it comes across as if our SEC chair understands less.

HT ZERO HEDGE

SEC May Ban Unethical Flash Trading

Up until recently certain companies had advanced access to the orders other investors made, ahead of the transaction. Today it looks like the SEC may be making a move to ban the practices.

By placing servers with special detection and fast trade programs on them next to the computers that run exchanges like the New York Stock Exchange, companies like Goldman Sachs could determine very quickly what orders were coming through the system.

Taking an advantage of a delay from when an order is entered by someone like me and when it hits the market, the company could read order and then go in and buy the equity themselves just in time to mark it up a very small amount to then sell it me for a guaranteed, albeit small profit.

This is one form of computerized flash trading. Very recently one company, Goldman Sachs accounted for about 48% of all trade volume on the market through these types of trades, and flash trading in general. The practice allowed the company, to rack up billions in profits that many in the market feel are unethical and against the general principals of free market exchange in that it grants specific players an unfair advantage.

Read More Here
More from Bloomberg News

A Kid in Guantanamo

I heard a snippet of a story today on NPR that I thought I must not have heard right because it sounded too outrageous to be true. I looked into it further only to find my fears realized.

A young Afghani, Mohammed Jawad, has grown up in our custody a the Guantanamo Bay Detention Facility since 2002, almost 7 years now. The story of Guantanamo is not new, and the controversy surrounding it has been in the National Debate for some time now, but what shocked me was to hear that this particular kid may have been as young as 12 years old when he was captured by Northern Alliance Officials. (It's my understanding that at that time The Northern Alliance was being paid a bounty for handing over prisoners who were militants working in support of Taliban, or Al Qaeda.)

While tortured by members of the Northern Alliance it is alleged that Jawad admitted to throwing a hand grenade at a U.S. military Jeep injuring 2 soldiers and their interpreter. Jawad was then handed over to the U.S. and he was transfered to Guantanamo where he recanted those statements.

According to the Christian Science Monitor the interrogations continued while the kid was in our custody.

"Jawad's files show extensive efforts to obtain more detailed information through repeated interrogations at Guantánamo. Records show that Jawad was subject to a sleep deprivation technique called the "frequent flyer program." At one point Guantánamo guards moved him from cell to cell 112 times within a two-week period. This regime required him to be shackled, moved, and unshackled on average once every two hours and 50 minutes."

If the facts of the story are as I have come to understand them then I view this as a terrible violation of at the very least the spirit of this nations highest values and laws.

As citizens we cannot just allow these things slip by. Allowing our representatives to miscarry justice in such a manner is a threat to all of our security.

"You Cannot Any Longer Suggest That President Obama Is Advancing Civil Liberties"

The above quote is from GWU Law Professor Jonathan Turley in this interview with Keith Olberman.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Visit msnbc.com for Breaking News, World News, and News about the Economy

VIA Eff.org

On Inflation

The Feds recent proposal has many people concerned about inflation. While for others it just revives the debate of hyper inflation vs deflation. Minyanville brought about some greater perspective for me however this quote:

Inflation, like other economic entities, is controlled by supply and demand. The velocity of money is one way to represent the demand for “stuff” - when it goes up, prices tend to follow.

From Minyanville

I'm not sure this plays out in the real world but the idea makes sense. We're already maxed out and over leveraged. That's why the global economy is contracting. So it's only producers that can borrow, not spenders, not the banks.

Our American Challenge

Today we witnessed the inauguration of our nation's 44th president and yesterday we honored someone who helped make that possible.  

Dr. Martin Luther King Jr. was a citizen who worked against powerful forces to expand liberty, justice and equality.  When my grandfather fought in the second world war, and when this nation's founders fought the British in The American Revolution, it was those same ideals that stood at the forefront of our national consciousness.

We enjoy the hard fought gifts of liberty,and justice, for all as a result of the sacrifices of many.  With that freedom comes our own individual burden of responsibility for the condition of our democracy. 

And while we vote in an exercise of our democratic ideals, that act alone does not satisfy our democratic obligations.

In the aftermath of the September 11th attacks, our nation was asked to open up our wallets and spend for the sake of the economy.  Consumerism became synonymous with patriotism.

It is a popular idea, that the economic decisions we make, can be a force for good in this world.  Undoubtedly the tactic of "voting with your dollar" can effect change, but it still cannot satisfy our obligations as citizens.  

Today this country faces tremendous challenges.  In the face of these challenges we must bring individuals to account for their actions, however we must not be victims.  

Consumerism cannot be allowed to replace citizenship. Our responsibility to does not end once our representatives are in office. And we must not simply surrender our freedom to victimhood. As citizens of this democracy we are responsible for our own fates and the fate of this nation. Our biggest challenges are not terrorism, or economic calamity, rather they are apathy and dogmatism.

Yesterdays celebration of Dr. King and today's presidential inauguration serve as inspiration, as we each take up action defending against the apathetic and dogmatic tendencies within ourselves.

It is on each of us to take up a cause.  It is on each of us to improve our communities. It is on each of us to listen with humility and empathy to those with whom we disagree.  It is on each of us to be critical and to petition our media and our elected representatives on a frequent basis.  It is on each of us to accept the responsibility of our freedom and to take on the task of making this nation better.

Yes We Can.

Porn Industry Bailout: A line in the sand?

Excellent publicity play:

The porn industry has been hurt by the downturn like everyone else and they are going to ask for the $5 billion. Owen Moogan speaking for Hustler Publisher Larry Flynt. CNN

As Mish Shedlock points out "once you cross the line and start picking favorites, it is hard to stop."

CNN Political Ticker via Mish's Global Economic Trend Analysis.

It's Simple Economics.

Matt Bors @ Comics.com Via Campaign for Liberty Blog

Cameras At War

Korean TV via RFK Action Front

Kroszner: "It's not the CRA."

"we found essentially no difference in the performance of subprime loans in Zip codes that were just below or just above the income threshold for the CRA."

I've seen quite a bit of writing in the blogosphere, pointing to the Community Reinvestment Act (CRA) as the, if not one of the, causes of our current financial crisis. Ridiculous as it may seem, some are very adamant about the impacts of the CRA. Fed Govenor Randall Kroszner, today, spoke on the results of a study by the fed to investigate those allegations.

The findings clearly show that the CRA could not have had a significant impact.

"First, only a small portion of subprime mortgage originations are related to the CRA. Second, CRA- related loans appear to perform comparably to other types of subprime loans. Taken..."

Given the stories about lenders giving loans to whom ever they could without regard to standards, affirmed in my personal experience in mortgage origination, it's hard to see how anyone could blame a program like the CRA as been the root of the problem.

Our nation has been experiencing an economic decline since some time in 2002. We've shipped many of our jobs over seas to locations with lower, if non existent, labor and environmental quality practices. An expansion of credit made possible through accelerated regulatory liberalization in our financial industry masked a decline. We've now reached a point where the benefits of industry and production are exceeded by the levels of debt we've incurred.

This strong debt contraction is a necessary reaction to correct potentially 30 years of financial abuse. The idea that bailing out lending institutions so they can continue lending in the face of an already over leveraged economy makes little or no sense.

Given this idea, that we are facing the consequences of over-leveraging (or that we're just bankrupt) it seems impossible to point to something the size of the CRA, especially in light of the comparison of CRA eligible loans in default to non CRA loans, as the source of our current financial troubles.

[Kroszner's Speech]

Palin Bashing From Republican Insiders

From the Financial Times

even as the Alaska governor tried to keep her options open, some allies of Mr McCain were busy trying to trash her reputation with a series of allegations about her conduct during the campaign.

Perhaps the most startling involved fresh claims about Ms Palin’s shaky grasp of geography, with unnamed McCain aides telling Fox News that during preparations for the vice-presidential debate, it emerged that she did not know Africa was a continent rather than a country.

This is a very interesting turn of events. It seems as if there is some feeling that she seriously pulled the campaign down in the end. Palin still has strong support from a part of the party.

It's become clear that Palin has the potential to continue to be a phenomenon to follow, on the other hand she may not be able to garner support beyond some of the more diehard social conservatives.

President Elect Transitional Website

Check out Change.gov. A website for the president elect.

It's important to remember that government is not going to "fix things" or take care of us. We've got to continue to pressure our representatives and work to fix things ourselves. Get moving.

Hat tip Jessica Lee

Seattle Shouts.

From the Seattle Stranger.

Well Said

A Hedge Fund Manager Says Goodbye.

Andrew Ladhe Goes out in style.

I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

Capitalism worked for two hundred years, but times change, and systems become corrupt. ...My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles.

From the Financial Times Hat tip Matt

?

"Housing has always lifted the economy out of downturns, and it is imperative to get the housing market moving forward as quickly as possible," NAR President Richard F. Gaylord said in a press statement.

Via Inman News

The People You Should Vote For.

I couldn't resist. Brought to you by Willamette Week.
(hat tip Miranda)

The Shorts Are Comming

A different kind of short. (Hat tip Matt) As reported earlier tightening credit markets threaten to wreak havoc on on world trade. Bloomberg's Chan Sue Ling reports that Hong Kongs biggest try bulk carrier Pacific Basin Shipping Ltd. is having trouble moving it's shipments due to lack of credit availablility.

The Baltic Dry Index dropped 8.5 percent to 1,809 points yesterday, the lowest since August 2005. Pacific Basin dropped 6.5 percent to HK$4.75 in Hong Kong and Precious Shipping declined 5.5 percent to 12.1 baht in Bangkok.

Banks worldwide have curbed lending because of increased concerns about getting their money back. Shipowners are already struggling to obtain funding for new vessels. Precious Shipping took as long as 15 months to secure financing for 18 vessels it has on order, Hashim said.

Why is this important?

This is important because it could mean significant shortages of imported goods. Areas that rely on a significant amount of food imports could see strong price increases as supplies are depleted.

It will bring about a significant slow down in international trade. Goods traveling over-seas won't make it here, or anywhere. This will mean a reduction in the supply of available imports.

Retailers in this country could see this affecting their ability to provide products for sale during the holiday season.

As Matt pointed out to me the effects won't be noticed for some time, as things slow down and as it takes some time for the consumer at the end of the chain to notice a problem in a supply chain.

It could be weeks before we see a problem in our local supermarkets and stores if it comes to that.

I would assume eventually demand would go up enough that someone would work to finance the shipments, but in the meant time this could have many troubling effects.

Set for Failure.

Trouble Ahead; Not Enough Cash To Cover...

Consider the following:

• The Dow Jones is now down 40% from it's peak. In the last 7 trading days it's dropped 20%.
• Those declines will mean a significant drop in tax revenues as tax revenue will not the same as it was during years of market growth when market players took profits. Their losses will now be written off for years to come. That tax revenue will not be there for some time.
  
• While trillions in investments have been lost, many soon to be retired Baby Boomers have lost money from their retirement accounts.
• With anticipation of greater and greater job lay-offs the tax roles will be further depleted by the lack of payee's into the payroll tax system will mean great deficits in the social security system.
• Great declines in housing markets are shrinking tax revenues for states and local governments throughout the country.
• We've committed over a trillion dollars so far to a bailout into failed tactics that will lead to greater losses, and further depletion of government accounts.
• The FDIC does not have enough money to cover the bank defaults to come, and will need to be recapitalized.
• Were currently devoting trillions of dollars to fight wars in Afghanistan and Iraq.