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The Stock Market Roller Coaster

The stock market is like Pavlov’s dogs. It starts to salivate at the thought of a juicy meal, long before it gets one. (About a century ago, Russian scientist Ivan Petrovich Pavlov found that if he rang a bell before he gave the dogs meat powder, pretty soon they would salivate at the ringing of the bell.)

With the world in a funk (Europe on the brink, the United States growing only moderately), stocks have dipped a bit but done surprisingly well this year, largely because central banks have kept interest rates so low. It’s hard for stocks to go down much when banks — even foreign banks — can borrow money from the Federal Reserve for a very low interest rate.

For more than a year, stocks have soared whenever world leaders announced another plan to rescue Europe’s sick puppies — and the euro currency — with a snort of liquidity. American stocks zoom upward on the announcement, only to fall back a couple of days later when the new initiative proves to be mostly hooey. It’s happened more than half a dozen times. On November 30, American stocks zoomed 4 percent on the announcement that under a coordinated program, foreign financial institutions will have an easier time borrowing United States dollars from their central banks, which in turn would get the money from our Federal Reserve.

On Thursday, December 8, stocks plunged on fears of less liquidity. The next day they soared on expectations of more juice. The following Monday they plunged, continuing the weakness last week and through this Monday.

There will almost certainly be another flood of liquidity; our Federal Reserve says more juice could be forthcoming. So, like Pavlov’s dogs, the markets will salivate at the thought.

Del Mar’s Arthur Lipper III, a member of a legendary Wall Street family, says “investor enthusiasm in the face of widely known socioeconomic problems” puzzles some people, but given the coordinated loose monetary policies of the world’s central banks, there is a “vast amount of cash” available to institutional and individual investors.

And there is the Pavlovian effect: “Markets react to psychology before they do to statistics. Anticipation — the wish becoming the parent of the thought — dictates the trend. With so much money around and with more people making more money when markets go up, the wish for appreciation is understandable.” Governments, too, love rising markets, as tax receipts increase and politicians can justify more spending. The market may do well “at least until bleak despair is again present, as is likely at some point.”

Mike Stolper of Stolper and Company thinks the despair is already here and will help stocks. “I would be very surprised if we don’t have a huge rally,” he says. Many dejected investors are betting that stocks will go down; if there is good news, they will rush to buy stocks, pushing them up. “All it takes to spark a good rally is when sentiment gets so negative that virtually anything will spark a rally.” Dividends on blue chip stocks are higher than yields on cash or bonds. “Most people would argue that stocks are statistically cheap.”

Today, investors “want to believe that the apocalypse is not around the corner,” Stolper says. However, many believe that “There is not enough money on the planet to bail Europe out.” Europe may already be in recession. If it’s contagious, the American economy could slow sharply. “If you operate on the premise of having to reschedule or repudiate debt around the globe, we will have subnormal growth rates for some time.” Earnings would fall, and the market would be wary of stocks.

Robert Snigaroff, president of Denali Advisors, began buying stocks for his personal portfolio the first week of August. “Stocks have attractive yields compared to Treasury bonds and cash,” he says. His firm buys blue chip stocks, preferably with generous and safe dividends, and avoids financial equities. “Stocks have more upside than bonds.” (Bonds have been in a bull market since 1981; stocks have had a sloppy ride since 2000.) “I’m optimistic but cautiously so.”

Viewing the various initiatives to bail out Europe, Neil Hokanson of Solana Beach’s Hokanson Associates says, “This is like running a marathon. We’ve run the first quarter of a mile, all downhill. The rest is uphill — cutting entitlement spending, current and future, both in the U.S. and Europe. We just can’t sustain the programs put into place in the last 75 years. History indicates that it takes a crisis to generate structural reform.”

Hokanson says he is an optimist, but he is not bullish on the short run. “There is great latent potential for stocks if governments get their acts together,” he says. But things may have to get worse for politicians and bureaucrats to wake up, and the market may react negatively to the dallying approach to deep crises.

Still, “If you came down from Mars and looked for places to invest, you would pick common stocks,” he says. His firm is emphasizing dividends. “We believe in investing globally, but the U.S. is the place to be now. We have reduced international exposure and increased the level of dividends in the portfolio. We are not just buying utilities and telecom issues; even tech stocks like Intel and Paychex have good yields.”

But he sums up: “We are at the point where the government drives interest rates so low that savers get nothing and governments get to borrow for almost free. Governments are inflating away debt at the expense of investors.” That’s one reason that when his firm buys bonds, it keeps the maturities short. He fears inflation. Summing up all these factors, says Hokanson, “We are not at the beginning of a new bull market” in stocks.

We have a looming apocalypse, and central banks are creating oceans of money to thwart it. So stocks and bonds do surprisingly well. But suppose the apocalypse comes?

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The stock market is like Pavlov’s dogs. It starts to salivate at the thought of a juicy meal, long before it gets one. (About a century ago, Russian scientist Ivan Petrovich Pavlov found that if he rang a bell before he gave the dogs meat powder, pretty soon they would salivate at the ringing of the bell.)

With the world in a funk (Europe on the brink, the United States growing only moderately), stocks have dipped a bit but done surprisingly well this year, largely because central banks have kept interest rates so low. It’s hard for stocks to go down much when banks — even foreign banks — can borrow money from the Federal Reserve for a very low interest rate.

For more than a year, stocks have soared whenever world leaders announced another plan to rescue Europe’s sick puppies — and the euro currency — with a snort of liquidity. American stocks zoom upward on the announcement, only to fall back a couple of days later when the new initiative proves to be mostly hooey. It’s happened more than half a dozen times. On November 30, American stocks zoomed 4 percent on the announcement that under a coordinated program, foreign financial institutions will have an easier time borrowing United States dollars from their central banks, which in turn would get the money from our Federal Reserve.

On Thursday, December 8, stocks plunged on fears of less liquidity. The next day they soared on expectations of more juice. The following Monday they plunged, continuing the weakness last week and through this Monday.

There will almost certainly be another flood of liquidity; our Federal Reserve says more juice could be forthcoming. So, like Pavlov’s dogs, the markets will salivate at the thought.

Del Mar’s Arthur Lipper III, a member of a legendary Wall Street family, says “investor enthusiasm in the face of widely known socioeconomic problems” puzzles some people, but given the coordinated loose monetary policies of the world’s central banks, there is a “vast amount of cash” available to institutional and individual investors.

And there is the Pavlovian effect: “Markets react to psychology before they do to statistics. Anticipation — the wish becoming the parent of the thought — dictates the trend. With so much money around and with more people making more money when markets go up, the wish for appreciation is understandable.” Governments, too, love rising markets, as tax receipts increase and politicians can justify more spending. The market may do well “at least until bleak despair is again present, as is likely at some point.”

Mike Stolper of Stolper and Company thinks the despair is already here and will help stocks. “I would be very surprised if we don’t have a huge rally,” he says. Many dejected investors are betting that stocks will go down; if there is good news, they will rush to buy stocks, pushing them up. “All it takes to spark a good rally is when sentiment gets so negative that virtually anything will spark a rally.” Dividends on blue chip stocks are higher than yields on cash or bonds. “Most people would argue that stocks are statistically cheap.”

Today, investors “want to believe that the apocalypse is not around the corner,” Stolper says. However, many believe that “There is not enough money on the planet to bail Europe out.” Europe may already be in recession. If it’s contagious, the American economy could slow sharply. “If you operate on the premise of having to reschedule or repudiate debt around the globe, we will have subnormal growth rates for some time.” Earnings would fall, and the market would be wary of stocks.

Robert Snigaroff, president of Denali Advisors, began buying stocks for his personal portfolio the first week of August. “Stocks have attractive yields compared to Treasury bonds and cash,” he says. His firm buys blue chip stocks, preferably with generous and safe dividends, and avoids financial equities. “Stocks have more upside than bonds.” (Bonds have been in a bull market since 1981; stocks have had a sloppy ride since 2000.) “I’m optimistic but cautiously so.”

Viewing the various initiatives to bail out Europe, Neil Hokanson of Solana Beach’s Hokanson Associates says, “This is like running a marathon. We’ve run the first quarter of a mile, all downhill. The rest is uphill — cutting entitlement spending, current and future, both in the U.S. and Europe. We just can’t sustain the programs put into place in the last 75 years. History indicates that it takes a crisis to generate structural reform.”

Hokanson says he is an optimist, but he is not bullish on the short run. “There is great latent potential for stocks if governments get their acts together,” he says. But things may have to get worse for politicians and bureaucrats to wake up, and the market may react negatively to the dallying approach to deep crises.

Still, “If you came down from Mars and looked for places to invest, you would pick common stocks,” he says. His firm is emphasizing dividends. “We believe in investing globally, but the U.S. is the place to be now. We have reduced international exposure and increased the level of dividends in the portfolio. We are not just buying utilities and telecom issues; even tech stocks like Intel and Paychex have good yields.”

But he sums up: “We are at the point where the government drives interest rates so low that savers get nothing and governments get to borrow for almost free. Governments are inflating away debt at the expense of investors.” That’s one reason that when his firm buys bonds, it keeps the maturities short. He fears inflation. Summing up all these factors, says Hokanson, “We are not at the beginning of a new bull market” in stocks.

We have a looming apocalypse, and central banks are creating oceans of money to thwart it. So stocks and bonds do surprisingly well. But suppose the apocalypse comes?

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Comments
352

Ask three stock brokers who go by the name "financial planner" and they will tell you its a good time to buy stocks. I'm sure these guys were pushing tech stocks before the crash (heck, one still is). Would love to know how you picked these three. My Bond broker says buy bonds now but look what he sells...

Dec. 22, 2011

The four quoted in the article are good sources. Lipper is a long-time investor and Wall Street insider. Stolper, Snigaroff and Hokanson are money managers with lots of expertise. You didn't ask, but I will tell you how I feel: frenetic money printing of central banks around the world will buoy certain parts of the U.S. stock market this year. In fact, I just bought a bunch of American utilities, pharmaceuticals, and telecoms (the old-style Verizon and AT&T). For many years now, I have concentrated on buying blue chips with yields from about 3.75% to 6% and even more on occasion. I would avoid financial stocks, stocks not paying generous dividends, and overseas stocks (particularly Europe, obviously.) For several years now, my stock portfolio has done three times better than the S&P 500 on a total return basis -- largely because utilities have done so well. That could end, of course. But because interest rates are so low, bonds hold little interest anymore. My portfolio is loaded with muni bonds bought in previous years, but as they mature or are called, I will keep buying these blue chip stocks yielding 4% or more, probably mostly utilities, pharmas, telecoms and oils. And I think foreign money will increasingly pour into American blue chips such as these; why buy Treasury paper with horrible yields? A ten-year T yields under 2% and the 30-year under 3%. You can do better in certain stocks. There are several risks: 1. My strategy will stop paying off -- that certainly will happen at some point; 2. There could be a global recession next year. Even though central banks would escalate the printing of money, and interest rates would fall much further, fear would throw things out of kilter, a la 2008. Remember, this advice is worth what I charged you for it: zero. Best, Don Bauder

Dec. 22, 2011

Great info, thanks. I do a little small time investing myself. I'm surprised how much trading takes place in pre-market enough to move the dji 200-300 points before the market opens! Who is doing all this trading and with how much $$$? 100B + ?

Dec. 22, 2011

Pre-market and after-market trading is generally done by institutions -- hedge funds and the like. Best, Don Bauder

Dec. 23, 2011

Don, that is a decent strategy that should work until the cycles change (as described by Bacon.) I tend to only buy stocks when there is a huge bear market and I like to fade the final climactic selling when irrationality takes over. I tend to hold stocks like these for years and only pitch them when the position is no longer right. I generally write covered calls against my stocks to generate a little extra income and have had a measure of success doing this. I don't recommend this strategy for everyone, as the strike price can get hit and stocks can get called away from you if you're not watching the market.

@Mr.Bios, markets are pretty much 24 hours these days and everyone all over the world is trading the pre-markets and the Globex. The overnight markets are not as thin as they were a few years ago, and show surprising liquidity at times. Still, I would not want to do a market order for 1000 ES, as it would probably move the market a few full points. Also, during the overnight/pre-market, the spreads are just a little wider(~30%+-) than during regular market hours and this is indicative of the premium one has to pay for getting their action down outside regular market hours.

Dec. 23, 2011

Jeff: Yes, my strategy of buying high-yielding American blue chips (very heavily utilities) will go out of date at some point. But that doesn't mean I will necessarily jettison the strategy. If, for example, bonds take a big hit and yields go much higher, I will no doubt go back to buying highly-rated munis heavily. Stocks (now about 32% of my portfolio) will drift down below 30% again, because the new money will go into munis. I simply do not like stocks that don't pay generous, well-covered dividends. But you are right: at some point, risk will come roaring back; emerging techs, IPOs, etc. will do the best. I'll sit that out. Best, Don Bauder

Dec. 23, 2011

For your edification, I yanked this off of a website where I sometimes contribute. The author is my friend Charles Pennington, and he posted an interesting chart.

Ticker / cash per share / price / 2012 earnings from ValueLine / (price-cash)/earnings

msft $7 $26 $2.80 7 csco $8 $18 $1.45 7 goog $129 $630 $40 12.5 orcl $6 $29 $2.42 9.5 jnj $11 $64 $5.25 10 pfe $5 $21 $1.60 10 aapl $87 $395 $32.50 9.5 cvx $10 $103 $13.10 7 wlp $53 $65(!) $7.70 1.3 amgn $19 $61 $5.50 7.5

His contention that some stocks are ridiculously cheap with the cash on hand per share. Whether they are or not is a matter of opinion which is way above my pay grade. However, I don't like sitting on a lot of cash, or cash equivalents right now with negative interest rates. I suspect that those companies aren't thrilled on some level with all that cash.

Frankly, I don't think that risk has left the room and I think right now is very risky with many hidden dangers bubbling up from right under the surface. But then again I get real paranoid about freaky events that can dislocate markets.

Dec. 23, 2011

All good information. There is perhaps a 20% risk of a global recession springing out of Europe. Worse, it would be a financial recession -- the worst kind, as we learned 2007-2009. Should that happen, deflation would probably arrive, so bonds would continue their 1981-forward bull market. But utilities have similarities with bonds. With central banks handing money too banks at ridiculously low rates, it's hard to bet against stocks. But it could turn out to be a bad bet. Remember: black swan may show up. Best, Don Bauder

Dec. 23, 2011

Everything you post is from someone elses website.

Dec. 23, 2011

May be, but he does write some of it. http://www.dailyspeculations.com/wordpress/?cat=422

Dec. 23, 2011

Come on twister-you're blocking my griefing of Jeff!

Dec. 24, 2011

If Jeff Watson is his last name, he posts elsewhere. Jeff gives us some very perceptive posts, SP. Best, Don Bauder

Dec. 24, 2011

I know, I am just returning a little of Jeffs hostiule fire..........Jeff has his own blog, he has posted it here in the past and I have read parts of it........

Dec. 24, 2011

Falstaff, just let it go, you're not going to win so let it be. But your earlier comment raises an important question. I've noticed that you post a lot to the Reader....2400 posts in 2.5 years to be exact. I've noticed that you make a lot of mistakes and misspellings in your ramblings which brings me to another qustion. With the amount of wild emotion, mistakes, bombast, invective, and poor research, one could say that you are writing a lot of this while drunk or stoned. Do you need help? Are you in danger of hurting yourself or another? Can we arrange an intervention? Can I help you?

Your mental illness would explain a lot. Your accusations of my "stealing from someone else's website," is very amusing, since I am a major contributor and cite and link to the site. If I thought that you were any more than a little flea biting my crotch, I would spend some time and copy and paste the links to places that you lift(which is 25% of the time) content and use it as your own, but I'd probably spend the better part of a week doing so. What you accuse me of doing is exactly what you do on an everyday basis as you haven't an original thought in your head. I don't have the time to waste on fringe players like you and will only respond when I'm totally bored....which isn't often .

Dec. 24, 2011

Your mental illness would explain a lot. Your accusations of my "stealing from someone else's website," is very amusing, since I am a major contributor and cite and link to the site.

Actually Jeff you posted a rather lengthy expose on why brokers are needed in America and tried to pass it off as your own. Well I Googled a few phrases and found the original piece, which you did not write nor cite to ...all you did was go in and changed a few phrases and words adn then tried to pass it off as your own- or plagerized it. I owned you and now you're mad because I caught you in one of your frauds. Oh and then you tried to claim you have a working ranch (one of your many "income producing investments") or some nonsense, implying you actually managed it...Oh brother.....whopper after whopper after whopper.

Dec. 24, 2011

Falstaff, I have exposed your many rip offs on the web and you won't address them, just like you won't solve statistical problems which you claim expertise. What is your real name? I don't like talking to straw men.

Dec. 25, 2011

This is sounding more and more like Mitt Romney vs. Newt Gingrich. Or Gringrich vs. Ron Paul. Best, Don Bauder

Dec. 25, 2011

I don't think it's a case of hostile fire. You people have honest differences and are expressing them here. That's what this blog is all about. Best, Don Bauder

Dec. 25, 2011

Don, I am not ashamed of my name or who I am or what I do or have accomplished in my life. I propose that SP give us his real name and not hide behind a pseudonym while blasting away at my character with total bombast without suffering any consequence to his reputation. After all, he knows your real name, he knows mine, why can't we know his? Is he a coward? The public would be better served if we could look him up, see his CV etc and determine whether he was real or a flake or whatever. After all, while I have profound disagreements with you, we are still gentlemen, are civil, and we trade scholarly papers and information offline all the time, all we hear from SP(Falstaff) is hyper-infused, shrill invective with no substance. I am pretty sure he's at least a paralegal, or maybe he even went to a California Law School, but it would be nice to see the specter who hides behind the mask. Furthermore, the people in charge at the reader post, most prominently, "We prohibit profanity, libel, spam, racial epithets, and the harassment and abuse of others." As I see it, I've been libeled and harassed by SP for months, a gnome who operates with total anonymity while my identity is in the open. Something is wrong with this picture.

Dec. 24, 2011

The Reader bends backwards to ensure two things.

First, that you have the right to your anonymity, if you so desire. While I use a nick in the comments here, my name is easily researched. It doesn't bother me. When I contribute stories to the Reader I insist that they use my real name, first, middle, and last so that no one would confuse my words with anyone who has the same first and last name (apparently, there is some guy with my first and last name that wrote a large and definitive reference to all Grateful Dead lyrics, my email in-box would amuse a lot of people here). Some people, however, are very nervous about their identity. They have that right.

Second, the Reader is smart enough to realize that playful arguments are stimulating and attract readership. They invite controversy and strong opinion and are willing to allow comments that walk right up to the line, and will only remove them if they cross that line. SP has found that line and employs everything in his arsenal, not just at yourself, but at many folks in here. It's like taking a shower, Jeff. So much water, after all, just goes down your back and into the drain when it's all over. SP is lucky to have you around these days.

And my friend, have a very Merry Christmas. You too, SP, and Don.

Dec. 24, 2011

I think you have hit it on the head, refriedgringo. I believe we are all enjoying the scrum between Jeff and SP, and they know it. Best, Don Bauder

Dec. 25, 2011

Actually dork I don't know your name, unless Jeff is your real name. I could care less to be honest with you. I have read a few bits of your blog, that's it.

As for the libel and harassment, that is the height of hypocrisy!!!! ......seriously, you have said derogatory comment after derogatory comment after derogatory comment about me on every post you put up.......put on your big boy pants and stop being the little wimp you always have been.

Look at your comment dork, your post was 243 words-all insults over my post that had like 25 words and all i said was you had a blog.....LOL!

I bet you were beat up on a lot as a kid, well even today-that explains your constant need to engage in these verbal assaults. You seem to have this inferiority complex, and your failures to measure up are brought out here.

Dec. 24, 2011

SP, stop being a royal ass. Just have a nice Christmas.

Dec. 24, 2011

Hey, watch that mouth Refired!

Dec. 25, 2011

His name -- or his pseudonym -- is Refried, not Refired. Best, Don Bauder

Dec. 25, 2011

REFRIED! I miss typed, as usual.

Dec. 25, 2011

I define a royal ass as a purebred donkey. Best, Don Bauder

Dec. 25, 2011

I have a hunch SP and Jeff know each other, and have had many beers, and shared many laughs, together. Best, Don Bauder

Dec. 25, 2011

Really classy post. Let's see if I can top it by imploring you to live up to your oft-stated intention to abandon this site. That would include ceasing to post inane and vituperative comments. Enough, already....we get it. You don't like us, you REALLY don't like us. Happy friggin' holidays.

Dec. 25, 2011

I know nothing about those oft-stated intentions. I would hate to see some of our most prolific posters depart. Best, Don Bauder

Dec. 26, 2011

No worries, Duhbya. I wish everyone a very Merry Christmas with no lumps of coal in the ol' stockings. People can say whatever they want about moi, and moi doesn't really much care. One of my very favorite songs, by a Caló poet from Mexico City named Jaime López, and was later used in the infamous Chilanga Banda recorded by Café Tacuba, sums it up best in the closing line:

Carcacha y se les retacha.

That loosely translates to bouncing off of me and sticks to them. I think we are what we write. And I think that Kurt Vonnegut was 100% right when he said that, in such a case, we must be very careful about what we write.

Merry Christmas, my friend.

Dec. 25, 2011

I know you're right about the boomerang effect, D. That post tripped my "irk" mechanism. Espero que hayan tenido una gran navidad. In the perfect timing category, we were treated to half a foot of powdery snow here.

Dec. 26, 2011

That irk mechanism keeps some lively posts off this blog. Best, Don Bauder

Dec. 26, 2011

We are what we write? Oh dear. Best, Don Bauder

Dec. 26, 2011

Some kings of England were royal -- and bloodthirsty -- asses. Best, Don Bayder

Dec. 26, 2011

Sticks and stones will break my bones but names will never hurt me. Best, Don Bauder

Dec. 29, 2011

Jeff, I agree that SP's invective darts have stung you, sometimes unfairly. But remember, you have said that SP is mentally ill. So you both have calumnies in your quivers. Best, Don Bauder

Dec. 25, 2011

Don, That apparition has called me a liar. Prove me wrong on the mental illness. He has only been responding for a couple of years and how many posts??? That could be a sign of illness, plus his drunk writings might be a sign of more. And why don't you insist that Falstaff give his real name? I guess since he mostly agrees with you that you won't give him a pass. I suppose if he was blasting you like he does me, he'd be banned in a heartbeat. I guess there are a few sets of rules around here and they apply differently to different folks. SP(Falstaff or whatever you call yourself), be a man and tell us your real name.

Dec. 25, 2011

I not only proved you wrong, I proved you were a lair and plagerizer. Cut and paste king.

Dec. 25, 2011

Jeff is a lair and plagerizer? I wouldn't mind being called a lair. Best, Don Bauder

Dec. 26, 2011

Yes, that essay on why we need brokers that a Jeff posted a few weeks back- it was a repsonse to one of your comments-it was long and was supposedly justification for having brokers. The problem was he did not write it nor attribute credit to the source-he tried to pass it off as his own. Sure, he changed up a few words here and there to try to throw off a Google search, but that was just more evidence of his lie and plagerizing of the eassy, buttressing the fact he was stealing it. I CALLED HIM ON IT AND HE GOT MAD.

Dec. 26, 2011

Hey SP, Falstaff or billybobhenry, or Johnnyvegas. What is your real name? Be a real man instead of a coward.

Dec. 26, 2011

Falstaff? I haven't seen that one come up. Best, Don Bauder

Dec. 26, 2011

I call him Falstaff because he reminds me of Shakespeare's John Falstaff. http://www.essortment.com/shakespeares-falstaff-61257.html He's probably likeable in a perverted sense of the word, but has no social skills as all his time is spent bullying people on sites. I suspect that he has no friends. What a sad way to have to go through life. I've gotten private messages from other commentators in these threads that tell me that he's been banned from many sites, and only appears on this site because this is the end of the road. If the Reader ever enforces their TOS, he'll have to move on. Again, I wonder what his real name is and if he has the courage to reveal himself. Just operating with a pseudonym plus his own episodes of lifting stuff off the internet makes his accusations moot.

Dec. 26, 2011

Oh jeff, you made me cry!

Dec. 26, 2011

Is this a death penalty offense? Best, Don Bauder

Dec. 26, 2011

The only death penalty offense is Jeff's plagerizing the work of others and passing it off as his own.

Dec. 26, 2011

And yours also.

Dec. 27, 2011

If SP were blasting me, he would be even more welcome than he is. My job is being a punching bag. Also, I have no say over whether a blog poster gets banned. Best, Don Bauder

Dec. 26, 2011

Don, this is your dinner party and I suspect that you have more control than you let on. You should not tolerate bad guests, this isn't the Jerry Springer show.

Dec. 26, 2011

Jerry Springer considered running for president of the U.S. If nominated I shall not run and if elected I shall not serve. Best, Don Bauder

Dec. 26, 2011

So did Pat Paulsen.

Dec. 26, 2011

Are you talking about me or nokomisjeff? Or someone else? Best, Don Bauder

Dec. 24, 2011

LOL!!! Now this is why I still read this paper. Merry Christmas, Don.

Dec. 25, 2011

I hope it is lucky for the Reader. Best, Don Bauder

Dec. 26, 2011

dem bad boys and gals is real verbally fun wingdingers eh Grantie...a merry merry to all of Dons commentors!

now to ur respective corners everyone...here's a glass of eggnog while u take a breather before the next round

Dec. 26, 2011

The donnybrook between SurfPup and nokomisjeff was not an example of Peace on Earth. Best, Don Bauder

Dec. 26, 2011
This comment was removed by the site staff for violation of the usage agreement.
Dec. 26, 2011

It's time for you two to draw up a truce. Best, Don Bauder

Dec. 26, 2011

Jeff's wife died of cancer a short time back. Your statement about his late wife is hateful. If all you can do is to personally attack people in that manner, then you need to seek some help.

Dec. 27, 2011

I think most people who have been around a while know what a a$$hole surfpuppy can be when it suits him. Most of us just ignore him. But in this case, I agree with refriedgringo. His remark about Jeff's late wife is not merely in bad taste, it's dispicable. I guess if if anyone's looking for an accurate indicator of surfpuppy's true character, I think we've just seen it. Absolutely no one with any decent moral compass would make such a remark, even in in the "heat" of their current discourse.

Dec. 27, 2011

coraclay is back under the new gimmick handle!!! I thought you were eating lobster out in the keys or kicking it at crystal cove!

I see I have been so far in your head you're now sending old Jeffie my personal info in PM's!!!!! Where can I send the rent check I owe you for camping out inside your head :)

Dec. 27, 2011

We intend to inform and entertain. Sounds like we're doing the latter and not the former. Best, Don Bauder

Dec. 26, 2011

"And enterprises of great pitch and moment With this regard their currents turn awry And lose the name of action."

This is the most unreservedly mature bloggery of which I am aware . . .

Dec. 25, 2011

Not to mention "the Whips and Scorns of Time." Best, Don Bauder

Dec. 26, 2011

For some reason, I'm soooo happy that I stayed out of this one. Prospero ano y felicidad to all of you!

Dec. 26, 2011

Yes, a prosperous year to all. Holders of blue chip U.S. stocks may do well. But I am afraid the general population -- both in the U.S. and in other nations, particular in Europe -- will continue to suffer. Certain stocks should do well BECAUSE Main Street is suffering. The Fed lowers interest rates to almost zero, making bonds and cash undesirable investments, and quality, high-yielding stocks rise -- unless there is a calamity/panic as in 2008. Best, Don Bauder

Dec. 26, 2011

I'm moving toward capital preservation. I don't see signs that bode well for maintaining the current HIGH level at which the "market" rides.

Dec. 27, 2011

Twister, your idea of capital preservation is very smart. One needs to play a strong defensive game in these treacherous times but it's not as easy as it looks. Like you I don't see any signs that bode well, and I am seeing some dark clouds on the horizon. With the dollar index hovering near the all time bottom, around 80(off it's 2002 high of 106), equities and commodities are the only thing you can put those depreciating dollars in where you have a chance of making a positive return. With most interest rates firmly in the negative return zone, and the yield curve what it is, it makes no sense to even save, especially if your saving in dollars. I don't think the stock market is going up per se, it's just that currencies are losing so much value their decline is causing the stock market to appear to go up. Here's a sample of 5 year charts on gold prices in all the major currencies. http://www.usagold.com/gold-price-forex.html Sorry I couldn't put up my Bloomberg screenshot of gold charts, but the charts I linked give you the gist of the fact that all the major currencies are losing value. Anyways, I wouldn't particularly mind seeing a market blow off like 2008 where one could step in and buy good stocks and make 20% on a stock in a week or so. I have done extensive work quantifying the risk/reward for stepping in on panics and buying good stocks when the indices have a greater than 7% decline in one day. Buying panics seems to be the best method(from a trading standpoint) for taking money out of the stock market. Rothschild, Gould, Vanderbilt, Fiske, Henry Clews and old Joseph Kennedy always stepped in on panics.

Dec. 27, 2011

Yes, the Robber Barons stepped in on panics. They also helped create the panics from which they profited. Best, Don Bauder

Dec. 27, 2011

The market is overpriced but less overpriced than bonds and cash. Best, Don Bauder

Dec. 27, 2011

I don't know if the stock market is overpriced or not. The price action suggests it's not. If the S&P holds 1221, there is a 85% chance that the market will have a strong move upside. Pundits like Alan Abelson (http://topics.barrons.com/person/A/alan-abelson/6032) have been bearish ever since the Dow was at 800. Hell of a big move to miss. Cash isn't overpriced, it's dirt cheap right now. The prime rate is 3.25% and the overnight is 0.25% which suggests that my contention is correct....I know there's lots of money out there and my clearing firm is trying to shove it down my throat.

Dec. 27, 2011

I stand by what I said: the stock market is overpriced, given the looming disasters that hang over the world. (I would give a global recession, combined with worldwide street violence aimed at financial officialdom, about a 25% chance.) To fight the economic weakness, the Fed has lowered interest rates to ridiculously low levels. This makes stocks less undesirable than other assets. This is why I am still buying utilities, pharmas, telecoms, some oils yielding 4% or more. But if that 25% macroeconomic possibility eventuates, I don't know what I will do. I might keep buying U.S. blue chips yielding over 4%. If there is a panic, they would go down, but at least would throw off some income. Best, Don Bauder

Dec. 28, 2011

Curious on your methodology of arriving at the 25% recession combined with violence. Is it formulaic, an opinion from someone else you that fits your worldview, a guess, or some other proprietary system? Just price action, the yield curve, depreciation, government debt, debasement, the slowing velocity of money, and a few other variables cause me to arrive at a much higher figure, somewhere in the 50% within 5 years. Utilities make sense for now, but one can look at the 1930's action of utilities for guidance. Interesting observation....I was in Comcast today getting a new digital box and noticed people turning in their boxes and slimming down on the cable. The clerk told me that nobody can afford premium cable anymore. Surprising because Comcast is way off it's 2009 low of 11.63.

Dec. 28, 2011

No methodology -- just a quick opinion based on some economists' predictions. I was only talking about 2012. I think 50% very possible in 5 years. And I agree that utilities won't always be good. Best, Don Bauder

Dec. 28, 2011

Free speech includes venality. Fortunately, for forewarning.

Consider the source, quoth grandma.

"I have sworn eternal vigilance over any form of tyranny over the mind of man." Including women, of course.

With respect to exceptions, there can be none in a grown-up society. Those who err, or fail to exercise common courtesy, soon realize there are consequences. But they should not be banned or muzzled.

Dec. 27, 2011

Then there is the Gilbert & Sullivan Watch and Ward song from Yeomen of the Guard. "The screw may twist and the rack may turn, and men may bleed and men may burn...." but she thinks it's necessary for the sake of stability in her beloved British empire. "I keep my silent Watch and Ward." Best, Don Bauder

Dec. 27, 2011

Some recent free speech trends in the U.S. are frightening. Best, Don Bauder

Dec. 29, 2011

"But if that 25% macroeconomic possibility eventuates, I don't know what I will do. I might keep buying U.S. blue chips yielding over 4%. If there is a panic, they would go down, but at least would throw off some income. Best, Don Bauder"

What percent cash are you holding (capital preservation) now, and how would that change if there is a foreclosure bloodbath or a continued, perhaps worse recession/depression? What investments would benefit (recession-proof) other than going short? (I believe short selling is just gambling. Of course it is all gambling if there is no real value involved.)

Dec. 28, 2011

Short selling is gambling. It is no calamity protection. I try to hold as close to 0% cash with rates so low, but I always hold some in case of emergency. If the recession/depression worsens, U.S. Treasury paper would be the best bet. High quality bonds do well in deflation. (Bad bonds default.) Best, Don Bauder

Dec. 29, 2011

I would contend that for the general public, that anything they do in the market is a gamble, not just short selling. Short selling is just another tool in one's belt to extract money from the market. However the general public generally is long, and shorting is not something they do and it would be gambling for them to short. In fact, one of the most accurate indicators back in the 1950's-1980's was the odd lot short sales number from the NYSE.

Your statement that if the recession/depression worsens that treasuries would be the best bet is only true if it is a 1929-1940 style depression where treasuries remained steady while equities lost 90%. Treasuries would be a very bad bet if we had an 1874 style depression, or if we had a Weimar style collapse/hyperinflation/depression (1921-1922). Furthermore, if the current debasement of the dollar continues, one might look at commodities which didn't hold up in 1929-1940, but performed very nicely in 1874 and were really the only thing to own(if one had no access to foreign currencies) during the Weimar collapse.

Dec. 29, 2011

Good points, Jeff. Quality bonds were good in the 1930s Depression but they were awful in the Weimar collapse, which was hyperinflationary. I sometimes lie awake at night wondering what will happen to my bonds after the economy starts growing and the banks start lending all that money the Fed created. Best, Don Bauder

Dec. 29, 2011

The trading history is beyond my pay grade, but I have always considered any market investment a gamble. One reason why Don and me are at odds on economics; while we can agree on the results, we don't always agree on the cause. Don wants investments protected and I have insisted that Reagan's economic allies were at fault for not entirely disconnecting the government from all investment. Radical differences. I have maintained for years that if the Fed was abolished long ago we wouldn't be seeing this crisis as sharply as we are currently living through it.

I'll stick to the ponies. At least I know what the take-out is. With the government involved in whatever investment I make, I never know how deeply they are willing to prop up the book maker as opposed to the punter.

Dec. 30, 2011

You say markets are rigged. Right on. They are. But what about the ponies? Now there is where the rigging is even more blatant. Best, Don Bauder

Dec. 30, 2011

On the major tracks, races are seldom rigged. Exceptions are trainers that give horses illegal supplements. It happens at times. Savvy players learn to use that as a variable in such instances, or else not to bet races where such suspected trainers enter a horse. I would say this: there is more transparency on a big race track than in the markets. I would also say that anyone who devotes a mountain of their time studying the markets will be able to overcome the shenanigans. I think this is even more easy at the track.

In a capitalist society, everything is rigged to some point. I think some economists would be better off with a degree in sociology. It is simple, for example, to understand Keynes' theory of consumption or even Friedman's permanent income hypothesis, but both equations rely on human behavior. And neither effectively address profit in terms of a range, or perhaps a playground for such behavior.

Simplified, supply and demand doesn't affect either the consumer nor the vendor in theory except as a balanced transaction, but in practice we tend to want to be both successful consumers and successful vendors. This human nature of ours will inevitably lead to some sketchy practices on both sides, regardless of how strictly any entity should try and control it.

Critics of Hayek will point to Canada and claim that their robust economy and lack of bank failures is due to strict control and regulation. I'm not convinced that's the case. Rather, Canadian bankers and investors could simply be smarter and more practical than their American counterparts. There are simply not enough variables for the intangible attributes of human behavior.

Dec. 30, 2011

You concede that races are fixed through use of chemicals, and go on to say that it is the insiders who are aware of this and stay away from rigged races. You say the same set of variables applies to Wall Street, and I don't disagree: unfortunately, Wall Street is an insider's game, too. I have always thought that newspapers should run the race results and stock market listings on the same page to attract the same audience. Best, Don Bauder

Dec. 31, 2011

Actually, a lot of traders also play the ponies, bet on sports, play poker etc. However, in most of those games, with the exception of poker, there's a built in negative eV. It's all about the risk and the thrill of risk. Among the professional trading community, the trading is usually +eV, and most good, professional traders can quantify their eV pretty accurately. In my case, I know that for every contract of wheat I trade, I can expect a usual profit of three quarters of a cent(this includes losses. This percentage changes for each different market cycle. Some high frequency traders I know have their algorithms tuned to spit out a profit of $.10/100 shares, some at $.1125/100 shares and on and on. They are pretty spot on with their quantifications and the results are pretty close to the predictions.

Dec. 31, 2011

I pick up finances on Bloomberg TV. I always get a chuckle out of how much time they give to sports. Obviously, they are playing to gamblers who also happen to gamble on markets. Best, Don Bauder

Dec. 31, 2011

When I'm trading in the market, I do best when I am playing the role of the house. The vig can add up over time.

Dec. 31, 2011

In the casinos, the house wins in the long run. But people keep going to the slaughter. Best, Don Bauder

Dec. 31, 2011

As it should be in both casinos.

Jan. 1, 2012

Just remember that when you bet on a pro sports game, you are betting against the house. Best, Don Bauder

Jan. 1, 2012

The only time I ever bet sports is when someone wants to get a bet down and I charge them vig and usually lay it off with a bookie.

Jan. 2, 2012

In betting on sports, you may be betting against somebody who knows who willl win or beat the spread. Best,Don Bauder

Jan. 2, 2012

Absolutely, but the cost of the vig more than compensates for inside knowledge over the long run.

Jan. 3, 2012

I study the internet traffic to various websites. The two searches that top the traffic every day are sports and celebrity news. The same pattern is true of the San Diego U-T. I feel someone could make a daily that just covered sports and it would sell as well as the daily (that has a variety of news stories). Over the years, I have seen many people buy the paper and through everything in the trash but the sports pages. Not really on topic, but I thought I’d share my observation.

Dec. 31, 2011

Oh yes. Sports has huge readership in newspapers throughout the country. And it attracts a lot of advertising. Why do you think newspapers with few exceptions editorially espouse massive taxpayer subsidization of pro sports facilities? Your observation is not off topic. We have been talking about gambling. Why do you think newspapers run the point spreads on all kinds of sports events, college and pro? Gambling is a huge part of both pro and purportedly amateur sports. Pro football has been rife with owners who were big-time gamblers with organized crime ties. Rooney, Mara, Gene Klein, Rosenbloom, DeBartolo -- the list goes on and on. Al Capone financially backed both the Chicago Bears and Chicago Cardinals. Read the 1989 book, "Interference: How Organized Crime Influences Professional Football," by Dan Moldea. It is footnoted and thoroughly researched. If you read it carefully, you will never bet on a pro football game again. Best, Don Bauder

Dec. 31, 2011

Getting back to the media aspect of sports, there have been many newspapers (and likely there still are) that sell more volume based on the performance by the Toy Department (the sports section, but I thought that Don would appreciate the reference) than by all other sections combined. One that comes to mind, now defunct, was the Los Angeles Herald-Examiner. That newspaper had the most outstanding sports section I've ever read. Much as a Chicago crime beat reporter would have done well to have first served time at the old Chicago City News, any sports journalist would have been lucky to have worked under the late great Sports Editor Bud "Steamer" Furillo at the L.A. Herald-Examiner.

Dec. 31, 2011

But your ultimate boss would have been William Randolph Hearst. Those who made passes at his flirtatious wife suffered grave consequences. Best, Don Bauder

Jan. 1, 2012

Furillo would have slept with Hearst's wife, missed the event, written about it anyway, and won an award for the column. Furillo was a very gifted journalist ;)

Jan. 1, 2012

The Herald-Examiner had a legendary city editor, too. My favorite tale, told to me by a friend who worked at the paper in the Hearst years, was the city editor bringing a story to a reporter. It was preposterous: something like a hunter eaten by a 150-pound grasshopper. "We think this is a great story, page one," the city editor said. Then he added, "Now, I don't want this oververified." Best, Don Bauder

Jan. 1, 2012

When I used to read the print U-T years ago (and the LA TIMES before that), the first thing I threw OUT was the sports section.

Jan. 1, 2012

You might have thrown out the sports section, but you were in a minority. Best, Don Bauder

Jan. 2, 2012

Oh I know that! I'm a minority in more ways than one. ;-)

Jan. 2, 2012

Ditto. Best, Don Bauder

Jan. 2, 2012

This has gotten far off topic, as usual.

Let me respond, again, to Jeff's self-aggrandizing description of what he does as "trading".

It's not trading. It's gambling. It's not investment, it's parasitism.

Futures contracts for agriculture were never intended to be a gambling sport, but to even out price gyrations for farmers. Nowadays it's all about swarms of day traders jockeying to grab a percentage for themselves. They produce zero value, and serve only to distort markets, too often with the result that the poorest in the world starve.

At the basis of all this behavior is morality, or a lack thereof. People like Jeff subscribe to the Mandevillian "Parable of the Bees" analogy, claiming that even evil acts are magically transformed by the "invisible hand" to public good.

This is flat out wrong. It's immoral to profiteer on the backs of starving children...to then brag about it is even worse.

Those of us who actually produce goods and services of value ought to be outraged at the parasites who suck value out of the real economy. Yet folks like Jeff look on us with scorn.

The insiders game that is derivatives and futures trading is far worse for the world than illegal drugs...the least we can do is tax every transaction he makes until the only transactions that make sense are the ones that actually have a relationship with underlying values of commodities, rather than rewarding people like Jeff with his gangster's "vig".

Jan. 2, 2012

Fred, I'm baffled. So, when you educate yourself in one particular area of interest, and I mean educate yourself to the point that you have vast knowledge about that area, more so than most folks, and you take advantage of that knowledge by turning a profit from it, it's immoral? Should we all, then, demand that we have equal knowledge of all things lest anyone be in the position to take advantage?

Jan. 2, 2012

Hi Refried,

I don't think that's it's accurate to say that Jeff's educated in an area of interest...he's just experienced in gambling.

If there were no side effects, and the only persons involved or affected were consenting adults, I'd have no problem with this.

But the truth of the matter is that what he does for a living sucks money away from the needy. He doesn't produce "goods" and he doesn't "serve" anyone. He just maneuvers to cut little slices off everyone else's cake.

I have zero objection to a skilled craftsman, writer, programmer, builder, or other creative person using their superior skills and knowledge to better themselves. But there's no equivalence to what Jeff does. He's not providing finance or liquidity, enabling transactions, helping establish a realistic price for futures contracts...he's just playing a game where psychological tricks and insider information are the chips he uses to take money from others like himself...but it's all built upon the REAL actions of REAL people who REALLY grew food for people to eat. He doesn't assist in that in any way, just siphons off what he can for himself. The result is higher food prices for the very poorest.

Children starve so Jeff can buy himself a new surfboard.

That's immoral. It's not taking advantage of superior knowledge (we've established he has little that's not copy/pasted from elsewhere), it's taking food from the mouths of children.

Jan. 3, 2012

"Children starve so Jeff can buy himself a new surfboard."

I don't see it that way. I've known him for years. I don't have a stake in the markets, I don't see that as investment, I see it as a wager. I don't think anyone should get some automatic guarantee in that arena. And I don't think that walking into that arena is immoral. And I think that those who battle in the markets will succeed based on whatever level of genius they possess in that area.

If I work for you and you drive an expensive Porsche in to the office every day, should I hate you for that? No! I should instead be proud that I work for someone who has the brains and the ability to run a successful company! Right?

I am not responsible for so many hungry mouths on this planet. Neither are you. Neither is Jeff. I stopped mating many years ago, I have enough offspring on this planet. That is where our responsibility ends. Neither of us dictate that problem, and neither of us can solve it. You are a very smart man, Fred, I very much enjoy reading your responses in here. I hope you can come up with something less rhetorical in this particular discussion, I would look forward to that.

Jan. 3, 2012

Hey Refried. Didn't know you and Jeff are buddies...that raises his stature in my eyes.

But I think you've misunderstood, and misstated my point.

Jeff doesn't make anything. He doesn't earn anything. He trades derivatives.

If he were some large trading house, a market maker perhaps, he could claim to add liquidity to the market.

But he's just a gambler, same as some geezer at the blackjack table. He produces nothing of value.

So when he gets money, it's not from doing anything productive or positive in the world...it's just shaving points, distorting prices, using insider knowledge to play his game.

The result is clear and well documented. Children starve when speculators drive up prices not because of market factors but because of their playing these games.

I'm not saying you or anyone else has a responsibility to feed all the children in the world, but we all have a moral duty to refrain from deliberately starving them.

Jan. 3, 2012

There is a more cosmic question here: isn't the problem of the U.S. that we don't make enough or earn enough from our manufacturing? We knowingly gave our manufacturing base away post-1980s. Best, Don Bauder

Jan. 3, 2012

Exactly, Don. And it was psychopaths with MBAs who are responsible for that.

One of the few bright spots in recent decades has been technology, my field. You know what, the finance boys are trying to move that offshore too. They have the same attitude as Jeff, treating those of us who actually create the technology as their inferiors because they have the ability to manipulate the financial system.

Don, the real issue is morality. From ancient times his kind of behavior has been recognized as detrimental to society, and punished accordingly. In the last few decades we've turned away from that, trying to separate morality and economics. Look where it's gotten us.

Jan. 3, 2012

Refried wrote:

"I think that those who battle in the markets will succeed based on whatever level of genius they possess in that area."

Sorry, but there's little evidence for this today, as you well know. In fact, the evidence points another direction entirely.

Those who cheat, lie, steal, distort, and turn government into their private tool are the big winners today...and that's immoral.

Jan. 3, 2012

You make an excellent point, Fred -- capsulizing the tragedy of what has happened to capitalism. You left out one thing: luck. Best, Don Bauder

Jan. 3, 2012

Yes. You're right. Luck is far more of a factor than Jeff, or most financial gamblers, will ever admit.

Look at the studies of financial advisors and fund managers...you'd be just as well off getting a chimp to throw darts. They're "success" is almost entirely due to luck, except when it's due to outright fraud or insider trading.

Jan. 3, 2012

Something less rhetorical? C'mon, this is a website devoted to discussion of matters that, largely, aren't addressed elsewhere. Each side will accuse the other of employing rhetoric. That's how it works. Keep it up. Best, Don Bauder

Jan. 3, 2012

To what end? No one learns anything from invective rhetoric. Hire Jerry Springer if you want for that.

Jan. 9, 2012

Fred, you are really clueless and your lack of knowledge is apparent in this logically false statement you made. "I have zero objection to a skilled craftsman, writer, programmer, builder, or other creative person using their superior skills and knowledge to better themselves." There, that's my cut and paste. You've commented on my site....and realize that it's not cut and paste. At least I will give you credit for using a proxy server when you visited so you still have your anonymity. Surfpuppy wasn't so smart. Anyways, I have run into jealous people like you(lots of programmers are that way for some inexplicable reason) all my life and the comments and invective don't bother me.

Jan. 3, 2012

So your reply is:

  1. I'm clueless.

  2. I am a jealous programmer.

Both quite false, in this case.

My conclusion is:

  1. You didn't read what I wrote, since you haven't responded to it.

  2. You know as little about making software as you do about how the real economy works.

Jeff, you can do better. Give it a try.

Jan. 3, 2012

I am sure Jeff will address the question under discussion: that he is working in a casino. Best, Don Bauder

Jan. 3, 2012

Yes. I'm waiting for him to address the question, instead of just calling me names.

Sure, I've called him names too (pyschopath, immoral, gambler) but I think I can back that up based on his own words.

He demands respect from us merely because of the balance in his checking account and his ability to shave points off the production of others...I refuse to give him that undeserved reward.

(Actually, Don...I also think I've got a higher net worth, not that it matters, and that when things blow up he's gonna be left naked in the cold. I have actual friends, a real life, loving family, and genuine wealth earned through productivity rather than legalized theft from the mouths of poor children.)

Jan. 3, 2012

A clarification, Jeff...

I'm not anonymous. My name is Fred Williams. I'm quite well known actually, and thirty seconds of searching would show you all kinds of information about me. I always comment using my real name, never hide behind a pseudonym.

In addition, I'm not hiding behind a proxy...you're really don't know much about how the Internet works, do you?

Jan. 3, 2012

It's true. Fred is well-known. Best, Don Bauder

Jan. 3, 2012

Invective shouldn't bother us. We should welcome it. (I do, anyway.) But Fred's points are sound: Wall Street is a sea of mendacity. It always has been, but it is now more polluted than ever. Best, Don Bauder

Jan. 3, 2012

I would like to hear from Jeff on this controversy. He has given us some good information in support of his activity. We may not agree, but Jeff deals with facts in building his argument. Best, Don Bauder

Jan. 3, 2012

Don, I disagree that he's given us any useful information...he'll spout numbers, and copy/paste somebody else's ideas, and he's really fast to go to ad hominem when he has nothing to back himself up.

But information? Where? When?

Jeff has some tricks for how to gamble on commodities, and that's about it. Otherwise, his knowledge of economics and finance seems quite shallow, falling into the ludic fallacy more often than stumbling on truth.

He has, as F.A. Hayek would say, only the pretense of knowledge.

http://www.nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-lecture.html

I suggest he get a real job, work for a living, and learn something about the world. I've met plenty of Jeffs in this world, and I don't respect them a bit.

Jan. 3, 2012

Refried: I don't believe Fred is saying this. He is lamenting correctly that speculation has morphed into mere gambling. Best, Don Bauder

Jan. 3, 2012

Fred, you are correct that the commodities pits have become gambling pits. Supposedly, the difference between speculation and gambling is that speculation serves to help move the economy forward. But the pit speculators are too often simply gamblers. This is a problem not only in the commodities pits, but throughout our economy -- and throughout economies overseas, too. Best, Don Bauder

Jan. 3, 2012

Yes. Exactly.

I have no issue with someone who actually creates something getting a big reward.

I have many issues with those who break or bend the law, cheat, and act immorally to literally steal from the rest of us and then lecture us all on how their brilliance made them rich.

Have you read about the recent research on pyschopathology? As one wag put it, if you're born a poor psychopath, you go to prison...if you're born a wealthy psychopath, you to to business school. Top CEOs frequently exhibit psychopathic tendencies, an utter disregard for the consequences of their actions, and disdain for others in the world.

I think Jeff fits that description nicely.

Jan. 3, 2012

Don, maybe you're behind the time, but the commodities pits are pretty well closed up and only account for 2-3% of volume at the exchange. Everything has gone electronic.

Jan. 3, 2012

Fred, I hire a computer guy, an hourly guy to manage my systems. I don't know too much about computers, nor do I need to. I pay people to do that kind of stuff. And Fred, although I don't really know how the economy works, I do know how markets work, and furthermore I understand all the economic philosophies from Hammurabi all the way through Marx and Krugman. Anyways, your cognitive dissonance was clearly exhibited when you visited my blog and had a cute little retort. Furthermore, I'll admit that I'm mistaken about you....you're a writer and hack, sorry about my confusion...a profession far more useless than what you accuse mine to be. The world can live without what you write, but the world cannot live without what I trade. However, it's obvious that you need a victory in life so I will let you have the last word.

Jan. 3, 2012

A writer and a hack? Been called a lot of things, but never that. You still don't know what I do...

Jeez, Jeff. Maybe you should hire someone intelligent to find the information for you while you go gamble some more.

Jan. 3, 2012

Well, one thing I'm certain of is that you are far more self-righteous and sanctimonious than I ever will be. Have a nice day sport.

Jan. 3, 2012

Still avoiding the issue, aren't you Jeff?

Defend your position instead of calling me names...or have you given up in sad recognition that your position is indefensible?

Jan. 3, 2012

Self-righteousness and sanctimoniousness are not qualities that create success in the commodities pits. Best, Don Bauder

Jan. 3, 2012

As I recall, Jeff knows you work with computers. So in using the word "hack," he might have meant to say that you are a computer hacker. Best, Don Bauder

Jan. 3, 2012

Jeff, we writers ain't THAT otiose. Best, Don Bauder

Jan. 3, 2012

Careful, Don...Jeff has repeatedly called you ignorant (like anyone else who doesn't share his hubris), and I'm sure he'll repeat that again here while simultaneously claiming that you're just attacking him and calling him names.

Quite funny, in an ironic way.

When the guy who calls Don Bauder ignorant of finance and economics also calls me names, it makes me proud of the company I keep. :-)

Otiose...that's a word I haven't seen in ages. I'm sure Jeff is googling it right this moment.

Jan. 3, 2012

Otiose is a good word for useless, but there are other equally delightful meanings. Best, Don Bauder

Jan. 3, 2012

xx

Jan. 3, 2012

Jeff,

  1. The link doesn't work. You should test this before posting.

  2. Are you trying to call me a sex offender? Because I disagree with your economic philosophy and have called you a parasitic speculator, you want to label me a rapist? That's totally pathetic, dude.

  3. Ironically, when I was at Epic Solutions in San Diego, I helped design and test the user interface of the first version of California's Megan's Law database for the CalDOJ.

Jan. 3, 2012

I've refreshed this page, and look...Jeff removed his pathetic accusatory link.

What a loser.

Jan. 3, 2012

One calls the other a parasitic speculator and the other calls the first a rapist. I would call that tat for tit. Best, Don Bauder

Jan. 3, 2012

No...I simply used common English words to describe what Jeff does for a living and how he does it, according to what he's written here.

I don't think I've ever written anything anywhere that would suggest I'm a sex offender...except maybe that one time two years ago I jokingly offered to give a female poster a "pearl necklace", but I quickly apologized when she took offence.

Tit for tat would be him calling me sanctimonious, which is fair enough. What he's done here today is just childish.

Jan. 3, 2012

xx -- does that mean you guys are going to kill and make up? Best, Don Bauder

Jan. 3, 2012

No, it's Jeff's edit...originally he posted a link to a sex offender database.

The link didn't work, but I'm guessing it pointed to someone who has a similar name as mine.

It's too bad he removed it, since it clearly demonstrated his inability to advance his arguments through reason or examples, and his eagerness to insult and denigrate those who disagree with his bombast.

As noted above, it's especially ironic since I actually helped create California's sex offender database, and Jeff has posted numerous claims that we're calling him names.

As to "kill and make up"...I hope you unintentionally used your right ring finger instead of your left ring finger when you typed that...I don't see any reason (yet) to commit murder over mere blog comments, though I'm sure I won't be kissing Jeff any time soon either.

Jan. 3, 2012

I meant to say kiss and make up, and didn't proof the entry before I sent it. My error. Go ahead. Neck. Best, Don Bauder

Jan. 3, 2012

I thought Jeff was offering us a beer. Since he thinks he's "the most interesting man in world." When he does drink beer, he prefers Dos Equis.

Jan. 3, 2012

Fred, you've lost the argument when you start calling me names. Your exhibited cognitive dissonance is treatable with modern medicine. I suggest that you consult your physician.

Jan. 3, 2012

That's entertaining, Jeff...but you still haven't told us how you justify taking food from the mouths of the hungry so you can buy yourself a new surfboard.

Please, just answer our questions instead of posting a link to a sex offender database.

  1. How is what you do different from gambling?

  2. Where and how does your "work" benefit society?

  3. Do you think morality and economics are separate, or connected? Explain your reasoning. If they are connected, how can you justify the way you get your money?

  4. Why do you hold productive members of society in such contempt? Do you believe that being involved in finance makes you superior to those of us who create real things?

We're all waiting for your brilliant reply, buddy, since you've claimed that you understand economics from Hamurabi to Krugman.

Best,

Fred

Jan. 3, 2012

This delightful colloquy between Jeff and Fred for some reason makes me think of a sequence in Gilbert & Sullivan's HMS Pinafore. The Rt. Hon. Sir Joseph Porter, K.C.B., the first lord of the admiralty, is the world's most pompous ass. He takes moral umbrage at use of the word "damn." Captain Corcoran uses the word. Growls Porter, "That word of evil sense is wholly indefensible. Go ribald, get you hence, to your cabin with celerity. This is the consequence of ill-advised asperity." Best, Don Bauder

Jan. 3, 2012

I have never heard of a medicine to treat cognitive dissonance. Please tell us about it. Best, Don Bauder

Jan. 3, 2012

Well, this has been fun.

But I have people to see and things to do, so I can't indulge in this play any more today. Maybe I'll check back in eight hours or so...hopefully Jeff will be able to defend his position then, telling us why he believes it's moral to speculate on other people's food.

See y'all later,

fred

(P.s. For anyone who's interested in digging deeply into economics and morality, I highly recommend Tomas Sedlacek's book, The Economics of Good and Evil.)

Jan. 3, 2012

There are so many good books on economics. That sounds interesting. Best, Don Bauder

Jan. 3, 2012

Hi Fred, I mean "Chance the Gardner."

Your questions. 1. How is what you do different from gambling? When one gambles they create risk. When one speculates, they assume risk. In gambling, the risk isn't there until you get the bet down and spin the wheel. If I buy a wheat contract, the risk is already there.

  1. Where and how does your "work" benefit society? We aid in price discovery which is a better system than any central planner can do. And contrary to your contention, I add quite a lot of liquidity as I have a solid bid and offer for at least 200 contracts of wheat during the entire trading session. If speculators aren't around, who's going to buy the farmers crop at harvest time? Have you studied agricultural market pricing before there were futures markets? I suspect not. Do speculators raise prices? Sometimes, but we also lower them. Irwin and Saunders wrote an interesting paper. http://www.oecd.org/dataoecd/16/59/45534528.pdf

  2. Do you think morality and economics are separate, or connected? Explain your reasoning. If they are connected, how can you justify the way you get your money? I can't explain it to you as trying to get through to you would be like trying to explain the Mona Lisa to Helen Keller. Read, Adam Smith's "Theory of Moral Sentiments" http://www.ibiblio.org/ml/libri/s/SmithA_MoralSentiments_p.pdf As Smith says, "Charity, while a virtuous act, cannot alone provide the essentials for living. Self-interest is the mechanism that can remedy this shortcoming. It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest”

  3. Why do you hold productive members of society in such contempt? Do you believe that being involved in finance makes you superior to those of us who create real things? That is merely your opinion. I don't hold productive members in contempt(that is your own delusion), I celebrate and admire them. However, I do hold people (especially people who do a lot of business with government and are rent seekers) in contempt who offer ad hominem attacks about my character, while being smug, self righteous, and sanctimonious.

Finally, while beating up on speculators, remember that every time you go to the grocery store and buy that 99 cent special on sugar during inflationary times, you are speculating in food prices. The grocery store who's selling you that food is speculating that you will buy the product that they are carrying and will profit before it goes bad. When you top off your gas tank during rising gas prices, you are speculating in gasoline. And every time you get out of bed and drive to work, you are speculating that you won't get killed on the way to work so you can earn your wage.

Show me real evidence that speculation makes children starve.....that children victim hood thing sounds like a real Democrat Talking Point. http://www.youtube.com/watch?v=Qh2sWSVRrmo

Jan. 4, 2012

We can all concede that futures markets and the speculators who play them are important cogs in the economy -- have been for centuries. But at the same time, we can see that speculation has morphed into pure gambling. The financial industry has gone from 10% of the economy to more than 20% at a time when manufacturing has gone the opposite direction. Much of that shift is a direct result of gamblers at trading desks rolling dice all day long. The proliferation of derivatives -- extremely complex, mathematics-based contracts -- was a natural outgrowth of this shift to gambling from speculation. And derivatives almost pushed us off the edge -- and could still do so. Best, Don Bauder

Jan. 4, 2012

Show me a time when the markets were any different than today. 1989? 1929? 1874? 1857? 1812? Nothing has changed, ever, it's just that the easy money evaporates and the general public's investments go south, then it's gambling. People seem to get depressed when the market goes against them. Whenever there's a bull market with easy money, then nobody's complaining about gambling, it's the general public's market savvy that's making them money. Nothing has changed since the Rothschild play during Napoleon's defeat.

Your mention of derivatives....are options part of what makes speculation gambling? The people buying the other derivatives like CDS etc, were the ones engaged in risky behavior, not the sellers. Furthermore, isn't it possible to hedge every derivative in the futures, cash, or options market? All are correlated in one way or another.

Jan. 4, 2012

Yes, there IS something quite different from today and 1929, 1874, 1857, 1812. The difference is that the public is in the markets much more heavily than in the past. Through such vehicles as mutual funds, IRAs, and 401(k)s, along with heavy promotion, the little people are now heavily in the market -- about 50% directly or indirectly. The wee folk represent a market ready to be fleeced, like outsiders in the commodities market. Second point: you seem to exonerate the sellers of the derivatives. But look at some of the scandals: Bankers Trust, Goldman Sachs. Sellers use deception to put together and peddle the derivatives. Best, Don Bauder

Jan. 4, 2012

Jeff...you've obviously NOT read the Theory of Moral Sentiments. Otherwise you would know better than to pull out that old canard of the butcher. This has been misquoted and misapplied for a long time, and misrepresented in business schools too...but you've swallowed the lie and believe it to be true.

In fact, if you actually bother to read for yourself rather than just parrot others, you'll find that Smith was directly contradicting what Mandeville proposed. While the butcher does act in self interest, this is and always has been limited and circumscribed by SYMPATHY. This was Smiths' biggest issue in the book, which is why it's clear to me you've never read it beyond that one popularly misunderstood quote.

Let me educate you:

Smith portrayed man as an inherently social being, NOT the egoistic, self-centered "homo economicus" you claim. His close friend David Hume was similarly convinced that emotion and fellow-feeling trumped reason and was the well-spring of human action...NOT cold calculation of advantage. Reason is a slave to the passions, not the other way around.

Smith makes it very clear than any philosophy that neglects the key role of inherent human sympathy is merely, "debauched teachings":

"There is, however, another system which seems to take away altogether the distinction between vice and virtue, and of which the tendency is, upon that account, wholly pernicious. I mean the system of Dr. Mandeville."

Smith wrote the Theory of Moral Sentiments specifically to REJECT Mandeville's "Parable of the Bees", which is the theory that the invisible hand turns vice into virtue. Smith NEVER claimed that unfeeling selfishness produces public goods except by accident...and was clear in saying that morality MUST trump economic calculations. Even more, he also noted that MORAL actions can create bad outcomes...so all he was saying in the butcher metaphor is that there are unintended consequences in the world, good and bad.

HE NEVER SAID THAT EVIL ALWAYS PRODUCES GOOD.

It's perverse to twist Smiths' words around so completely, although you are not alone in this whopper of an error.

But let's get back to YOU.

You wrote in earlier comments elsewhere that you clear your positions every night. You never invest for the long haul, and never hold a position for longer than a day. Isn't this what you have said?

Didn't you also write that the "common man" has no business investing because people like you will take all their money? Haven't you agreed that the market is rigged against outsiders, and that only the pros can manipulate the system?

(cont...)

Jan. 4, 2012

Adam Smith was -- or considered himself -- a moral philosopher. Best, Don Bauder

Jan. 4, 2012

(cont.)

This makes it clear to me, and any one else, that what you do is not honest business, but an insider game where your wet dream is to fleece a sucker. You're not an investor, who risks his capital in the hopes of gains in value...you're just a gambler betting on the outcome of issues you have no business in. It's no different than betting whether a roulette ball goes into black or red, and it's NOT investing or producing anything.

That's not particularly moral, and you know it (which is why I get your goat so badly and provoke you to such insane fury...that's your guilty conscience speaking).

So any talk about "risk" or price discovery is pure merde del toro, amigo.

Face it...you are not lubricating the market, or discovering price, you are just betting.

Finally, I must remind you that you still know nothing about me. Your characterizing me as a "rent seeker" who "does a lot of business with government" is absurd. Yes, almost fifteen years ago I helped create the Megan's Law database, and soon after I worked on the LACFD HazMat MIS, allowing firefighters to have critical information about the location of various dangerous materials in Los Angeles County so they could evacuate schools and hospitals, don the proper gear en route, and otherwise save lives that would otherwise be lost.

Since that time, I don't believe I've worked for any government agency in the USA...and when I worked in Laos designing an early warning system for the Mekong River Commission, I wasn't paid a single Kip for my work.

And then you close with insinuating that I'm parroting Democrat's talking points. In the first place, that's a non-sequitor (or poisoning the well, another logical fallacy).

In the second place, it's ridiculous to anyone who knows anything about me. Why don't you ask Richard Rider, perhaps the best known libertarian activist in San Diego, who I am and whether I'm likely to be a registered democrat?

(Oh yeah, you don't know squat about San Diego, do you?)

So, again, you swing and miss. You cannot defend your position, especially not by misinterpreting Adam Smith.

Jan. 4, 2012

Please excuse me for writing something so long...the baby's being fussy, and he'll only give me a short time to indulge in this sport of educating Jeff, so I don't have time to go back and cut it down to size.

Jan. 4, 2012

Fred, you need to get your panties out of a bunch. It's going to strangle you. Again, your cognitive dissonance has stopped you from understanding Adam Smith. I don't need any "educating" from the likes of you, and I'm doing just fine without you. Furthermore, I did not call you a "rent seeker," and did not direct my comment at you...Feeling guilty perhaps? But you are parroting democratic talking points as they always talk about "The Children." But enough of this absurdity.....I don't have time for sanctimonious types, and especially you. I'm too busy having a good year today to waste any time discussing market morality with second handers, third rate minds, and naysayers.

Jan. 4, 2012

Um...Jesus also talked about the children.

He also threw the money changers out of the temple.

Are you saying that anyone who quotes Jesus is also parroting democratic talking points?

(And, yes, I'm an atheist...who cares deeply about morality.)

As to cognitive dissonance, I suspect you throw the term around so much that you no longer know what it means, and are too lazy to find another fancy sounding pejorative to toss willy-nilly into your weak arguments.

Jan. 4, 2012

Jeff, you're having a good year, but we are only two days into it. Best, Don Bauder

Jan. 4, 2012

Not such a good year for Jeff...hubris has already met nemesis. :-)

Seriously, have you ever seen someone fold so quickly and completely in a public debate? I had high hopes he could actually bring something to the conversation other than childish insults.

Hmmm...should I have mentioned to him that way back in high school I went to the California State Championship in debate and public speaking? The first semester I ever tried it? With no coach?

The private school kids were in shocked disbelief as the trailer trash kid from the wrong side of the tracks in San Bernardino, wearing a borrowed corduroy sports coat, jeans and a ten year old tie, whipped them again and again...their lawyer daddies had even prepared their briefs for them, but I still won. And then went to wash dishes at Sizzler until midnight.

Nah...I prefer not to give the smug and pampered any warning at all of the humiliation to come. I love watching them melt down in frustration, like Jeff has done here. (Remember when he bragged about how he always wins every argument? That was like waving a steak under a dog's nose.)

Maybe when he skulks back with his tail between his legs he'll begin to talk sense, instead of just repeating the talking points of Limbaugh and Fox News.

I'm still convinced that in the real world, I've got more net assets than little whiny Jeffy-boy. I don't think that someone who is so weak and uninformed survives long in the real market...he's just a minor day trader, not the mogul he portrays himself to be.

It's been fun toying with him, and educating him on what Adam Smith actually wrote...maybe now he'll take the time to read it for himself instead of trusting to others to do the thinking for him.

Jan. 4, 2012

Was it Mark Twain who told a friend that he was sorry the letter was so long; he didn't have time to write a short one? Or was it somebody else who said that? Best, Don Bauder

Jan. 4, 2012

I thought that was Voltaire...hold on, let me google...

You're right. It was Clemens:

"I would have written a shorter letter, but I did not have the time."

Jan. 4, 2012

It did sound like Twain. Best, Don Bauder

Jan. 4, 2012

Speculators are important in greasing the wheels of commerce -- no question. Gamblers possibly inhibit the smooth running of commerce by diverting money to the casino owners that belongs in the schools, for example.

Jan. 4, 2012

The pattern here is clear:

  1. Jeff, proudly representing the 1% who have destroyed the economy through irresponsible gambling, makes ridiculous claims.

  2. Others dispute these ridiculous claims.

  3. Jeff calls them names, sulks, and whines.

It's a pity. I had hopes that Jeff would be capable of analysis, argumentation, discussion, maybe even truth-seeking.

But his hubris overwhelms his reason (proving, again, that his homo-economicus world view is bunk) and he'd rather make wild accusations (like calling me a sex offender -- I don't expect he's man enough to apologize for that) than engage in debate.

So I'll have to be content with being called a "second hander, third rate mind, and naysayer".

Anyone else want to try to defend Jeff's side here? He's not capable. I really would like to have a rational discussion about the topic of economics, morality, and the situation in the world today where parasites like Jeff gloat over stealing food from starving children.

Jan. 4, 2012

If I had a dollar for every time I have been called a naysayer or obstructionist, I could afford to gamble in the markets, too. Best, Don Bauder

Jan. 4, 2012

You and me both...but if Henderson had a nickle for each insult, he'd be the richest man in San Diego.

BTW: In an ironic twist of fate, Duane Dicharia was Henderson's campaign manager in 1994...I think it was his very first try at campaigning. Now he's a big wheel in California Repubican consulting, and is running campaigns for some of the worst liars and crooks in politics today.

In another ironic twist, I'm pretty sure that I taught a 17 year old Nathan Fletcher how to walk precincts and phone bank in the same year.

How times have changed and evolved since then, heh?

Jan. 4, 2012

Yes, Bruce Henderson has endured thousands of calumnies. The reason? He was right. Now that ensuing events have proved that he was right, the invective darts are thrown even harder. People don't want to be reminded that they were wrong. Jeff was referring to cognitive dissonance. It's relevant in Bruce's case, but, alas, there is no medical cure for it. Best, Don Bauder

Jan. 4, 2012

I'm not going to play with Fred any more. He doesn't want rational discussion, he wants a fight. Evidence that he wants a fight is that he even said that I don't know much about San Diego. What does that have to do with anything, but is evidence that he's just throwing stuff against the wall to see what sticks.

It dawned on me that Fred is very angry at the 1% and I represent a convenient whipping boy. Since he's full of his own intelligence, he feels free to try to beat me up. It makes him feel good, or doing his part, or he wouldn't keep this up with 6000 character screeds. I'm not going to contribute or assist with his mental masturbation and he will get no help in the circle j**k from me. I answered his questions, and that's the last response he will get as my computer guy wrote some code that will block anything with his name in it. So Fred, I won't be seeing you any more. Hey Fred, my final word to you: http://www.youtube.com/watch?v=pp0cg91rK2o&feature=related

Jan. 5, 2012

I will be disappointed if you break off your colloquy with Fred. But if you do that, I hope you continue to contribute. Best, Don Bauder

Jan. 5, 2012

Ahhhh...I hurt wittle Jeffy's delicate feelings. Boo hoo hoo.

And then his computer guy charged him money for "blocking" anything with my name in it. (News Flash: Jeff's computer guy knows he's a chump.)

Well, as Don says, if you have anything relevant or intelligent to contribute, please go ahead. If you look back, you'll see I've defended some things you've written here -- when what you wrote is true. I only spank you when you misbehave.

I know you'll be back, Jeff. Wipe the tears from your eyes, change your underwear, and put on your big boy pants. This sand box is still open to you if you'll grow up and play by the rules.

Jan. 5, 2012

This donnybrook has been so much fun -- and, frankly, quite informative. I would like to see it continue: battle on! Best, Don Bauder

Jan. 5, 2012

I enjoy debate and discussion. I abhor the name-calling. If you listen to two economists, one a Keynesian and the other a Hayekian, discussing economics (basically two entirely different economic ideologies), they are quite rational about this. Each can find useful ideas in the others ideas. And still they will never reach an agreement on the whole, simply an understanding. Be a gentleman first and foremost. If you can't respect each other then I would question how much respect you have for yourselves.

Jan. 6, 2012

However, the problem with a civilized and wholly academic discussion between a Keynesian and Hayekian is that very few understand what the two were talking about. Name-calling brings some passion and interest into the equation. We need more heated discussions if the public is ever going to understand how it is raped by the Wall Street-Washingnton DC nexus. Best, Don Bauder

Jan. 6, 2012

It doesn't have to be wholly academic, just rational. People can be passionate without the name-calling.

Jan. 6, 2012

Refried, your friend Jeff has called me a sex offender, among other things, for characterizing what he does as gambling rather than investing.

You've been online discussing things here for a long time, and you know that I don't often go out of my way to insult people...Jeff is so offensive that it was necessary to put him in his place.

Please review the above conversation. Your friend Jeff really needs to grow up.

Don't try to lump us into the same package...that's both simplistic and unfair. I really would like to discuss these issues, but Jeff was only calling names -- way over the line. He deserved the spanking I gave him.

best,

Fred

Jan. 6, 2012

This discussion has generated a lot of passion -- and a lot of good information. I would like to see it continue. Best, Don Bauder

Jan. 6, 2012

You decided he killed babies, Fred. That's hardly the case.

Jan. 6, 2012

Refried, see below...yes, what he does for a living results in dead children.

That's the world we live in today, and I won't pretend to admire someone who does this kind of immoral gambling for a living.

Jan. 6, 2012

He didn't say that Jeff goes out and stabs babies. It was more subtle than that. Best, Don Bauder

Jan. 6, 2012

You support his comments, you own them. Best, Dave.

Jan. 8, 2012

Don't remember that one. Best, Don Bauder

Jan. 6, 2012

A Short History of Derivatives (from Matt Taibbi)

The commodities market was designed in large part to help farmers: A grower concerned about future price drops could enter into a contract to sell his corn at a certain price for delivery later on, which made him worry less about building up stores of his crop. When no one was buying corn, the farmer could sell to a middleman known as a "traditional speculator," who would store the grain and sell it later, when demand returned. That way, someone was always there to buy from the farmer, even when the market temporarily had no need for his crops.

In 1936, however, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission — the very same body that would later try and fail to regulate credit swaps — to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.

All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops — Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.

This was complete and utter crap — the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument.

Read more: http://www.rollingstone.com/politics/news/the-great-american-bubble-machine-20100405#ixzz1ihv06iTh

Jan. 6, 2012

How Derivatives Gamblers KILL CHILDREN

First, you should read the rest of Taibbi's article. He delves into how derivatives traders artificially inflated the price of gasoline through market manipulation while claiming to just be hedging, or "discovering price" through trading paper.

The same is applicable to ALL commodities today, especially food. When the manipulators and gamblers play their immoral games, someone has to pay.

For most of us, a rise in the price of food (say corn and wheat) is no more burden than paying double for our bread at the grocery store.

But for the very poor, especially in the developing world where people subsist on a dollar a day, even a slight shift in world prices can mean disaster.

So, when I say that Jeff is literally stealing food from children, responsible for starvation, this is what I'm talking about.

Children starve when the prices of commodities soar -- not due to genuine market conditions, but solely due to traders like Jeff gambling the prices higher. There are so many of these parasites now that the pieces of paper they play with determine the price of food as much, and too often more so, than the weather, pests, or bad harvests.

This isn't an accident, or unintended by-product of their behavior, this is a cynical and calculated effort to fatten themselves at the expense of the poorest in the world.

Participating in this market when you're not genuinely a farmer or have anything to do with growing or distributing food is highly lucrative, as Jeff brags. But in the end you cannot escape the ugly fact that the result is dead children.

Jan. 6, 2012

Why don't you just call him a "poopy-head". It would take less convoluted logic on your part and save people from the diatribe. For a man who is so staunchly opposed to religion, a belief in a God, or any other such direct intervention having anything to do with anything else, you are very much proposing that anyone that plays the markets for whatever they are worth on either side are also directly responsible for over-procreation in Africa. That's a leap of faith even I can't endorse.

Jan. 6, 2012

Refried, Jeff is your friend, and so you can't be expected to think clearly. If you cannot follow the logic above, well...not my problem. I'm sure everyone else gets it.

As to atheism and morality, I suggest you are being disingenuous. You and I both know that religion never "created" morality. It exists as part of the human condition, and has nothing to do with some invisible angry sky daddy. I suspect that atheists are MORE moral than your average religious nut...we don't believe in divine forgiveness, so we have to actually live moral lives on this earth in our own lifetime, rather than hoping for redemption.

"Over-procreation in Africa"? WTF? You wanna walk that one back?

Refried, you haven't been in this discussion...jumping in only after your buddy made a public fool of himself. So lay off if you don't have anything to contribute other than the same kinds of personal insults that Jeff substitutes for argumentation and reason.

Jan. 6, 2012

I can guess what WTF means but I dare not print it here. Best, Don Bauder

Jan. 6, 2012

WTF = Welcome To Facebook. :-)

Jan. 6, 2012

I was thinking of something else, given the context in which you used it. Best, Don Bauder

Jan. 7, 2012

Religion did create morality. I have no idea where you are getting your history from, Fred. Morality is not a natural occurrence. It is an invention. If you truly challenge me on morality you will be wading in way over your head. Bring it on, from whatever aspect you desire. If you get to the point where logic fails your argument, you have my permission to call me a poopy-head, I will not take that as a personal attack.

Atheists are the most religious people I have ever met. I love them. Their faith in a non-God rocks my world. If only Christians and Jews and other "believers" were so entirely convinced of a thing they couldn't possibly know, what a GREAT World this would be.

Everyone else doesn't "get it", Fred, it's your World, my friend, we just live in it. You want some "sky-daddy" government to come in and protect you from the very people that the "sky-daddy" created. You can switch out "sky-daddy" for God or government, it's all the same. My friend, you are blind. No one is guaranteeing your life, and no one is guaranteeing your investments. You want your investments guaranteed? Maybe you need to pray for that. Get it?

Jan. 7, 2012

Here's hundreds of evolutionary biologists who present convincing evidence that morality is inborn, the product of natural selection, and independent of any religion.

http://scholar.google.com/scholar?q=origin+of+morality&hl=en&as_sdt=0&as_vis=1&oi=scholart

Like your friend Jeff, you don't seem to read or think much for yourself if you believe that morality came from religion.

Religion did NOT create morality. If anything, religion hijacks morality and claims it as its own.

Atheism is NOT a religion, any more than being a non-stamp collector is the same as being a stamp collector.

Are you really serious?

I don't ask the government or Jaweh or Beezebub or Enlil to protect my investments...I only ask that government enforce rules fairly and equally, and treat crime as crime, whether it's committed by a gang banger or a Madoff.

You make unfounded assertions...show me your proof.

My case is very easy to prove. If morality were merely a cultural invention, then morality would be VERY different from culture to culture. It's not. We all, every where in the world, have the same basic morality.

Empathy is ingrained in us for very good reasons. Those of us who have it are able to thrive and grow in society. Those who don't are pyschopaths who deserve either treatment, jail, or execution. This is true in every society.

There's a simple test to prove my case...if you didn't think God would punish you, would you immediately go out to steal, rape, and murder? Is your fear of God the only reason you act morally?

Well...if so, you're not moral at all, just scared into acting better than you otherwise would. But I know you're a better man than that, and don't need the threat of eternal damnation to treat your fellow humans as you would wish to be treated.

Remember, Madoff and Abramoff both claimed to be religious. Didn't stop them from committing crimes. Vaclav Havel was an atheist, didn't stop him from being a moral exemplar.

The religion question, however, is FAR off topic here...shouldn't we take this some place else? The Sheeps and Goats archive ought to have several long discussions on the topic you can join.

Jan. 7, 2012

Oh wait...we DID have this discussion before Refried...maybe you don't remember, but you participated:

Do we really need to repeat it here? Let's save time...just re-read what I wrote two years ago. If anything, the evidence for the biological evolution of morality is stronger today than it was then.

Please, let's keep this topic on the morality of economics, and whether your friend Jeff with his gambling on food does good or evil in the world.

Jan. 7, 2012

Oh, GOOGLE is your God! I can do that as well and come up with MILLIONS of links that incorporate religion with morality. Better yet, let's ask Larry what he thinks since you think so HIGHLY of Google. Hint: He is not an atheist.

Regarding your militant stance on anti-religion, it makes you far more guilty than innocent concerning your atheism. I almost expect you to come-a-knockin' on my door passing out literature. Or Google links.

Regarding Jeff, neither you nor myself are futures traders, but you full well know that futures trading has nothing to do with how many mouths are fed. You claim that its invention was to help farmers, but we both know how crafty politicians lie. The difference between you and me is that I would never pull that argument out of my backside. Government uses the markets to further its control, Google THAT up since you seem to enjoy employing that device.

Jan. 7, 2012

Like your friend, you assert with no evidence.

Weak.

Since you have no evidence, argument, or basically ANYTHING to back you up other than calling me names, why don't you quit now?

I can see why you and Jeff are friends...birds of a feather, both filled with sound and fury, but in the end it's all just bluster that you cannot back up.

It's a pity. When you have some evidence for your assertions, please feel free to write and I'll actually respond...so far, your doing the same as Jeff:

  1. Say something stupid.
  2. Be contradicted by those who know what they're talking about.
  3. Call names.

Kinda childish, Refried. If you have ANY evidence that God created morality, then please lay it out, or explain to me how you disagree with the points I've made above, (like would you be a rapist if fear of God didn't stop you -- do you have ANY evidence that different cultures have different moralities), or please make any kind of argument at all...I'm still waiting.

You said I'm over my head. Well, show me the errors of my ways rather than just calling me names.

(P.s. I use Google because it's a good information tool...what do you use? Prayer?)

Jan. 7, 2012

I'm not calling you names, Fred. That's not my style. I also don't rely on Google much, also not my style. I am, I suppose, a Platonist, in that dialogue is a better way of expressing philosophy than is rhetoric.

What name did I call you? Tell me and I'll certainly apologize.

And, most religions do not incorporate belief. Neither does atheism. Both are based on faith. Not on proof.

Jan. 7, 2012

What's called morality or ethics -- Ten Commandments, whatever -- is simply the wisdom of the ages. That's why the same precepts are found in religions throughout recorded history. But as I said in another post, belief in the precepts and actually living by them are two separate things, and genetics probably plays a huge role in whether certain people actually live by ethical standards they believe in. Best, Don Bauder

Jan. 7, 2012

It's not only crafty politicians who lie. Nitwit politicians lie, too. We are finding that out in the current string of Republican debates (not that Republicans have a monopoly on stupidity.) Best, Don Bauder

Jan. 7, 2012

And one person in that enlightening discussion two years ago was fumber. Remember him (or her)? Best, Don Bauder

Jan. 7, 2012

I think we have to distinguish here between the BELIEF in a certain ethical standard (moral, if you prefer) and the actual PRACTICE of that standard. I think genetics and religion play a role in both. Best, Don Bauder

Jan. 7, 2012

I have barely ever been in a casino, but I understand that people at the craps table do pray for divine intervention. Best, Don Bauder

Jan. 7, 2012

i hate the fact that all non Godhead believers are lumped into the Atheist category...so many are Human Secularist.....Altruistic and as Moral as you get!!

Jan. 7, 2012

There is nothing inherently immoral or unethical about secular humanists. Best, Don Bauder

Jan. 7, 2012

that's good cause i am one

Jan. 7, 2012

I guess the question is whether God is a bull or a bear -- or doesn't give a hoot. God does want a certain team to win the Super Bowl, however. I know, but I am not telling which team until I have made all my wagers in Vegas. Best, Don Bauder

Jan. 7, 2012

Certain ethical standards exist through all religions, and possibly many existed in the very earliest religions, about which we know very little. Best, Don Bauder

Jan. 7, 2012

This reminds me of a story. An atheist is rowing a boat on Loch Ness. All of a sudden the Loch Ness Monster rises from the water, carrying the boat on its back. The atheist screams, "God, save me!" Everything freezes -- the monster, the boat, all completely still in mid-air. God pokes his head out from a cloud, gets on the megaphone, and shouts, "OK, jerk! You want me to save you. All these years you have been telling people I don't exist." Shouts the atheist, "Hey, 15 seconds ago I didn't think the Loch Ness Monster existed." Best, Don Bauder

Jan. 7, 2012

Reminds me of a non-religious joke I actually take credit for creating.

Q: How many neo-Keynesians does it take to change a light bulb?

A: Print more money.

Jan. 7, 2012

That applies to monetarists, too. Best, Don Bauder

Jan. 7, 2012

hahahahahahahahahahaha

here's another Don

An atheist was taking a walk through the woods, admiring all that the evolution had created. "What majestic trees! What powerful rivers! What beautiful animals!", he said to himself.

As he was walking alongside the river he heard a rustling in the bushes behind him. He turned to look. He saw a 7-foot grizzly charge towards him. He ran as fast as he could up the path. He looked over his shoulder and saw that the bear was closing.

He ran even faster, so scared that tears were coming to his eyes. He looked over his shoulder again, and the bear was even closer. His heart was pumping frantically and he tried to run even faster. He tripped and fell on the ground. He rolled over to pick himself up but saw the bear right on top of him, reaching for him with his left paw and raising his right paw to strike him.

At that instant the Atheist cried out "Oh my God!...." Time stopped. The bear froze. The forest was silent. Even the river stopped moving.

As a bright light shone upon the man, a voice came out of the sky, "You deny my existence for all of these years; teach others I don't exist; and even credit creation to a cosmic accident. Do you expect me to help you out of this predicament? Am I to count you as a believer?"

The atheist looked directly into the light "It would be hypocritical of me to suddenly ask You to treat me as Christian now, but perhaps could you make the bear a Christian?"

"Very well," said the voice. The light went out. The river ran again. And the sounds of the forest resumed. And then the bear dropped his right paw ..... brought both paws together...bowed his head and spoke:

"Lord, for this food which I am about to receive, I am truly thankful..."


so i guess God at least listens to the BEAR

Jan. 7, 2012

Above, we discussed whether God was a bull or a bear. We haven't settled that, but now we know that God has a certain affection for bears. Best, Don Bauder

Jan. 7, 2012

yes Pooh bear he does...lolol

uh oh ...i already broke my New Years resolution NOT to be a inveterate flirt

Jan. 7, 2012

Why should you have ever made such a resolution. What's wrong with inveterate flirts? Best, Don Bauder

Jan. 8, 2012

God is a spread trader, pure and simple.

Jan. 9, 2012

We have talked oversupply and undersupply of ag commodities, excessive prices of ag commodities, and now overpopulation of emerging nations. Good transitions there. Best, Don Bauder

Jan. 6, 2012

Commodity traders would argue that the arm-waving in the pits actually stabilizes the world food supply, and helps children. Best, Don Bauder

Jan. 6, 2012

Market liquidity serves a purpose, stability. Regardless of whatever moral violations some may find in the practice.

Jan. 7, 2012

Yes, liquidity can be good for markets.

But excess liquidity searching for a home leads to waste and asset bubbles.

Where did you study economics?

Jan. 7, 2012

Asset bubbles are created by government intervention. Where did you study history?

Jan. 7, 2012

Evidence, please? Anything?

I might actually agree with you on this, but I want to see if you know how to lay out a case...assertion without evidence is just hot air.

Jan. 7, 2012

Fred and Fan, for starters. Nothing spells "reelection" like enabling poor people to buy houses, it started 20 years ago and every administration encouraged it. The government enabled that bubble by creating supply where there shouldn't have been a demand. So when bankers grew concerned over their bad debt, the SEC allowed slop-bucket derivatives to absorb the instant impact of bad debt. Too bad they didn't lay that out in the commodities exchange, the World would have seen how worthless they were right away.

And people want to occupy Wall Street. They should be occupying the White House. Government are the enablers.

Jan. 7, 2012

Truth is, the Occupiers should protest both Wall Street and the government. To blame the government and not Wall Street is naive, if not disingenuous. The problem is that government is not cracking down on Wall Street's greed. Yes, government pushed housing ownership, but the major problems were created by private sector predators who took advantage of the government's programs. Best, Don Bauder

Jan. 7, 2012

AMEN AND HALLELUJAH!!!

Jan. 7, 2012

You're probably one of those arguing that the 2008 crash was caused by Fannie, Freddie, and years of government pushing for broader home ownership. If that's true, why did overseas economies suffer the same fate? The argument makes very little sense. Best, Don Bauder

Jan. 7, 2012

My answer to this is below, printed at 12:56 p.m. Best, Don Bauder

Jan. 7, 2012

No doubt that liquidity can help stabilize markets. But EXCESS liquidity, which is what we have been talking about here, destabilizes markets and can destabilize society. Best, Don Bauder

Jan. 7, 2012

Would we really???

Jan. 9, 2012

Matt Taibbi is one of the great journalists today. He has a great grasp of market shenanigans and an ability to write about the mendacity clearly. Best, Don Bauder

Jan. 6, 2012

Taibbi just plays to your worldview. He's actually quite mediocre and biased.

Jan. 9, 2012

Again...on one hand we've got a highly respected financial journalist with four decades experience saying Taibbi is a great jouralist.

On the other hand we've got a day trader with no known qualifications saying he's mediocre and biased.

Hmmmm...does anyone wonder whom we should believe?

Jan. 9, 2012

The religious faith that does most harm to the world goes like this:

"The Invisible Hand will turn all economic actions into something good for society. Amen!"

This is the faith of our modern age, a blind faith in markets, a faith that continued growth of GDP is all we need to solve all our problems, a faith that markets always find the proper price and act as an honest measurement of value.

This faith, unwarranted, is so ingrained in the world today that hardly anyone questions it.

But why is growth ALWAYS good?

WHERE is the proof of this "Invisible Hand" making things turn out for the best in this world. (Has there ever been a more ridiculously Panglossian belief?)

WHY do we believe in this, implicitly, and dare not question it?

If anybody running for public office dares to question this faith that the market is always right, their career is finished. Can you imagine what would happen to a business leader who said, "No, I think we have enough money and we'll just keep things as they are. Maybe not make so much profit, but we won't be firing people either."

My friends, let's skip the whole religion discussion (fun though it is) and address this instead.

Why do people, powerful people running our governments and biggest corporations, believe in an "Invisible Hand"?

I assert that this belief is:

  1. Unfounded. There's no proof of the Invisible Hand whatsoever.

  2. Dangerous. This erroneous belief leads to any number of outrages against morality, our environment, and our children's future.

  3. Used against us all. The market is worshipped more fervently in America than any god...and is used just as cynically by the psychopaths to loot the wealth of the nation.

Care to comment?

Jan. 7, 2012

Business executives will look at your solemnly and declare their faith in a free market. The next day they involve their companies in another example of rigged markets. Businesses want profits -- in fact, the law essentially mandates that their only important constituency is the shareholder. This means their only concern is running up the stock, legitimately or illegitimately, and reporting improved profits every quarter. To accomplish the profit growth, the last thing they want is competition. Companies in oligolopies surreptitiously carve up markets among themselves so they can all make money and don't have to compete. That doesn't mean there is no competition. Of course there is -- in industries such as retailing, media, etc. But the "Invisible Hand" is the one that guides each member of an oligopoly away from government/antitrust intervention in their schemes. Best, Don Bauder

Jan. 7, 2012

"Hypocrisy is the homage vice pays to virtue."

Francois de La Rochefoucauld

Adam Smith described how businesses inevitably gang together to prevent competition, frequently using government for this purpose.

So the people who are least likely to believe in the Invisible Hand are those same business "leaders" who most loudly proclaim its existence, all the while employing the dead hand of anti-competitive government regulations, wrought by paid-for legislators, to stifle competition.

Jan. 7, 2012

If you examine your statement here, you will find the word "government" in every part of your logic-equation. What would happen, then, if you removed "government"?

Jan. 8, 2012

If you removed "government," Ron Paul and the Club for Growth would say they are ecstatic, until federal contracts disappeared from Paul's district, sports team owners could no longer get government subsidies, tottering banks could not get bailouts and would have to leave their depositors and other customers empty-handed, etc. Austrian school and University of Chicago economics are great in theory, but are no longer relevant in practice. Best, Don Bauder

Jan. 8, 2012

Fred, you are right on that one. The ones who genuflect most conspicuously at the altar of free trade are often the ones who avert it at all costs. The "Invisible Hand" is a shibboleth -- useful for polemic but not meaningful in most cases. Best, Don Bauder

Jan. 8, 2012

It's going to be difficult to keep the discussion rational if we view a very simple invention like religion on such a polar scale. We will need to get back to that at some point here, you will see the value in how it weighs into the discussion later. The most important part of this discussion centers on the nature of humankind, economics in general strives to predict human behavior. A seemingly simple word, for example, that Don uses a lot is "greed". Understanding greed as a concept means that one must understand charity as a concept. Charity and greed are not inherited through genetics. They are learned behavior, gained through social interaction.

Which is a good link to Adam Smith's philosophies.

The "invisible hand" has been hijacked, conceptually, as Smith never actually used the phrase much in his writings. The idea is that all social transactions will eventually seek their own level (much like one could pour water into a ditch in order to reckon building a level retaining wall). It isn't an intentional idea in terms of some moral obligation. It is more simple than that.

If I have an apple grove, then were I some greedy bastard I would be rich in apples, to whatever end I wanted to be rich in apples. But I can't possibly pick all of them myself. Thus, others will benefit, regardless of whether I find any moral satisfaction in that or not; because my neighbors will be given the opportunity to harvest the apples in exchange for keeping some, or by whatever other contract I care to offer. And that contract, by necessity, must be worthwhile for my neighbors lest the fruit rot on the tree or on the ground.

And now that I'm a rich apple-farmer, my inter circle includes other people of similar means. We all have reputations to uphold, we are expected to behave in a manner that society mandates. It isn't enough to simply grow apple trees, it is to grow them in a manner that is not only respectful and admirable to my peers, but also to those looking up at me from a less advantageous position. However, it would do little or no good to be charitable for the sake of being charitable. Because if I give away my apples and my trees, then whatever good has come from being an apple farmer (in terms of how I have contributed to the betterment of society in general) is now gone from society.

The "invisible hand" is simply that act of contributing to society unintentionally by doing what is in my best interest. Take away my orchard, or worse, regulate it, and you diminish or eliminate that contribution. It isn't something to "believe in", there's no magic there. The invisible hand is simply not tangible enough to be put into some big eff-off macroeconomic equation. So obviously, neo-Keynesians think it's nonsense.

Jan. 8, 2012

This is quite incoherent, Refried.

Are you trying to say:

  1. Religion is a simple human invention. (Sure contradicts what you wrote yesterday.)

  2. Economic activities are always conducted in an honorable fashion because of the desire for the admiration of peers and underlings. (Any proof of that assertion?)

  3. So therefore, the "Invisible Hand" is nonsense to neo-Keynesians. (Huh?)

This is just a jumbled incoherent mess -- does anyone here understand what Refried's trying to say? I honestly don't, though I would like to.

Jan. 8, 2012

When we're young, we think love makes the world go 'round. As we get older, we realize it's greed. Those who discover that truth at a young age -- but don't talk about it publicly -- are those likely to succeed. Best, Don Bauder

Jan. 8, 2012

I don't mind greed, so long as I can rely on such behavior when negotiating my way along life's path. I expect it. I depend on it when I bet a horse, and stay clear of the markets because I know better. Love is intangible. You can bait a sharp hook with it, but you won't catch many fish. I think when we're at our sharpest, we are able to cope with humankind's shortcomings, and celebrate her intangibles.

Jan. 8, 2012

We've always had greed. We now have out-of-control greed. (Is that where we got drunk bonds?) Best, Don Bauder

Jan. 8, 2012

Can you quantify the greed going from merely greed to "Out of control greed?" When did this happen and is greed worse today than any other period of history?

Jan. 9, 2012

"1. Religion is a simple human invention. (Sure contradicts what you wrote yesterday.)"

It doesn't contradict what I said yesterday. You don't understand the statement? Do you think God invented religion? Religion is a human invention, Fred. Regardless of our argument over the existence of some higher power, I though we could at least find some common ground here.


"2. Economic activities are always conducted in an honorable fashion because of the desire for the admiration of peers and underlings. (Any proof of that assertion?)"

I didn't say they were "always" conducted in any particular way. It is a basic explanation of Adam Smith's "invisible hand". I'm getting the feeling that Smith's philosophies are difficult for you to grasp. In essence, you can't have wealth and not share it, otherwise the wealth does you no good to have. You can sleep on a mattress stuffed with money and live in poverty if you don't spend it. That would be pointless. Even if you are Scrooge, Tiny Tim still eats, regardless whether or not the ghosts scare you into some convoluted idea about charity. I have no idea how much more clear I can make this.


"3. So therefore, the "Invisible Hand" is nonsense to neo-Keynesians. (Huh?)"

Neo-Keynesians (you and Don are apparently both neo-Keynesians, from an economically philosophical standpoint) abhor any part of economic theory that isn't tangible enough to be rolled into some equation. For example, Adam Smith believed that automatically goods would always be better off manufactured and services would be better off rendered on a local level. He believed this BECAUSE of the "invisible hand" ideal. Neo-Keynesians think that's utter nonsense, because it doesn't work in their equations. You are witnessing the results of neo-Keynesian economics right now. Tax the hell out of local businesses, force them to manufacture elsewhere (because PROFIT is WHY people own businesses and they WILL do what is in their best interests), regulate the hell out of them, and the invisible hand will not serve its purpose. San Diego is your example, my friend. Nothing is built here anymore. By your standards, based on what you have to say about Jeff, San Diego is killing babies. It contributes nothing.

Jan. 8, 2012

So, after the 2008 debacle, you would have no regulation of financial institutions? Deregulation of financial institutions was a disaster, and I believed that when it occurred, back in the Clinton administration, when I was very sympathetic with both the Austrian and University of Chicago schools. My father spent 50 years on La Salle Street in Chicago. He was an arch-conservative who believed government had no business in any industry -- EXCEPT the financial industry, in which he worked. He understood that greed was the only variable in that industry, and mendacity was rampant. If he were alive today (he died in 1978), he would say it's now worse. And it is. Best, Don Bauder

Jan. 8, 2012

The big mistake that Reagan made (I've said this before in here) was PERMITTING government to regulate a supposed free market. It isn't truly free if you have a Fed controlling things, now is it? You can't execute an idea half-assed, that's my point. If you really want to see a free market in action is must be entirely divorced from government. It never has been, entirely.

Think about what government uses to control the masses. It uses economics and religion. It seeks to get into bed with both. I'm not a 19-year old idealist here. I'm not thinking that anyone will realize this truth in even four generations from now. But one day in hundreds of years from today if this planet can manage not to blow itself up, someone is going to wake up and realize that the ruling class has screwed everything up from the start. Ruling class owns government. That's the biggest problem, this stupid free society isn't free, Don. It's owned.

And maybe people will wake up in a few hundred years. The best transactions happen very far away from government or regulation. I trade you a very comfortable bed for those golf clubs you don't use. It's that simple. We don't need that regulated.

Jan. 8, 2012

Good to see that you think you're hundreds of years ahead of the rest of us mortals...but that isn't the same as making a coherent case for whatever it is that you seem to be claiming to believe in, which I honestly cannot figure out.

Reagan permitted government to regulate? Yeah, okay...and?

Now I can agree with individual sentences you write ("ruling class owns the government") but when I try to put it all together, you're just rambling.

Seriously...are you drinking, Refried? Sleep it off and try again when you're sober. You're not making any sense now.

Jan. 8, 2012

Invective. Seriously, Fred, I'm surprised. I thought that perhaps we could have an intelligent discussion here. Yes, I am dead drunk, call 911. I'm done. You win. Me and Jeff are jerks and you're a Goddamned genius. Congrats. You learned nothing today.

Jan. 8, 2012

Being soused is similar to being an endogenous variable. Best, Don Bauder

Jan. 8, 2012

Good point that you may not have intended to make. You said that the market has never been divorced from government. So what does that say about Austrian and University of Chicago schools? They are based on free markets that have never existed. Best, Don Bauder

Jan. 8, 2012

It doesn't say any particular thing about them, it really cannot. As you point out, true free markets have yet to be born.

Jan. 8, 2012

The economists at the University of Chicago are doing their best to bring free markets into the world, by Caesarean section if necessary. But economics is supposed to deal with the REAL world. Best, Don Bauder

Jan. 8, 2012

Real economics happen a mile up the hill from me. Fridays and Mondays a big f-off street market rolls out. that is where you see the true price of avocados, the real deal when it comes to meat and fish, and what sort of price a used skillet will fetch. That's the REAL world. That's economics, it's capitalism at its finest.

Jan. 9, 2012

Some theories about free markets were written when street markets were all there were. Best, Don Bauder

Jan. 9, 2012

Hmmmm...

What about Somalia? Seems to me that it's got as little government as anywhere on earth today...how's that experiment going?

Jan. 8, 2012
  1. Agreed. Humans invented religion. Morality, however, exists completely independent of religion.

  2. Adam Smith emphasized human SYMPATHY in his writings, not selfishness, as the wellspring of the wealth of nations. When he referenced an "Invisible Hand" it was to show the existence of unintended consequences, both good and evil...NOT to prove that greed is ultimately converted into good. This is the fundamental misunderstanding of Smith that I'm discussing above, so I'm not sure why you say I cannot grasp his philosophy. As to the point you mixed into #3 about local manufacturing, I think you might be confusing Smith with Ricardo (comparative advantage).

Still, what's your point? That wealthy people are more generous than the poor? Hardly...I think you and I have both seen the opposite.

  1. Nope. I referenced Hayek's Nobel speech because I DON'T agree with the "pretense of knowledge" that goes along with bogus attempts to reduce human activity to neat equations. The "quants" had their day, and messed up big time. I'm not a follower of Keynesian, neo-Keynsian, Chicago, Austrian, or ANY of the schools of economic fashion. I can quote them, as the devil quotes scripture, but don't believe in any of them.

NOBODY knows what makes the economy work, and anyone (like your friend Jeff) who claims to have a wizard-like understanding of events is simply deluding themselves. Just like a gambler with a "system" to beat the house at roulette, but far worse because they don't even have the ludic crutch to rest on. (Ludic Fallacy is a great term coined by Taleb -- fun to use when debunking the quants.)

My sole advantage is that I recognize that I'm ignorant. I have never bought stocks because I could never understand how things allegedly worked in that world...and now we all see that the snake-oil salesmen didn't understand it either, but just parroted fancy sounding theories based on erroneous models. I'm proud to say that the reason it never made sense to me was that it never made sense in the real world. But that doesn't mean I have the answers either, just lots of questions and deep scepticism of the received wisdom that masquerades as knowledge.

If you go back to my point above, I was asking a straightforward question...where is the evidence of this religious notion of an Invisible Hand? I still see none except from those who misunderstand what Adam Smith was talking about when he used the term in the first place.

Was your apple farm example supposed to give me evidence of the Invisible Hand, or do you agree that it's just a faith-based notion that we can dismiss since it's no more reliable or useful to understanding the actual working of economics than believing in Leprechauns and Unicorns?

So, please, my friend, tell me if you can think of any evidence for the Invisible Hand (and quoting Smith, as I've shown, won't pass the laugh test).

(And thanks for engaging in a good discussion. I appreciate it.)

Jan. 8, 2012

Regarding Taleb, Jeff is a fan. I am not, I find his diatribe nothing more than butterflies and B.S. I don't find anything he has to say or write as useful. I respect him, but I don't buy into his theories.

Regarding the invisible hand stuff, it isn't a tangible thing, it's a process. You work for someone with money, he or she gives you a bonus for Christmas, that's an example. He or She doesn't want to lose your services or for whatever reason enjoys giving you a bonus. It isn't out of whatever kindness they show to you, it's entirely separated from charity. It is, conceivably, out of selfishness. But that is the invisible hand, it can (and usually is) entirely self-serving on their part. But it contributes, regardless. If you want evidence, just ask anyone who works for anyone. It's really that simple.

Jan. 8, 2012

Huh?

Please, can anyone else understand what Refried is ranting about here?

Clear writing reflects clear thinking. This is just a muddled mess of non-sequitors.

What are you even talking about Refried? You've got some weird mix of Ayn Rand and Marx going on here, and I don't understand what you're getting at.

As to your opinion of Taleb...who cares what you think? I suspect that you misunderstood him just as you've evidently misunderstood everyone from Adam Smith to Ayn Rand and Frederick Hayek.

Dude, you gotta stop watching Fox (or wherever you're getting your half-baked nonsense from) and start reading.

(Are you drunk when you're writing this stuff?)

Jan. 8, 2012

Fred, I'm sure the Reader loves "(Are you drunk when you're writing this stuff?)" and "who cares what you think?" or instead, "Dude, you gotta stop watching Fox." I don't watch television. I've been nice here. You haven't. Have a nice day, pal.

Jan. 8, 2012

Let me help you out. As a libertarian, you ought to appreciate this:

http://www.thefreemanonline.org/featured/government-is-no-friend-of-the-poor/

Refried, I'm not trying to insult you...I honestly cannot parse what you're trying to say. I cannot follow the thread of your argument at all.

Sometimes when people are drinking or high they write stuff that they think is brilliant, but later it makes no sense. I just figured that was the case here, since you seem to think you're making great points, but I don't think anyone is following along with your line of thought.

Jan. 8, 2012

I'm not a Libertarian. And I'm not drunk. And you certainly enjoy insulting people. If you don't get what I write, then don't pretend it's my fault. It isn't because I can't write or because it isn't beyond the comprehension of your average 8th-grader. It's because you decide not to, based on your own version of moral behavior. Fred, honestly, you need to examine your ability to hold a rational conversation. You haven't held one yet in this particular thread.

Jan. 8, 2012

There's a pivotal passage in "A Child's Garden of Grass" (IF I remember the title correctly). The author, high on weed, came up with an ABSOLUTELY BRILLIANT IDEA, but knowing he was high, conceived another brilliant idea: I'll write it down and read it tomorrow when I'm my usual, mediocre self. When he awoke next day he actually remembered his INCREDIBLE INSIGHT, and rushed to read what he had written. It read: "This room smells funny!"

Jan. 9, 2012

Glad to see you are not watching Fox. Best, Don Bauder

Jan. 9, 2012

Gringo, For the record, I'm not a fan of Nassim Taleb. His approach to investing and trading runs counter to what I was taught by my mentor.

Jan. 8, 2012

I stand corrected.

Jan. 8, 2012

Gringo, I found an enlightening article disproving Smith's Invisible Hand that might be taken literally by some of the great intellects on this forum. http://www.theonion.com/articles/continued-existence-of-edible-arrangements-disprov,19856/

Actually, there are so many different economists agreeing with the equilibrium theory(Dynamic equilibrium) that is the Invisible Hand, the question is to find the rare economists who are skeptics. Stiglitz 1991, Durlaf 1991, Tobin 1991, Marris and Mueller 1981, Hahn 1970, Arrow and Debreu 1954, all argue for the existence of the invisible hand. In fact, Arrow and Debreu even proved the existence. If there isn't an invisible hand, then what is there?

Jan. 9, 2012

The Onion link is broken.

Please provide the links to those who you claim have proven the Invisible Hand. I've been waiting for this for days now.

Jan. 9, 2012

Right. So when Taleb lays out his case, in considerable detail with plenty of evidence, Jeff can just wave it away with a contemptuous "That's not what I was taught."

That's a great strategy for remaining ignorant, not really something to be proud of.

The reason I admire Taleb is precisely that he challenges assumptions, accepted wisdom, and the prevailing mindset.

Searching for understanding is not a popularity contest, you know.

Jan. 8, 2012

You're not searching for understanding. You see this as some sort of contest. Ne honest, Fred, you see this as a wager of some sort.

Jan. 8, 2012

You have to respect someone who made so much money on a book. Best, Don Bauder

Jan. 8, 2012

So the guy who wrote the "Turner Diaries," should be respected. Hitler made millions on Mein Kampf." I doubt if I would respect him.

Jan. 9, 2012

Godwin's Law has been invoked:

http://en.wikipedia.org/wiki/Godwin%27s_law

Jeff is now resorting to redutio ad hitlerum...what a dimwit.

(BTW: Summer of 2008, I worked at the desk next to Mike Godwin at WikiMedia HQ.)

Jan. 9, 2012

We're just a couple of drunks high on pills, Fred, we couldn't possibly be smart enough to invoke a law.

Jan. 9, 2012

Karl Marx made money on books, too. Best, Don Bauder

Jan. 9, 2012

One reason people buy stocks is that the brokers really push them, because they get larger commissions on stocks. Best, Don Bauder

Jan. 8, 2012

If any economists thought they were God when they started reading this blog, they should be disabused of the notion now. Best, Don Bauder

Jan. 8, 2012

Thanks for bringing up Ricardo and the theory of competitive advantage. Should we discard his teachings now? Best, Don Bauder

Jan. 8, 2012

You can't make goodness out of greed any more than you can make chicken salad out of chicken s**t. Best, Don Bauder

Jan. 8, 2012

Don...I think what Smith was getting at was that SOMETIMES greedy actions produce unexpectedly positive outcomes.

...just as sometimes the best intentions and purest motives can create extremely negative outcomes. (Fannie and Freddie's perverse incentives in the housing market are perhaps an example, as noted by Refried.)

But the point we both agree on is that common sense and experience tells us that evil acts are far more likely to result in evil outcomes, and vice versa. So depending on unexpected outcomes to right wrongs is foolish.

The financial press, economists, and politicians have been peddling this notion that the Invisible Hand makes everything A-Okay and excuses immoral cheats and lies, turning the despicable into the admirable, and absolving bad actors from all blame.

Jan. 8, 2012

Fannie's and Freddie's production of perverse housing incentives was one cause of the calamity -- but it wasn't the major cause, by a long shot. Best, Don Bauder

Jan. 9, 2012

It contributed in the U.S. A lot more than many folks think. Obviously, Europe didn't help. Prefect storm scenario, but in both cases, government was ultimately responsible. Not some wild gamblers. No one not inside of the beltway's system got away with a big haul.

Jan. 9, 2012

Well, yes--SOMETIMES. But in the final analysis, it's where the TREND

Jan. 20, 2012

Well, yes--SOMETIMES. But in the final analysis, it's where the TREND is headed that count.

And don't forget, "Nine-tenths of the hell being raised in the world is well-intentioned."

Jan. 20, 2012

One could make a very excellent case that a market trend only exists in hindsight.

Jan. 21, 2012

It takes insight.

Jan. 21, 2012

By the way, and this is likely a separate discussion, but I'm not at all convinced that morality is at all divorced from religion. I'll not quote any C.S. Lewis here, but I am of the opinion that morality and religion have held hands for centuries. It's entirely conceivable that morality, as a practice, could have evolved without religion as we know it, but it's equally conceivable that morality is its own religion. Killing, for example. It's easy to see why that generally isn't in our best interest, but equally easy to incorporate into any single notion of morality or religion. It's logical, we need each other.

Jan. 8, 2012

WARNING: I'm, apparently drunk, according to Fred, so if you respond to this comment, know that I'm somehow not in my right mind. If my opinion happens to mirror Fred's, then perhaps I'm sober. Or maybe not then, either. Or maybe I've taken pills. Either way I'm entirely wrong, my opinion is invalid. Because I'm drunk or high on something. Or because I'm not Fred. I just wanted to warn everyone in advance. Excuse me while I get back to watching Fox News, I live on that stuff. I don't read. I'm practically illiterate. And, you know, constantly drunk. Or high. Or whatever.

Jan. 8, 2012

He's pretty easy to block. Blocking seems to be the best way to handle intolerant people.

Jan. 8, 2012

It's all good. One day I'll get entirely drunk and go all Hemingway here, see how he responds. I'll make my sentences short. To the point. I fished. I caught bass. I gutted them. We ate. It was good. Stuff like that.

Jan. 8, 2012

So, if something contradicts Jeff's belief system, he just covers his ears with both hands and shouts "LA LA LA LA LA LA".

Brilliant strategy, sure to always find the truth.

Jan. 8, 2012

Yours is to accuse people of being drunk. LALALALALALA. It's the same, dude. You make the discussion uninteresting, I don't want to continue with you, it isn't worth the investment of my time and thought. You might want to think about that for the future. Not for me, for others.

Jan. 8, 2012

An' all this time I thought it was "na, na, na, na, NA, na!

Jan. 22, 2012

Tackling, too. Best, Don Bauder

Jan. 8, 2012

Fred is a horses patoot in this sober remark Refried and needs to be asked to clean up his own manure before it stinks us all out of this thread

WARNING...those who can't make a civil high minded argument resort to personal attacks on someones character

at that point the best thing to do is not to honor the offender with any further conversation and stay in the high ground where the very fine people live

“No hay nada noble en ser superior a alguna otra persona. La nobleza verdadera está en ser superior a su uno mismo anterior.”

“There is nothing noble in being superior to some other person. The true nobility is in being superior to your previous self.”

Jan. 8, 2012

I can't claim I'm any more noble than Fred. I don't point to that as some sort of standard. I just don't want to argue from some brutal rhetoric. That does no one any good at all. I love you, Nan. Happy New Year to you and yours :)

Jan. 8, 2012

Nan, the reason I asked if Refried was drinking while writing is that his prose is sometimes incoherent...like something written while under the influence.

I honestly cannot unravel what point he's allegedly making...Christmas bonuses prove the existence of the "Invisible Hand", or apple farmers are a metaphor for the trickle down theory, or...really, I don't know.

Maybe you can explain to me what he's getting at. I've re-read his posts and still can't discern what evidence he's proposing to back up his assertion that the Invisible Hand converts selfish acts into public good.

Wanna give it a try?

Jan. 8, 2012

No, Fred, it's because you ran entirely out of logic. That's the only reason you accuse someone of being a drunkard. Your lack of ability at understanding my writing means my writing must be that of a drunkard. Right? Grow up.

Jan. 8, 2012

put ur butterfly net away Fred...even tho i usually arrive here on gossamer wings that doesn't mean i don't have a sensitive internal alarm system that senses fly swatter alert!!!

all i can say about Refried writing style is this

he could and has described how rain rivulets and runs down the muddy streets in Tijuana in a way that stops ones breath and brings a tear to the eye

can u communicate ur individual truth that well??

Jan. 9, 2012

!Ay, seguro que si!

Jan. 9, 2012

What percentage of people watching Fox News are intoxicated? Has Madison Ave. done a study on that? Best,, Don Bauder

Jan. 8, 2012

Religion and the Rise of Capitalism is a classic. Then there is the poem: "And what rough beast, its hour come 'round at last, slouches toward Bethlehem to be born?" Best, Don Bauder

Jan. 8, 2012

Still waiting for anyone who can provide an argument supporting the existence of this faith-based notion of an "Invisible Hand" that doesn't rest on a (thoroughly debunked) misinterpretation of Adam Smith.

Jan. 8, 2012

I think your interpretations of Adam Smith have been on the mark, Fred. Best, Don Bauder

Jan. 8, 2012

Of course you do. You haven't read him either. Best, Dave.

Jan. 8, 2012

I wouldn't know, I'm a drunkard.

Jan. 8, 2012

You've never even read Adam Smith. Pitiful.

Jan. 8, 2012

Interesting...on one hand we've got Don Bauder, respected financial journalist with more than four decades experience saying I'm describing Smith's views accurately, and on the other we've got Refried (no known qualifications) saying I've got no clue what I'm talking about.

Hmmm...what a contrast.

Jan. 8, 2012

Go screw yourself, Fred. I think you're an ass.

Jan. 8, 2012

Donkeys aren't proficient at auto-erotic activities. Best, Don Bauder

Jan. 9, 2012

Oh yes they are

Jan. 9, 2012

How do you know donkeys engage in self-copulation? Best, Don Bauder

Jan. 9, 2012

Because they are almost always sterile. Makes no sense to screw what can't bear fruit.

Jan. 9, 2012

I don't drink. How can I understand Adam Smith? Best, Don Bauder

Jan. 9, 2012

I know better. I read your column decades ago. You didn't read Smith (or perhaps, you did and you've forgotten it), but you know full well that classically liberal economics are based on his philosophies. You weren't wrong back then. Like most of us, you simply underestimated the government's role in everything. You can set any economic system in place you desire and in the end - regardless of charity or greed or whatever piece of humanity you want to hold accountable for someone getting swindled out of their savings - government will provide the perfect path to unravel the natural and honest transactions between people.

Tiger can't change its stripes. I'm grateful for that. And there is a piece of you there that knows I'm right.

Jan. 9, 2012

I don't deny that classically liberal economics is based on some people's interpretations of Smith's writings. How's that for a non-drinker's hedge? Incidentally, if you read my column decades ago, I didn't drink then, either. I am going on four dry decades. Prior to that time, I wrote for Business Week and didn't have a column. Best, Don Bauder

Jan. 9, 2012

Your column was often hijacked in a certain Los Angeles paper. That paper was also bought by Platinum, ultimately, and turned out in short time. Small world. I wrote for that paper at one time, I was in the Toy Department. I drink daily, but I'm seldom drunk. It's a pastime, not some sort of a target. Fred would disagree.

Jan. 9, 2012

Boo hoo hubris. Pity there's such a lack of specificity, detail, continuity, relevance, and context, all necessary for coherence.

Jan. 8, 2012

I think we have had a lot of specificity and relevance in this discussion. It has been one of the more enlightening ones, although in the recent veering into posters' bibulous proclivities we have gotten a little off the track (but it has been fun). Best, Don Bauder

Jan. 9, 2012

Can't wait until I'm accused of beating my wife and children. You know that's what is next, right?

Jan. 10, 2012

"We have a looming apocalypse, and central banks are creating oceans of money to thwart it." --Bauder

THWART? What do you suppose will happen with the world awash in paper? What are those hysterical patterns again, historically, I mean . . .

Jan. 8, 2012

Weimar comes to mind...inflate the currency to avoid paying off unsustainable debt, flood the economy with worthless paper, and watch the tragically inevitable result.

Jeff posted a very interesting study of the Weimar Republic's financial mishaps. I highly recommend it.

Jan. 8, 2012

You can't possibly recommend anything that comes from people who kill babies.

Jan. 8, 2012

Jeff has posted online links to a number of very enlightening texts, including some attributed to Epictetus which I had not read before. I appreciate that.

See, Refried, I'm interested in the validity of ideas and don't exclude an idea from a person I may not personally like...and similarly, some people I like very much personally say some ridiculous things I cannot agree with.

If you writing something intelligent, defensible, and backed up by evidence I'll give you the respect you're due. When you write something incoherent, indefensible, and devoid of evidence, I'll give you the disrespect you're due.

Jan. 8, 2012

When you do that, let me know. Otherwise, you've been a jerk here. Best, Dave.

Jan. 8, 2012

You and your friend Jeff keep threatening to leave this discussion.

Well? We're waiting...

You're both continually accusing others of spouting nothing but invective. Yet so far you've accused Don Bauder of being ignorant of economics, screamed at me for daring to suggest that your incoherence might be the result of over-indulging in alcohol, declaimed your superior wisdom and knowledge of all topics economic, while providing plenty of evidence that you have never read a word of the authors under discussion.

So when exactly will you two be stomping out in a huff, never to return? If you have nothing to contribute other than your childish rants, we'd all be better off without you.

Jan. 9, 2012

I've never accused Don Bauder of "being ignorant of economics".

I love this one in particular... "we'd all be better off without you."

You would be. Because you see yourself as some big F-off intellectual and you're proving yourself as entirely ineffectual in intelligent conversation. Obviously, you would love to see me gone. I thought you were very smart at one time, you had me fooled. You're entirely ignorant, Fred. But unlike you, I don't want you to leave. Because I hope that one day you'll catch on. I want that for you. But you have to want it for yourself.

Jan. 9, 2012

You can't argue anything I toss out cogently. It's all rhetoric. And, invective, inviting me to leave the Reader because you find it threatening to your asinine comments here. You need to get a grip on yourself. I'm incredibly disappointed in you. I expected better.

Jan. 9, 2012

Why would you want for me to leave the Reader, Fred, do you think it would be a much better publication without me? Have I contributed negatively? Are you sure you've exhausted all means at insinuating that I'm an alcoholic retarded person? I'm simply amazed at the stupidity you've resorted to. I never expected this from you, I expected civil discussion. You're not capable of that, are you? Amazing.

Jan. 9, 2012

"I'll give you the disrespect you're due."

No, Fred. You'll accuse me of being drunk. That's because you've run out of ideas.

Jan. 9, 2012

Good point. Thwart on the short run. Drown on the long run. Best, Don Bauder

Jan. 9, 2012

Gentlemen: Please tell us what you think of this (Maslow's "Politics 3"). http://www.maslow.org/sub/p3.php

Jan. 9, 2012

I'll read it, Twister...give me a few days. Thanks for the link, my old friend.

Jan. 9, 2012

I read it yesterday. I think it's very ambitious. And perhaps quite a bit collective, and that's sort of scary. Can this happen? Perhaps, but the leap of faith will be far, a very hard target to reach. I admire the work, but I'm not certain it's feasible.

Jan. 9, 2012

Optimism, my dear gringo, is the only option. Where would we be without staring down the "infeasible?"

Jan. 9, 2012

I don't know twister, that's the million-dollar question. But you'll have to get an awful lot of people to buy into this to get it to work, that's the issue here, right?

Jan. 9, 2012

this a great link Twister...thx!!!

Jan. 9, 2012

oh u guys and ur donkeys!!

Jan. 9, 2012

There's a simple way to dialogue.

  1. Make statement

  2. Replies Remain Responsive (the 3 R's)

  3. Eschew obfuscation

  4. Repeat until clarity is achieved.

Jan. 9, 2012

Can you imagine a politician eschewing obfuscation? Best, Don Bauder

Jan. 20, 2012

Not often. But we don't need to follow their lead.

Jan. 21, 2012

And whom would we then follow? Best, Don Bauder

Jan. 23, 2012

Before I forget it, check this out. The way this is set up, you can watch the video a minute or two at a time. That way, it won't make your brain hurt too much. That's what I did. But those of you with exceptional powers of perception may be able to go farther . . .

http://www.openculture.com/2012/01/the_richard_feynman_film_trilogy.html

Jan. 9, 2012

The dude in the mirror, man!

Re: And whom would we then follow? Best, Don Bauder

Jan. 23, 2012

You mean Twister will follow and emulate Twister? Not a bad idea at all. Best, Don Bauder

Jan. 23, 2012

After it gets advice from Bauder.

March 28, 2012

I mean all of us. Eschew suckerdom at all levels!

Jan. 24, 2012

Chew all-day suckers? Best, Don Bauder

Jan. 24, 2012

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