Author: Matthew G. Saroff

Yeah, Change We Can Believe In

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So, here’s another one that Barack Obama and His Clueless Minions™ are allowing to slip through their fingers.

This time, it’s student loan reform, which would have taken the private loan companies out of the game, saved the tax payer money, saved the students money, and eliminated a lot of fraud and waste:

Four months ago, it appeared all but certain that the White House and Democrats in Congress would succeed in overhauling the student loan business and ending government subsidies to private lenders.

President Obama called the idea a “no-brainer” last fall, predicting it would take billions of dollars from the profits of private lenders and give it directly to students, and many colleges were already moving to get loans directly from the federal government in anticipation of the next move by Congress.

But an aggressive lobbying campaign by the nation’s biggest student lenders has now put one of the White House’s signature plans in peril, with lenders using sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business.

Yes, we have reports that the administration has, “recognized the threat and was beginning to push back in an effort to get the plan approved,” as evidenced by the recent criticism of the lobbying and the progress of the bill by Education Secretary Arne Duncan, but it is indeed weak tea.

It appears that they dropped the ball on this because they were working on healthcare reform, which might be marginally excusable, only, of course, the administration pretty much screwed the pooch on that one too, handing it off to Congress and allow ratf^%$s like Nelson and Lieberman to screw that up.

Seriously, the problem here is that the FIRE (Finance, Insurance, Real Estate) sector has captured our government to an astonishing degree, and eventually the parasitic rent taking that they extract from society needs to be reined in.

Germany Gets It

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The German tax authorities have decided to pay €2.5 million to a whistle blower who stole information on 1500 accounts, with the payments being dependent on the data being real. (See also here, and here) in order to catch tax evaders.

They did this before, with Lichtenstein in 2008, where payment netted tax revenues in excess of €200 million.

The Swiss have a problem, because I bought a 4 Gig memory stick a year ago for $12, and it’s smaller than a pack of gum.

Even if you assume 100K per account, this stick can hold about 40,000 accounts on each memory stick, and with the going rate from German tax authorities of about €1,666 per account, that memory stick could net an insider well over €50 million, with a bulk discount.

Their style of bank secrecy is likely to go away, because it is unsupportable.

Now, Germany needs to learn about the “Perp walk”.

Moron

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Chris Dodd, the senior Senator from Connecticut, is not running for reelection because he cannot win. He is too unpopular.

In fact, about the only person in the state that he might beat is Joe Lieberman, the junior Senator from Connecticut, who is currently polling behind a case of the clap.

Well, now that Dodd is not running, the new front runner in the state is Democratic Attorney General Richard Blumenthal.

Unfortunately, he has decided to take his cue from Joe Lieberman:

Barack Obama shouldn’t expect an invitation from fellow Democrat Dick Blumenthal anytime soon: Blumenthal said in a New Haven stop that the president “may not want to come here” to stump for his U.S. Senate campaign, given how independent he claimed he’ll be if elected.

That turnabout in partisan loyalty emerged Monday night as Blumenthal continued tacking away from his liberal roots —including through newly expanded support for military tribunals for domestic terror suspects.

(emphasis mine)

The explanation is that Massachusetts changes everything.

No, it doesn’t. The election of a Republican in Massachusetts was all about voters disgusted with Democrats not getting stuff done when they had near historic majorities.

And who prevented anything from getting done?

Well, that would be Senators like Joe Lieberman.

I will leave Mr. Blumenthal with the words of Harry S Truman, “Given the choice between a Republican and someone who acts like a Republican, , people will vote for the real Republican all the time”

Big Surprise, Old Dominion Governor Rolls Back Protections for Gay Workers

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Yes, now that Bob McDonnell is now Virginia governor, he repealed the protections instituted by his predecessor for gay and lesbian state workers:

McDonnell (R) on Feb. 5 signed an executive order that prohibits discrimination “on the basis of race, sex, color, national origin, religion, age, political affiliation, or against otherwise qualified persons with disabilities,” as well as veterans.

It rescinds the order that Gov. Tim Kaine signed Jan. 14, 2006 as one of his first actions. After promising a “fair and inclusive” administration in his inaugural address, Kaine (D) added veterans to the non-discrimination policy – and sexual orientation.

It’s because they need someone to hate, or they would have nothing to campaign on.

Not Enough Bullets: PC Edition

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Because what billy wants, Billy gets.

And I don’t mean politically correct. I mean companies involved in the personal computer business, most notably Microsoft, Hewlett Packard, and Dell, who are aggressively lobbying against a proposal to prevent tax evasion through transfer pricing:

Software and computer companies such as Microsoft Corp., Hewlett-Packard Co. and Dell Inc. are gearing up to fight an Obama administration plan to curb offshore tax avoidance.

The $15.5 billion proposal in President Barack Obama’s 2011 budget targets what the Internal Revenue Service calls the growing problem of so-called transfer pricing. The technique allows companies to reduce their tax bills by transferring intangible property such as patents, trademarks and licenses to offshore subsidiaries.

They use our courts and our law enforcement and our regulators to enforce their IP licenses, and they want to assign that IP to dummy corporations

Additionally, Microsoft has evaded Washington state taxes over the past 13 years, to the tune of $1.27 billion, with a similar shift by opening up a store front in Nevada. (see vid)

But don’t you worry about Microsoft, they are lobbying to have the tax gutted, as well as getting an amnesty in the lege, so they won’t owe anything, and the state will find some way to deal with their $2.8 billion deficit over the next few years.

Silly voter, taxes is for plebes.

8 of 10 Jailed Haitians Released

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The two apparent ring leaders remain in custody, and as a condition of their release, they must return later to Haiti to answer investigator questions:

While Judge Saint-Vil’s ruling allows eight of the Americans to leave Haiti on the condition that they return to the country to answer further questions in the case, it requires that Laura Silsby, the Idaho businesswoman who led the group, and her live-in nanny, Charisa Coulter, remain in jail to answer questions about traveling to Haiti before the Jan. 12 earthquake.

Some of the freed Americans had already contended this month that they were misled by Ms. Silsby, who had faced more than a dozen legal complaints connected to her online shopping business before she persuaded fellow Baptists from Idaho to assist her in setting up an orphanage for Haitian children.

“We are disappointed that all in the group are not being released,” said Terry Michaelson, a lawyer for Central Valley Baptist Church in Meridian, Idaho, where five of the detainees, including Ms. Silsby and Ms. Coulter, attended church.

The church mission’s lawyer had put forward about $7,000 to help pay for the first month’s rent for the orphanage that Ms. Silsby planned to establish in the Dominican Republic.

…………

Some of the freed Americans had already contended this month that they were misled by Ms. Silsby, who had faced more than a dozen legal complaints connected to her online shopping business before she persuaded fellow Baptists from Idaho to assist her in setting up an orphanage for Haitian children.”

(emphasis mine)

This is beginning to sound like something written by Dashiell Hammett.

Bye-Bye Gold Bugs

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The IMF has had significant gold holdings, and it does not do them much good.

When you provide and loans, shoveling out gold does not work that well, you want to use currency of some sort, preferably something that can be transferred electronically, so they have been selling it off for some time.

Well, the, “central banks of India, Mauritius and Sri Lanka,” have been buying up gold, for reasons that appear to be tied to batsh%$ insane medieval monetary ideas, so the IMF gold has not effected the commercial markets for gold.

Well, it appears that, “India, Mauritius and Sri Lanka,” have finally had enough, and the IMF plans to sell 191.3 tons of gold, in order to be able to make low cost loans to poor nations that have been hurt from the financial crisis.

Basically, when everyone goes over crazy about an investment, it’s time to get out.

If you own gold for speculative purposes, it’s a good time to get out ………… Now.

If you are buying a gold wedding band, that’s still cool, but take my advice: Elope, and use the money saved for a party.

Marja Offensive Hits a Hitch

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At the core of General Stanley McChrystal’s tactics in winning meaningful and lasting control of the Marja province is the rapid and aggressive delivery of benefits to the civilian population.

This means things like roads, schools, doctors, farm aid, and jobs.

It’s a good idea, the problem is that the UN has just said that it will take no part in the provision of such aid in Marja province, and we can be relatively sure that the NGO’s will follow their lead:

Senior United Nations officials in Afghanistan on Wednesday criticized NATO forces for what one referred to as “the militarization of humanitarian aid,” and said United Nations agencies would not participate in the military’s reconstruction strategy in Marja as part of its current offensive there.

“We are not part of that process, we do not want to be part of it,” said Robert Watkins, the deputy special representative of the secretary general, at a news conference attended by other officials to announce the United Nations’ Humanitarian Action Plan for 2010. “We will not be part of that military strategy.”

The American commander in Afghanistan, Gen. Stanley A. McChrystal, has made the rapid delivery of governmental services, including education, health care and job programs, a central part of his strategy in Marja, referring to plans to rapidly deploy what he has referred to as “a government in a box” once Marja is pacified.

………

“The distribution of aid by the military gives a very difficult impression to the communities and puts the lives of humanitarian workers at risk,” Mr. Watkins said.

While it’s standard at this point to make jokes about the impotence of the UN, this is a very real problem, particularly when the many of military reconstruction teams, “See their role as providing services in exchange for intelligence-gathering and political activity directed against the insurgents.”

If the UN and the NGOs do what McChrystal wants, they are painting big targets on the back of every aid worker in the country, and those aid workers don’t have flak jackets and weapons, and they are not trained in combat, nor should they be.

So, I guess it’s back to Halliburton and Blackwater Xe to deliver those services.

I Spoke too Soon

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The Ukrainian Supreme Court has temporarily suspended the election results for the Presidential election, so the official declaration of Viktor Yanukovich’s victory is on hold.

It has not suspended the inauguration, so it may largely be a formality, but my guess is that they will give a few days for Yulia Tymoshenko to present evidence.

I don’t expect much in the way of vote fraud to be found, and certainly not enough to change the results, but my record on predictions is a bit spotty.

Please Check My Math

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James Kwak in discussing Barack Obama’s putative deficit reduction panel, which is supposed to seat people from both sides of the aisle to address the deficit, asks the following question, “What if they put Mankiw and Krugman on this commission?”

Well, let us assume that both Greg Mankiw and Paul Krugman mass 75 kg.

It’s fair to characterize them as the economic equivalents of anti-matter and matter, so:

  • e=mc2
  • M=75+75=150 kg
  • e=1.35×1019joules
  • According to the wiki, a megaton is 4.184×1015 joules
  • This gives 1.35×1019 joules/4.184×1015 joules/megaton = 3226.5 megatons of energy released.

I think that this places the idea of placing both of them on the same panel as “imprudent”.

Finished My Tour of American Dynamics Flight Systems

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I have notes, and photos, taken with my cheap digital camera, as opposed to my profoundly cruddy cell phone camera.

I talked with Wayne Morse, the President, and Paul Vasilescu, the Technology Development Director for the firm at their offices in a Jessup, Maryland office park, right next door to, if the stickers on the doors of the neighboring are any indicator, old offices from the Baltimore Examiner.

We went over their technology, what they have covered under IP, potential customers and applications, and their capabilities.

They will be sending me a copy of their presentation in PDF, which I will be embedding via ScribD.

A full write-up will be coming in the next couple of days.

I had fun……It’s kind of a kid in a candy store thing for me.

I May Have Been too Tough on Bayh

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Not that I care all that much, but the Hill is reporting that Republicans are pissed off about the timing of the announcement:

Republicans are livid about the timing of Sen. Evan Bayh’s (D-Ind.) retirement announcement.

They have at least four candidates in the upcoming primary while the Indiana Democratic Party will get to decide its nominee.

Indiana required nominating petitions to be filed by noon Tuesday. Bayh announced Monday he would not seek reelection, giving would-be candidates less than 24 hours to get on the ballot.

………

Republicans have called on Bayh to ask for an extension of the filing deadline.

“The reality and ramifications of this timing cannot, and should not, be ignored,” National Republican Senatorial Committee Chairman John Cornyn (Texas) said in a statement.

“Assuming there is no qualified candidate that files the appropriate documentation before the deadline, Sen. Bayh should call on the state Democratic Party to ask an Indiana court to extend the candidate filing deadline — both for this Senate candidacy and for any House candidacy that is left open by a Democrat House member who runs for the Senate nomination,” Cornyn said. “Doing so would remove any appearance of unfair gamesmanship by the Democrats while affirming their belief that voters, and not party bosses, should be the final arbiters of elections.”


Bummer of a birth mark,
Indiana Republicans

Boo-f%$#ing-hoo.

Your strongest candidates, Rep. Mike Pence, Secretary of State Todd Rokita, and Governor Mitch Daniels, didn’t want to run because of Bayh’s $13 million war chest, and now the best you can find is former Senator Dan Coats, who retired as a Senator, then moved to DC to be a lobbyist, and is on tape joking about leaving Indiana.

Bayh’s decision might not have been quite the f%$#-you to Democrats that I had previously thought.

Economics Update

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Mortgage applications fell last week, with home purchases leading the way relative to refinancing on the way down.

Even so, housing starts rose sharply, though as Calculated Risk notes, a lot of this is likely from home builders trying to complete houses in time before the latest round of housing tax credits expire at the end of April.

In the world of actually making stuff, US industrial output rose more than expected in January.

In the “looming train wrecks” category, the newly released minutes from the Fed’s January meeting show increasing confidence in the economy, it appears that there are some strong voices for the Federal Reserve to significantly shrinking their balance sheet, would would likely result in a significant, probably in excess of 50 basis points (½%), increases in mortgage rates, which would make an already shaky real estate market even more problematic.

In any case, the news on housing starts and industrial output drove both oil and the dollar is higher.

Senator Kirsten Gillibrand Proposing Budget Prohibition on Enforcing DADT

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Moving to prohibit the military from spending money to enforce DADT is a good idea.

Among other things, it is a non-filibusterable measure, and when the usual crowd of Republicans start screaming, it’s an opportunity to show them up as hypocrites, since they are now ignoring the military leadership and the budget and HR needs of the military.

It also raises a question about Senator Gillibrand (D-BY).

She was, when she was the Congresswoman from New York’s 20th district a very conservative lawmaker, but now, that she’s in the Senate, far more liberal in her record.

The 20th is a conservative district, R+2 according to the Wiki, and it is understandable how a politician might find it in their best interest to represent the needs and wants of their district.

On the other hand, since being appointed by Governor Paterson to replace Hillary Clinton, she has also faced the prospect of viable primary challengers from the liberal wing of the party,* and her positioning may simply be an attempt to forestall any challengers, much in the same way that Arlen Spector is doing in Pennsylvania.

There is nothing wrong with her attempting to represent the views of her constituency, and her constituency has changed, and become significantly more liberal with the change in office.

Unfortunately, there is no way to know if this is driven by a constituent considerations, or if it is driven by primary election considerations.

If it’s the former, she should be a decent Senator. If it’s the latter, then come November, we’ll have another wanker in the Senate, at least for the next year or so, until she positions herself for the regularly scheduled election for that Senate seat.

*We’ll ignore the Harold Ford, corporatist DLC puke “candidacy” right now, because I’m not sure if it’s a serious candidacy, an attempt at extortion, or an exercise in masturbatory ego stroking.

Big Surprise

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What causes this?

Could it be ………… Satan?

Barry Ritholtz finds a rather delicious piece of information showing that fraud in earnings statements is rather widespread, to be fair, it originally came from the Wall Street Journal, but since that’s behind a pay wall, and Ritholtz summarizes nicely, he gets the link.

You see, when you look at companies reporting earnings per share, the general number is rounded to the whole cent, but when you delve deeper into the numbers you get fractions of a cent per share, and lo and behold, a fraction of 0.4¢ a share is conspicuously absent from these numbers?

Why would this be?

It’s not the work of Satan, but the work of accountants.

Basically, if your earnings are 13.4¢ a share, you announce earnings of 13¢ a share, but if they are 13.5¢ a share, you announce earnings of 14¢ a share.

This number is statistically significant.

If you saw this in a poll you would immediately conclude that someone was just making sh%$ up.

Quoting Ritholtz, quoting the Journal:

The study, which examined nearly half a million earnings reports over a 27-year period, reached its conclusion by going beyond the standard per-share earnings results that are reported in pennies and analyzing the numbers down to the 10th of a cent.

That deeper look showed that companies tend to nudge their earnings numbers up by a 10th of a cent or two. That lets them round results up to the highest cent. Investors often snap up shares of companies that beat earnings expectations, even by a cent, and, likewise, sell off shares of companies that don’t make their numbers.”

I love the euphemism “meet investor expectations” as opposed to the more colloquial “lie cheat and steal.”

It also points out the need for the SEC to develop a Department of Quantitative Analysis filled with math geeks and computers, doing nothing but sifting through data looking for investor fraud. I’d bet they would get more convictions than the rest of the SEC combined. (If someone in the SEC would call me, I’ll help you set it up).

(emphasis mine)

This is the sort of application of “quants” in finance that I could wholeheartedly get behind.