Daily Archives: August 29, 2009

Bonds vs. the stock market

As IB’R pointed out earlier this week, the bond market and the stock market are at odds over where the economy is headed. Bond rates are dropping; a sign of pessimism, while the stock market’s surging; buyers expect the economy to keep improving.

Only one group can be right but while waiting to see who is, the Wall Street Journal reports that mortgage rates have followed bonds down and 5% loans are available again. “The difference between 5 1/2% and 5%,” the article quotes one mortgage expert, “is shopping around.”  I have no insight on whether the economy is truly on the mend or, rather, my guess is based on conservative fiscal thinking and could be wrong as likely as being correct, but a 5% fixed mortgage sounds attractive enough that would-be buyers hesitating on buying now might want to consider it. If they find a good value on a house, that is.


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Here’s a change for the better

The WSJ reports that one of the changes Obama is seeking to impose on Wall Street is increasing the standard of care stock brokers owe their customers from the “suitability” standard to a “fiduciary” one. Right now, a broker’s only obligation when giving you investment advice is to refrain from making recommendations unsuitable for you given your age, income, net worth and financial sophistication. In practice, that means  brokers can sell you anything they like because, in Wall Street’s morality, if you were smart enough to accumulate something worth stealing, you’re financially sophisticated enough to have realized that your broker was pitching dog doo.

A fiduciary or trustee relationship would require the broker to only consider your best interests and bar him (or her – some of the worst crooks I hunted in the canyons were woman – ask me about Linda Schwartz some day) from pitching the latest Merrill Lynch -“Guaranteed to lose but it sure pays huge commissions” fund.

This change would have a huge effect on brokers’ earnings and liability so naturally, the firms are fighting back. It seems likely that Obama will lose this fight or the bill will be so watered down as to be worthless, but I give him credit for trying.


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Wall Street as an indicator of value

Lehman Brothers, bankrupt and worthless, has seen its stock price soar 200% recently, giving it an imaginary capitalization of $103 million. I haven’t checked General Motors (old) stock recently but last time I did it too had a make-believe value of hundreds of millions. I understand why someone would sell this worthless paper: the question is, who’s buying?


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Middle class subsidies for the rich? But of course!

Pelosi International Airport

Pelosi International Airport

InstaPundit reports on Stimulus funds paying for an expansion of Aspen’s Pitkin County jetport, a strip of tarmac used by the uberrich to land their private jets. I imagine Frederick Bourke won’t be using it for 18-28 months, depending on good behavior, but Pelosi and her gang will no doubt find it useful for attending Global Warming ski conferences in the coming winters.

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It’s raining on Florida

Oh boo hoo, the New York Times has discovered that Florida’s in a slump. This may be news to young reporters, but have the Times’ editors have no sense of history too? Railroad magnate Fielder built the Breakers in Palm Beach and then went bust (I think – in any event, the people who followed him down there certainly did). Florida was the home of swampland scams that would have made Bernie Madoff paint his rooms black in envy (oh, he already did that). I forget which Marx Brothers movie immortalized an earlier boom-bust cycle in Florida – “Dumb Coconuts”? – but regardless, this is Florida’s history and destiny. The state will do fine so long as it has sunshine and retirees grow tired of the cold.

Besides, Florida could use some downsizing – it’s entirely dependent on a rapidly depleting aquifer system, developers have been building in hurricane alleys and traffic is awful. I myself can’t stand the state, with the exception of Marathon Key, but even its biggest boosters would have to concede it could do with slower growth and fewer people.

The Times, of course, worries that with fewer people the state will suffer diminished tax revenues. It wouldn’t occur to the Times that few people could also mean lower spending because that sort of thing doesn’t happen in the Times’ world. Maybe they’ll learn something here.


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Connecticut campaign finance law ruled unconstitutional

So ruled Federal Judge Stefan Underhill, in a suit brought by the Libertarian party. I haven’t read the decision yet -I’m going to go find it now – but I think advocates of the law would spend their time more wisely redrafting it than appealing Judge Underhill’s decision. I know the judge only slightly but he’s my best friend’s close friend (they were partners together at Day, Berry & Howard 15 years ago) and he’s always told me that Stefan was a genius. From my few meetings and discussions with the man, I was as impressed as my friend. Underhill is not of my own political persuasion, by the way. Nominated by Chris Dodd, the only thing Dodd’s ever done that I admired him for, he’s just a brilliant jurist with no axe to grind. He’s also the only published poet I know – which would be irrelevant except that to find a commercial publisher willing to publish poetry in this market is exceptional.

All of which is to say that I doubt the ruling will be over-ruled on a matter of error in interpreting the law. So if you want to restrict campaign contributions, fix the law.

UPDATE: Decision is here. I’ve just dipped into it (it’s long) but I’m amused that the case makes bedfellows of two of my least favorite entities: the ACLU and the Green Party, with my favorite band of whackos, the Libertarians. That’s the fun part about free speech arguments, of course, because by protecting it for your enemies you’re also preserving it for yourself. It’s too bad the ACLU has turned so anti-American because, as cases like this illustrate, they could still serve a valuable purpose.


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