Daily Archives: May 27, 2010

Greenwich tennis coach fired

Connie Jones fired. Sure seems like bullshit to me but then, I almost never believe cops and their stories.


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I’ve always thought Sherwood vs. Walker was wrongly decided

NSDAQ cancelled all trades based on a faulty algorithm a couple of weeks ago. Buyers in good faith were screwed, and idiots rewarded. Typical for Wall Street, but hardly just, or fair.

The best laid schemes of mice and men gang aft agley.  I thought I’d celebrate turning in my Contracts grades by musing about the contractual doctrine of mistake and the “Flash Crash” of May 6.

Here’s where the cows come in.  Lawyers, remember that old chestnut, Sherwood v. Walker? Buyer buys cow for “beef on the hoof” price, but before the cow is delivered, it’s discovered that she is pregnant, and therefore a “breeding cow” and considerably more valuable.  Seller claims the right to rescind because of mutual mistake: both buyer and seller were mistaken as to the fundamental nature of the transaction (barren vs. fertile cow), so the deal should be void.  Mutual mistake still applies today, with the Restatement requiring both parties to be mistaken about a basic assumption and that the claimant not bear the risk of the mistake.

On May 6th the DJIA plunged almost 1,000 points. Congressional hearings followed, and while there was widespread speculation that a “fat finger” entered some extra zeroes into a P&G order, that’s not the mistake that interests me.  It’s the fact that the stock exchanges canceled trades occurring between 2:40 and 3pm at prices 60% above or below the 2:40 price.  According to the WSJ, “Nasdaq alone canceled more than 10,000 trades involving at least 1.4 million shares.”

On what grounds?  Mutual mistake sprang to my mind.  Both parties think they’re getting the “true market price,” they’re mistaken as to that basic assumption.  As James Stewart put it, “presumably no rational person would sell Accenture for a penny.”

But what about the risk-bearing question?  Stewart asks interesting questions:

If the trades resulted from sophisticated algorithms that failed to take into account the possibility of such volatile trading conditions, do those investors deserve to be bailed out by having the trades unwound? Should MIT-trained engineers turned professional traders be protected from their lack of foresight? Conversely, should those traders who devised programs to take advantage of such a free fall be denied their profits?

In other words, where do we allocate the risk of mistake?  I like teaching Sherwood because it illustrates that most market transactions are premised on a mistake.  Sellers think the buyer is paying too much (caveat emptor), and buyers think the seller is charging too little (caveat vendor).  Where do we draw the line between “great deal” and mistake?


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Buhl is back

RBS Can’t Handle Journalist Printing the Truth

The group of British government-funded bank traders in Stamford, Royal Bank of Scotland, have thrown a hissy fit over one financial blog printing news about some of their most embarrassing mistakes. That’s right, RBS has now banned its employees from reading one of the funniest wall street publications – Dealbreaker – and cut off their Internet access to the site.

You see last week,when the bank lost power for about 10 minutes during trading hours, Dealbreaker correctly reported that it was because of an overflowing toilet. Yep, all that money they spent on their high-tech brand new building didn’t plan for bathroom problems and the water spilled into their communications closet. Well RBS brass didn’t take too kindly to a staffer outing this embarrassing mistake to Bess Levin at Dealbreaker and instead of just laughing it off, have now punished employees by taking away their daily DB reading.

Personally – I’ve always found the press people at RBS immature – like the fact they still won’t admit why rouge trader James Glover hasn’t been arrested after they turned him over to Feds for a stealing from Greenwich Capital clients.

I mean don’t you think the shareholders would like hear that US authorities actually got Glover to give the millions he took back and maybe gave him some jail time?

Anyway – Levin is now asking for all RBS insiders to give her a shout and tell any and all gossip about their bank bosses so she can print it. Please do – we need some fun finance stories around here now that Greenwich Time has failed to find a financial services reporter to cover the news hole I left them with.


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Fraud in New York: a Mini- Madoff

Somebody named Starr ripped off rich folks – nothing new there. But also arrested was Andrew Stein who was, back in the Koch administration a big deal.I mean, I remember the guy – he was president of the City Council, for goodness sake, and the son of a multi-millionaire. Can’t anyone down in Manhattan keep his zipper closed?

I do like this bit:

When Mr. Starr, 66, was arrested Thursday morning, he was found hiding in a closet, betrayed when agents spotted his shoes under the door.


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Should Obama be at Arlington on Monday?

Sorry you lost your kid, ma'am - can I play through?

He’s being criticized for blowing off the ceremony on Memorial Day and taking a vacation instead. On the one hand, I’m sympathetic to the President. He’s under pressure, and can doubtless use another break. On the other hand, George W. quit playing golf when the war started because, in his words, he “didn’t want the mother of a soldier just killed to see me on television having a good time”. [Update: turns out, I was paraphrasing, but close enough – check the link for what he said exactly]. Obama loves his golf and apparently feels it’s okay to keep it up because it was his predecessor who started the damn war, not he.

I come down on the side that he should be at Arlington – he’s Commander-in-Chief and regardless of who started this mess, he is now responsible for keeping the troops over there, and some are dying every day. I think that going without a golf outing comes with the job.

UPDATE: Another Instalanche! Thanks, Glenn.


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Why we’re all going down, hard

In New York, Patterson can’t even cut $11 million from the budget. Politicians can’t see past November’s elections (it’s probably mean to point out that Patterson can’t see at all) and will not, cannot stop their spending. It’s the same all across our fair land, including here in Connecticut, and I fear we’re all in for a very bad ending, soon.


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Too bad: I had higher hopes for this man

Pequot Capital and its founder, Arthur Samberg, are disgorging $28 million in profits (plus penalty ) illegally gained from trading on insider information. Samberg was once a highly reputable fellow, and it’s a shame to see he had feet of clay.


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Without Milton Friedman around to explain money supply to me, I don’t know how to interpret this

M3 money supply at Depression-era levels. Is this as significant as the reporter thinks, or is Bernanke right? Friedman was always preaching on the importance of money supply, but I never quite grasped the concept and still don’t. Bet you smart Wall Streeters do, though.


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More from InstaPundit

Just in case you missed this:

A SIGN OF OVER-INFLATED PROSECUTORIAL BUDGETS: Prosecution for truancy-related forgery.

Shannon Anderson 27, along with her husband, William Anderson, were arrested March 8 and March 9, respectively, on felony warrants charging them with forging a doctor’s note to excuse their third-grade son from school.

Really, prosecutors have time for this kind of stuff? Apparently, yes:

A Corning woman is out on bail today, one day after she was arrested on a warrant charging eight felony counts of truancy-related forgery.

“This is a sad, sad case for the little kids who should have been in school,” Tehama County District Attorney Gregg Cohen said in a statement.

Kari Shannon Brandt, 38, was booked into the Tehama County Jail on Tuesday on six counts of preparing false documentary evidence and two counts of offering false evidence in the course of an investigation, Cohen said. . . . Prosecutors accuse Brandt of forging signatures and creating doctors’ notes on 12 occasions between December 2009 and April. The reported notes were written for three of Brandt’s children, ages 6, 7 and 8, in a reported effort to excuse them from West Street Elementary School in Corning, Cohen said.

I feel comfortable concluding that Cohen’s appropriation is much too large if he has time for cases like this. I encourage the relevant officials to direct the money to more significant priorities in this time of hard-pressed public budgets.

UPDATE: Reader Al Nugent writes:

This is the prosecutorial equivalent of the apocryphal Vietnam ‘we had to destroy the village in order to save it’ incident. In this case he’s burning down the family. Apparently this idiot thinks the best thing he can do for these kids is give their parents felony conviction. I’m sure that will improve their chances of supporting them through college immeasurably.


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Nice house but … (II)

20 Dingletown

This ill-fated spec house was built by amateurs back in 2006 by a nice couple who paid a builder to erect it for them and then, having paid him his profit, tried adding on a second slice and priced it at $5.395 million. Even at the top of the bubble there wasn’t room for that much gravy and so it didn’t sell. It finally dropped to $3.895 last year and today it’s back at a higher price, $4.195. It’s unlikely, in my opinion, that the house has increased in value since last year.


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Nice house but …

33 Boulder Brook

This 2008 spec house has dropped its price again, down now to $5.495 from an original ask of $6.875 million. And that’s good, but the trouble lies with the recent sale of another equally nice if not better spec house on 9 Boulder Brook that sold for $4.4 million, from an original price of $7.245.

I would think that a buyer or an appraiser will look to see recent comps and land on #9 as the perfect match. In which case, #33 has another million to drop. That, plus the presence of a couple of houses in foreclosure on the street, spells trouble.


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Open house Thursday

42 Winthrop Drive


Look past the crummy picture because this house on Winthrop is a really nice place. It was blown out in back in 2004, so it has all sorts of nice, modern amenities while still retaining the 1954 charm of the original house. Nice yard (0.57 acre), great, quiet street, and all within easy walking distance of Riverside School, Eastern, and the train. Priced at $2.525 which, given recent sales, is pretty spot-on. Good deal.

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What’s up this morning

Two contracts, a couple of sales.

131 Lockwood Road, RVSD

This nice house in Riverside is in contract in under sixty days; asking $1.525.

33 John Street, great land, asked $3.125, Fudrucker nailed it for a builder/client.

41 Will Merry Lane

41 Will Merry last sold for $1.425 in ’07, asked $1.975 in ’09, sold today for an even $1 million. Ow.


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Cross your fingers, but it seems that the “top kill” is working

No gas or oil escaping. Let us hope.

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Copper River salmon

My mother’s doctor advised her to eat more fish, especially salmon, so yesterday I stopped by Fjord Fisheries in Cos Cob to see what they had. Personally, I’m not a fan of farm-raised salmon, I find it bland and unpleasant at the same time. But they were offering wild-caught Copper River salmon at the absurd price of $35 a pound and I bit.

It’s a totally different fish; in fact, possibly the best fish I’ve ever had.

I cooked it simply: preheated an oiled baking pan in a 500 degree oven, then put the fillet on the pan, dusted it with a little salt and pepper and dropped the oven temperature to 275 and baked it maybe ten minutes. I also made a salsa? salad? Of red and yellow bell peppers, shalots, avocado and diced cherry tomatoes with some oil and vinegar and some herbs, all of which I refrigerated ahead of time. With toasted (3 cheese semolina la Brea) bread and rice, it was a memorable meal, and probably took all of ten minutes prep time.

I don’t have the kind of money to buy fish at this price often, but apparently Copper River salmon season runs just mid-May to mid-June, so the temptation is over quickly. Check it out, if you’re so inclined. Beats the hell out of the Bluefish that are coming.


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Home detoxification – “An idea whose time has come”

That’s according to the New York Times. My question for these alarmist is why, with new tales of toxic horrors publicized every day, does the average life expectancy continue to increase?

Hogwash is the nicest term I can come up with.


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We’re in the best of hands

$24,000 Rolex stolen by TSA worker. You think they put a 63-year-old lady through two separate screenings so they could steal her watch? I do.

And then there’s this:

7 out of 8 of all attacks on TSA workers are from other TSA workers. We’ve hired people with real anger-management problems and made them all federal employees, invulnerable to dismissal. Great.

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From InstaPundit:

GOOD QUESTION: “If deficits didn’t matter as many like Economist James Galbraith argue today, why should citizens even pay taxes? It would make everyone happier if they didn’t.”


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