19 Sep 2008

Bob, 21st Century; 21st Century, Bob

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For months now I have known that I “need to” get a PDA. Finally spurred by the recent loss of my cell phone (which ran on vacuum tubes), I broke down and bought a Blackberry before my Penn State trip. Let me just say: OH MY GOSH. I would have been going crazy had I not had internet access for several hours at a time during these crazy days. But now I have the CNBC Blackberry icon (not sure what the actual term for those things is). Now work can consume even more of my waking hours. Woo hoo!

19 Sep 2008

The Government Is Not Promoting Financial Stability

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The stock market is opening way way up today because of the announcement of massive government efforts to “support” financial shares. This just demonstrates that the government interventions have not been promoting “stability.”

Imagine that during normal economic times, the government started handing out hundreds of billions of dollars to various firms every few days, but that there wasn’t a discernible pattern. (I’m referring to the decision to let Lehman fail but not Bear, Fannie & Freddie, or AIG.) Moreover, investors learned that if a firm became troubled, the government might literally seize it and end up robbing the equity from common shareholders.

OK, so again, suppose we were in a normal economy and a delusional Treasury secretary started doing the above. Wouldn’t every “conservative” financial analyst decry how destabilizing these actions would be? Well, those actions are still just as destabilizing, but now we are treated to them during the midst of a financial crisis. I.e. it’s during periods of economic vulnerability that the government unleashes measures that would obviously be harmful even during times of strength.

Last observation: I have been saying for months that the government’s steadily increasing rescue attempts were prolonging the crisis, because investment banks and others with assets tied to suspect mortgages were postponing their adjustment, hoping the government would finally provide a massive bailout. And that’s exactly what happened. So those institutions performed “rationally” by trickling out the bad news and stringing their shareholders along for over a year, rather than giving a very candid disclosure 12 months ago, taking their losses, and getting on with a recovery.

18 Sep 2008

SEC to Impose More Restrictions on Short-Selling

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You can’t make this stuff up. (And if you did, your literary label would be “socialist fiction.”) The SEC is now going to “temporarily” ban short-selling.

Details of course are yet to be announced. It’s not clear what the timetable will be, or which stocks will be affected. Also, this particular story doesn’t say whether it will be bans on “naked” short-selling, or even fully clothed short-selling.

I stand by my earlier opinion that the completely useless ban on naked shorting back in July had the sole purpose of softening up the public, i.e. getting them used to the government meddling with shorting. Back then nobody raised a fuss, because the ban was so easily skirted. (It would be as if the government banned people from saying, “Bush is a big a-hole” but everything else was legal. The ACLU might not even bother bringing a suit, because critics of Bush could still legally say, “Bush is a huge a-hole.”)

BTW here is the madman Cramer spouting nonsense about short sellers, and how the SEC is to blame for our financial crisis. I guess it’s just a coincidence that these evil short sellers spread scurrilous rumors about Bear Stearns, Fannie & Freddie, Lehman, and AIG. Luck of the draw, I guess. The shorters could just as easily have destroyed the share prices of Exxon and Shell, right?

UPDATE: Here is Robert Wenzel with his angry yet cogent analysis. Warning, he uses some phallic metaphors in describing investment bankers. (And yes, now you have no choice but to click on the link.)

18 Sep 2008

Did Andrew Cuomo Make Palin-Like Gaffe On Naked Short Selling?

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I’m getting ready for my Penn State student radio interview so I can’t pontificate–don’t worry, I’ll be long-winded tonight. But I’ve got CNBC on in the hotel room, and CNBC’s Maria Bartiromo was interviewing NYS Attorney General Andrew Cuomo, who is getting ready to crack down on “illegal” short-selling. She said something like, “Well Mr. Cuomo, a lot of analysts are focusing primarily on naked short selling, saying this is the real problem, not short selling in general. Can you explain the difference to our viewers?”

Suffice to say, Cuomo’s answer gave no indication that he knew the difference. He totally dodged and just talked about other things that he understood. But because he wasn’t fighting the bimbo label, Bartiromo didn’t follow up with, “What do you interpret the difference to be?”

18 Sep 2008

Murphy at Penn State Thurs – Fri

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Notwithstanding the Wall Street meltdown and other newsworthy items, I will be blogging lightly for the next couple of days as I am giving a talk tonight for the Penn State Libertarians. Here is their flyer (pdf). On Thursday at 5 PM EST I will be on the Penn State radio station (90.7 “The Lion”) and people can listen live here.

17 Sep 2008

Faith in Humanity Update

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I’m pleased to report that I just got my cell phone back in the mail. (Loyal readers will recall that I left it in a cab last week.) And because I was pressed for time, I just put in a $5 bill for the guy (with the postage paid envelope). So maybe The Dark Knight was right, and average people are good.

This almost makes up for the time my wife and I were walking home from a bar in Auburn, AL (home of the Mises Institute) and we wanted to get something from McDonald’s. Unfortunately only the drive-thru was open. So we gave our order and (I think) a $10 bill to some college kids in line, and when they were behind the building they must have taken off out a different exit, because after about 15 minutes on the other end, we realized they were no longer in the queue of cars.

Now if you think about it, that’s pretty bad. Everybody in line had beer munchies, and it was only a $10 bill (I wouldn’t have been so foolish as to hand them a $20). It had occurred to me, of course, that they might bolt, but I figured the payoff wouldn’t be worth it. I think what probably was decisive was that there were a few guys in the car, and so it probably was funnier/safer for the driver to rip me off in front of his buddies.

17 Sep 2008

Practicing What I Preach

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I just bought about $700 in US silver coins (dollars, half-dollars, quarters, and a few dimes) and I threw in a 1/4 oz gold coin just for kicks. I bought the crappiest coins they had; i.e. no numismatic value here.

I realize there’s an incentive for me to be an alarmist–because then people come to read what I say–so I want to stress that I am not making a prediction that this is likely. However, I want to point out that we keep hearing the phrase, “Not since the Great Depression has the government…” these days. And you know what else FDR did? Declared a bank holiday.

So I feel much better now that we have few weeks of (real) money on hand, in case Paulson decides our checking account needs to take a breather.

17 Sep 2008

Disgruntled Lehman Employee: "Austrian Economics Was Right!"

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No joke. Check it out. (Click for larger image.) Thanks to my former student Shannon P. for the picture.