Thursday, September 30, 2004

George Soros and his Disdain for the President


I agree with Soros' points on our haphazard methods of fighting this war- the lack of troops on the ground, the difficulty in bringing democracy to a theocratic state, and the mistreatment of Iraqi prisoners. However, his point about the 9/11 report is grossly incorrect. The report clearly states that al-qaeda aids had once sought to seek shelter from Iraq, but Saddam was worried that the US would eventually come seek them out. So he sent them to Afghanistan to live amongst the Taliban. Moreover, there were paintings on the walls of Saddam’s palaces of planes (with Iraqi flags on the side) flying into the twin towers. In the US, we arrest, sequester, and detain anyone who tries to buy fertilizer, so why isn't it a surprise that we went after this guy?

Tuesday, September 28, 2004


Perplexing as it might seem, commodities prices continue their upward ascent (nat gas is up 21% in two weeks while gold is also up 4% in that same time period) in the face of decreasing long-term rates. Typically, stronger commodities should to higher levels of inflation which in turn pushes long term rates higher. However, the 10 year has rallied 30 basis points since early Sept, as rising inventories are signaling a slowdown in economic activity. Consumer demand is not keeping up with the rise in inventories, putting pricing pressure on companies even as their cost of running the biz increases. These effects will not be seen for another quarter.

Today, OPEC threw in the towel and said there was nothing they could do to halt the rise in oil. Yesterday, Boone Pickens said we will see oil at $60 before we see $40. These statements are indicative of a short-term top. And there's nothing that fuels the market more than decreasing oil prices...

Monday, September 20, 2004

Buying the Election Electronically

In a 2002 Michigan State University study on the "Influence of Media Projections on Voter Turnout In Presidential Elections from 1980-2000", Michael Crespin and Ryan Vander Wielen found that media projections have a "statistically significant and negative effect on voter turnout". They also concluded that "an early projection can result in a substantial decrease in voter turnout." Furthermore, voters become discouraged by a projected landslide victory and don't turn out on election day, specifically if they support the losing candidate.

In recent years, electronic futures markets, where participants can buy and sell the probability of an uncertain outcome (such as who will win the Superbowl or the presidential election), have been increasingly noted in the media. I've heard Larry Kudlow mention the Iowa Electronic Markets on CNBC and in the Washington Times. In speaking to the investment community, Tony Crescenzi, Miller Tabak's chief economist, cited a 9 point increase last week in Bush futures on Intrade.com's electronic exchange.

There is even evidence to suggest that the political futures markets offer a more accurate picture of the political race than the polls. Since its inception in 1988, past predictions in the Iowa market have shown an average error rate of just 1.5 percentage points in the week before each of the past four elections. That's more accurate than the final Gallup polls.

University of Iowa economics professor Bob Forsythe, a founder of the Iowa Electronic Markets, says swings in the Bush-Kerry futures market are less volatile than in traditional political polls. That's because profit-motivated investors put their own money in Bush or Kerry shares and think twice before buying or selling.

I decided to use my trading knowledge to figure out how much it would cost Karl Rove and clan to buy the election. In other words, how much capital would need to be committed to give Bush an insurmountable lead in the electronic markets? A lead which could be played out in the media, thereby discouraging democratic voters from turning out to pull the levers on Nov. 2.

On Intrade.com, the market to purchase a Bush win is 69.2 bid and 69.7 offer. That means the market is pricing the odds of a Bush win around 69.5%. On the flipside, Kerry's victory chances would be roughly 100 - Bush odds - odds of a 3rd party victory. To purchase 10 contracts on a Bush win, the net investment is $69.70. However, the market is very illiquid, and it doesn't take large pools of capital to influence the results. There are only 200 contracts offered for the next 3 points. The most it would cost to move Bush's probability of winning the election to 73% is a mere $1,440! Extrapolating this cost forward, if one wanted to move Bush's expected chances up to 78%, it would only cost $4,320! This seems to be cheaper and more effective advertising than any 15-second TV ad that the GOP could ever produce.

Meanwhile, the Iowa Electronic Markets claims that it can control the influence of large investors by limiting the account size to a maximum $500 investment. On this supposedly more efficient electronic exchange, the market for a Bush victory is 61.0 bid and 61.7 offer. However, the average daily $Volume for September is a dismal $1,084. If one were to open various accounts under different names, the Iowa markets could be just as easily manipulated as Intrade.com's!

The Hostage Suggestion

The US does not negotiate with kidnappers. A 1995 policy on hostage-taking said the U.S. government "will not pay ransom, release prisoners, change its policies or agree to other acts that might encourage additional terrorism." However, after WSJ reporter Daniel Pearl was kidnapped in February 2002, the Bush administration reversed course and said that the US might sometimes pay ransom to the kidnappers. However, the officials also stressed that the government would be aggressive in recovering the money once a hostage was safely released.

Currently, two Americans and a Briton are facing beheading unless the US releases prisoners from two detention facilities in Iraq. I am amazed that the US has yet to contract Lojack to develop a system to track our prisoners after we release them in return for hostages.

We have satellite systems that can locate your stolen Lexus in a Newark chop house even after the parts have been fully stripped from the chassis. Likewise, there's even a system developed to find Fido when he wanders the neighborhood in search of bithces in heat. We even use Satellite-linked radio telemetry to track Flipper's migration in the Northern Atlantic. Why don't we tag and release captured terrorists and monitor their activity until they lead us right into the lion's den?

Thursday, September 16, 2004

I’m not flip-flopping on the war issue. It’s a war I believe in and want to succeed, especially since it’s the primary front in the war on terror. I think the administration failed to estimate the costs associated (we thought our soldiers would be greeted with ticker-tape parades on the streets of Baghdad) and has not been quick enough to correct its errors. It truly bothers me that the president refuses to acknowledge reality- that the Green Zone is no longer secure and the insurgents are now standing and fighting (as evidenced by the amount of our troops falling to bullet wounds, not just shrapnel).
Bush ran on a fiscally conservative agenda, but his presidency has been anything but that. That angers me.
As far as the limousine liberals (Buffet, Rubin, Schwartzman, etc) are concerned. Yes, they’re financially savvy, but their political policies are borderline social. I guess you can afford to believe in this ideology when money is no longer an issue. But to me, it is. And so is making this country the greatest place to live on earth. That’s why I will support the candidate who is the most socially liberal, yet fiscally conservative. Unfortunately, only one of the candidates represents the former and neither represents the latter… so I might just sit this one out.

Thursday, September 02, 2004

This might be the best essay i have ever read...


Interesting Buffet article: http://www.pbs.org/wsw/news/fortunearticle_20031026_03.html

Buffet draws some ominous conclusions about the US but fails to compare our situation with the rest of the civilized world.

For instance, the US Deficit/GDP is about 35%. In Europe, the average is 60%; and Japan is running at 140%. So although the $374 billion deficit may seem colossal, it doesn’t even begin to equate (on a percentage basis) to the $290 billion deficit we were encountering in 1991.

In Japan, one would assume they would have abnormally high interest rates with debts outstripping production at an alarming rate. However, the Japanese 10 year note yields only 1.5%. The yield is a function of the credit-worthiness of the nation, rather than the size of the debt. On the contrary, the 10 year yields of lower-rated Brazil and Colombia yield 11% and 13% respectively. Our debts are not in jeopardy of affecting our credit rating.

Japan is also the second largest holder of US debt, and they have been buying $’s, thereby ensuring the $’s strength for the benefit of their exporters. They also receive about $1 billion per week for exports to the US. Liquid treasury bonds are the easiest way to invest their $$ reserves, hence why they own a good deal of our assets.

If you understand how the deficit was created in the past 3 years (discretionary government spending, lower taxes, and a slower economy), then you can see signs of an end to the slide. The economy is improving. Compared to FY03, in FY04 corporate income tax receipts are up 45% and Medicare/Medicaid receipts are up 10%. This will go a long way to fixing our fiscal situation which is by no means cautionary just yet…

Criticisms of Democratic Senator Zell Miller's speech at the RNC:

“No one should dare to even think about being the Commander in Chief of this country if he doesn't believe with all his heart that our soldiers are liberators abroad and defenders of freedom at home. But don't waste your breath telling that to the leaders of my party today. In their warped way of thinking America is the problem, not the solution. They don't believe there is any real danger in the world except that which America brings upon itself through our clumsy and misguided foreign policy.”

The majority of Democrats voted for, and are still in support of the war in Afghanistan and Iraq. On top of that, I’ve never heard any politician claim that 9/11 was our fault. You can’t equate everyone on the extreme left (in Moore-land) with the moderates of the party. Even though I don’t agree with Kerry’s dissenting opinion in matters of defense, you can’t call someone a traitor or say they’re not patriotic!

"Senator Kerry has made it clear that he would use military force only if approved by the United Nations. Kerry would let Paris decide when America needs defending. I want Bush to decide." - In Kerry’s acceptance speech, he claimed he would never seek permission to defend our country.

Don’t get me wrong- I still think Bush is the man for the job. However, a democracy is based on the tolerance of dissenting opinions, not lambasting your opposition through severe character denigration. Rather than focus entirely on the shortcomings of our opponents, why not highlight the positives of the administration? An administration that was dealt a 3-9 off-suited and skillfully played the hand (with a few setbacks along the way) to create the better world in which we live in today…

The Jesus Paradox

The Christian Coalition claims to be the largest grassroots political organization in America, committed to representing the pro-family agenda and educating America on the critical issues facing our society. Prior to the November election, they sent out a record 70 million voter guides throughout all 50 states. They also actively lobby Congress and the White House on numerous issues and organize community activists regarding issues facing their local government.
Perusing the CC website (www.cc.org), I noticed a few political issues which don't jive with their own beliefs:
1. Prohibit special civil rights protection based on sexual preference/'domestic partners'.
2. Supporting legislation barring adoptions of children by homosexuals.

I find it somewhat troubling to think that a group who purports to be based on the teachings and ways of Jesus Christ would not display the same type of acceptance and tolerance as their Messiah. Herein lies the difference between the sectarian Christians and the humanitarian Catholics, and its important not to confuse the two. The word "Catholicism" means "universality", and is based on the inclusion of all individuals under one Holy Trinity.

My question to the Christians who seek to deny certain interest groups from unalienable civil rights:
If JC were to return to the world, with whom would He associate? Who are the modern-day outcasts and lepers with which He once walked?

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