Real Name

Just a note. From now on I will be posting entries using my real name instead of my nom de blog, Grodge. Mainly this is to avoid confusion from friends and family who have continued to ask, "I read you blog, but who is the guy named Grodge who writes all the entries."

Grodge is Tony. Tony is Grodge.

Ike was Right-- Don't Trust Anyone

Eisenhower warned us to beware of the military industrial complex almost 50 years ago and now we have all his unheeded warnings come to raw fruition. The New York Times reported Sunday on the multitude of retired military officers who have acted as television "analysts" during the run-up and early stages of the Iraq war and occupation. According to emails recently released only after NYT sued the Defense Department through the Freedom of Information Act, many of these analysts were also on the payroll of defense contractors in addition to being wined and dined by the Pentagon in order to be fed pro-war propaganda-- which some have conceded after the fact was misrepresented-- as well being paid by the networks for their appearances.

This should make your blood boil.

From the NYT:

Hidden behind that appearance of objectivity, though, is a Pentagon information apparatus that has used those analysts in a campaign to generate favorable news coverage of the administration’s wartime performance, an examination by The New York Times has found.

The effort, which began with the buildup to the Iraq war and continues to this day, has sought to exploit ideological and military allegiances, and also a powerful financial dynamic: Most of the analysts have ties to military contractors vested in the very war policies they are asked to assess on air.

Those business relationships are hardly ever disclosed to the viewers, and sometimes not even to the networks themselves. But collectively, the men on the plane and several dozen other military analysts represent more than 150 military contractors either as lobbyists, senior executives, board members or consultants. The companies include defense heavyweights, but also scores of smaller companies, all part of a vast assemblage of contractors scrambling for hundreds of billions in military business generated by the administration’s war on terror. It is a furious competition, one in which inside information and easy access to senior officials are highly prized.

Critics I have read in various comments sections have made remarks about the veracity of the NYT, and I will be gracious enough to give voice to those misgivings. However, the damning accusations by the Times article, if untrue, would surely elicit defamation lawsuits by the networks and retired officers. These retired military men are 1) getting tax-supported pensions, 2) being paid by main stream media outlets for appearances as supposedly objective observers 3) receiving payment from defense industry lobbyist firms or the companies directly, and in one instance-- General Marks-- is a CEO of a defense contracting company who was actively negotiating contracts with the Pentagon while he is beating the war drums on CNN as a paid "analyst", and 4) accepting tax-supported air fares and dinners to receive talking points directly from Donald Rumsfeld from 2003 to 2006.

Nobody is innocent in this affair if the NYT's piece is to be believed. The networks never questioned the "analysts" about industry ties and accepted their "analysis" as objective. The retired military lost Pentagon access if they failed to promote the war strongly enough, which would have threatened their lucrative jobs lobbying and negotiating defense contracts. So they continued to dance.

Some network officials, meanwhile, acknowledged only a limited understanding of their analysts’ interactions with the administration. They said that while they were sensitive to potential conflicts of interest, they did not hold their analysts to the same ethical standards as their news employees regarding outside financial interests. The onus is on their analysts to disclose conflicts, they said.

[snip]

CNN, for example, said it was unaware for nearly three years that one of its main military analysts, General Marks, was deeply involved in the business of seeking government contracts, including contracts related to Iraq.

General Marks was hired by CNN in 2004, about the time he took a management position at McNeil Technologies, where his job was to pursue military and intelligence contracts. As required, General Marks disclosed that he received income from McNeil Technologies. But the disclosure form did not require him to describe what his job entailed, and CNN acknowledges it failed to do additional vetting.

“We did not ask Mr. Marks the follow-up questions we should have,” CNN said in a written statement.

In an interview, General Marks said it was no secret at CNN that his job at [defense contractor] McNeil Technologies was about winning contracts. “I mean, that’s what McNeil does,” he said....

...General Marks said his work on the contract did not affect his commentary on CNN. “I’ve got zero challenge separating myself from a business interest,” he said.

Whew! That makes me feel a whole lot better. A guy whose salary of several million dollars depends on the occurrence of a war goes on television to use Rumsfeld's talking points to "sell" the war to me-- but he says he can separate all these competing conflicts. Sure, I believe him.

How about this... instead of interviewing Mark McGuire and Frank Thomas about whether they juiced in order to hit home runs, what if our astute Congress hauled these snake oil salesmen before the hot lights and cameras and grilled them about the obvious conflicts involved in the orchestration of this war? Is that too much to ask? Get the retired generals and colonels, but also the Pentagon officials who planned the dog and pony shows, and most importantly the network executives who either willingly took part or failed in their obligation as purveyors of information. I want to see them at least squirm.

We have perpetrated a criminal war, slaughtered civilians, maimed and killed our own soldiers, exhausted our treasury, empowered terrorist leaders, destabilized the world's supply of oil-- and why? Because craven "analysts" sold us this war and occupation for apparent financial gain and the press allowed it.

Perhaps the retired military guys are true believers who somehow feel that a great service is being done by our war machine and defense contractors, but that does not release them from the responsibility of submitting possible conflicts of interests. Fox News I understand: they are unrepentant warmongers and have been from day one; we all know their "analysis" has always been a commercial for Rummy's magical mystery tour. But what the fuck was going on at CNN, NBC, ABC and CBS?

No hell is hot enough enough for this lot.

Expected Rally Occurs; Take Profits

I don't trust weekends. Some craven CEO is always likely to divulge bullshit after a nice broad-based market rally. The counter-trend rally we've been watching has not been as healthy as we like, although today's run is welcome.



Eric has been posting the LIBOR spreads against fed funds, which gives a little window into trader sentiment. As the spread narrows, it shows more confidence in the credit markets. As Eric explains, the LIBOR-fed funds spread is a fear index, and as the spread widens this denotes the liquidity and credit markets are locking up. Another explanation is here. Just one more data point I suppose, but we all know that bond traders are the smartest guys in the room-- reference Rick Santelli.

Great market sentiment, cash on the sidelines, high short interest: all point to a continued market rally in the immediate term. Even so, if there is a melt-up, say to SPY 142 in the next couple trading days, then I would not hesitate to open a short position for the pull-back.

Have a good weekend. Be careful.

Disclaimer: Never, never, never take advice from hacks who have free websites on the internet. This is for entertainment purposes only, so have fun.

Market Trend Breakdown/ Recovery

Last Thursday we looked at the Elliot wave analysis of the S&P depository shares (SPY). The trend was short term up, and we expected further runs up with 138 as resistance.




But the market did not respond as expected. Presumably due to worse than expected earnings from bellwethers such as General Electric and big banks, the market dropped below trend on Monday and Tuesday. Now today, we are seeing more recovery as some regional banks announced better-than-expected earnings. The SPY has come back within the regression lines on good volume.


The higher low this week with an upturn above $132 is a bullish sign for the short term; this should act as support. The trip earlier this week emphasizes the trouble with the economy overall and the justified skittishness for investors. Be careful.

The NASDAQ has done even better today than the financial-laden SPY, and IBM reported excellent results after the bell and is trading up $7 as I type.

My surmise is that $138 on the SPY is very reachable this week as the countertrend rally continues. Shorts continue to put a nice bid on this market and lots of cash on the sidelines may also act to lower the risk for long positions. The economy sucks and the long term market trend is still down, but this bear market rally still has legs with support at $132.

Specifically, regional banks look appetizing. UnionBanCal Corp (UB) is my personal pick with favorable Return on Assets and even a 4.4% dividend. Many have been beaten down with all other financials, and the stronger regionals should be the first to recover.

Elliot Wave Analysis

Chart Astrology, as Eric the market sage explains, affects the price movement of the stocks. Elliot came up with his wave theory almost a hundred years ago, and proponents have kept the principle alive to this day. The basis is the Guassian bell curve of human sentiment. The market begins to rise (or lower) and a few early adopters will make the trend, wave 1. The market then pulls back a bit making the countertrend wave 2, but then later adopters will pour into the market making the definitive wave 3, only to have a countertrend wave 4 and a final wave 5 when late comers try to make some money. The corrective 3 wave cycle is termed the A-B-C and goes counter top the 1-2-3-4-5 main wave pattern.

Voo-doo? Sure, but followers of wave theory will swear by it, and most will admit that it takes an active right brain to see the trends and line patterns. Here's my amateur evaluation of the last few days:



And the prediction of the A-B-C corrective phase should last over the next 2 or 3 trading days:




My analysis differs from Eric's only slightly. While I just dabble in the dark arts of market prediction, I still find some value in watching the trends and counter-trends. And I find value in Eric's discipline and narrative as well.

Another analysis of the trend could look like this:



Which gives a similar result and SPY hitting $138 by Tuesday. We'll see...

Counter-trend Rally

Charles Kirk's daily trader's blog is among the best around. He compares the current market strength to the counter-trend rallies in 2001. Kirk says:

Counter-trend rallies always suck in people at the worst times as people think the “all clear” signal has been provided:

Kirk continues:

We could very easily see a similar situation here although history never repeats exactly (that would be far too darn easy). And, many will also legitimately argue there are major differences between now and back then (like reasonable valuations for example). However, at the end of the day, the market itself must ultimately confirm whatever thesis you’ve aligned yourself to.

All in all, I expect we’ll see a series of powerful and impressive counter-trend rallies that are worthy of trading short-term but extremely dangerous for those investors who like to hold stocks for more than just a few weeks. Most everything I continue to see confirms this so far.

Be careful out there.

The Good Shepherd

How did I miss this movie?! For some reason, despite an Oscar nomination, a great cast and Robert DeNiro as director, The Good Shepherd missed my line up of movies when it was in the theatres. Last week I happened upon it on HBO and became enthralled immediately.

The movie was long, nearly three hours, but was completely captivating due to its excellent acting, interesting plot material and adequate screen writing. When this movie came out it was advertised as a history drama about the start of the Cold War and the CIA. It is much more than that.

In fact, The Good Shepherd follows Matt Damon's character, Edward Wilson, from childhood and through his career in the Foreign Service during World War II and then into his role as counter-intelligence operative during the Cold War. Wilson is loyal to his wife, his son and his country; he murders, tortures and deceives wantonly and without conscience if such actions are in the interest of these charges. The good shepherd indeed. Angelina Jolie, as his wife Margaret, is amazingly believable as a Connecticut daughter of privilege.

The underlying theme of the movie, however, is more fundamental than a simple history pic about spooks and bad guys. This movie is actually the WASP version of The Godfather. Really. Loyalty and family and "doing the right thing" are emphasized above all else, much like Mario Puzo's 1969 novel and subsequent movie starring Marlon Brando about the New York mafia. The good shepherd is no less than a blond-haired blue-eyed capo regime.

The thematic scene in this movie has Joe Pesci making a cameo appearance as an aging mobster, ala Sam Giancana, who was apparently expelled from Cuba after Castro's revolution. He is being recruited by Matt Damon's CIA character Wilson in a plot to overthrow the Castro regime. Appalled that he would be expected to do the CIA's bidding and that Wilson threatened to export him back to Italy, Pesci's character Joseph Palmi says,

Who are you people? We Italians have our families and the Church, the Irish have their homeland, the Jews have their traditions, even the ni&&ers have their music. What do you have?

Edward Wilson, in a stoic, matter of fact way, intones, "Mr. Palmi, we have the United States of America. You people are all visiting."

And that is the entire point of the movie. The governmental, political, military and clandestine infrastructure of this nation was established for the service of the white majority. Historically, all other ethnic and racial groups exist only at the discretion of this establishment.

Much has evolved in the nearly fifty years since that scene supposedly took place, but the fact remains that the mindset of the aristocracy has not changed. Edward Wilson was a member of Yale's Skull and Bones, as were many of his friends and colleagues at CIA-- an apparent reference to our current president and many of the extant political power-brokers.

The Good Shepherd is an excellent movie with an enduring message as well as a cautionary tale. To limit its message as merely a depiction of the early CIA misses the strong underlying themes of entitlement and purpose of the majority race as well as loyalty, family and service. Leave it to DeNiro to direct such a tour de force.

Studio advertising and movie trailers did not do adequate service promoting this flick. If I had known the fundamental motif, I would have willingly shelled out $8 to watch in the theatre.

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Day Trading... Swing Trading... Position Trading

In a perfect world, I would not have a job.

Instead I would day trade stocks and indices, or more accurately, swing trade: keeping positions anywhere from a few hours to a few days. Follow market trends and nimbly get in and out. Position trades are longer term, holding positions for months or years.

Today is such a perfect day. I had a big case cancel, so I took the day off. The non-farm payroll report, i.e., the jobs report, for March was scheduled to be announced at 8:30 am, so the market promised to be interesting.

The jobs report was terrible by all standards, which by itself did not surprise me at all. Service and manufacturing jobs declined month over month and year over year. The only maintenance of job numbers were in the government sector-- go figure (I thought we had small government conservatives in charge. Ha!)

The market has responded very well this week and it seemed to take the poor jobs report in stride. Either the traders and investors feel this is the bottom, or they are confident that Ben Bernanke and his team are not willing to allow any more drainage on market returns. The market is solid.

As Charles Kirk says:

As we saw from trading [Thursday], investors are showing some confidence (or brash complacency) depending on your perspective. I suppose with bailout Bernanke and Paulson now on high alert and the economy already out of recession, there’s no downside risk anymore. At least that’s the vibe I’m getting from a number of people.

Granted, there is always downside risk, but in relative terms the market should fly over the next 2-6 weeks. If it can absorb the crappy metrics in the economy, then it will certainly weather the storms of any poor earnings next week.

Barry Ritholtz, the writer of an award winning macro-economic blog, recently has called for traders to close their short positions and look for select long opportunities. I agree. Last week I began looking at tech plays like Sybase, (SY), Taiwan Semiconductor (TSM) and Sun Microsystems (JAVA). I think that tech will lead us out of this recession eventually.

Also, small retail banks should be at multi-month bottoms. Associated Bancorp (ASBC) is located in Green Bay, home of the vaunted Packers (who are looking for Lynn Dickey to come out of retirement now with the departure of Favre, but I digress). Northern Wisconsin has a relatively stable economy based on tourism from Chicago and Milwaukee, paper and other natural resources. Another is Union Bank of California (UB). Both of these have 4%-plus dividends, great technicals and solid fundamentals. These are longer term holds-- probably through the summer at least-- but eternal vigilance is the price of trading.

Another flyer I got into recently is Cameco (CCJ), the largest producer of uranium. If the world isserious about decreasing carbon emissions, then nuclear energy will play a huge role. Toshiba just signed a large contract to make several reactors for the United States and they will all need substrate uranium. Cameco has not the run up in valuation that solar stocks have had and nuclear power offers proven potential to generate large quantities of electric power, unlike solar. Cameco is a long term secular trend that should last several years, if not a lifetime.

By the way, the trade today was China (FXI) on the upside. In at the bottom, out near the top. The perfect day-trade. The perfect day.



Disclaimer: I'm a simple working stiff who knows less than nothing about finance and economics. My interest in the market is solely for entertainment purposes. In no way should my ranting serve as investment advice in any way. (Unfortunately, the same disclaimer is true for every financial "adviser" I've ever sought out.)

Frozen!

Check this out:

Frozen at Grand Central Station.

Freaky.

"They are not 'those' kids, they are 'our' kids...."

In case The Kalamazoo Post is your only outlet to the Democratic primary, I will furnish Barack Obama's increasingly famous "Race Speech" in its entirety. Not exactly Martin Luther King, but important if only for the fact that it's given by the likely next president of the United States.

Especially listen from 28:20 to the end (less than 9 minutes).

When Central Bankers had more Diligence...

...and less celebrity (hat tip, Eric.)

"...looking for storm clouds behind every silver lining..."

Inflection Point for Commodities

There are several factors putting pressure on commodities: overbought technicals, short term strengthening dollar, popping of speculative micro-bubble, hedge funds needing to cover margin calls and thus selling anything with gains, weakening of the economy, and relative geopolitical stability. Deflation.

As outlined in the New York Times, these factors are leading to a drop in gold, silver and oil. And when commodities drop, it is often precipitous. The smart money gets in early and gets out early, and it's time to take profits if you have not already done so.

The booming commodities market has become increasingly attractive to investors, with hard assets like oil and gold perhaps offering a safe hedge against inflation, as well as the double-digit gains that have fast been disappearing from the markets for stocks, bonds and real estate.

Undeterred by the kind of volatile downdrafts that sent oil plunging 4.5 percent Wednesday, to settle at $104.48 a barrel, large funds and rich individual investors have sent a torrent of cash into this arcane market over the last year, toppling records for new money flowing in.

Small investors are plunging in, too, using dozens of new retail commodity funds to participate in markets that by one measure have jumped almost 20 percent in the last six months and doubled in six years.

But this market, despite its glitter, offers risks of its own, including some dangerous weaknesses that are impairing the ability of regulators to police fraud and protect investors. Commodities are also vulnerable to the same worries affecting the rest of Wall Street, where on Wednesday the Dow Jones industrial average plunged almost 300 points, erasing more than two-thirds of Tuesday’s steep gains.

Moreover, the biggest speculators and lenders in the commodities markets are some of the same giant hedge funds, commercial banks and brokerage houses that are caught in the stormy weather of the equity, housing and credit markets.

As in those markets, an evaporation of credit could force some large investors — especially hedge funds speculating with lots of borrowed money — to sell off their holdings, creating price swings that could affect a host of marketplace prices and wipe out small investors in just a few moments of trading.

My take is that the long term case for energy, grain and even gold may be valid, but the dollar should strengthen from its oversold position in the short and intermediate term. Positions that would capitalize on this would be Ultrashort Emerging Markets (EEV) or Ultrashort Oil (DUG).

Technology, especially semiconductors have been forming a nice bottom over the last few weeks, which is usually a sign of accumulation. Early, aggressive buyers could look at Sybase (SY) or Taiwan Semiconductor (TSM) or Applied Materials (AMAT). A more careful approach would be to wait for greater conviction, but tech may lead us out of the bear market. Taiwan ETF (EWT) has a lot of TSM and should be a solid player in the intermediate term.

One play may be to go long EWT and short emerging markets (EEV), and keep dollars on hand for now.

Disclaimer: I'm a simple working stiff who knows less than nothing about finance and economics. My interest in the market is solely for entertainment purposes. In no way should my ranting serve as investment advice in any way. (Unfortunately, the same disclaimer is true for every financial "adviser" I've ever sought out.)

Your President and *His* Money

As usual, The Cunning Realist puts the finest point on the issue, and calls for us to rise up and wield pitchforks. Rage against the machine. The fact is that the federal government prints the money and owns the money and decides how much it is worth in labor and capital goods. It's not our money, and technically it's not real currency anyway since it has no intrinsic value. We are free to accept it as payment for our efforts and salable items, or not. To me, it is becoming clear that the greenback has diminished value and I'm not so sure I want any of it in my savings or retirement accounts since it is quickly becoming junk. Giselle Bundchen, the fashion model, in a recent contract asked for her salary in euros instead of dollars and can you blame her? Stores in New York and other cosmopolitan centers in the US are accepting other currencies as well.

I'm not sure if this is a long-term trend or just a passing fad. Trends in the US dollar, however, tend to last several years so this one may have legs. The fact is that the US dollar is currently at the value of 1996, so precedent exists for the current valuation. The ominous issues are the circumstances for the Fed’s willful devaluation, the rapidity of the current trend, and the persistent solvency storm clouds hanging over the banking industry despite all the bullets fired at our currency. The Fed has decided that it will continue to devalue the dollar in order to eliminate debt accrued from duplicitous, cynical, greedy or ignorant individuals and institutions, thus removing moral hazard from our free market ideology. Is this the correct tactic? Maybe, but for those of us who get paid in US dollars and have saved US dollars through personal thrift and sacrifice, it is beyond galling that these hard-earned dollars are now worth 25% less than just two years ago and the reason is the policy of my own government to whom I have faithfully paid taxes and contributed in any way necessary.

This same administration who chose to neglect regulation, this same administration who chose to ignore bad mortgages-- what Alan Greenspan called "frothy" a few years ago-- this same administration whose officials come from long careers in business and finance and Wall Street... these same guys are now taking MY paycheck and home equity and bank account and purposefully cutting its value in order to devalue the obscene leverage debt that their pals and colleagues have unscrupulously accrued through obviously craven policies of malfeasance.

Does it sound like I'm angry? Well, I am. George W. Bush was handed one the greatest opportunities ever given a president of the United States. In 2001, we had a budget surplus, were at peace, enjoyed worldwide diplomatic support and respect, had the largest most advanced military, full employment and an historically strong dollar. We even had a mild recession that gave the president cover to pander to his base of tuxedo-wearers and pass tax cuts for his friends.

What Bush did with that hard-earned comity and fiscal health is beyond the pale. He ignored terrorists' warnings; started two wars-- both of which were mismanaged, one of which was immoral; pissed away the budget surplus; made no attempt to re-train workers who lost their jobs to globalization; allowed poor banking and mortgage policies to go unchecked and unregulated… and now to correct all this, he is pissing on my paycheck and assets. A perfect ending to the ultimate economic ass fucking. But I doubt Mr. Bush cares because as The Cunning Realist alludes: Bush is the feudal lord, the United States is his fiefdom and we are the lowly fiefs.

Thank you, George W. Bush. (And Uncle Harry and Aunt Nancy aren't much better.) You can have all your lousy worthless dollars… just give me enough to buy one last pitchfork!

Good-bye Greenback

Man oh man, I completely dislike alarmism. I hate it. One of the things I dislike the most about my profession is the overweening drama associated with childbirth. Young parents, emotionally charged, bright lights, high-tech machines beeping in annoying cadence-- all are emblematic of the usually unnecessary and counterproductive alarmism of the modern era.

As the years have passed I have grown used to the omnipresence of dread, whether it's in the delivery room or the financial markets. Almost never are the sum of all fears realized. The Black Swans exist, but we cannot live our lives paralyzed by their prospect.

Few things freak me out as much as the gestalt of realization that our financial markets are vulnerable to any manner of perturbation, and the guys at the helm have been so wrong so many times that confidence is gone. Our fiat currency-- the US dollar-- is dying. Since it is no longer pegged to the gold standard, it floats at the whim of the "full faith and credit of the US government." How much faith do you have in who is running the US government?

We have borrowed from the world in order to finance immoral and unpopular wars, ridiculous consumer spending, imported oil and profligate cronyism. Marc Faber and Jimmy Rogers both think the US dollar is going to zero. Zero! Yeah, I know they are the ultimate alarmists and even broken clocks are correct twice a day, but much of the scenario they have painted over the last ten years is coming true.

My mother was an intelligent, curious and analytic person who learned computer programming in the 1980's. She worked as head systems analyst for a Fortune 500 company until retiring in the early 1990's. She died in 1998. When the US dollar gold standard was halted in the 1970's, she and my grandmother (her mother) argued that the US dollar would die a slow awful death. They bought gold-- as much as they could afford at the time. Those coins are long gone now; investments are now in exchange traded funds (GLD and SLV).

Today, we hear of the US dollar being devalued on a daily basis. The nominal price of gold versus the dollar is at all time highs. Our financial markets are in turmoil and brokerage houses are imploding. If ever there was a time for alarmism, this would be it.

I'm too young to have been immediately affected by the savings and loan crisis in the 1980's. I was cloistered away at a university preparing for my future career and remained completely disaffected, or so I thought. My memory of the time was my mother decrying the cravenness of the power structure (Neil Bush ran Silverado S&L into the ground at taxpayers' expense) and predicting the end of the economic world. It never quite happened.

But the S&L crisis did have an impact on our lifestyles, even if none of us may have realized it. When that much capital goes to money heaven something is indeed lost. Less capital is available for schools and hospitals and business expenses and innovation. Workers put in more hours and effort for the same benefit. We all do suffer a thousand deaths in ways that may not be immediately perceptible.

The same is happening today. Bear Stearns goes bankrupt. The Federal Reserve backs JPMorgan in purchasing the shares at a huge discount and covering the outstanding liability. The market futures continue to decline in a not-so-orderly fashion. To what end? Capital is lost, lending power is lost, faith in the financial markets is lost; less is available for schools and hospitals and business expense and innovation. We all lose.

Don't be alarmed, but be prepared. Hold onto your gold. Buy Swiss Francs (FXF) or Japanese Yen (FXY) on any weakness. Stay away from US Treasuries and stocks. If your financial adviser recommends US stocks today, find another adviser. And if you're a doctor or teacher, don't expect to get a raise any time soon.

The Black Swan, by Nassim Nicholas Taleb

Nassim Taleb was a financial derivatives trader who made enough money in his 20's (born 1960) and checked out of the rat race to become a "philosopher." His book is a snarky but intellectual appraisal of the pseudo-knowledge employed in our financial markets and elsewhere. He argues that economics is a soft non-science that tries to legitimize itself with "statistical analysis" of risk using techniques such as the bell curve, standard deviation and other charlatanry, which only gives the field a veneer of validity.

He discusses the Black Swan, i.e. the unlikely event that always rears its head and has profound consequences. The unknowable unknown, the risk which cannot be assessed, is ignored by the managers of risk-- to the detriment of everyone. The book was written a few years ago and the lesson is prescient. Whether its 9-11, the Asian currency crisis of 1998, the Great Depression, the Influenza Epidemic, or the current mortgage solvency meltdown, the markets are always vulnerable to something unseen.

All of the successes in the world, whether it’s Bill Gates’ career or the discovery of penicillin, are reliant on a combination of skill and luck, but luck is always under-emphasized in the human brain. When fortunes are made, the human psyche is quick to take the credit, but when disaster strikes we blame some external phenomenon. Taleb does not call for paralysis in the face of such bias, only truth in assessing the risks and recognition of the lack of control we have. The world is a complicated, interconnected place and one hiccup-- whether man-made or natural-- can spell disaster. It's always the entity that was not anticipated that brings down the house.

Humans are vulnerable to several fallacies and biases that can have deleterious effects on our judgment. The narrative fallacy is the appeal of the story: we look for causation for events and this is often misleading. “The market crashed because x occurred this morning.” David Hume, the great Scottish philosopher outlined the problems with causation a couple centuries ago and we need to re-consider his premise now more than ever.

Another problem Taleb outlines is the Ludic fallacy, the idea that all of life resembles game theory with predictable structure and controllable randomness. In life, however, rules often do not apply and such structure, the idea of which is appealing, is absent.

Taleb discusses various biases to which humans attach themselves. The strongest is confirmation bias that is characterized by seeking “proofs” that our preconceived notions are true. We ignore or avoid information that contradicts our worldview. Coupled with narrative fallacy, confirmation bias can be deadly. While Taleb comes at these topics from a financial point of view, the philosophical constructs are applicable to any field, and I would argue that great understanding is at hand for most scientific fields.

The difference between Platonism--i.e., top-down theorizing ala the Ivory Tower-- versus Empiricism--i.e., experiential real-world knowledge-- is a particularly important part of Taleb’s thesis. We yearn to find science where this is none, whether it’s modern financial portfolio theory or alternative medicine; humans look for the comfort of proof that our preconceptions are valid. Often it’s not there.

The desire to create a narrative to explain history or current events leads to an overvaluation of these usually inaccurate facts. As a result, we overvalue the intellectual elite who proposes the narratives. The debacle of Long Term Capital Management, a group of Nobel Prize winning economists and “experts” who went bankrupt in the 1990’s, is an especially poignant example. The history of medicine is also rife with such false theoretical thinking, with examples of grand theories of bodily humours or gases which needed to be expelled or infused, often with horrific results. Only with the practice of empiric study— reasonable conclusions drawn from our collective experience-- can the truth be found if ever. But we must also know the limits of our empiric knowledge; some things just are not known.

The Black Swan is as important a book as any as we seek bedrock explanations for fast moving events in our globalized existence. Taleb’s points are interesting, his book excellent and my short discussion hardly does it justice.

That's Why They Play the Games

Deservedly unranked and unloved Illinois beat #16 Purdue in round 2 of the Big Ten Tournament in Indianapolis. I didn’t watch the game because it was not televised in our area, (apparently Charter cable thinks West Michigan fans would rather watch the ACC Tournament), but according to the ESPN gamecast it looked like a great win. Come from behind, overtime victory. Who needs Eric Gordon?

The Self-Pitiable Obamanauts, Wolcott Edition

First of all, nobody blogging in the English language holds a candle to James Wolcott of Vanity Fair. The fact that he treats us to a near-daily helping of his delicious prose is one of life's gentle hugs, never mind that I care not one lick for half the topics he covers.


Most recently, Mr. Wolcott lays waste to the dramatist undercurrent of the self-important Obama supporters. His issue is not with all Obama supporters, mind you, just the ones worshiping the graven images within Obama's cult of personality. Saint Barack of the Transcendent Hope has got himself a loyal posse of Messiah seekers.

Read it yourself-- it is choice.

Train Wreck!

Ian Welsh at FireDogLake has it right. As he said, his list of economic predictions have been discussed at length over the last few years. We have been watching a slow-motion train wreck ensue right before our eyes, and now the two economic locomotives of cheap oil and ever-increasing home values are just now meeting-- head-on. Ka-boom!

Ian writes:

1) Housing prices and sales will continue to decline. Expect 3 years before the bottom, as a very optimistic best case scenario.

2) Commerical real-estate will suffer a steep decline as well.

3) Consumer demand will drop. Unemployment will rise.

4) The US will go into a recession at best, a depression at worst. Expect first stagflation (high inflation and high unemployment), both because of the increased price of imports and deliberate pump priming by the Fed, then deflation, as asset prices collapse so hard they take everything else with them. The other likely scenario is stagflation followed by hyperinflation. Formal inflation numbers put out will become not just a joke amongst market-watchers, but amongst the actual population. Same thing with unemployment numbers.

5) The Asian economies are not going to "decouple", they are going to have their own financial crises and recessions. Yes, this includes China.

6) China's stock market will collapse some time next year. China will go into a recession. There will be huge amounts of violence and the Chinese government will redirect anger towards the US and Japan.

7) Multiple banks will probably go insolvent. They are simply holding too much crap paper. There will be an extreme tightening of consumer debt of all kinds, including consumer loans, credit cards and mortgages (this is already beginning, but you ain't seen nothing yet). Even people with good credit will start having difficulty getting loans.

8) Protectionism is going to get stronger. Even if Clinton, a free trader, is put in power, by the time the 2010 Congressional elections are over no "free trade" bill will be able to pass Congress and in fact actual tariffs are likely to be put in place.

From a purely intellectual standpoint, this has been a beautiful portrayal of the way monetary policy can take down the world-wide economy, and I believe we are just at the outset of the calamity. Welsh's list is quite ominous, and hopefully all those predictions won't manifest, but even if just half come about we are in a world of hurt. As he said in the final paragraph, " Hope may not be a plan..." He should have just stopped there. Indeed, hope is not a plan. I'm no economist, but the problem I see is that nobody really has a plan to unwind all this bad debt-- and derivitives and leverage are compounding the negative consequences of all the bad decisions and lack of regulation made over the last 5-7 years.



Most market bulls hang on the meme that the Asian and US economies are "decoupled." That's bullshit. Either we have globalization or we don't; we can't recognize it's insidiousness one day and then claim it doesn't exist the next. If there is a recession or depression, then everyone is going down. Period.



Ian's most ominous prediction is:

9) I wouldn't be surprised, at some point, to see capital controls put in place to stop money-flight from the US.

I'll let you read his six other predictions at the link.

Who knows if any of this comes true, but I'm starting to believe that it might. Marc Faber, the renowned currency trader, recommends that US citizens keep some capital stashed overseas for the possible event of such closures of capital flight. From a timing perspective, the US election cycle is occurring at just the wrong time. Bush, Paulsen and Bernanke are staring at the two locomotives like deer in the headlights, frozen by Bush's lame-duckness and Bernanke's mistaken belief about the role of the federal reserve. For some reason Ben Bernanke seems to think the federal reserve banking system exists to preserve stock market value or something. (The role of the fed is to #1: maintain the value of the US dollar, and #2: maximize employment. Period.) Bush and Paulsen's lack of insight is somewhat understandable and even forgivable in a way when you think about the fact that Bush was re-elected with the voters having all the information available to connect the dots between his utter stupidity and all the problems we face that have been completely avoidable. We get what we deserve.



Bernanke, on the other hand, is an enigma. He is an ivory tower type who supposedly has studied the Great Depression. Hello! Isn't this is exactly what a Great Depression looks like in the early stages! WTF! While most recessions are a simple matter of over-supply and the need for demand to catch up, we currently have over supply (housing) leading to asset deflation, but lowering interest rates has not achieved the desired effect of increasing housing demand. Why? Because inflation in other assets (oil and food) have been grossly underestimated and slowing down the economy-- this is a (lack of ) demand driven recession. Thus, the fed has been enacting a completely wrong policy. As JD at the Big Picture notes, the current subprime crisis is a credit problem, not an interest rate problem. Lowering interest rates in order to "jump start" an ailing economy is a fool's errand. You may get away with it many times, maybe even most times, but when it doesn't work-- like now-- the economy AND the currency both tank together. Recessions in and of themselves are not necessarily bad; as Rick Santelli famously said, a recession is an enema for a bad economy. This should have been done 18 months ago in order to at least preserve the US dollar's value. Instead we have become Bernankeville: weak dollar, high inflation, poor employment and contracting GDP.



Depressions associated with a cratered currency, if that is indeed what we are experiencing, are dangerous things. While some of us may be tempted to high-five each other over our apparent insight in preserving capital by avoiding stocks and riding commodities lo these past several months, economic depressions can explode at any time and in toxic unforeseen ways. Only the lucky survive financially. Our paychecks have become devalued by 20% since 2006, and for many of us our largest assets-- our home and our IRA's-- have likewise been devalued. The indolent chronicity of the current devaluation, as disheartening as it may be, could be abruptly worsened by a sudden snap in the structures of our economy. A rapid rise in unemployment, as Friday's federal employment data has suggested, is not only possible but likely, and the consequences would be grave right now. The world's economies are too entwined to have any safe-havens. If the US consumer loses his or her job and stops buying Chinese toys or Korean computers or Guatemalan clothes, then their economies tank along with ours.



In such a scenario, oil would drop for lack of demand as factories worldwide shut down. Hard commodities like aluminum, silver and platinum would likewise crash due to the halting of end-product manufacture. Gold. Gold may be spared, but who knows? Capital flows to whichever haven is determined to be the safest. Those of us in middle class America may get by with a few less trips to Starbucks or a more austere vacation as our paychecks tumble in value or we collect unemployment, but an increasing majority of the world's population-- an unprecedented number-- depends for their daily survival on the interconnectivity of the world's economies to eat and live safely. Will the fabric of this interwoven economic cloth begin to unravel? Wars, rebellion and pestilence could occur.



Recently my posts about the economy have been depressing. Don't be misled, the worst case scenarios rarely come true and solutions may pop up unannounced (even if I don't happen to see one on the horizon.) The stock market has a way down to go-- who knows it might even crash. Be forewarned, but don't panic. Go to work, do a good job. Invest wisely in gold, foreign bonds and currencies, and US bonds and safe investments. If you have long positions in stocks, then hedge against a market meltdown with Ultrashort ETF's (DXD, SDS, QID or MZZ). Don't buy into the goldilocks fantasy by stock salesman and charlatans. Buy stocks ONLY when there's blood in the streets--and there is nary a drop so far. For a red-alert-save-the-family calamity, open an emergency currency account in Switzerland or at least keep a bag of solid silver dimes under your bed. Why the heck not?



Hang on it's going to be a wild ride!

Preserve Capital

Friends and family reading this, please make every effort to preserve your retirement funds. This is not a time to commit new capital to stocks, especially speculative or high-risk equities. Don't be greedy, be careful.

Government bonds (not munis) and cash are the safest investments now; foreign currencies, gold and silver should be okay. Myriad factors are churning just out of the radar and market risk is very high. I am not being an alarmist, just issuing a strong opinion that severe market fluctuations are a real possibility.

Do not panic. If I am wrong, so be it. I have been easing out of stocks over the last 20 weeks and have been increasing investments in safer asset classes. Now, I am winnowing my holdings in oil stocks as well in preparation for an economic slowdown or recession.

The best appraisal is from Tim Iacona (read the entire article for an excellent review of the current economic reports). Excerpt:

As if the dismal reports on housing, producer prices, and economic growth were not enough, there was even more bad news elsewhere last week. The mood of the American consumer is now quickly souring, the slowdown in manufacturing is accelerating, the labor market is showing increasing signs of trouble, and personal income and spending both disappointed.

Granted, plenty of market strategists and financial planners inexplicably see the current market as oversold and presenting a buying opportunity. I would respectfully disagree. To wit, from Barry Ritholtz:

...consider the following headlines:

Eight Reasons There Won't Be a Recession

Blue chips are signaling recession can be avoided

Stocks in U.S. Tumble After GDP Trails Economists' Forecasts

Eisenbeis Says Concerns of U.S. Recession `Overblown'

U.S. Economy Grew 0.6% in Q4, Less Than Economists Estimated

Despite write-downs, it looks like the bottom is near for stocks

Bush: US is not headed into recession

Sears Net Sinks on Weak Sales

My favorite is "Bush: US not headed into a recession"; Ha! Doesn't that pretty much guarantee it?

Seriously.

This Nation Needs to Heal (not Heel)

This nation needs to heal. Barack Obama’s message.

Respect is due both Hillary Clinton and John McCain, but the juggernaut of President Obama will not be deterred. The message is clear. Division and triangulation, even under the guise of policy nuance, have no place in the election of 2008.

Fear is everywhere. Fear of recession, fear of inexperience, fear of terror, fear or banking crises, fear that Obama is merely a “cult of personality.” It’s time to put aside the fears and get to work.

I’m not a fan of hope. The Buddha famously said, "Fear and hope chase each other's tail." Oftentimes, a call for hope is either a fatuous rhetorical flourish or a cynical and counterproductive cop-out. It’s not time for hope—it’s time to get back to work to make this nation healthy.

Make a stand. You are either with us or with the terrorists: the terrorists who have instilled fear into a nation. These terrorists have stolen our government, spied on us, waged an illegal war in our names, tortured people and killed civilians with our weapons, transferred wealth to our enemies and willfully devalued our currency. They have damaged our country by destroying our diplomatic relationships, destroying our economy and destroying our spirit.

It’s time to stand up and be counted. We can. Obama is not the movement, but just one member of the movement. It’s about you. This nation needs to heal. This nation needs to re-discover what it’s like to be healthy, to be productive, to contribute.

There's been a lot of damage, so roll up your sleeves.

O-ba-ma

Next Bubble: Alternative Energy

We live in a Lovely Bubbly world as our economy inflates and deflates at the whim of the latest fad. The federal reserve provides liquidity which flows into whichever soap bucket tickles our fancy. With housing deflating before our eyes, we must cast our gaze upon the horizon to see the next big thing.

Alternative energy is here. We saw a little preview with the ethanol boondoggle perpetrated by the subsidies put forth for ethanol from corn and other biomass. This is merely the first inning of this energy drama, and much more is to come. The bubble is growing.

Harry Newton writes an amazing little blog about all things financial and seems to have a good grasp of the macro-economics we are enduring. He references a Harper's article about bubbles which reminds us that such asset inflation tends to overshoot on the upside, and we may have quite a run ahead of us with alternative energy and especially solar stocks. First Solar (FSLR) is the latest sexy stock that TV guru Jim Cramer is promoting, now that his four horsemen of the Naz are frothy and panting from exhaustion. Newton seems to agree.

Jack Yetev, writing at Jim Kingsdale's Energy Investment Strategies, has a differing opinion after looking at the valuations of various solar stocks. He prefers Canadian Solar (CSIQ) which has no earnings as yet, but boasts a much better sales growth rate than the others. The forward PE for CSIQ is a reasonable 11 based on consensus estimates for 2008. Even using the lowest earnings estimate of the seven analyst covering CSIQ, the PE is only 27. First Solar on the other hand has a consensus PE of 90 and a stratospheric PE of 125 based on the lowest estimate of the 24 analysts covering.

The demand for energy will steadily increase, a current recession notwithstanding. The supplies of fossil fuels are tight and no new reserves or new extracting technologies seem imminent. Add to this shrinking supply and increasing demand the consciousness of global climate change and the scenario is right for massive development of non-carbon energy sources.

I won't go into the vagaries of the methods of alternative energy generation: photovoltaic solar versus thermal solar... and don't forget wind power. You can pursue that on your own. From an investment standpoint, be aware that the big multinationals like General Electric (GE), Siemens (SI) and even Kyocera (KYO) will surely stake their claim and as the market matures their huge coffers will change the playing field.

Personally I own some oil stocks as well as Cameco Corporation, a large uranium mining company, as a play on the non-carbon energy industry. Nuclear has its own set of problems, but I cannot help but see a growing demand for such power generation. I am in the market to expand into alternative energy and Canadian Solar looks like a good candidate.

So let's ride this bubble!!

Jim Cramer and Today's Market

I read Jim Cramer’s memoir “Confessions of a Street Addict” a few months ago (very entertaining), but have never read any of his other books in its entirety. I took one out from the library last year and got about halfway through it. I like his show, but admit that I don’t watch as much as I used to.

My main problem with Cramer is his lack of consistency in stock picks. He will pick stocks based on the industry or sector fundamentals and then select a company that does well within the sector. That seems to work well. But then in the next breath he’ll recommend another company in a supremely bad sector and give a cockamamie reason to own it. He has a nightly show so he obviously must make a lot of recommendations and some are destined to be dogs.

Examples of the above are Monsanto (MON) during the recent and continuing rise in grain commodities. Monsanto has done very well and this is the real benefit of Cramer: telling you which company in a given sector will do well. The fact is that any company in that sector would have done okay, Archer Daniels (ADM) was fine and Mosaic (MOS) even better.

On the other hand, Citigroup ( C ) has been pummeled along with all the banks and financials over the subprime mortgage meltdown and the resultant liquidity crisis. Cramer was pounding the table to buy the stock in anticipation of its CEO Chuck Prince being fired. The stock continued to drop and then when Prince was fired, the stock barely budged upward. My problem with this recommendation is that it is not based on the fundamentals of the industry or the company. To recommend a stock on a potential headline is fraught with plain old bad judgment.

Another example of such bad judgment is his recommendation of Alcoa (AA) in October at the outset of a global economic slowdown. His rationale for the recommendation was because he thought AA would get bought out. Again, a potential headline is not a good reason to buy a stock. In addition, the impending drop in the market and continued weakening of the dollar would only give incentive for a potential suitor to wait for a lower price.

I like Jim Cramer. His infectious enthusiasm stimulates people to consider the market. My problem is his lack of discipline in his recommendations and his lack of consideration of macro-economic factors. To him its always a good time to buy stocks even when it may be abundantly clear from a technical and fundamental analysis that the market is in trouble. As with any teacher, you need to know their weaknesses as well as their strengths.

My guess (and I have not looked at his performance in various markets) is that Cramer does well in broad based bull markets but lags in bear markets or in narrow bull markets. To wit, I read a lot of macro-economic websites in order to get a view of the broader economic issues that are driving stock prices. Over the past 18 months they have been very bearish on owning equities and as a result I have trimmed my stock holdings dramatically and hold more gold and silver than usual. This has done well. The only stocks I have held onto are the oils, although I did lighten that load last fall as well.

The downsides in my picks have been my recent acquisition of Goldman Sachs (GS), a company that Cramer obviously likes, but I am holding my position in the expectation that this well-run company will be the first to emerge from the financial sector doldrums. Another financial I recently bought is Wachovia Bank (WB), which has a nice dividend of 7%, and I am about even now on capital appreciation. I think this may bounce along at the current bottom, and as long as they don’t cut their divvy I am honored to get paid while I wait. Bottom fishing can tax my patience.

The rest of the market is a mystery right now because we are going through a transition. Technically it looked slightly oversold last week, but I’m not so sure now. Fundamentally there are myriad stocks with low PE’s and great anticipated earnings (CAT for example) for the next year, but I fear that this is a value trap; if recession does occur, then earnings projections will be revised downward and stocks will have another leg lower to go.

My answer to this is to buy stable industries that have good cash flow no matter what. The industries I think will outperform now are pharmaceuticals and maybe utilities. These have good dividends and will outperform in a recession. Boring maybe, but this market is scary. Traders, moreso than investors, must preserve capital.

Cash should be okay to hold now, too, since the US dollar is at multi-year lows and as the credit crisis spreads overseas we may see a flight to safety. In addition, if/when European Central Bank and Asian banks lower interest rates further, the US dollar should strengthen. Gold should hold its value too, but it has had a nice run right now.

If you are really daring, real estate is very low now. I would be very careful, but REIT’s have nice dividends and some have been taken out and shot unnecessarily.

The Case for Barack Obama

The last couple weeks I’ve engaged in a little back and forth over the Hillary and Barack rivalry. The Democratic party is fortunate to have two intriguingly qualified candidates and I am dismayed that the nomination is sprinting toward a contentious battle that may cause scars within the two factions.

In re-reading my scathing rebukes (one and two) of Frank Rich’s soft thinking and ridiculous defamation of the only female candidate in the race, I realize that casual followers of my polemics may think that I am some vehement pro-Clinton lackey or a virulent anti-Obamite. Nothing could be further from the truth. My gripe is with Rich who practices careless critical thinking under the guise of journalism.

Today, Paul Krugman decries the friction: “The bitterness of the fight for the Democratic nomination is, on the face of it, bizarre. Both candidates still standing are smart and appealing…Both have broad support among the party’s grass roots and are favorably viewed by Democratic voters.”

The fact is I understand the hope and vision that Barack Obama prattles on about. I grew up in a grimy Irish Roman Catholic neighborhood on Chicago's south side. By the time I was conscious, the Kennedy Camelot had already been destroyed with two of her finest sons murdered, but the hope was still palpable. We knew that someone like us could one day be president. Growing up, every one of my friends my age was named either John or Bobby or Joe. The girl I took to senior prom in 1979 was Jacqueline. The legacy of those sunny days before November 1963 lived on throughout the decades of my childhood. We're all college educated now, schoolteachers, engineers, lawyers and doctors; some having served appropriately in the Peace Corps, and the Kennedy legacy was a large part of our identity.

This nation could benefit greatly from a President Obama who may indeed bring feelings of limitless possibilities to countless kids in Chicago’s Altgeld Gardens or Detroit’s downriver communities or Kalamazoo’s hardscrabble north side. Such buoyant optimism that could penetrate such insoluble circumstances may be worth the election of Obama in itself.

Or not. While I recognize the intangible benefits that Obama brings to the election, I cannot transcend my concern about the nuts and bolts of running a country at a critical time. My background is limited to plying my trade as a highly skilled laborer in the health care field and I admit ignorance regarding much of geopolitics, federal budgets and legislative process. I know few things, but I do know that Obama’s rebuff of a mandate for universal health insurance will only serve industry and corporations’ interests at the expense of citizens and small businesses, and four years from now we will be no closer to solving that problem. If he lacks detail on that critical issue, then where else is his platform deficient?

When the dust settles, I will likely vote for whichever Democratic candidate is the nominee. I may prefer Hillary Clinton for her policies on specific issues and my perception is that she knows what is necessary to achieve specific goals, but Obama would be okay, too. Barack Obama is appealing for his transcendent rhetoric—and that no doubt is important—and he will get my vote in November (if his name is on the ballot) even though I still see many of his policies as delusional (negotiate directly with Iran’s Ahmadinejad) or toothless (lack of mandates on health care) or pandering (expanding SCHIP).

I understand that certain voters feel excitement about their candidate. Heck, even Tom DeLay and Trent Lott could somehow get their supporters motivated for their hapless candidacies of hatred and cynicism. I get it. What I don’t get is the virulent lying crap being promoted by otherwise progressive and rational Obama supporters—much of it right out of the playbook of Karl Rove. Frank Rich promotes the Orwellian tactic that assumes mere repetition makes any accusation valid.

I agree with Krugman as he points out:

I won’t try for fake evenhandedness here: most of the venom I see is coming from supporters of Mr. Obama, who want their hero or nobody. I’m not the first to point out that the Obama campaign seems dangerously close to becoming a cult of personality…

…What’s particularly saddening is the way many Obama supporters seem happy with the application of “Clinton rules” — the term a number of observers use for the way pundits and some news organizations treat any action or statement by the Clintons, no matter how innocuous, as proof of evil intent.

I like Barack Obama, but if he plans on being the transcendent uniter, he would do well to remind his supporters (and Frank Rich) first.

More Frank Rich BS speweth forth

A couple weeks ago the New York Times columnist Frank Rich received a thumbs down from the Kalamazoo Post with his promotion of ancient anti-Clinton memes. This week, Rich makes up a whole new set of delusional memes to be cast about without regard for accuracy. He must be studying the swift-boat Kool-Aid recipe and his fellow liberals are drinking it up.

My critique of Frank Rich's most recent missive would be equally scathing and replete with references, but I'm not sure I want to make a mini-career of trying to clear up all of the inaccuracies in Mr. Rich's blather. I'll make a couple observations. First, we learned that Frank Rich watched Hillary's entire Town Hall broadcast but has absolutely nothing substantive to say about the actual content of that broadcast, only that it apparently wasn't as cool as the Barack Obama Youtube video. The horror!

We also learned that Bill Clinton is a racist for praising Jesse Jackson's 1988 South Carolina campaign and Hillary's strategist is a racist for saying the word "cocaine" (a word used in Obama's own memoir), but Rich is not bringing race into the conversation when he uses the term "ghettoize" or when he talks almost threateningly about a potential "race-tinged brawl" at the convention. And Rich accuses the Clintons of risking "shredding three decades of mutual affection with black America"? Methinks he doth protest too much.

Finally, Rich fictionalizes the current situation of the "ghost delegates" from the phantom primaries in Florida and Michigan. Somehow Clinton is the establishment candidate because she went against the Democratic establishment and entered those primaries and won delegates. As the primary season matures, it is becoming glaringly apparent that the Democratic Party may not have a candidate with the requisite number of delegates to win the nomination unless these two large disenfranchised states are somehow counted. According to Rich, Clinton is somehow being unfair for asking for consideration of those votes that loyal Democrats had cast for her and then he makes up some claim that she is being disingenuous because she never wanted them counted in the first place. Huh? Idiot.

If Mr. Rich likes Obama, great... he should vote for him. But he should refrain from this BS demonization of Hillary Clinton. At some level we should see the lunacy of this constant and pointless unsubstantiated malevolence towards the Clintons; it was wrong when the right-wing smear machine made stuff up, and it's wrong when soft-headed liberals do the same. If the left wing of the Democratic Party intends to win the White House, they will need to polish their tactics because such obtuse reasoning and rank inaccuracies will never make it against the right-wing Leviathan waiting in the wings.