Hillary Clinton, "Hillary Clinton: How I’d Rein In Wall Street": Can a Leopard Change Its Spots?

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If Hillary Clinton is elected president, do you believe she is going to get tough with the world's financial institutions? As was reported in a July 30, 2015 Wall Street Journal article entitled "UBS Deal Shows Clinton’s Complicated Ties" by James V. Grimaldi and Rebecca Ballhaus:

"A few weeks after Hillary Clinton was sworn in as secretary of state in early 2009, she was summoned to Geneva by her Swiss counterpart to discuss an urgent matter. The Internal Revenue Service was suing UBS AG to get the identities of Americans with secret accounts.

If the case proceeded, Switzerland’s largest bank would face an impossible choice: Violate Swiss secrecy laws by handing over the names, or refuse and face criminal charges in U.S. federal court.

Within months, Mrs. Clinton announced a tentative legal settlement—an unusual intervention by the top U.S. diplomat. UBS ultimately turned over information on 4,450 accounts, a fraction of the 52,000 sought by the IRS, an outcome that drew criticism from some lawmakers who wanted a more extensive crackdown.

From that point on, UBS’s engagement with the Clinton family’s charitable organization increased. Total donations by UBS to the Clinton Foundation grew from less than $60,000 through 2008 to a cumulative total of about $600,000 by the end of 2014, according to the foundation and the bank."

More about Hillary's relationship with some of the world's largest banks? In a May 22, 2015 editorial entitled "Banks as Felons, or Criminality Lite," The New York Times informed us:

"As of this week, Citicorp, JPMorgan Chase, Barclays and Royal Bank of Scotland are felons, having pleaded guilty on Wednesday to criminal charges of conspiring to rig the value of the world’s currencies. According to the Justice Department, the lengthy and lucrative conspiracy enabled the banks to pad their profits without regard to fairness, the law or the public good.

. . . .

In all, the banks will pay fines totaling about $9 billion, assessed by the Justice Department as well as state, federal and foreign regulators. That seems like a sweet deal for a scam that lasted for at least five years, from the end of 2007 to the beginning of 2013, during which the banks’ revenue from foreign exchange was some $85 billion."

Or stated otherwise, these banks paid fines of $9 billion on foreign exchange revenue of $85 billion. Sweet!

However, the Times didn't tell us about the connection of some of these banks (not Royal Bank of Scotland) to the Clinton Foundation and the Clinton Global Initiative ("CGI"). The Clinton Foundation lists Barclays Capital and the Citi Foundation as donors in the $1,000,001 to $5,000,000 range. It also lists JPMorgan Chase as a donor in the $100,001 to $250,000 range.

In addition, with regard to Barclays, a March 3, 2015 CNN article entitled "Base wary of Clinton Foundation's ties to troubled banks" by Alexandra Jaffe stated:

"British banking giant Barclays emerged as a 'strategic partner' with CGI for its 2010 annual meeting, and gave the same level of support every year after that.

. . . .

In August of 2010, the Justice Department announced Barclays would pay nearly $300 million in fines for breaking sanctions against Iran, Cuba, Sudan and others.

. . . .

According to a Justice Department statement issued in June 2012, Barclays 'admitted and accepted responsibility for its misconduct' at the center of a scheme to manipulate global interest rates, which in turn affected prices for consumer lending.

The bank agreed to pay $450 million in total to the Justice Department, the U.S. Commodity Futures Trading Commission and the UK's Financial Services Authority to resolve the violations.

. . . .

In July 2014, the Senate Permanent Subcommittee on Investigations accused both Barclays and Deutsche Bank of helping hedge funds avoid paying more than $6 billion in taxes."

But never mind any of the above. Today, in a New York Times op-ed entitled "Hillary Clinton: How I’d Rein In Wall Street," Hillary Clinton tells us of her plans to reform the financial industry:

"My plan proposes legislation that would impose a new risk fee on dozens of the biggest banks — those with more than $50 billion in assets — and other systemically important financial institutions to discourage the kind of hazardous behavior that could induce another crisis. I would also ensure that the federal government has — and is prepared to use — the authority and tools necessary to reorganize, downsize and ultimately break up any financial institution that is too large and risky to be managed effectively. No bank or financial firm should be too big to manage.

My plan would strengthen the Volcker Rule by closing the loopholes that still allow banks to make speculative gambles with taxpayer-backed deposits. And I would fight to reinstate the rules governing risky credit swaps and derivatives at taxpayer-backed banks, which were repealed during last year’s budget negotiations after a determined lobbying campaign by the banks.

My plan also goes beyond the biggest banks to include the whole financial sector."

In addition, Hillary says that she "would appoint tough, independent regulators and ensure that both the Securities and Exchange Commission and the Commodity Futures Trading Commission are independently funded," and would also hold financial industry executives "more accountable." Do you believe her?

What is missing from Hillary's op-ed is any mention of the repeal of the Uptick Rule in July 2007, which enabled hedge funds to freely manipulate American stock markets to their advantage. An illustration of the consequences of its repeal:

Micro-cap company "X" has designed and patented a revolutionary widget. Recently, the achievements of "X" have made their way into the news, and its shares have risen. Farmer Joe, who attends night school and reads the financial news, decides to buy 1,000 shares of "X". However, Farmer Joe is unaware that Slick Eddy at Hedge Fund "Z", who couldn't care less about the merits of company "X"'s widgets, has also noticed the rise in the share price of "X". With almost unlimited resources behind him, Eddy borrows "X" shares from various financial institutions and begins to sell vast quantities into the market, causing a precipitous decline in the market price of "X". Eddy then blocks any rally in the share price by activating a computerized program to immediately sell 100 shares at the bid after any purchase. Worried by the huge downswing in the price of "X," and also concerned that at the end of each trading day "X" always goes down (Eddy often sells into the market during the last seconds of trading), Farmer Joe dumps his shares at an enormous loss ("Someone must know that something is wrong at 'X'"). Having succeeded in panicking Farmer Joe and other small investors in "X", Eddy buys back the shares at a significantly lower average price than that at which he sold them, resulting in enormous profits for Hedge Fund "Z". Eddy's bosses note his "fine" work and reward him with bonuses as the shares of "X" tumble.

Of course, there are those who will say that ultimately the stock market is "efficient", and the price of "X" will recover to an appropriate level. However, in the process we have witnessed the flow of wealth from Farmer Joe and other small investors to Hedge Fund "Z" and Slick Eddy.

Also, consider the damage to company "X", which, owing to doubt raised by the run on its shares, is suddenly unable to raise additional funds to finance expanded production of a new line of widgets, declares bankruptcy and fires its staff.

Sure, there are instances when the scientific and/or commercial progress of a company shorted by Hedge Fund "Z" is so great that Hedge Fund "Z" must buy back the shares at a higher price, but these losses are more than covered by its programmed downward manipulation of the shares of many other companies

In her op-ed, Hillary declares, "we need to reform stock market rules to ensure equal access to information, increase transparency and minimize conflicts of interest." How about also doing something to make US stock markets a place where small investors are not habitually - pardon my French - screwed?

Paul Krugman, "Springtime for Bankers": Fairy Tale Economics

And all this while you thought that Paul Krugman was a Keynesian economist? You were mistaken!

In his latest New York Times op-ed entitled "Springtime for Bankers" (http://www.nytimes.com/2014/05/19/opinion/krugman-springtime-for-bankers.html?partner=rssnyt&emc=rss), Krugman concludes:

"In the end, the story of economic policy since 2008 has been that of a remarkable double standard. Bad loans always involve mistakes on both sides — if borrowers were irresponsible, so were the people who lent them money. But when crisis came, bankers were held harmless for their errors while families paid full price.

And refusing to help families in debt, it turns out, wasn’t just unfair; it was bad economics. Wall Street is back, but America isn’t, and the double standard is the main reason."

Or something akin to Peter and the Big Bad Wolf.

But were bankers, i.e. financial institutions, really held harmless? Perhaps Paul would care to explain what happened to the likes of Lehman Brothers, Wachovia and Merrill Lynch. Or maybe Paul should explain why Citigroup shares are now selling for a tiny fraction of their 2007 prices.

Don't get me wrong: What happened in 2008 was all about greed gone wild and the absence of regulation. I remember well how the big banks were busy hawking newfangled real estate derivative packages (indeed akin to the Wicked Witch's poison apple) to their feeble-minded colleagues.

More to the point, what about today? Has greed disappeared from the landscape? Not a chance! Today we have high frequency trading, which is effectively placing a tax on anyone wishing to invest in shares. And there was the cancellation of the Uptick Rule, which enables hedge funds to manipulate share prices in any direction they please.

"Wall Street is back"? Heck no! Under the very nose of Krugman's beloved Obama administration, high frequency trading is sucking the life blood from the economy, but once again, when the parasite ultimately kills the host, the parasite is also destined to die.

David Brooks, "The Moral Power of Curiosity": Can You Beat High-Frequency Traders?

I have yet to read Michael Lewis's bestseller "Flash Boys" - I am mired in a history of the Knights Templars - but I will certainly get to it. High-frequency trading? A friend recently related the following story to me:

"I had placed an order to buy shares of XXXX, and my order had been the bid for quite some time. I suddenly decided that the market was going lower and that I could buy the shares at a better price. Using my laptop, I attempted to cancel my bid, but within a second my bid was hit, and I had bought the shares."

Coincidence? No. Before the cancellation of my friend's order could be effected, this information had been routed to high-speed traders, and they had sold him the shares. Or stated otherwise, their computers had been "informed" that his cancellation was electronically en route, and they beat his cancellation by a nanosecond. Corrupt? Absolutely.

In his latest New York Times op-ed entitled "The Moral Power of Curiosity" (http://www.nytimes.com/2014/04/11/opinion/brooks-the-moral-power-of-curiosity.html?partner=rss&emc=rss), David Brooks examines the market-rigging described in Lewis's book. Brooks writes:

"On Wall Street, as in some other areas of the modern economy that I could mention, this attitude leads to a culture of knowingness. People learn to bluff their way through, day to day. Executives don’t really understand the complex things going on in their own companies. Traders don’t understand how their technological tools really work. Programmers may know their little piece of code, but they don’t have a broader knowledge of what their work is being used for.

These people are content to possess information, but they don’t seek knowledge. Information is what you need to make money short term. Knowledge is the deeper understanding of how things work. It’s obtained only by long and inefficient study. It’s gained by those who set aside the profit motive and instead possess an intrinsic desire just to know."

Information? Knowledge? An "intrinsic desire to know"? Do I care?

The game is indeed rigged, and, with the cancellation of the Uptick Rule (see: http://jgcaesarea.blogspot.co.il/2013/08/maureen-dowd-summers-of-our-discontent.html), small investors are being milked every day by large financial institutions.

Can you still beat the system? I think so. But only with a strong heart, a long-term outlook and sufficient examination of a corporation's innovation, management and value proposition.

Paul Krugman, "The Stimulus Tragedy": Excuses, Excuses, Excuses

Have you ever encountered someone whose thesis has been proven wrong, but who persists in claiming that if everything had been done her/his way, the problem would have been solved? If not, have a look today at Paul Krugman's latest New York Times op-ed entitled "The Stimulus Tragedy" (http://www.nytimes.com/2014/02/21/opinion/krugman-the-stimulus-tragedy.html?partner=rssnyt&emc=rss&_r=0). His usual modest self, Krugman writes:

"All the evidence, then, points to substantial positive short-run effects from the Obama stimulus. And there were surely long-term benefits, too: big investments in everything from green energy to electronic medical records.

So why does everyone — or, to be more accurate, everyone except those who have seriously studied the issue — believe that the stimulus was a failure? Because the U.S. economy continued to perform poorly — not disastrously, but poorly — after the stimulus went into effect.

There’s no mystery about why: America was coping with the legacy of a giant housing bubble. Even now, housing has only partly recovered, while consumers are still held back by the huge debts they ran up during the bubble years. And the stimulus was both too small and too short-lived to overcome that dire legacy."

That's right, only Krugman has "seriously studied the issue." And yes, notwithstanding the fact that US federal debt now exceeds $17.3 trillion and will never be returned, President Obama should have bet the farm on stimulus, i.e. doubled down on spending on "big investments in everything from green energy to electronic medical records."

Me? I don't think Obama's stimulus was a failure. It may have been partially misdirected upon green energy and electronic medical record projects, but it was not a failure: the banks did not fail, and Ford and General Motors remain among the living. Regrettably, however, I believe that unemployment in the US might never return to its halcyon levels of 5 percent. Efficiency in our brave new world comes with a price.

On the other hand, Obama has also persisted in perpetuating the policies of his predecessors, which have destroyed the infrastructure necessary for future growth. Consider the effects of the cancellation of the Uptick Rule (see: http://jgcaesarea.blogspot.co.il/2013/08/maureen-dowd-summers-of-our-discontent.html) and the demise of antitrust law (see: http://jgcaesarea.blogspot.co.il/2014/02/paul-krugman-barons-of-broadband-when.html).

Place all our faith in Paul Krugman, and even now, go ahead with further massive stimulus? I don't think so. You see, Nobelist Krugman is far from infallible. Consider his past support for Occupy Wall Street  (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html):

"Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

. . . .

It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details."

Can you only imagine if "intellectuals and politicians" had indeed acted on Krugman's advice "to fill in the details"? I shudder at the consequences.

"The Wolf of Wall Street": Has Anything Changed?

Yesterday, I went to see Martin Scorsese's "The Wolf of Wall Street," and I suppose that I was not really prepared for what awaited me. I thought that Leonardo DiCaprio gave a marvelous performance, and the film had much of the flavor of Scorsese's 1990 masterpiece, "Good Fellahs." Also, I didn't fall asleep once during the three hours that I sat in the theater, perhaps also owing to the five cups of coffee I had before watching the film. But now, after reading several reviews of this flick, I find myself asking, "Why?"

I've done a lot of different things over the course of my lifetime, and no small part of it has revolved around the securities industry: as an investor, market maker and criminal investigator. Yes, I suppose I know more than I care to know, and as I near my 60th birthday, I wonder if anything has gotten better over the years in this field. Sure, it's computerized and faster, and much more information is available online to those wishing to make the effort to learn about the companies whose shares they buy, but is it any cleaner?

"The Wolf of Wall Street" depicts the evolution of a small boiler room operation, pushing penny stocks listed on the pink sheets during the 1990s, into an epicenter of debauchery. No, it's no longer done in this ostentatious fashion, but small investors continue to get eaten alive, and today it's with the connivance of the federal government.

I am not going to trouble you again with another denunciation of the federal government's cancellation of the Uptick Rule, which was intended to prevent share price manipulation (see: http://jgcaesarea.blogspot.com/search/label/Uptick%20Rule), and which has allowed hedge funds to prey upon the public. Instead, allow me to just say that all of the abuses of the 1920s remain alive and well, and I have yet to witness a response from the SEC, FINRA or the exchanges themselves concerning trading irregularities that I have reported.

So, I watched "The Wolf of Wall Street" and its voyeuristic depiction of the abuse of sex and drugs in the 1990s by persons in the financial industry, and I ask myself who in Washington has the courage to denounce the depravity of today's financial markets, which, perpetrated by means of computer algorithms without the sex and drugs, flies under the radar.

In fact, the campaign contributions continue, and nobody gives a damn.

Gail Collins, "Candy Crush and Mr. Christie": Is Internet Gambling Worse Than the Stock Market?

In her latest New York Times op-ed entitled "Candy Crush and Mr. Christie" (http://www.nytimes.com/2013/12/19/opinion/collins-candy-crush-and-mr-christie.html?_r=0), Gail Collins, founder of the Bonbon School of op-ed writing, acknowledges an addiction to "Candy Crush Saga." (Why am I not surprised?) Collins then segues to a denunciation of Chris Christie's legalization of Internet gambling in New Jersey. Collins writes:

"The whole idea of Internet gambling is enough to make you question the potential of Chris Christie for national office. There is no possible way the country could be improved by giving people a greatly expanded freedom to gamble for money in their pajamas. Some day in the near future, you may look back nostalgically on the time when your grandfather did not have a slot machine connection in his bedroom."

Christie's position regarding Internet gambling "is enough to make you question the potential of Chris Christie for national office"? Or is it the fact that Christie is a Republican enough to make Collins question his potential for national office?

In any event, I am not familiar with "Candy Crush Saga" and fortunately have no interest in gambling, Internet or otherwise, which is indeed a destructive addiction.

On the other hand, we have witnessed the legalization of hedge fund manipulation of the stock market, in large part owing to the 2007 cancellation of the Uptick Rule (see: http://jgcaesarea.blogspot.co.il/2013/08/maureen-dowd-summers-of-our-discontent.html).

You are going to lose money by engaging in Internet gambling in your pajamas? With time, this is almost a statistical certainty.

Are you also going to lose money by "investing" in the stock market while wearing pajamas? Perhaps the odds are not quite as bad as Internet gambling, but share prices are being manipulated by hedge funds at the expense of small investors, and persons "investing" in the stock market can easily be crushed by such hedge fund activity.

In the case of Internet gambling, the money lost by gamblers bolsters tax revenues. In the case of the stock market, the money lost by small investors lines the pockets of hedge funds.

Which is worse? You decide.

New York Times Editorial, "Keeping Shareholders in the Dark": The Season of Miracles

Miracles do happen! Today, I am in complete agreement with an editorial entitled "Keeping Shareholders in the Dark" (http://www.nytimes.com/2013/12/04/opinion/keeping-shareholders-in-the-dark.html?hp&rref=opinion&_r=0), in which The New York Times declares:

"Protecting investors and ensuring proper corporate governance are the essence of the mission of the Securities and Exchange Commission. But you wouldn’t know that from the recent actions of the agency and its chairwoman, Mary Jo White.

Last week, the S.E.C. unwisely removed from its regulatory agenda a plan to consider a rule to require public companies to disclose their political spending — even though the case for disclosure is undeniable. Basic investor protection requires that shareholders know how corporate executives are spending shareholder money. Good corporate governance requires that companies are transparent about their use of corporate resources. Shareholders know this and have demanded disclosure."

Ah yes, Mary Jo White, who was nominated by Obama earlier this year to replace Elisse B. Walter as Chairwoman of the U.S. Securities and Exchange Commission. Yet another successful appointment by the president, intended to ensure ongoing reform of America's corporate and financial sphere . . . not.

And while we're on the topic of the S.E.C., how about reinstating the Uptick Rule and putting an end to grotesque hedge fund manipulation of the securities markets (see: http://jgcaesarea.blogspot.co.il/2013/08/maureen-dowd-summers-of-our-discontent.html)?

Yes, I know, wishful thinking on my part.

Paul Krugman, "Plutocrats Feeling Persecuted": Which Millionaire Isn't Mentioned by Paul?

Pop quiz: Which name goes missing from Paul Krugman's latest New York Times op-ed entitled "Plutocrats Feeling Persecuted" (http://www.nytimes.com/2013/09/27/opinion/krugman-plutocrats-feeling-persecuted.html?_r=0)? Three, two, one . . . pencils down.

Ranting against the plutocracy emerging in the US, Krugman writes:

"The thing is, by and large, the wealthy have gotten their wish. Wall Street was bailed out, while workers and homeowners weren’t. Our so-called recovery has done nothing much for ordinary workers, but incomes at the top have soared, with almost all the gains from 2009 to 2012 going to the top 1 percent, and almost a third going to the top 0.01 percent — that is, people with incomes over $10 million.

. . . .

Well, I have a theory. When you have that much money, what is it you’re trying to buy by making even more? You already have the multiple big houses, the servants, the private jet. What you really want now is adulation; you want the world to bow before your success. And so the thought that people in the media, in Congress, and even in the White House are saying critical things about people like you drives you wild."

Indeed, Paul, there has been no recovery since Obama became president. No collapse, but no recovery. Unemployment in the US has ticked down, but it remains at a disastrously high rate. (If you're over 50, go try to find a job.) Almost 50 million Americans are on food stamps. US stock markets are near all-time highs, but raise interest rates by the tiniest notch, and the air will come flooding out of them.

And small cap companies, which are America's wellspring of economic growth, are being imperilled by government indifference to their well-being. Reinstatement of Glass-Steagall and the Uptick Rule (see: http://jgcaesarea.blogspot.co.il/2013/08/maureen-dowd-summers-of-our-discontent.html) since Obama took office? Heck no!

But why only point a finger at plutocrats outside of government? President Obama, who tried to give us Larry Summers as the next head of the Federal Reserve, and almost half the members of Congress (see: http://www.startribune.com/politics/statelocal/219127451.html) are millionaires.

Summers? "When he returned to serve in the Obama administration, he reported a net worth between $17 million and $39 million" (http://www.bloomberg.com/news/2013-08-02/summers-after-government-saw-wealth-surge-to-17-million.html).

John Koskinen, Obama’s nominee to head the IRS, "has a net worth between $7.1 million and $27.4 million, according to financial disclosure reports released by the Office of Government Ethics" (http://www.politico.com/story/2013/09/obama-irs-nominee-john-koskinen-net-worth-96471.html).

However, is Obama, who adores adulation and has a net worth of between $1.8 million and $6.8 million (http://www.huffingtonpost.com/2013/05/15/obama-net-worth_n_3281555.html), mentioned in Krugman's opinion piece? Not even once.

Maybe Krugman felt the need to cut Obama some slack. After all, this lame duck president has recently been busy placating Russia's Putin and running after a handshake with Iran's Rouhani at the UN .

Or perhaps, after Obama's recent "off-the-record" consultation with editorial and op-ed staffers from The New York Times (http://jgcaesarea.blogspot.co.il/2013/09/michael-calderone-new-york-times.html), any such critical reference is taboo.

Any chance of an end to this marriage between wealth and government? Sorry. In another three and a half years, Bill and Hillary Clinton, whose combined net worth is said to exceed $100 million (see: http://www.celebritynetworth.com/dl/bill-and-hillary-clinton-net-worth/), are not apt to change matters.

Indeed, government has become a very rich person's game.

Paul Krugman, "This Age of Bubbles": What About US Stock Markets?

Within the recent past, did a pop-up ad ever appear on your computer screen, with a woman dressed scantily for "Carnival," offering you high returns on investments in Brazilian eucalyptus plantations? Both the woman and the rates of return seemed attractive, but as I explained to a friend, both beauty and high rates of return don't last.

In his latest New York Times op-ed entitled "This Age of Bubbles" (http://www.nytimes.com/2013/08/23/opinion/krugman-this-age-of-bubbles.html?_r=0), Paul Krugman considers the nature of financial bubbles. Krugman concludes:

"In short, the main lesson of this age of bubbles — a lesson that India, Brazil, and others are learning once again — is that when the financial industry is set loose to do its thing, it lurches from crisis to crisis."

As anyone who reads this blog knows, I have serious issues with the greed and manipulative practices of an unfettered financial industry. One need only examine my routine diatribes aimed at restoring the "Uptick Rule" to understand how troubled I am by financial industry excesses (see, most recently: http://jgcaesarea.blogspot.co.il/2013/08/maureen-dowd-summers-of-our-discontent.html).

But is only the financial industry to blame for these crises? Could it also be that retired persons currently have no secure place to invest their savings, given that bank deposits pay so little interest today? Low rates on bank deposits do not result - at least directly - from financial industry excesses, but rather from Federal Reserve efforts to reduce interest rates to stimulate the economy.

But as long as we're talking about "bubbles," why is there no mention by Krugman of US stock markets?

Let's face it: The US economy is still rotten. As reported by Bernice Napach in an article entitled "Income Stats Suggest American Dream Is Dead" (http://finance.yahoo.com/blogs/daily-ticker/income-stats-suggest-american-dream-dead-161855152.html):

"The Great Recession officially ended in June 2009, but the U.S. economy still has not fully recovered. While existing home sales have returned to their June 2009 level and the current unemployment rate of 7.4% is far below the June 2009 rate of 9.5%, less people are participating in the work force and incomes are decisively lower.

A new report out Thursday from Sentier Research found that the median annual household income of Americans was $52,100 in June, after adjusting for inflation. That's 4.4% below the level in December 2009.

Even more dramatic, the median income is 6.1% lower than the level in December 2007, when the recession began, and 7.2% lower than January 2000. For many Americans incomes aren’t just stagnant, they’re falling along with their purchasing power and standard of living."

So why are US stock markets so high if things are so bad? The answer is simple: There is no secure place to park your money and receive a reasonable rate of return.

Yes, current US stock market prices are also a bubble, which ultimately must burst. Regrettably, they are not a reflection of an upturn in the economy.

Maureen Dowd, "Summers of Our Discontent": Winter Is Coming

Will Larry Summers become the next chairman of the Federal Reserve?

In her latest New York Times op-ed entitled "Summers of Our Discontent" (http://www.nytimes.com/2013/08/14/opinion/dowd-summers-of-our-discontent.html), Maureen Dowd takes aim at the Summers candidacy:

"This idea is being pushed by the boys’ club around President Obama, and also by the bullying cool kids, some of the Wall Street types like former Treasury Secretary Robert Rubin who paved the way for the country’s ruin. Larry’s loyal former protégée Sheryl Sandberg aside, it evokes a sexism of complacency — just a bunch of alpha males who prefer each others’ company and who all flatter themselves that they’re smart enough to know how smart Summers is.

These days, it’s impolite to mention that all those cool bankers that President Cool didn’t punish enough brought the country to the brink of disaster."

Dowd's appears to prefer Janet Yellen for the job:

"Sure, Summers, the son of two economists and nephew of two Nobel laureates in economics, has a high I.Q. and inspired a great cameo bit in 'The Social Network.' But there has to be somebody out there to run the economy who wasn’t a part of the culture that ran the economy into the ground.

Janet Yellen, the Fed’s vice chair, has generally been more publicly aligned with Bernanke than Summers has been in using monetary policy to revive the economy."

Me? I don't care if the next head of the Federal Reserve is a man or a woman. However, I am concerned by placing one of the architects of bank deregulation in the position. You see, I am not convinced by the strength of America's purported economic recovery, and I continue to be troubled by the failure of the Obama administration to rein in gluttonous American financial institutions.

In April, The Washington Post refused to publish my opinion piece submission calling for reinstatement of the Uptick Rule, so I'm going to repeat for the umpteenth time . . . the 2007 cancellation of the Uptick Rule is destroying the US economy:

Micro-cap company "X" has designed and patented a revolutionary widget. Recently, the achievements of "X" have made their way into the news, and its shares have risen. Farmer Joe, who attends night school and reads the financial news, decides to buy 1,000 shares of "X". However, Farmer Joe is unaware that Slick Eddy at Hedge Fund "Z", who couldn't care less about the merits of company "X"'s widgets, has also noticed the rise in the share price of "X". With almost unlimited resources behind him, Eddy borrows "X" shares from various financial institutions and begins to sell vast quantities into the market, causing a precipitous decline in the market price of "X". Eddy then blocks any rally in the share price by activating a computerized program to immediately sell 100 shares at the bid after any purchase. Worried by the huge downswing in the price of "X," and also concerned that at the end of each trading day "X" always goes down (Eddy often sells into the market during the last seconds of trading), Farmer Joe dumps his shares at an enormous loss ("Someone must know that something is wrong at 'X'"). Having succeeded in panicking Farmer Joe and other small investors in "X", Eddy buys back the shares at a significantly lower average price than that at which he sold them, resulting in enormous profits for Hedge Fund "Z". Eddy's bosses note his "fine" work and reward him with bonuses as the shares of "X" tumble.

Of course, there are those who will say that ultimately the stock market is "efficient", and the price of "X" will recover to an appropriate level. However, in the process we have witnessed the flow of wealth from Farmer Joe and other small investors to Hedge Fund "Z" and Slick Eddy.

Also, consider the damage to company "X", which, owing to doubt raised by the run on its shares, is suddenly unable to raise additional funds to finance expanded production of a new line of widgets, declares bankruptcy and fires its staff.

Sure, there are instances when the scientific and/or commercial progress of a company shorted by Hedge Fund "Z" is so great that Hedge Fund "Z" must buy back the shares at a higher price, but these losses are more than covered by its programmed downward manipulation of the shares of many other companies.

Notwithstanding the 2007 cancellation of the Uptick Rule, is there something other than Potemkin Village economic recovery underway in the US? Unemployment in the US has ticked down, but it remains at a disastrously high rate. (If you're over 50, go try to find a job.) Almost 50 million Americans are on food stamps. US stock markets are near all-time highs, but raise interest rates by the tiniest notch, and the air will come flooding out of them.

And small cap companies, which are America's wellspring of economic growth, are being imperilled by government indifference to their well-being.

Summers to the rescue? I don't think so.

Paul Krugman, "The Jobless Trap": Castigating Obama

Why are the columnists of The New York Times so down on Obama? Yesterday we had Maureen Dowd telling us that Obama has proven himself totally ineffectual ("he still has not learned how to govern") (see: http://jgcaesarea.blogspot.co.il/2013/04/maureen-dowd-no-bully-in-pulpit.html). Today, in his New York Times op-ed entitled "The Jobless Trap" (http://www.nytimes.com/2013/04/22/opinion/krugman-the-jobless-trap.html?_r=0), Paul Krugman begins by stating:

"F.D.R. told us that the only thing we had to fear was fear itself. But when future historians look back at our monstrously failed response to economic depression, they probably won’t blame fear, per se. Instead, they’ll castigate our leaders for fearing the wrong things."

A "monstrously failed response to economic depression"? Hey, Paul, aren't you being a bit harsh on the president? We might have high unemployment, but we still have "Hope," "Change" and "Forward." Obama is still learning the ropes, and you might just want to cut him some slack.

Jocundity aside, Krugman continues his opinion piece by highlighting America's disastrous unemployment numbers:

"Now, some unemployment is inevitable in an ever-changing economy. Modern America tends to have an unemployment rate of 5 percent or more even in good times. In these good times, however, spells of unemployment are typically brief. Back in 2007 there were about seven million unemployed Americans — but only a small fraction of this total, around 1.2 million, had been out of work more than six months.

Then financial crisis struck, leading to a terrifying economic plunge followed by a weak recovery. Five years after the crisis, unemployment remains elevated, with almost 12 million Americans out of work. But what’s really striking is the huge number of long-term unemployed, with 4.6 million unemployed more than six months and more than three million who have been jobless for a year or more. Oh, and these numbers don’t count those who have given up looking for work because there are no jobs to be found."

Krugman is correct. These figures are horrifying. However, we disagree as to how to put people back to work. Krugman believes that federal government borrowing still poses no danger and that the federal government should spend more to create jobs:

"America isn’t and can’t be Greece, because countries that borrow in their own currencies operate under very different rules from those that rely on someone else’s money. After years of repeated warnings that fiscal crisis is just around the corner, the U.S. government can still borrow at incredibly low interest rates.

. . . .

The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy."

But Obama's first term stimulus packages didn't work. Should good money be thrown after bad? Could it just be that something else, more fundamental, has been corrupted in the US? My belief is that US financial markets have been destroyed by legalized hedge fund manipulation and SEC indifference and that we have entered an era in which these markets no longer serve as economic growth engines.

What went wrong? The Washington Post recently refused my opinion piece submission on this topic, but I'll say it again here for the umpteenth time - the 2007 cancellation of the Uptick Rule is destroying the US economy. Allow me again to explain:

Micro-cap company "X" has designed and patented a revolutionary widget. Recently, the achievements of "X" have made their way into the news, and its shares have risen. Farmer Joe, who attends night school and reads the financial news, decides to buy 1,000 shares of "X". However, Farmer Joe is unaware that Slick Eddy at Hedge Fund "Z", who couldn't care less about the merits of company "X"'s widgets, has also noticed the rise in the share price of "X". With almost unlimited resources behind him, Eddy borrows "X" shares from various financial institutions and begins to sell vast quantities into the market, causing a precipitous decline in the market price of "X". Eddy then blocks any rally in the share price by activating a computerized program to immediately sell 100 shares at the bid after any purchase. Worried by the huge downswing in the price of "X," and also concerned that at the end of each trading day "X" always goes down (Eddy often sells into the market during the last seconds of trading), Farmer Joe dumps his shares at an enormous loss ("Someone must know that something is wrong at 'X'"). Having succeeded in panicking Farmer Joe and other small investors in "X", Eddy buys back the shares at a significantly lower average price than that at which he sold them, resulting in enormous profits for Hedge Fund "Z". Eddy's bosses note his "fine" work and reward him with bonuses as the shares of "X" tumble.

Of course, there are those who will say that ultimately the stock market is "efficient", and the price of "X" will recover to an appropriate level. However, in the process we have witnessed the flow of wealth from Farmer Joe and other small investors to Hedge Fund "Z" and Slick Eddy.

Also, consider the damage to company "X", which, owing to doubt raised by the run on its shares, is suddenly unable to raise additional funds to finance expanded production of a new line of widgets, declares bankruptcy and fires its staff.

Sure, there are instances when the scientific and/or commercial progress of a company shorted by Hedge Fund "Z" is so great that Hedge Fund "Z" must buy back the shares at a higher price, but these losses are more than covered by its programmed downward manipulation of the shares of many other companies.

I would only add that it has become known to me that although financial institutions are required to "borrow" the shares that they short, many financial institutions are ignoring these regulations: "If you look the other way regarding the shares of company "X" that I borrowed and should have returned long ago, I will look the other way regarding the return of the company "Q" shares that you borrowed.

In short, US financial institutions have been given carte blanche to cannibalize the economy, and we are witnessing their dirty work. Indeed, it's time for "Change."

Gail Collins, "A New Era in Political Corruption": Influence Peddling, Market Manipulation and Illicit Drugs Sustain the Economy

Corruption involving New York State politicians? Who would ever believe?

In her latest New York Times op-ed entitled "A New Era in Political Corruption" (http://www.nytimes.com/2013/04/06/opinion/collins-a-new-era-in-political-corruption.html), Gail Collins provides a laundry list of recent misdoings in the Empire State and its environs:

• "We have a Democratic state senator, Malcolm Smith, under indictment for trying to buy the Republican New York City mayoral nomination."
• "Also there’s Eric Stevenson, an unremarkable assemblyman from the Bronx accused of taking bribes from some men who wanted to start adult day care centers. Among other things, he introduced legislation prohibiting anybody else from opening a similar facility anywhere in the New York City area."
• "[Melanie Sloan of Citizens for Responsibility and Ethics in Washington] recalled the recent discovery that Senator Robert Menendez of New Jersey had been using his influence to try to resolve a multimillion-dollar Medicare billing dispute for a Florida ophthalmologist whose company contributed more than $700,000 toward the election of Senate Democrats, Menendez included."
• "One of the stranger elements to the New York story was word that a Bronx assemblyman named Nelson Castro has been wearing a wire for the feds for virtually his entire political career. He originally got into trouble when election officials noticed nine voters were registered as living with him in his one-bedroom apartment."

Bribery among politicians, both Democrats and Republicans? Is there anything "new" about that? Is there anyone among us who is shocked?

On the other hand, I am still horrified by the 2007 cancellation of the Uptick Rule, which has contributed mightily to America's prolonged economic downturn by enabling hedge funds to short shares, i.e. sell shares they do not own, in almost unlimited quantities, and permitting them to benefit from resultant investor panic (see: http://jgcaesarea.blogspot.co.il/2013/02/paul-krugman-rubio-and-zombies.html).

More recently, I was overwhelmed after hearing about friends' children, who became hooked on hard drugs in suburban high schools.

And so, despite yesterday's dismal jobs report, which let us know that the "labor force participation rate has not been this low — 63.3 percent — since 1979, a time when women were less likely to be working" (http://www.nytimes.com/2013/04/06/business/economy/us-adds-only-88000-jobs-jobless-rate-falls-to-7-6.html?_r=0), influence peddling, market manipulation and illicit drugs remain growth sectors in an otherwise dismal economy.

"Change"?  "Forward"? How about "Over the Cliff and Into the Abyss"?

David Brooks, "The Progressive Shift": The Department of Labor Commissions a New $300 Million Statue

In his latest New York Times op-ed entitled "The Progressive Shift" (http://www.nytimes.com/2013/03/19/opinion/brooks-the-progressive-shift.html?_r=0), David Brooks begins by referring to the bronze statue of a broad-shouldered young man seeking to control a powerful stallion, which is situated outside the Department of Labor in Washington. Brooks explains:

"This used to be a metaphor for liberalism. The horse was capitalism. The man was government, which was needed sometimes to restrain capitalism’s excesses.

Today, liberalism seems to have changed. Today, many progressives seem to believe that government is the horse, the source of growth, job creation and prosperity. Capitalism is just a feeding trough that government can use to fuel its expansion.

For an example of this new worldview, look at the budget produced by the Congressional Progressive Caucus last week. These Democrats try to boost economic growth with a gigantic $2.1 trillion increase in government spending — including a $450 billion public works initiative, a similar-size infrastructure program and $179 billion so states, too, can hire more government workers."

Brooks proceeds to question the wisdom of raising taxes on the rich, which will not prevent US debt from doubling over the next 30 years, and concludes:

"The progressive budget in the House seems to have been written by people hermetically sealed in the house of government. They work in government. They represent public-sector workers. They seem to have had little contact with private-sector job creators and no idea about what factors might play in their thinking. It’s a reminder that while Republicans may embarrass on a daily basis, many progressives have lost touch with what actually produces growth and prosperity."

Well, I would begin by noting that I disagree with Brooks's contention that "the economy is finally beginning to take off." Ask anyone over 50 years of age and unemployed whether she or he senses a sea change. As I have explained many times in this blog, the elimination of the Uptick Rule in 2007 has crippled US economic growth in the private sector and is allowing parasitic hedge funds to feed off naive investors (see: http://jgcaesarea.blogspot.co.il/2013/02/paul-krugman-rubio-and-zombies.html) . Unemployment in the private sector can only drop marginally.

The expanding public sector? Working 9-to-5, punctuated by coffee breaks and interrupted by lengthy vacations, does not bring innovation and productivity. The US is following Europe into the abyss.

I would only add that Brooks apparently is unaware of the Obama administration's plans to tear down the statue outside the Department of Labor in Washington. Instead, notwithstanding the sequester, a new $300 million statue has been commissioned, which will depict a blind man with a cane attempting to lead a sway-backed donkey pulling in the opposite direction.

C'est tout.

Paul Krugman, "Rubio and the Zombies": Oblivious to the Odious Cancellation of the Uptick Rule

So you "invest" in the stock market? But are you aware that you are a patsy in a rigged game controlled by giant hedge funds?

In his latest New York Times op-ed entitled "Rubio and the Zombies" (http://www.nytimes.com/2013/02/15/opinion/krugman-rubio-and-the-zombies.html), Paul Krugman links the financial crisis of 2008 to a housing crisis brought on by "risky mortgages." Krugman writes:

"For here we are, more than five years into the worst economic slump since the Great Depression, and one of our two great political parties has seen its economic doctrine crash and burn twice: first in the run-up to crisis, then again in the aftermath. Yet that party has learned nothing; it apparently believes that all will be well if it just keeps repeating the old slogans, but louder.

It’s a disturbing picture, and one that bodes ill for our nation’s future."

Hmm, "more than five years into the worst economic slump since the Great Depression" . . .

It doesn't occur to Krugman that the Uptick Rule, which went into effect in 1938 in response to market abuses, was cancelled in 2007, i.e. just prior to the onset of that economic slump. Cancellation of the Uptick Rule has contributed mightily to this prolonged downturn by enabling hedge funds to short shares, i.e. sell shares they do not own, in almost unlimited quantities, and permitting them to benefit from resultant investor panic.

I ask the indulgence of those who read this blog as I again provide the same illustrative example of how cancellation of the Uptick Rule is destroying the US economy:

Micro-cap company "X" has designed and patented a revolutionary widget. Recently, the achievements of "X" have made their way into the news, and its shares have risen. Farmer Joe, who attends night school and reads the financial news, decides to buy 1,000 shares of "X". However, Farmer Joe is unaware that Slick Eddy at Hedge Fund "Z", who couldn't care less about the merits of company "X"'s widgets, has also noticed the rise in the share price of "X". With almost unlimited resources behind him, Eddy borrows "X" shares from various financial institutions and begins to sell vast quantities into the market, causing a precipitous decline in the market price of "X". Eddy then blocks any rally in the share price by activating a computerized program to immediately sell 100 shares at the bid after any purchase. Worried by the huge downswing in the price of "X," and also concerned that at the end of each trading day "X" always goes down (Eddy often sells into the market during the last seconds of trading), Farmer Joe dumps his shares at an enormous loss ("Someone must know that something is wrong at 'X'"). Having succeeded in panicking Farmer Joe and other small investors in "X", Eddy buys back the shares at a significantly lower average price than that at which he sold them, resulting in enormous profits for Hedge Fund "Z". Eddy's bosses note his "fine" work and reward him with bonuses as the shares of "X" tumble.

Of course, there are those who will say that ultimately the stock market is "efficient", and the price of "X" will recover to an appropriate level. However, in the process we have witnessed the flow of wealth from Farmer Joe and other small investors to Hedge Fund "Z" and Slick Eddy.

Also, consider the damage to company "X", which, owing to doubt raised by the run on its shares, is suddenly unable to raise additional funds to finance expanded production of a new line of widgets, declares bankruptcy and fires its staff.

Sure, there are instances when the scientific and/or commercial progress of a company shorted by Hedge Fund "Z" is so great that Hedge Fund "Z" must buy back the shares at a higher price, but these losses are more than covered by its programmed downward manipulation of the shares of many other companies.

I would only add that it has become known to me that although financial institutions are required to "borrow" the shares that they short, many financial institutions are ignoring these regulations: "If you look the other way regarding the shares of company "X" that I borrowed and should have returned long ago, I will look the other way regarding the return of the company "Q" shares that you borrowed.

Yes, it's ugly out there, and it is high time to reinstate the Uptick Rule, before it becomes too late.

Moreover, it's not just "Zombie" Republicans who are preventing long overdue reinstatement of this rule.

New York Times Editorial, "Mary Jo White at the S.E.C.": Where Does She Stand Regarding the Uptick Rule?

In an editorial entitled "Mary Jo White at the S.E.C." (http://www.nytimes.com/2013/02/08/opinion/mary-jo-white-at-the-sec.html?_r=0), The New York Times supports the president's nomination of Mary Jo White as the next chairperson of the Securities and Exchange Commission. According to the editorial:

"[White's] résumé in the past decade has understandably alarmed advocates of financial reform, who fear that her work as a defender of Wall Street means that she is dangerously biased in favor of the banks and their deregulatory agenda. Her lack of a deep regulatory background is also a worry at a time when the agency’s top priority is to finish overdue rules to carry out the Dodd-Frank financial reform and other securities laws. Complicating matters further, her husband, John White, is also a corporate lawyer, at Cravath, Swaine & Moore, with his own long list of Wall Street clients.

We understand these concerns but do not believe they are disqualifying."

The editorial makes no mention of the Uptick Rule or White's position in respect thereto. Cancellation of the Uptick Rule in 2007 was thought to have contributed to the 2008 economic debacle and continues to shackle the US economy (see: http://jgcaesarea.blogspot.co.il/2013/02/paul-krugman-friends-of-fraud-do-you.html). The Uptick Rule urgently needs to be reinstated.

The Times editorial concludes:

"[White's] qualities of toughness, tenacity and aggressiveness are just what the S.E.C. needs in a leader. The overarching question she must be asked — and that she must answer — is how she will use those qualities to advance the S.E.C.’s mission, which is to protect individual investors by ensuring that markets are transparent, well regulated and vigorously policed."

The Times wishes to "protect individual investors"? Nothing is more urgent than reinstatement of the Uptick Rule. Without it, Wall Street is a casino with the odds dangerously stacked against individual investors and in favor of voracious hedge funds, which are busy manipulating the activity of American financial markets.

Where does White stand regarding the Uptick Rule? An answer is needed.

Paul Krugman, "Friends of Fraud": Do You Own Shares?

It's only the Republicans who are "defrauding" the public? Yeah, right.

In his latest New York Times op-ed entitled "Friends of Fraud" (http://www.nytimes.com/2013/02/04/opinion/krugman-friends-of-fraud.html?_r=0), Paul Krugman complains that Republicans are "threatening to filibuster the appointment of Richard Cordray, the [Consumer Financial Protection Bureau's] acting head, and thereby leave the bureau unable to function." Krugman concludes:

"Right now, all the media focus is on the obvious hot issues — immigration, guns, the sequester, and so on. But let’s try not to let this one fall through the cracks: just four years after runaway bankers brought the world economy to its knees, Senate Republicans are using every means at their disposal, violating all the usual norms of politics in the process, in an attempt to give the bankers a chance to do it all over again."

The Consumer Financial Protection Bureau? A fine idea, but it's the repeal of the Uptick Rule, for which Republicans and Democrats are both responsible, which is allowing financial institutions to milk the American public and destroying the US economy.

Given the importance of the subject, I will again repeat myself:

The Uptick Rule went into effect in 1938 in response to market abuses that threatened the health of the US economy and prohibited short sales of securities except on an "uptick." As summarized by the SEC:

"Rule 10a-1(a)(1) provided that, subject to certain exceptions, a listed security may be sold short (A) at a price above the price at which the immediately preceding sale was effected (plus tick), or (B) at the last sale price if it is higher than the last different price (zero-plus tick). Short sales were not permitted on minus ticks or zero-minus ticks, subject to narrow exceptions."

The Uptick Rule was cancelled in 2007, thereby enabling hedge funds to short shares, i.e. sell shares they did not own, in almost unlimited, immediate quantities, and permitting them to benefit from resultant investor panic in almost any given traded company.

Example: Micro-cap company "X" has designed and patented a revolutionary widget. Recently, the achievements of "X" have made their way into the news, and its shares have risen. Farmer Joe, who attends night school and reads the financial news, decides to buy 1,000 shares of "X". However, Farmer Joe is unaware that Slick Eddy at Hedge Fund "Z", who couldn't care less about the merits of company "X"'s widgets, has also noticed the rise in the share price of "X". With almost unlimited resources behind him, Eddy borrows "X" shares from various financial institutions and begins to sell vast quantities into the market, causing a precipitous decline in the market price of "X". Eddy then blocks any rally in the share price by activating a computerized program to immediately sell 100 shares at the bid after any purchase. Worried by the huge downswing in the price of "X," and also concerned that at the end of each trading day "X" always goes down (Eddy often sells into the market during the last seconds of trading), Farmer Joe dumps his shares at an enormous loss ("Someone must know that something is wrong at 'X'"). Having succeeded in panicking Farmer Joe and other small investors in "X", Eddy buys back the shares at a significantly lower average price than that at which he sold them, resulting in enormous profits for Hedge Fund "Z". Eddy's bosses note his "fine" work and reward him with bonuses as the shares of "X" tumble.

Of course, there are those who will say that ultimately the stock market is "efficient", and the price of "X" will recover to an appropriate level. However, in the process we have witnessed the flow of wealth from Farmer Joe and other small investors to Hedge Fund "Z" and Slick Eddy.

Also, consider the damage to company "X", which, owing to doubt raised by the run on its shares, is suddenly unable to raise additional funds to finance expanded production of a new line of widgets, declares bankruptcy and fires its staff.

Sure, there are instances when the scientific and/or commercial progress of a company shorted by Hedge Fund "Z" is so great that Hedge Fund "Z" must buy back the shares at a higher price, but these losses are more than covered by its programmed downward manipulation of the shares of many other companies.

It is widely thought that the elimination of the Uptick Rule significantly contributed to the 2008 financial crisis from which America has yet to recover. Why has the Uptick Rule not been reinstated? Obviously, there are powerful lobbyists from the financial industry opposed to its reenactment, which would kill this cash cow.

You think that you are "investing" in the stock market? In fact, there are powerful algorithmic forces driving the markets behavior and directly affecting the value of your shares, which have nothing to do with the strength or potential of the companies in which you invest.

Obama wants to reinvigorate the US economy? It is time to reinstate the Uptick Rule, before it becomes too late.

David Brooks, "The Collective Turn": Do You "Invest" in the Stock Market?

Do you "invest" in the stock market?

As Obama kicks off his liberated second term in office and pursues an unabashedly "progressive" (whatever this means) agenda, the United States is more polarized than ever and unbeknownst to many, including New York Times columnist David Brooks, its economic underpinnings are crumbling as financial markets are manipulated as never before.

In his latest Times op-ed entitled "The Collective Turn" (http://www.nytimes.com/2013/01/22/opinion/brooks-the-collective-turn.html?_r=0), Brooks reflects on Obama's inaugural address and pays the president a backhanded compliment:

"Reinvigorating a mature nation means using government to give people the tools to compete, but then opening up a wide field so they do so raucously and creatively. It means spending more here but deregulating more there. It means facing the fact that we do have to choose between the current benefits to seniors and investments in our future, and that to pretend we don’t face that choice, as Obama did, is effectively to sacrifice the future to the past.

Obama made his case beautifully. He came across as a prudent, nonpopulist progressive. But I’m not sure he rescrambled the debate. We still have one party that talks the language of government and one that talks the language of the market. We have no party that is comfortable with civil society, no party that understands the ways government and the market can both crush and nurture community, no party with new ideas about how these things might blend together.

But at least the debate is started. Maybe that new wind will come."

A "new wind" on the way? Yeah, right. Not when America's debt has become unsustainable. Not when the vitality of the American economy is being mauled by algorithmic trading. With the repeal of the Uptick Rule, US stock markets were effectively "deregulated" and converted into a shark pool, and the Obama administration, like its predecessors, has done nothing to undo this error.

The Uptick Rule went into effect in 1938 in response to market abuses that threatened the health of the US economy and prohibited short sales of securities except on an "uptick." As summarized by the SEC:

"Rule 10a-1(a)(1) provided that, subject to certain exceptions, a listed security may be sold short (A) at a price above the price at which the immediately preceding sale was effected (plus tick), or (B) at the last sale price if it is higher than the last different price (zero-plus tick). Short sales were not permitted on minus ticks or zero-minus ticks, subject to narrow exceptions."

The Uptick Rule was cancelled in 2007, thereby enabling hedge funds to short shares, i.e. sell shares they did not own, in almost unlimited, immediate quantities, and permitting them to benefit from resultant investor panic in almost any given traded company.

Example: Micro-cap company "X" has designed and patented a revolutionary widget. Recently, the achievements of "X" have made their way into the news, and its shares have risen. Farmer Joe, who attends night school and reads the financial news, decides to buy 1,000 shares of "X". However, Farmer Joe is unaware that Slick Eddy at Hedge Fund "Z", who couldn't care less about the merits of company "X"'s widgets, has also noticed the rise in the share price of "X". With almost unlimited resources behind him, Eddy borrows "X" shares from various financial institutions and begins to sell vast quantities into the market, causing a precipitous decline in the market price of "X". Eddy then blocks any rally in the share price by activating a computerized program to immediately sell shares at the bid after any purchase. Worried by the huge downswing in the price of "X," and also concerned that at the end of each trading day "X" always goes down (Eddy often sells into the market during the last seconds of trading), Farmer Joe dumps his shares at an enormous loss ("Someone must know that something is wrong at 'X'"). Having succeeded in panicking Farmer Joe and other small investors in "X", Eddy buys back the shares at a significantly lower average price than that at which he sold them, resulting in enormous profits for Hedge Fund "Z". Eddy's bosses note his "fine" work and reward him with bonuses as the shares of "X" tumble.

Of course, there are those who will say that ultimately the stock market is "efficient", and the price of "X" will recover to an appropriate level. However, in the process we have witnessed the flow of wealth from Farmer Joe and other small investors to Hedge Fund "Z" and Slick Eddy.

Also, consider the damage to company "X", which, owing to doubt raised by the run on its shares, is suddenly unable to raise additional funds to finance expanded production of a new line of widgets, declares bankruptcy and fires its staff.

Sure, there are instances when the scientific and/or commercial progress of a company shorted by Hedge Fund "Z" is so great that Hedge Fund "Z" must buy back the shares at a higher price, but these losses are more than covered by its programmed downward manipulation of the shares of many other companies.

It is widely thought that the elimination of the Uptick Rule significantly contributed to the 2008 financial crisis from which America has yet to recover. Why has the Uptick Rule not been reinstated? Obviously, there are powerful lobbyists from the financial industry opposed to its reenactment, which would kill this cash cow.

Brooks wants to reinvigorate a "mature nation." Reinstatement of the Uptick Rule is even more important than re-enactment of Glass-Steagall to achieve this goal.

David Brooks, "The Opening Statement": No Mention of the 2,000th American Soldier Who Died This Weekend in Afghanistan

In his latest New York Times op-ed entitled "The Opening Statement" (http://www.nytimes.com/2012/10/02/opinion/brooks-the-opening-statement.html), David Brooks suggests an opening statement for Mitt Romney for tomorrow's presidential debate. If Romney follows the advice of Brooks, he will lose the 2012 election. It's that simple.

On the other hand, if Romney follows my advice, he will win. But there's no chance of that happening.

Read Brooks's opinion piece. Now read it again. What's missing? Simple.

This past weekend we witnessed a tragic milestone: The 2,000th American soldier died in the war in Afghanistan, which was escalated by Obama. In addition to this heartbreaking loss of life, the US is spending $6 billion every month on this boondoggle.

There is no mention of Afghanistan in David's op-ed. There will be no mention of Afghanistan in the opening statements of Romney and Obama during the debate.

If Romney wants to win this election, he needs to tell the American people that he will end America's presence in Afghanistan within six months of taking office. But he won't do that. It would antagonize many of his conservative backers, notwithstanding the fact that it is the right thing to do. Romney would rather lose gracefully to Obama.

Regarding Medicare, Brooks is correct: Romney needs to treat Americans as adults and explain in no uncertain terms that the rising cost of medical entitlements, if unaddressed, will bankrupt the US. Brooks, however, does not mention that Medicare fraud costs the US $90 billion per year. It's time to declare war on this crime, which is draining the lifeblood from the country.

And then there is no mention by Brooks of the necessity to reform Wall Street, which is witnessing the departure of individual investors as algorithms and computerized trading have come to rule the roost. It's time to take this unfair edge away from the hedge funds and to allow stock markets to again serve the needs of innovative start-ups, hungry for seed money, which offer the promise of sustainable employment. But will Romney demand the reinstatement of the Uptick Rule and Glass-Steagall, thereby antagonizing many of his donors? Not a chance.

Given the disastrous state of the US economy and Obama's unlimited number of foreign policy failures, this is Romney's election to lose.

Yes, he is losing it.

Maureen Dowd, "The Son Also Sets": Where's the Business Plan?

In the business world, if you want to raise money for a start-up, you must present potential investors with a detailed business plan for future operations. No business plan, no money. Harvard Business School graduate Romney should know this.

In her latest New York Times op-ed entitled "The Son Also Sets" (http://www.nytimes.com/2012/09/23/opinion/sunday/dowd-the-son-also-sets.html?_r=0), Maureen Dowd observes with regard to the Romney campaign:

"Even if voters are inclined to fire the incumbent, they need reassurance about what the replacement would do. Romney has failed to give details where needed, and when he does give details, they contradict his own past stands."

Or as I said in a prior blog entry (http://jgcaesarea.blogspot.co.il/2012/09/david-brooks-thurston-howell-romney-or.html), "winning the presidency away from an incumbent, no matter how bad the economy, is not a matter of entitlement." Has Mitt provided a business plan? There's not even an executive summary.

Obama's recovery plan? It also doesn't exist. Obama is perfectly content to coast into a second term without providing a program, given the ineptitude of Team Romney.

How refreshing it would be if either candidate were to say that he is planning to put an immediate end to America's ground involvement in Afghanistan.

Or to declare war on Medicare and Social Security fraud.

Or to reinstate Glass-Steagall and the Uptick Rule.

Or merely to treat the American electorate as intelligent adults.

But it's not going to happen. We have only the next season of "Game of Thrones" to anticipate. Everything else is downhill.

Winter is coming.

Joe Nocera, "Frankenstein Takes Over the Market": Can You Beat the Machines?

A while back, a friend called to complain about the decline in the share price of a particular company on a certain day: "What the f@#% is wrong here? Where there's smoke, there's fire!" "In fact," I replied, "I think the company is just fine. What you're watching is computerized trading."

Many investors today, when reviewing their share portfolios, don't understand that the bid and offer on their computer screens is often not generated by orders to buy or sell from human beings, but rather by algorithms, which do not take into account the financial and commercial well-being of a company. Rather, these computerized algorithms, aided by the elimination of the Uptick Rule (see: http://jgcaesarea.blogspot.co.il/2010/02/reinstate-uptick-rule-immediately.html), are intended to milk small shareholders of their money on a day to day basis.

In his latest New York Times op-ed entitled "Frankenstein Takes Over the Market" (http://www.nytimes.com/2012/08/04/opinion/nocera-frankenstein-takes-over-the-market.html), Joe Nocera laments:

" . . . the market feels less and less hospitable to individual investors, while becoming, increasingly, a playground for the big boys, the way it was before the creation of the Securities and Exchange Commission in the 1930s. Yes, if you can shut out the white noise — à la Warren Buffett — rapid-fire trading shouldn’t matter over the long haul. But very few of us have Buffett-like blinders.

. . . .

One wonders if Wall Street itself is beginning to question if it can rely on the monster it has created — and which it no longer seems able to control. In the immortal words of the screenwriter William Goldman, 'Nobody knows anything.' He was talking about Hollywood. But the same could be said today for Wall Street and its fixation with computerized trading."

Which brings us to the next question: Can you beat the machines? (Sounds a bit like "The Terminator" movies, but without Arnold Schwarzenegger to help you.)

Well, I have repeatedly asked in this blog for the reinstatement of the Uptick Rule, which would do much to heal the American economy, but this would throw a monkey wrench into the highly profitable computerized trading programs of the investment banking firms, and neither the Democrats nor the Republicans will heed my words.

However, if you are not a day trader playing against the computers at what they do best, if you can "shut out the white noise" as suggested by Nocera, and if you can seek medium or long-term profits based upon an in-depth understanding of a company's product and business plan (something the algorithms barely take into account), you stand a shot at beating the machines.

But do you have this in you? Today, in a world of gloom and panic, can you block out the white noise and see beyond your nose? If not, stay away from the market - the machines will devour you and ultimately themselves.