Thursday, August 09, 2012
High Speed Trading Takes Over Stock Market
This chart from Technology Review shows the growth of high speed trading over the last few years. As the article says, at some point somebody other than insiders like Knight Capital is going to get burned, perhaps just some average investors.
You can thank 401(k)s and IRAs for a lot of this. In many cases these are just money that is not actively managed by the people it belongs to, allowing the stock market to play with it. They have just anted up and put a huge pot of money on the table for the hedge funds and big investors. As this money gets churned, the big guys probably get rich (unless their computer program blows up) and the little guys get fleeced. It's virtually (no pun intended) impossible for the SEC to police, because it's so big, so fast, and so complicated.
Friday, July 27, 2012
Al-Qaeda Still Alive
It looks like al-Qaeda is still alive. They are somewhat active in Iraq, Syria, and Mali. Al-Qaeda is is a radical Sunni group; most of the 9/11 hijackers came from Sunni Saudi Arabia. Now they are one of the groups terrorizing the current Shiite government of Iraq, and one of the groups undermining the Alawite/Shiite government of Assad in Syria. Meanwhile they are taking over the government of Mali in central Africa. So, the US is opposing al-Qaeda in Iraq in order for us to support the Maliki government we have set up, although Maliki is very close to Iran, our declared enemy. We are supporting the goal of al-Qaeda in Syria of overthrowing Assad, even if we so not support al-Qaeda explicitly. The Syrian rebels deny that they work with al-Qaeda, which may be true, but only because al-Qaeda works in Syria without identifying itself overtly. Finally, in Mali al-Qaeda makes no bones about openly taking over the government, leading to concerns that it may become a new base of operations for al-Qaeda, as Afghanistan was before 9/11, according to CNN's Erin Burnett.
Saturday, July 14, 2012
Is Ameica Still a Great Nation? 2
All the talk about the European atom smasher finding the Higgs boson adds to the perception of the decline of America. The US was supposed to have a particle accelerator in Texas, the Superconducting Super Collider, to rival CERN's in France and Switzerland, but we decided in 1993 that we couldn't afford it. Maybe the world doesn't need two huge accelerators, but the fact is that today Europe has one and the US doesn't. Two generations ago, the US would have been in the lead.
Today, the US has no manned access to space. Ironically, we have the International Space Station, but no American way to get people to or from it. We are dependent on the Russians to transport the crew. When I was doing science work at American embassies overseas, one of the best selling points we had was NASA. NASA had a wonderful reputation, mainly build on manned missions like the moon landing and the Shuttle, but also on scientific missions, particular the Hubble space telescope. The moon landing is now several generations ago, the Shuttle is in museums, and we have no way to service the Hubble, which will eventually die in orbit. You could see how important manned space activities were when the Shuttles were flown to the various museums that will house them. People stopped whatever they were doing to watch the Shuttles fly over on the 747 transport. That greatness is gone. NASA 20 years ago was what Apple was like before Steve Jobs died. It was a world leader that caught everyone's imagination. America has lost its Apple.
After the fall of Berlin wall, the US instituted a number of programs to help the Eastern European nations coming out of Communism. I went to Poland to run the Maria Sklodowski Curie Fund to help Polish scientists by financing small scientific cooperative projects between American and Polish scientists. We signed an agreement to maintain the cooperation for five years. After two years, the Republicans took over Congress in the Newt Gingrich revolution, and cancelled funding for the cooperation years earlier than specified in the agreement. The US did it under terms of the agreement that were put in for the Poles in case they ran out of funds, saying that the agreement could be cancelled if either party found it impossible to fund it. The only reason it was impossible for the US was that Congress refused to do so. It was an enormous contrast to the Marshall Plan that the US funded after World War II. The US had relatively much more debt, still had some rationing as a result of the war, but we sacrificed to help the Europeans. The Republican revolution was not that generous. In large measure, the European Union stepped in where the US failed, and is largely responsible for the current day success of the Poles and other Eastern Europeans. The contrast between the "greatest generation's" Marshall Plan, and the Gingrich Revolutions selfishness could hardly be starker.
The continual growth of a huge national debt and budget deficit is another sign of decline. There is nothing wrong with going somewhat into debt sometimes,but going hugely into debt all the time is bad. Although they agree there is a problem, the US is badly divided on this issue, with Democrats saying that taxes must be raised, while Republicans say expenses must be cut. The Democrats are in general more willing to put up with debt, but responsible Democrats less so. The US grew its social welfare programs, like Medicare and Social Security, when its economy was strong. Now we can't afford as much social welfare as we could a generation ago, but we can't have a civilized debate about how to reduce it, or pay for it. When you cut benefits, you hurt people. Today, Republicans, unlike Reagan, are unconcerned about who gets hurt; the taxpayers just want their money back. So, there is no discussion of how to reduce programs in a way that creates the least harm. There is more discussion of how to raise taxes, but only because the huge Bush tax cuts that were limited in time have been continued long past their intended expiration date. The "fiscal cliff" in theory will focus minds on taxes and budget cuts, but in fact Congress will probably muddle through without making a real decision. That is not the mark of a great nation.
A personal bugaboo for me has been America's hatred of its military since Vietnam. It's okay to hate the military as long as the nation is not threatened, but when it is, it may be hard to overcome. A good military requires good people to serve in it. Currently very few of the best Americans will serve. The service academies still turn out pretty good officers, but their perspective is somewhat limited. The military also needs outsiders who will bring a different outlook. This means you need some good people from Harvard and Stanford, as well a more graduates of good state universities. But today's generation grew up with parents or grandparents who avoided service in Vietnam, and who often pilloried veterans as psychotic baby killers, rather than praising them as defenders of the nation. Vietnam veterans probably share the homecoming experiences of Confederate veterans or low-ranking German soldiers who served under Hitler. The 9/11 attack began changing this attitude, because America really was attacked, but it was not a traditional military attack. Terrorists don't wear uniforms; The 9/11 attack was carried out by a handful of people who all died in the attack, except for Osama bin Laden and a few of his associates. Thus, it didn't really call for a military response, although that is how we responded. The resulting mess, getting rid of Saddam Hussein but strengthening the Iraqi regime, has not done a great deal to strengthen respect for the military, although it has helped. The Afghan war has at best been a wash, with no clear positive result from years of fighting. The fact that some many troops come home with mental problems has to some extend reinforced the perception that soldiers are psychotic killers, further discouraging people from joining the military. Without a strong military, the US position in the world is weakened, because it will be less able to respond if it is threatened by another country.
Today, the US has no manned access to space. Ironically, we have the International Space Station, but no American way to get people to or from it. We are dependent on the Russians to transport the crew. When I was doing science work at American embassies overseas, one of the best selling points we had was NASA. NASA had a wonderful reputation, mainly build on manned missions like the moon landing and the Shuttle, but also on scientific missions, particular the Hubble space telescope. The moon landing is now several generations ago, the Shuttle is in museums, and we have no way to service the Hubble, which will eventually die in orbit. You could see how important manned space activities were when the Shuttles were flown to the various museums that will house them. People stopped whatever they were doing to watch the Shuttles fly over on the 747 transport. That greatness is gone. NASA 20 years ago was what Apple was like before Steve Jobs died. It was a world leader that caught everyone's imagination. America has lost its Apple.
After the fall of Berlin wall, the US instituted a number of programs to help the Eastern European nations coming out of Communism. I went to Poland to run the Maria Sklodowski Curie Fund to help Polish scientists by financing small scientific cooperative projects between American and Polish scientists. We signed an agreement to maintain the cooperation for five years. After two years, the Republicans took over Congress in the Newt Gingrich revolution, and cancelled funding for the cooperation years earlier than specified in the agreement. The US did it under terms of the agreement that were put in for the Poles in case they ran out of funds, saying that the agreement could be cancelled if either party found it impossible to fund it. The only reason it was impossible for the US was that Congress refused to do so. It was an enormous contrast to the Marshall Plan that the US funded after World War II. The US had relatively much more debt, still had some rationing as a result of the war, but we sacrificed to help the Europeans. The Republican revolution was not that generous. In large measure, the European Union stepped in where the US failed, and is largely responsible for the current day success of the Poles and other Eastern Europeans. The contrast between the "greatest generation's" Marshall Plan, and the Gingrich Revolutions selfishness could hardly be starker.
The continual growth of a huge national debt and budget deficit is another sign of decline. There is nothing wrong with going somewhat into debt sometimes,but going hugely into debt all the time is bad. Although they agree there is a problem, the US is badly divided on this issue, with Democrats saying that taxes must be raised, while Republicans say expenses must be cut. The Democrats are in general more willing to put up with debt, but responsible Democrats less so. The US grew its social welfare programs, like Medicare and Social Security, when its economy was strong. Now we can't afford as much social welfare as we could a generation ago, but we can't have a civilized debate about how to reduce it, or pay for it. When you cut benefits, you hurt people. Today, Republicans, unlike Reagan, are unconcerned about who gets hurt; the taxpayers just want their money back. So, there is no discussion of how to reduce programs in a way that creates the least harm. There is more discussion of how to raise taxes, but only because the huge Bush tax cuts that were limited in time have been continued long past their intended expiration date. The "fiscal cliff" in theory will focus minds on taxes and budget cuts, but in fact Congress will probably muddle through without making a real decision. That is not the mark of a great nation.
A personal bugaboo for me has been America's hatred of its military since Vietnam. It's okay to hate the military as long as the nation is not threatened, but when it is, it may be hard to overcome. A good military requires good people to serve in it. Currently very few of the best Americans will serve. The service academies still turn out pretty good officers, but their perspective is somewhat limited. The military also needs outsiders who will bring a different outlook. This means you need some good people from Harvard and Stanford, as well a more graduates of good state universities. But today's generation grew up with parents or grandparents who avoided service in Vietnam, and who often pilloried veterans as psychotic baby killers, rather than praising them as defenders of the nation. Vietnam veterans probably share the homecoming experiences of Confederate veterans or low-ranking German soldiers who served under Hitler. The 9/11 attack began changing this attitude, because America really was attacked, but it was not a traditional military attack. Terrorists don't wear uniforms; The 9/11 attack was carried out by a handful of people who all died in the attack, except for Osama bin Laden and a few of his associates. Thus, it didn't really call for a military response, although that is how we responded. The resulting mess, getting rid of Saddam Hussein but strengthening the Iraqi regime, has not done a great deal to strengthen respect for the military, although it has helped. The Afghan war has at best been a wash, with no clear positive result from years of fighting. The fact that some many troops come home with mental problems has to some extend reinforced the perception that soldiers are psychotic killers, further discouraging people from joining the military. Without a strong military, the US position in the world is weakened, because it will be less able to respond if it is threatened by another country.
Monday, July 09, 2012
Barclays Adds to Bankers' Poor Image
The revelation that Barclays Bank manipulated the LIBOR interest rate is another example of corruption among world class bankers. Although Barclays is the only bank which has admitted guilt so far, it seems clear from emails and other documents that the manipulation was widespread among the other world class banks that Barclays did business with, probably including such big names a JP Morgan Chase and Citibank. Jamie Dimon was just on Capitol Hill testifying about loosing billions of dollars in bad investments, but the Senators and Congressmen basically gave him a pass. With few exceptions they praised him and asked for his advice on banking regulation and the economy. I was ashamed of my Senator, Michael Bennet, for kowtowing to Dimon by throwing him softball questions. Now Jamie Dimon's similarly named colleague at Barclays, Robert Diamond, has resigned under pressure for rate fixing.
It is clear why the banking community, and Jamie Dimon in particular, were so opposed to Elizabeth Warren's taking over the Consumer Financial Protection Bureau. They were afraid that she would be a real police woman, and they knew that they were dirty. They may not be criminals, but they are dishonest and corrupt. They have just manipulated the Congress to make it legal to do the unscrupulous things that they do. Their actions are often so complicated and involve such obscure financial instruments that it is very difficult to specify them as crimes, but Elizabeth Warren, as a Harvard law professor, could probably have done it. So, Jamie Dimon and his fellow big-shot bankers paid lobbyists and congressmen and senators directly to keep her out. He obviously got to President Obama, too, which is why I am not voting for Obama. He sold out America for something -- money, Jamie Dimon's love? I don't know what, but I don't like it. It was not good for the country.
It is clear why the banking community, and Jamie Dimon in particular, were so opposed to Elizabeth Warren's taking over the Consumer Financial Protection Bureau. They were afraid that she would be a real police woman, and they knew that they were dirty. They may not be criminals, but they are dishonest and corrupt. They have just manipulated the Congress to make it legal to do the unscrupulous things that they do. Their actions are often so complicated and involve such obscure financial instruments that it is very difficult to specify them as crimes, but Elizabeth Warren, as a Harvard law professor, could probably have done it. So, Jamie Dimon and his fellow big-shot bankers paid lobbyists and congressmen and senators directly to keep her out. He obviously got to President Obama, too, which is why I am not voting for Obama. He sold out America for something -- money, Jamie Dimon's love? I don't know what, but I don't like it. It was not good for the country.
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