Showing the CoCC the door

Recently a Republican State Senator spoke to a national meeting of the Council of Conservative Citizens in Jackson, MS. Some local liberals as well as the local progressive weekly alternative rag sharply criticized her for speaking at the event and the state Republican party chairman for not more forcefully condemning her actions. Since I and many others don't know much about the Council of Conservative Citizens, I decided to check out their website. Buckle your seatbelts.

(picture used on Alabama Chapter's website)

On the national organization's website, six of the nine "stories" posted are about race-related matters. For a group that touts itself as a leading conservative organization, there is no mention of taxes, deficit spending, expanding government, the erosion of civil liberties but there are more than a few words given to what blacks are doing to whites.

The blogs make for interesting reading. One accuses New York of "declaring war on white people". It blames the train operator's falling asleep causing the train wreck in Washington, DC on "diversity hiring", never mind that DC is heavily minority in population (Someone should tell him that in DC, hiring a white person would be the diversity hire.). He also mentions blacks robbing graves in Chicago.

Then there is the anti-Semitism. The same blogger refers to an L.A. Times article about Michael Jackson as a "piece of Jewish garbage" and opines about Steve McNair's death:
"McNair may have been a decent guy, but nothing can hide the obvious truth that wherever blacks go, crime, death, and misery follow. The sports channels will recount all McNair’s stats as they lionize him as a hero and great American. I’ll certainly rank him well above Michael Jackson, but let’s not get carried away. Could you imagine the howls of laughter if the sports TV Jews like Chris Berman, Rich Eisen, Linda Cohn, (the list could go on and on)"

Christians don't escape their ire as the Family Research Council, attacked by liberals everywhere for being conservative in nature, apparently doesn't meet his definition of conservatism:
"Tony Perkins, head of the Family Research Council, and the evangelical’s man in DC, recently held a rally in the nation’s capital to oppose same-sex marriage. There were several speakers at the rally -- Perkins, the FRC’s Uncle Tom “Bishop” Harry Jackson, some brown guys who can’t speak English, etc...". He even bashes Billy Graham. You got it. Even Billy Graham is the enemy.

Other money quotes from this blogger:
"The sooner the GOP collapses, and is replaced by a party that will speak up for white people, the better."

"Anyone who thinks free speech can survive in a multiracial America is dreaming."

Another blog on the website has the headline "Saving the White Race" and has a few things to say:
"The civility in this Forced Union is 3000 miles wide, but only an inch deep. And anytime you come into contact with murderous negros or other non-Whites, that civility has collapsed." So murderous whites don't cause a collapse in civility? Oooook.

Over at the Alabama chapter's website there is a post titled "Stuff black people don't like" with the above picture and a link to a website containing black jokes. The chapter has a list of "recommended reading". Here is a taste of the vintage found in this winery of racism:

• The Citizens’ Council: Organized Resistance to the Second Reconstruction, 1954-64″ by Neil R. McMillan
• “You and Segregation” by former Georgia Sen. Herman E. Talmadge
• “Mississippi’s Defiant Years, 1953-73″ by Erle Johnston
• “The Authentic History of the Ku Klux Klan, 1865-1877″ by Susan Davis
• “Take Your Choice: Separation or Mongrelization” by former Mississippi Sen. Theodore Bilbo

This organization is not a conservative group as conservatives believe in a limited government that is color-blind, free-market capitalism, strong national defense, and civil liberties for all. Racism has no place in conservatism or the Republican Party. Mississippi Republicans have NO BUSINESS WHATSOEVER speaking at one of these events and the chairman needs to condemn this group in no uncertain terms as racism and anti-Semitism have no place in the Republican big tent.

Chairman Brad White should forbid any Republican from speaking at one of these events. A group like this shouldn't get the attention it has recently as it is a fringe group but since a Republican State Senator decided to welcome them, the onus is on the Republican Party to show these guys the door and make it clear the Council is not welcome to Republicans or true conservatives. William F. Buckley and others threw out the Birchers when it became clear the Birchers were not true conservatives. Mr. White, Governor Barbour, and others should do the same and show the Council of Conservative Citizens the door. Read more!

Jena 6 Update

Looks like the apples didn't fall too far from the tree where the Jena 6 is concerned, as the sister and outspoken defender of the troubled lads just got arrested for being part of a very large drug operation:
"JENA — LaSalle Parish Sheriff Scott Franklin stood before a group of more than 150 law enforcement officers from at least 10 different agencies early Thursday morning, July 9, getting them ready for their day’s mission – Operation Third Option.
“We’re going into neighborhoods that are being controlled by drug dealers,” Franklin said. “I want to give them back their neighborhoods and return to them a safer neighborhood.”
Operation Third Option targeted a high-level drug trafficker and money launderer, those in the man’s drug ring and other lower-level dealers, police said. ....
A dozen arrests were made Thursday, and more than 20 more are expected as part of the investigation.....
The others arrested during the first strike of the operation were Adrian Carlinsky Richardson, 34, Michael D. Patterson Sr., 34, and Catrina Lynette Wallace, 29. All three are from Jena..... Wallace three counts of distribution of cocaine, according to police.
Wallace is the stepsister of Robert Bailey Jr., one of the “Jena Six” who recently pleaded no contest in connection with the 2006 attack on then-classmate Justin Barker at Jena High School. Wallace was outspoken during rallies in the community, helped organize a benefit concert to raise money for the Jena Six teens and was at one point the secretary of the local National Association for the Advancement of Colored People chapter." The REST of the story

Oh yes, the Jena 6 recently pleaded no contest to beating Justin Barker to a pulp. Read more!

Hollywood Royalty

Read more!

Some guys have all the luck (NSFW)

It's no secret that here at Jackson Jambalaya, women are held in high regard. JJ, after all, IS the home of the "Hottest Reporter in Jackson Poll", the "Hottest Defendant in Mississippi Poll", as well as posts every so often paying homage to beautiful women from all walks of life. Apparently one of our local residents, who is somewhat known, made it to a party at the Playboy Mansion (with his wife, no accusations of anything immoral or unethical are being made here). While there are some who undoubtedly will get their panties in a wad over said excursion, such will not be the case here, as he gets major props, as I've enjoyed an occasional costume party at Mardi Gras.

As for the Kingfish and the JJ nation, we think he achieved the pinnacle (without any TIF's or Ben Allen's help): he got to hang out with Hef. He's earned JJ's admiration for doing something many of us only dream of. Kudos to our new friend for achieving greatness and setting a new standard for the guidos and rednecks everywhere to follow. If anyone says otherwise, they are just jealous. Read more!

Taking a stroll down memory lane

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Mark Bolton passed away.

Former Clarion-Ledger cartoonist Mark Bolton passed away on July 2, 2009.

Online guestbook Read more!

Oops

Over at the Jackson Free Press:
"The June 2009 issue of the "Mississippi Economic Review and Outlook," a monthly report authored by Marianne Hill, senior economist for the Institutions of Higher Learning, says the state's recovery from the current recession will be slow. Hill predicts that it will be 2014 before employment rates are back down to where they were in 2000" (The statement was not Hill's but the JFP's.)

Um, don't you mean unemployment rates? Read more!

So if it's not reported, did it not happen?

A little wino told me an interesting fact. The National Traffic Safety Administration requires law enforcement to report all traffic fatalities to the federal agency. Anyone want to guess which wreck that caused two deaths in the last few months was not reported to NTSA by JPD? They are supposed to report fatalities to NTSA within a short time (by that I mean a few days) after they occur. Wonder how Lee will explain this one since Mac has left him holding the bag. Read more!

Windpower: nothing but hot air

The American Thinker makes a good case against windpower in a way which will not make T. Boone Pickens too happy:
"A typical large wind-driven turbine is rated at about 1,500 kilowatts. It's 350 feet tall and has a fan blade of about 240 feet in diameter. It will actually deliver about 375 kilowatts. It can power about 375 microwave ovens, or 6250 60-watt light bulbs simultaneously (only when the wind is blowing at about 25 miles per hour, which is a very strong wind). An average (1 gigawatt) power plant can power nearly a million microwaves, or 16 million light bulbs at the same time.
A power plant near me produces 1,100,000 kilowatts (1.1 gigawatts) of power. At a 25% capacity factor it would take nearly 2600 large wind turbines to produce the same power as this nuclear power plant. And this is not a particularly large plant.
If you placed these 2600 wind turbines the recommended 5 rotor-blade diameters apart, they would stretch for 600 miles. That's as far as the distance from Michigan to Georgia. In practice wind turbines are not placed single file, they are placed in several rows, like crops, in what are called wind farms, but you get the idea.
The amount of electricity generated by a wind turbine is proportional to the wind speed to the 3rd power (a 20 MPH wind will produce 8 times as much energy as a 10 MPH wind). Therefore wind turbines often produce energy in bursts; when the wind gusts, the energy output spikes, when the wind dies down, energy output dips.
Unfortunately, there is no easy way to store these bursts of energy for later use. There are no batteries large enough that are also practical, and pumped-storage systems, which use unwanted energy to pump water into an aboveground reservoir for later use in turning a water-driven generator, require a large body of water."
Column Read more!

WLBT twitter feed added

Added WLBT Twitter feed to the sidebar. Enjoy. Read more!

Home prices to fall another two years

Who ya gonna believe? CNBC tool Jim Cramer who tells you the housing market has reached its bottom OR a leading mortgage insurance company who says housing prices will fall for another two years? Housingwire reports:
"Home prices will be lower in two years compared to Q109 for much of the country’s metropolitan statistical areas, (MSAs) according to an economic trends report released by PMI Mortgage Insurance Co......
Florida, California, Nevada and Arizona are home to 36 of the most risky MSAs, but other regions are not immune, according to PMI’s chief economist and strategist David Berson.
“Rapidly rising foreclosure and unemployment rates, continuing declines in house prices, and weakening consumer demand all worked to increase risk in the general economy, and the housing market specifically,” Berson says in a statement today. “As a result of the continued weakness in prices, and the relatively low level of interest rates, improvements in affordability across the nation’s MSAs will continue to incentivize repeat and first-time homebuyers back into the market.”..."

Although the Jackson market should stay fairly stable, the housing market nationwide should continue to decline. The subprime implosion has passed and low interest rates have mitigated the effects of the ARM and Option-ARM resets to some degree. Unfortunately, the no-money-down mortgages that Fannie and Freddie passed out by the bushel are now imploding. Another time bomb is blowing up as well: the Fannie Mae stated income program for investment properties. Yup. Fannie Mae financed stated income program investment properties and allowed the purchaser to put only 10% down. This will cause prices to decline further as more foreclosures take place. There will be some temporary spikes as people take advantage of the lower prices in some markets, but they will be outweighed by the loss of potential homebuyers as underwriting standards have drastically tightened. Remember, the median price of a home should be no more than 3.5 times the median income. Until we reach that ratio, we are still sliding towards the bottom. Read more!

Magic in Vicksburg

Enjoy more of his work here. Read more!

Jackson group to visit Baton Rouge for ideas

Baton Rouge Business Report reported last week:
"A contingent of about 70 people from Jackson, Miss., will be in Baton Rouge next week to learn about the progress the city has made in downtown redevelopment, Mayor Kip Holden says. The group will be in Baton Rouge on July 9-10, looking at a things such as the consolidation of state government buildings and how city initiatives spurred developments such as the Shaw Center for the Arts, the Hilton Baton Rouge Capitol Center and Kress at Third and Main, says Davis Rhorer, executive director of the Downtown Development District. “That’s a moment to celebrate, that we are moving to that level,” Holden says. Holden made the announcement Wednesday evening at a meeting of Progress Is Baton Rouge, a grassroots organization that supports the bond issue the mayor hopes to have before voters Nov. 14. The details of the next bond issue will be revealed July 22, but Holden says it will be at least $100 million smaller than the $989 million voters rejected last year that included various infrastructure improvements, expansion of the River Center and the Audubon Alive riverfront attraction. The cities of Baker, Central and Zachary, which voted overwhelmingly against the last bond issue, will be eliminated from the potential taxing district and therefore won’t vote this time around.—David Jacobs" Read more!

Robert McNamara died.

May he rot in hell. Read more!

Vote for your favorite blog.

Just posted a new poll about the local blogs. As some people will wonder why I didn't include Sid Salter or Marshall Ramsey, I think an explanation is in order. The poll excluded blogs by journalists and professional media outlets. I tried to limit it to blogs that covered the Jackson area to some degree, and didn't include websites such as Magnolia Report, which are not blogs but aggregators. (They just post headlines from other websites.) Vote early and often and if there is one I missed, feel free to let me know. Read more!

Subpoenas issued in Irby case

Copy of Subpoena

The Hinds County District Attorney's office has subpoenaed two individuals to testify in the Karen Irby prosecution. Prosecutor Patrick Beasley filed the subpoena with the Hinds County Circuit Clerk's office on June 29, 2009. The two individuals subpoenaed are Dr. Lisa D. Williams and Kirk McDaniel (Kirk McDaniel of Ridgeland).

No information is known about Dr. Williams. Mr. McDaniel was once an attorney who was suspended from the practice of law for a year in Pennsylvania. Text of decision' Mr. McDaniel was suspended after being found guilty of unethical conduct as well as being found guilty under UCMJ for being awol and also testing positive for cocaine. Read more!

JJ Poll: Margaritas best Mexican restaurant in Jackson

Although I voted for Cinco De Mayo, Margaritas won the recent "Best Mexican Restaurant in Jackson" poll. It was a close race but in the end, the Pear Orchard cantina pulled it out. Congratulations to Margaritas.

El Charro	14 (8%)
Cazuela	27 (16%)
Fernando's	22 (13%)
Cinco De Mayo	12 (7%)
Cozumel	8 (4%)
El Potrillo	22 (13%)
El Sombrero	8 (4%)
Margaritas	35 (21%)
Papito's	15 (9%)

Read more!

Mid-year check of Market Ticker's 2009 predictions

Wonder why I post so many items from Karl Denninger's website, The Market Ticker, or why Kim Wade has him on his show so much? Its because Karl's track record the last few years predicting the economy has been on the money (pun intended). Every January he makes his economic forecast for the next 12 months and sufficeth to say, he's usually right. He is one of the reasons many of us don't listen to the CNBC gurus anymore as they are known for consistently getting it wrong. Here is his mid-year check of his 2009 predictions:

"Let's take a look at the scorecard first from my 2009 Prediction Ticker, remembering of course that I have six months left!

1. The economy will not recover in 2009. No sign of it yet, "green shooters" be damned. I predicted that U3 would reach 8% by the end of the year, it has exceeded that wildly, and is now 9.5%. U-6 also has exceeded my predicted value already.
2. Deflation, not inflation, will become evident well beyond housing. Already has. CPI and PPI have come in with negative prints as has capital goods pricing.
3. Housing prices will continue to decline. Yep.
4. The Fed's attempt to "pump liquidity" will be shown to be an abject failure. I'll leave this one on the table for now; I believe the evidence is in, but I'm in the minority. Score this one as a "no result" as of yet.
5. GDP will post a 12-month negative number. 12 months aren't up yet, but we're working on it!
6. The Stock Market has not bottomed. Remember, this was made with the market around the 900 level. Major check; we declined to 666. My secondary prediction was a 50% trading range and a 5xx low; we missed that by 67 points, but I still have six months left. I'm sticking with this one.
7. Precious metals will not be a safe haven. Oh Jim Sinclair! Where's my $1,600+ gold price? (Or for some, their $5,000+ gold price?) Missing, that's where. I know, I know, its all manipulation (instead of debt deflation.) Check.
8. The Dollar will not collapse. Hasn't yet.
9. The pound or euro will be where the FX dislocation originates if it occurs. I predicted Par for both being a possibility, not happening yet. We'll see what the next six months bring.
10. The US Consumer will go from a negative savings rate to a seriously-positive one. I'm predicting 4% but it could go as high as 10%. Major double-check! We're up close to 7% now. That's a home run in any book.
11. Commercial Real Estate will effectively collapse. The REITs have not yet imploded but the pricing and occupancy look like something that came out of the back end of a horse. Anyone got a finger to lend to push this pile over?
12. Along with the above, expect 10% of retail stores to close. We're getting there.
13. Several states will get in serious financial trouble and outright default of one or more is possible. California anyone? Major check.
14. Mortgages are not done. Yep. Prime, OptionARMs, ALT-A.
15. If you want to refinance you may get one brief shot at it with long rates around 4%. Check again. Hope you took it.
16. Those who have said that the corporate bond market is being "unreasonable" in its expectation for defaults will start to look like the jackasses they are. Ding! Check CDS spreads the last few weeks? They're widening again. Even worse, the actual corporate default rates are getting rather nasty. This trend continues.
17. Calls for "more lending" to consumers and businesses will go exactly nowhere. Major check. The drunk who is passed out from intoxication can't lift the bottle. Nice try guys.
18. General Motors and Chrysler will wind up in bankruptcy. DING!
19. Protectionism and currency manipulation will rear their ugly heads. This has started but there's much more to come. Watch out; this has the possibility of igniting wars.
20. Commodities will appear to be headed for a new bull market but this will turn out to be a false hope. Attempts to manage oil output to prop up the price will fail. Crude just rolled over, in fact, and major agri commodities were lock-limit down on one day last week. Ding......"

So let's see - I have 25 predictions and of them I can score 13 "confirms", half the year is over, and no busts as of yet (although there is one, the Euro/Pound prediction, that is looking shaky.)" Rest of article

If you are interested, here are his 2008 predictions. When he made them, many thought he was nuts. Read more!

Remembering Entebbe and Freedom on the Fourth.

I'm going to take a different twist in remembering Independence Day on this blog. It's been over thirty years since the Raid on Entebbe. Many of you don't know what this was, as nearly a generation has passed since that night when the Israelis freed their people from terrorists on July 4. The Israelis knew something about freedom as it was denied to them for so long. After a long struggle, they finally established a homeland and created a free and prosperous nation amid decades of wars initiated by their neighbors, as the Arabs refused to acknowledge they even existed. Fresh off the heels of the Arab sneak attack of Yom Kippur and the murder of its Olympians at Munich, the Israelis must have thought "not again" as PLO terrorists hijacked a plane, flew it to Uganda, and separated the Jews from the rest of the passengers, whom they freed.

The Israelis sent several C-130's carrying commandos (led by Netanyahu's brother) to the airport in Uganda where they were held, as Idi Amin gave the terrorists and their hostages sanctuary. The Israelis killed the terrorists, freed the hostages, and returned home to a shocked world and joyous nation. Watch the faces of the crowd in the clip below as they wait for the planes to return. What does one see but hope, relief, and a feeling that only among each other are they free and safe, that they have something worth fighting for.



The movie is available on Youtube. Forget the phony action movies filled with pretty boy 'roid monsters produced by Hollywood. Here is a movie needing no scriptwriting, as the true story was script enough. It has an all-star cast, a great director in Irving Kershner, and several moving scenes. The ending. The commandos singing several hymns as they flew to carry out their mission. The barbarism of the terrorists and the surreal nature of Idi Amin's Uganda. Entebbe is a lesson for the free world and to its enemies that there will always be those who will fight and die for freedom.



Interviews with some of the people involved 30 years later.

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John Wayne explains the meaning of freedom

Read more!

Santelli: "Bait and Switch Economics"

Start at 9:30. Having a problem with Firefox. If video doesn't appear, here is link. Read more!

JPD drives past suspect leaving with stolen goods.

WLBT reported:
"Surveillance cameras captured a man falling off of a bicycle at 4:15 A.M. at the entrance to Woodland Hills at Old Canton Road and Glenway Drive. The man picked up dropped materials, put them in a bag, and started to ride away. About that time a Jackson police car came by. The man waved at the officer and went on his way. The officer did not stop....
Assistant Police Chief Lee Vance looked at the video and said he couldn't tell if the officer actually saw the man on the bicycle. Vance said Commander Kenneth Goodrum, of Precinct Four, where Woodland Hills is located, consistently has the lowest crime rate in the city. Vance says crime is down over 10% in the past year, and violent crime in that area is down over 23%, so he trusts Goodrum and his officers.
Vance told WLBT that an officer cannot just stop a black man for riding a bicycle in a white neighborhood because that is profiling." Story

This is simply ridiculous and yet another example of the incompetence at JPD. Vance as usual is covering for his officers and defending a cop's dereliction of duty. Keep in mind Vance opposed releasing police reports to the public because he said he didn't want his officers getting sued, his duty to the public be damned.

JJ has learned two houses in the area were hit that night and two things were stolen: a purse out of an unlocked car and a woman's bicycle. Hmmm.... what was the suspect in possession of when the police car drove by? A woman's bicycle and a purse.

Unfortunately for Fondren residents, Vance is more interested in protecting his officer than he is protecting the public. His excuse that JPD does not profile is just that, an excuse as JPD profiles all the time. If you are white and in a certain part of town at a certain time, you will get stopped by JPD as they assume you are in that area to buy drugs (and they are probably right). No one wants JPD to stop and question black people in white neighborhoods or vice versa. What IS expected of JPD is for police officers to stop and investigate suspicious activity, regardless of color.

If nothing else, someone weaving all over the place while riding a bike at 4:00 AM is enough to give an officer probable cause to see if he is guilty of public intoxication. Then he can question him about the items in his possession. That is not profiling, that is police work and in just about any other jurisdiction, that is exactly what would have happened. Lee Vance's defense of his police officer was pitiful and a kick in the stomach to the victims whose purse and bike were stolen by that thief. Lee Vance owes us an apology. Read more!

More on Goldman Sachs

Rolling Stone writer Matt Taibbi is interviewed by Business News Network about his recent expose on Goldman Sach's market manipulations. Video Read more!

Bond deal dead, new one possible

Well, you never know what happens until you try. That old adage includes fighting Jackson's decision to refinance its 2002 and 2004 public works bonds with "interest rate swaps" derivatives that have bankrupted other local governments.

In the original deal, Jackson planned to refinance $95 million in bonds while paying $4 million in fees to various parties (this included $120,000 to Baker Donelson, $60,000 to Anthony Simon, $60,000 to Sarah O'Reilly-Evans, and $476,000 to Sterne Agee plus additional fees to "monitor" the contract to Sterne) for bonds which generated only $1.5 million in fees when originally issued.

However, City Finance Director Rick Hill announced Jackson will only refinance $40 million of bonds using interest rate swaps. The deal fell through because Deutschebank insisted Jackson would have to pay early termination fees if it ever got out of the deal (if it refinanced for example.). Other cities have been burned by these prepayment penalties as they usually cost millions of dollars. The deal was going to be insured by Financial Security Assurance, which proposed Jackson should have five years to pay the fees if termination occurred. The two parties could not agree on this issue so FSA is only going to insure a smaller amount.

Unfortunately, Mr. Hill tried to spin this new refinance as a good deal for Jackson. First he misstated the reasons why these swaps bankrupted Jefferson County:
"Hill said the banks involved in Jefferson County were unable to find anyone to buy the county’s variable-rate debt. He said Jackson has safeguards in place to prevent the same things from happening here. “They went way beyond normal practices,” he said." Northside Sun story

Actually Mr. Hill got it completely wrong. Whether he didn't know the facts or tried to deliberately mislead the reporter is for the reader to decide. The truth is the credit rating for the insurer, Ambanc, for Jefferson County's swap was slashed, causing the interest rate on it's bonds to literally jump overnight from 3% to 10%. There was no problem with selling the bonds as JP Morgan Chase was more than happy to collect ten percent interest and bankrupt the county. In fact, Chase allegedly overcharged JC by over $100 million.

Mr. Hill also says that the fees will only be $2 million. Only. The fees when the original $128 million in bonds were underwritten were $1.5 million dollars. The amount refinanced will be 31% of the original amount yet the fees will be half a million dollars more than what was originally paid. I asked Councilman Weill for a copy of the fees and was told Mr. Hill has not provided the Council with any materials yet showing the structure of the deal and further details about the fees. At this point, we only know there will be $2 million in fees, which is an exorbitant amount.

One other part of the story was wrong: "The agreement would have generated between $10 million and $13 million in upfront cash for the city and would have meant lower payments on bond indebtedness."

There was no upfront cash from the original refinance. Nowhere in the documents provided did it mention Jackson would get any upfront cash. A swap such as this consists of several different cash flows (which is why they are so complicated). Jackson was going to receive a cash flow every year that eventually would have reached a total of $10 million. However, the money was no sure thing, as several factors such as a change in Jackson or another party's credit rating, a change in interest rates, or a default, would have jeapordized the proposed $10 million.

What Jackson should do is suck it up and stick with the fixed interest rate it has now unless it can refinance for a lower fixed rate. It is true Jackson will pay a fixed interest rate in this deal. However, these swaps consist of several transactions and cash flows and those are based on adjustable interest rates. If they move in the wrong direction for any reason, Jackson will pay dearly for what little savings would realize. This deal should be thrown out along with the rest of the Melton administration.

WLBT story
WLBT video

earlier posts:
Stern Agee: Come get your bottle
Sterne Agee's connections
SEC going after JP Morgan for ripping off Jefferson County
Sterne Agee gets more money for "monitoring" swaps
Municipal Carnage caused by Wall Street
Jackson: paying $4 million in fees
Will Jackson end up like Jefferson County? Read more!

How Goldman created the oil bubble.

Yesterday I posted a great article from Rolling Stone which chronicled how Goldman Sachs made quite a pretty penny manipulating bubbles for decades. It's a great read and I wish I could require every one of you to read it. There was one tidbit of information, though, that really got my attention and it was how GS was able to manipulate the oil bubble last year:

"So what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help - there were other players in the physical-commodities market - but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures - agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.

As is so often the case, there had been a Depression-era law in place designed specifically to prevent this sort of thing. ... In 1936, Congress recognized that there should never be more speculators in the market than real producers and consumers. If that happened, prices would be affected by something other than supply and demand, and price manipulations would ensue. A new law empowered the Commodity Futures Trading Commission - the very same body that would later try and fail to regulate credit swaps - to place limits on speculative trades in commodities. As a result of the CFTC's oversight, peace and harmony reigned in the commodities markets for more than 50 years.

All that changed in 1991 when, unbeknownst to almost everyone in the world, a Goldman-owned commodities-trading subsidiary called J. Aron wrote to the CFTC and made an unusual argument. Farmers with big stores of corn, Goldman argued, weren't the only ones who needed to hedge their risk against future price drops - Wall Street dealers who made big bets on oil prices also needed to hedge their risk, because, well, they stood to lose a lot too.

This was complete and utter crap - the 1936 law, remember, was specifically designed to maintain distinctions between people who were buying and selling real tangible stuff and people who were trading in paper alone. But the CFTC, amazingly, bought Goldman's argument. It issued the bank a free pass, called the "Bona Fide Hedging" exemption, allowing Goldman's subsidiary to call itself a physical hedger and escape virtually all limits placed on speculators. In the years that followed, the commission would quietly issue 14 similar exemptions to other companies.

Now Goldman and other banks were free to drive more investors into the commodities markets, enabling speculators to place increasingly big bets. That 1991 letter from Goldman more or less directly led to the oil bubble in 2008, when the number of speculators in the market - driven there by fear of the falling dollar and the housing crash - finally overwhelmed the real physical suppliers and consumers. By 2008, at least three quarters of the activity on the commodity exchanges was speculative, according to a congressional staffer who studied the numbers - and that's likely a conservative estimate. By the middle of last summer, despite rising supply and a drop in demand, we were paying $4 a gallon every time we pulled up to the pump.

What is even more amazing is that the letter to Goldman, along with most of the other trading exemptions, was handed out more or less in secret. "I was the head of the division of trading and markets, and Brooksley Born was the chair of the CFTC," says Greenberger, "and neither of us knew this letter was out there." In fact, the letters only came to light by accident. Last year, a staffer for the House Energy and Commerce Committee just happened to be at a briefing when officials from the CFTC made an offhand reference to the exemptions.

"1 had been invited to a briefing the commission was holding on energy," the staffer recounts. "And suddenly in the middle of it, they start saying, 'Yeah, we've been issuing these letters for years now.'.....

Armed with the semi-secret government exemption, Goldman had become the chief designer of a giant commodities betting parlor. Its Goldman Sachs Commodities Index - which tracks the prices of 24 major commodities but is overwhelmingly weighted toward oil - became the place where pension funds and insurance companies and other institutional investors could make massive long-term bets on commodity prices. Which was all well and good, except for a couple of things. One was that index speculators are mostly "long only" bettors, who seldom if ever take short positions - meaning they only bet on prices to rise. While this kind of behavior is good for a stock market, it's terrible for commodities, because it continually forces prices upward. "If index speculators took short positions as well as long ones, you'd see them pushing prices both up and down," says Michael Masters, a hedge-fund manager who has helped expose the role of investment banks in the manipulation of oil prices. "But they only push prices in one direction: up."......

But it wasn't the consumption of real oil that was driving up prices - it was the trade in paper oil. By the summer of 2008, in fact, commodities speculators had bought and stockpiled enough oil futures to fill 1.1 billion barrels of crude, which meant that speculators owned more future oil on paper than there was real, physical oil stored in all of the country's commercial storage tanks and the Strategic Petroleum Reserve combined. It was a repeat of both the Internet craze and the housing bubble, when Wall Street jacked up present-day profits by selling suckers shares of a fictional fantasy future of endlessly rising prices.

In what was by now a painfully familiar pattern, the oil-commodities melon hit the pavement hard in the summer of 2008, causing a massive loss of wealth; crude prices plunged from $147 to $33. Once again the big losers were ordinary people. The pensioners whose funds invested in this crap got massacred: CalPERS, the California Public Employees' Retirement System, had $1.1 billion in commodities when the crash came...."

Do I really need to make a comment? Read more!

Another business leaves

Mugshots is moving in a few weeks to the old Corky's location in Flowood. But although that might bother some, I could care less if they do. What REALLY has me bothered is the fact I don't know where the hell I can get some damn good barbecue this weekend. Pig Out was average but it closed. No Homers. Corkys, as bad as it became, bit the dust. Red, Hot, and Blue sits empty. They are even tearing down the Northside Drive Exxon, which had the best ribs in town.

So where am I supposed to get some decent barbecue on Fourth of July weekend without driving to Grenada?

Note: Don't mention Hickory Pit as it's simply not that good. What I wouldn't give for some Jake & Rip's. Read more!

READ!

Your homework assignment for today

Rolling Stone article about Goldman Sachs accusing it of creating most bubbles. Here is Goldman's response. and here is Tabbai's response to their response.

Update: Fixed links. Read more!

Last week's crime stats

Crime stats for June 22-28, 2009 in Jackson, MS. Read more!

Perfect example of what is wrong with GM

GM can't seem to get it right. One of the few bright spots in the entire fiasco is the pending sale of Saturn to Roger Penske. Penske represents quality, success, and the entrepreneurial spirit that built America. Unlike most corporate leaders, Penske is the type of man you'll see meeting with engineers to discuss design on Monday, kicking butt in the plant on Tuesday, and visiting customers on Wednsday. Such drive and attention to detail is what brought him success and has caused many to be hopeful about Saturn's survival after Penske and GM announced a pending sale.

Unfortunately for Saturn, GM still can't stop itself from trying to screw up a good thing. The Wall Street Journal reported this week:
"Though its fortunes soured further in December, when GM said it would sell or close Saturn, they got a boost June 5 when the big chain of auto dealerships owned by motor-racing mogul Roger Penske -- struck a deal to buy the brand. "We were on death row," said Saturn Marketing Director Kim McGill, in an interview. Now, the brand is in "remission," thanks to Mr. Penske, but "is not yet totally cured," she said.
To spark interest and remind consumers that Saturn is still alive, its dealers have kicked off a new marketing campaign built around the slogan, "Wonder where the car business is headed? It's here." The slogan will be used on banners across Saturn storefronts and in a spate of email blasts, Facebook blogs and direct communications with buyers."

However, GM has other ideas as it tells its dealers not to spread the good news. Seems as though the corporate chieftains can't stand the thought of someone else getting any credit:
"But at least for now, GM has asked Saturn not to trumpet the Penske connection -- even though some dealers think it is the biggest thing the brand has going for it -- lest it overshadow the Saturn brand name. The deal may not be sealed until late in the third quarter, Ms. McGill said."

As a former GM employee, I can say I'm not too surprised, as GM is a company where egos mean more than performance or numbers. There is very little accountability at GM, as the worst executives tend to move from title to title, as they all protect each other. (We actually had divisional sales managers who had never been in sales much less visited a customer in their entire careers). Once you rise above a certain management level at GM, individuals with actual ability and common sense are seen as a threat by management and don't last too long. GM is not a corporation but a bureaucracy that just happens to sell cars.

What these REMF's care about is not results but GM's image as they try to avoid the "Penske Connection" even though it means more sales: "Enthusiasm about the "Penske deal helped Saturn in June, Ms. McGill said, drawing more traffic into Saturn showrooms and leading to a 35% year-to-year sales increase."

One dealer started using Penske in his advertising only to earn a stern rebuke from the Empire:
"He said the ads increased traffic to his dealership. "People want to buy from someone they like," Mr. Davies said in an interview. "A lot of customers won't buy a car from GM, but they will buy a car from Roger Penske."
Not long after dealer initiatives like Mr. Davies's billboards began to crop up, Saturn dealers got a letter from GM executives asking them to not overplay the Penske deal, for fear of taking the spotlight off the brand itself."

This is a perfect example of what is wrong with GM and corporate America. Sales, profits, or market share do not matter, as what is important to the Michael Jackson of the car business is the image and reality they created for themselves, a reality where GM reigns supreme and is adored by everyone.

Unfortunately for GM, what built America was not bloated bureaucracies like GM or Citi but risk-takers like Penske, Gates, Watson, Ford, and even Jobs. Business owners like Mr. Penske care only about results, while corporate bureaucrats worry about their image and avoiding any responsibility. If Saturn survives, it will be because it is led by a Penske and not a bunch of REMF's who are clueless about the real world.

One further note: Mr. Penske owns VM Motori, a company that manufactures diesel engines. American car manufacturers have had problems building a small diesel engine for regular cars that would allow them to compete with diesel-powered cars made by Volkswagen and Mercedes. If Penske can use VM Motori to build a diesel engine for Saturn, he might be onto something here and create a real winner. Read more!

Mississippi banks in better shape than most other states

The FDIC published a list of the loan to deposit ratios for host states of banks. It describes the ratio as "The host state loan-to-deposit ratio is the ratio of total loans in a state to total deposits from the state for all banks that have that state as their home state." Mississippi's ratio was 85%, placing it 11th on the list (This is good). FDIC report Read more!