Tuesday, December 13, 2011

Barker's Newsbites: Tuesday, December 13, 2011


Well, kids... it can't be all Christmas music!
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4 comments:

William R. Barker said...

* TWO-PARTER... (Part 1 of 2)

http://online.wsj.com/article/SB10001424052970203413304577088881987346976.html?mod=WSJ_Opinion_LEADTop

Several academic studies show that the investment portfolios of congressmen and senators consistently outperform stock indices like the Dow and the S&P 500, as well as the portfolios of virtually all professional investors.

Congressmen do better to an extent that is statistically significant, according to studies including a 2004 article about "abnormal" Senate returns by Alan J. Ziobrowski, Ping Cheng, James W. Boyd and Brigitte J. Ziobrowski in the Journal of Financial and Qualitative Analysis.

(The authors published a similar study of the House this year.)

Democrats' portfolios outperform the market by a whopping 9%.

Republicans do well, though not quite as well.

[T]rading is widespread, although a higher percentage of senators than representatives trade - which is not surprising because senators outperform the market by an astonishing 12% on an annual basis.

(*PURSED LIPS*)

These results are not due to luck or the financial acumen of elected officials. They can be explained only by insider trading based on the nonpublic information that politicians obtain in the course of their official duties.

* I BELIEVE THIS.

The "Stock Act" - Stop Trading on Congressional Knowledge Act (H.R. 1148) - [was] first introduced in 2006...and [has now been] reintroduced.

The "Stock Act," would make it illegal for members of Congress and staff to buy or sell securities based on certain nonpublic information. It would toughen disclosure obligations by requiring congressmen and their staffers to report securities trades of more than $1,000 to the clerk of the House (or the secretary of the Senate) within 90 days. And it would bring the new cottage industry in Washington, the so-called political intelligence consultants used by hedge funds, under the same rules that govern lobbyists.

* THIS IS ALL NONSENSE. THE ANSWER IS TO MAKE ALL TRADES PUBLICLY TRANSPARENT IN REAL TIME. PERIOD!

* To be continued...

December 13, 2011 at 9:26 AM
William R. Barker said...

* CONCLUDING... (Part 2 of 2)

Publicly, House members echo bill sponsor Rep. Louise Slaughter (D-NY) in saying things like: "We want to remove any current ambiguity" about whether insider trading rules apply to Congress. Or as co-sponsor Rep. Timothy Walz (D-MN) put it: "We are trying to set the bar higher for members of Congress."

(*SMIRK*)

On closer examination, it appears that what Congress really wants is to keep making the big bucks that come from trading on inside information but to trick those outside of the Beltway into believing they are doing something about this corruption.

* YEP! OH... AND GET THIS...

[T]he proposed rules in the Stock bill are directed only at information related to pending legislation. It would appear that inside information obtained by a congressman during a regulatory briefing, or in another context unrelated to pending legislation, would not be covered.

(*JUST SHAKING MY HEAD*)

At a Dec. 6 House hearing, SEC enforcement chief Robert Khuzami opined that any new rules for Congress should not apply to ordinary citizens. He worried that legislators might "narrow current law and thereby make it more difficult to bring future insider trading actions against individuals outside of Congress."

This don't-rock-the-boat approach serves the interests of the SEC because it maximizes the commission's power and discretion, but it's not the best approach. The sensible thing to do would be to rationalize the rules by creating a clear definition of what constitutes insider trading, and then apply those rules to everyone on and outside Capitol Hill.

If the law passes in its current form, insider trading by Congress will not become illegal. [T]rading will increase because the rules of the game will be clearer. Most significantly, the rule proposed for Congress would not involve the same murky inquiry into whether a trader owed or breached a "fiduciary duty" to the source of the information that required that he refrain from trading.

If enacted, the law of insider trading will remain one of many where one reality applies to Congress and an uncomfortable and insecure reality applies to everybody else.

Just as Congress is protected from the vicissitudes of ObamaCare, Congress will remain safe from the vagaries of insider trading law. The rest of us will still be vulnerable.

December 13, 2011 at 9:26 AM
William R. Barker said...

* TWO-PARTER... (Part 1 of 2)

http://online.wsj.com/article/SB10001424052970204012004577072470158115782.html?mod=WSJ_Opinion_AboveLEFTTop

Years before the Obama Administration dumped $70 billion into solar and wind energy and battery operated cars, and long before anyone heard of Solyndra, President Bush launched his own version of a green energy revolution. The future he saw was biofuels. In addition to showering billions of dollars on corn ethanol, Mr. Bush assured the nation that by 2012 cars and trucks could be powered by cellulosic fuels from switch grass and other plant life.

* FRIGG'N... MORON... BUSH...

'We'll fund additional research in cutting-edge methods of producing ethanol, not just from corn but from wood chips and stalks or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years," [announced Bush in his 2006 SOTUA].

Bush signed an energy bill in 2007 that established a tax credit of $1.01 per gallon produced.

(*GNASHING MY TEETH*)

To launch this wonder-fuel industry, the feds under Mr. Bush...

(*SIGH*)

...and President Obama...

* OF COURSE!

...have pumped at least $1.5 billion of grants and loan subsidies to fledgling producers.

(*JUST SHAKING MY HEAD*)

Most important, the Nancy Pelosi Congress passed and Mr. Bush signed a law imposing mandates on oil companies to blend cellulosic fuel into conventional gasoline. This guaranteed producers a market.

* AIN'T BIPARTISAN COOPERATION GRAND...?!?! (SARCASTIC, RHETORICAL QUESTION; THE ANSWER IS "NO!" THE ANSWER IS "HELL NO!")

In 2010 the mandate was 100 million barrels, rising to 250 million in 2011 and 500 million in 2012. By the end of this decade the requirements leap to 10.5 billion gallons a year.

When these mandates were established, no companies produced commercially viable cellulosic fuel.

* SWEAR TO GOD! CROSS MY HEART AND HOPE TO DIE!

[T]he dream was: If you mandate and subsidize it, someone will build it.

Guess what? Nobody has. Despite the taxpayer enticements, this year cellulosic fuel production won't be 250 million or even 25 million gallons.

(*SMIRK*)

* To be continued...

December 13, 2011 at 9:49 AM
William R. Barker said...

* CONCLUDING... (Part 2 of 2)

Last year the Environmental Protection Agency, which has the authority to revise the mandates, quietly reduced the 2011 requirement by 243.4 million gallons to a mere 6.6 million.

(Some critics suggest that even much of that 6.6 million isn't true cellulosic fuel.)

* FOLKS... (*SIGH*)... YOU CAN'T MAKE THIS STUFF UP!

The EPA has already announced that the 2012 mandate of 500 million gallons is unattainable, so it is again expected to lower the mandate to fewer than 12 million gallons for next year.

* FOLKS... (*SIGH*)... THE GOVERNMENT CREATES ABSURD LAWS AND THEN - WHILE LEAVING THE ABSURD LAWS ON THE BOOK - EXEMPTS FAVORED INTERESTS FROM ABIDING BY THEM. HOW DOES THIS MAKE ANY SENSE...??? ANSWER: IT DOESN'T!

An October 2011 report on biofuels by the National Academy of Sciences concluded that the mandates "may be an ineffective way to reduce global greenhouse gas emissions." Because production is so low, advanced cellulosic fuels also do very little to reduce U.S. dependence on foreign oil. The report notes that "currently, no commercially viable biorefineries exist for converting cellulosic biomass to fuel."

Still, the subsidies roll on.

(*SIGH*)

In August 2011 the Obama Administration funded a $510 million program in partnership with the Navy to produce advanced biofuels for the military.

In September the feds loaned $134 million to Abengoa Bioenergy to build a cellulosic plant in Kansas. Also in September, the Department of Energy provided POET, which advertises itself as the "world's largest ethanol producer," a $105 million loan guarantee for cellulosic.

(*HEADACHE*)

To recap: Congress subsidized a product that didn't exist, mandated its purchase though it still didn't exist, is punishing oil companies for not buying the product that doesn't exist, and is now doubling down on the subsidies in the hope that someday it might exist.

We'd call this the march of folly, but that's unfair to fools.

December 13, 2011 at 9:49 AM

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