Wednesday, January 28, 2015

Flash Boys: A Wall Street RevoltFlash Boys: A Wall Street Revolt by Michael Lewis
My rating: 4 of 5 stars

Michael Lewis’s latest book, Flash Boys, talks about high frequency trading and the creation of a new stock exchange to create fairness in stock sales. I started hearing him on Terri Gross and 60 Minutes when the book came out, but now I understand more about the issues.

Lewis has established himself as one of our leading authors in explaining economico-cultural phenomena, like baseball or the 2008 housing collapse, and Flash Boys continues in this familiar vein.

Lewis describes a number of characteristics of the current stock market system that have the potential to work to the detriment of investors. They include:

1.       While we tend to think of the stock market as a unitary system, trades take place not on one or two exchanges, like the New York Stock Exchange, NASDAQ, and the AMEX, but on a dozen or fifty public and private exchanges.

2.       High frequency traders (firms running computer algorithms) invest millions of dollars in getting closer to the exchanges--actually placing thir computers physically closer to the computers where the stock trades take place--so that they have access to market information microseconds before ordinary traders, which enables them to make trades ahead of trades that were ordered first, and use that information to buy lower or sell higher than the investor first seeking to make the trade. (How this happens is complicated, but the way it works is that they see an investor looking to make a big purchase or sale on one exchange and then, using their faster electronic connections, they can run ahead of that investor to the other exchanges, cut to the head of the line, and get a better price.)

3.       The advantage that high frequency traders and big banks have is not limited to speed: these multiple exchanges also make financial arrangements—kickbacks or payments--that pay investment banks and brokers to make transactions in a way that makes them money even though their investors, whom they are supposed to be serving, worse off.

The book talks about the establishment of a new exchange called IEX (from their original name, Investors Exchange, which had unfortunate connotations when reduced to a URL) designed to eliminate these distortions in the market (i.e. stop traders from screwing investors).

As with Lewis's other books, Flash Boys brings the subject matter to life through the stories of well-drawn protagonists who must move beyond what they--and we--think they know in order to understand and respond to changing circumstances. Also, as with The Big Short, once you understand how the market and money manipulators are making things very profitable for themselves at your expense you may have a hard time keeping your temper in check.

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Wednesday, January 14, 2015

More Muslim--and Christian--terrorism

Since the terrorist attack on Charlie Hebdo last week there have been plenty of discussions of what is really terrorism, and whether there is such a thing as explicitly Muslim terrorism.

Let's take a look at the definition. Federal law defines terrorism as follows:

"International terrorism" means activities with the following three characteristics:

Involve violent acts or acts dangerous to human life that violate federal or state law;
Appear to be intended (i) to intimidate or coerce a civilian population; (ii) to influence the policy of a government by intimidation or coercion; or (iii) to affect the conduct of a government by mass destruction, assassination, or kidnapping; and
Occur primarily outside the territorial jurisdiction of the U.S., or transcend national boundaries in terms of the means by which they are accomplished, the persons they appear intended to intimidate or coerce, or the locale in which their perpetrators operate or seek asylum.*

"Domestic terrorism" means activities with the following three characteristics:

Involve acts dangerous to human life that violate federal or state law;
Appear intended (i) to intimidate or coerce a civilian population; (ii) to influence the policy of a government by intimidation or coercion; or (iii) to affect the conduct of a government by mass destruction, assassination. or kidnapping; and
Occur primarily within the territorial jurisdiction of the U.S.

There are some differences, but the key concepts include violent or dangerous acts intended to intimidate or coerce a civilian population. Let's keep those concepts in mind.

Last Friday, a blogger in Saudi Arabia received the first fifty lashes of the sentence he received of ten years in prison and one thousand lashes for "insulting Islam". According to the Washington Post, In 2011 prosecutors alleged that his Web site “infringes on religious values.” He was arrested in 2012, when a well-known cleric issued a religious ruling that Mr. Badawi was an apostate who must be tried. 

In the Philippines, local cultural activist Carlos Celdran is appealing a sentence of imprisonment imposed for violating the law against “offending religious feelings.”

In both cases, the state seeks to carry out violent acts to prevent public criticism of the dominant religion.

There are differences. For instance, critics of Celdran might be quick to point out that the crime he was convicted of involved his going into a church service with a protest sign, but look more closely: he wasn't charged with unlawful trespass, or disrupting the church service. The gravamen of his crime was that he offended religious feelings.

The State Department publishes a list of state sponsors of terrorism, countries that have been "determined to have repeatedly provided support for acts of international terrorism". The listing has always been political. Nevertheless, given the actions of these two United States "allies", one of them, Saudi Arabia, being one of the most repressive regimes in the world, can we justify not targeting these states for terrorism against their own people?

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Monday, January 12, 2015

Prosecutorial discretion

I'm sure you don't recognize this guy, because, after all, you don't live in Idaho.

If you did you might recognize him as Barry McHugh, the prosecuting attorney for Kootenai County, Idaho.

Old Barry's hit the news, and maybe not for something he'd want to be in the news for. You see, Barry has issued a warrant for the arrest of a nine-year-old boy for stealing gum.

I don't know, maybe the kid's a repeat offender. Maybe he stole a cookie when he was six and got away with it, so now he's headed down the road to a life of crime. A cookie here, gum there, and there's no telling where it will end.

I'm sure Barry has his reasons, because, you see, he has prosecutorial discretion. He gets to decide who he will prosecute and who he won't prosecute, and there's pretty much nothing that anybody else can do about it. So the nine-year-old gets sent off the the Little Big House to learn the error of his ways.

But you know, practicing law can be hard work, especially with all that exercising prosecutorial discretion. You mouth sure can get dry from all that discretioning, especially up in Idaho.

So wouldn't it be a kind gesture, a way to let him know how much we appreciate his efforts to keep Kootenai safe, to send him a piece of gum?

I know that's what I'm going to do, and if you're inclined to do the same, here's the address:

Barry McHugh, Prosecuting Atty
P: (208) 446-1800

Physical Address:
501 Government Way
Coeur d'Alene, Idaho 83814

Oh, one other thing: I went and got some legal advice and I'm told that if you are inclined to send ol' Barry some gum you should make sure not to send him anything with a liquid center or a powdery residue. There are people who send dangerous stuff through the mail, but a little gum never hurt anybody.

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Sunday, January 11, 2015

Just say no, Boston edition

Lord knows there's no shortage of issues to get organized about, but I know what my number one advocacy issue would be for the coming year if I were living in Boston right now.

It's the Olympics.

Sure, it's supposedly a point of national pride when your country is selected to hold the Olympics, and within the country it's supposedly a point of pride, of preeminence, a sign that you've made it if your city is selected, but what's the benefit of being selected for the equivalent of a flood, an earthquake, or a major hurricane? Yet that's exactly what the U.S. Olympic Committee wants the people of Boston to do.

Friday Nate Scott posted a column in USA Today laying out some of the practical problems with trying to shoehorn an extra half million people into a medium-sized, already congested city with already inadequate transportation and housing infrastructure. Boston's already been through one massive, disastrous public works program in recent years, and the congestion, delays, and cost overruns of the Big Dig will be dwarfed by the spending and construction needed to build the Olympics.

In addition to the problems with this plan that Scott enunciates, anyone in Boston or anywhere in Massachusetts who thinks that there are already misguided priorities in the city and state budgets will be shocked by what can only be a massive diversion of funding from human needs to this plaything for the international rich.

But it's not just the money. Just last year Norway decided to pass on a bid for the Winter Olympics because of the arrogant demands of the International Olympic Committee to be treated like royalty throughout their say at the competition. Here are some of their demands:

*A meeting and cocktail party with King Harald before and after the opening ceremony, with the royal family or Norwegian Olympic committee picking up the tab.

*A full bar for IOC pooh-bahs at the stadium during the opening and closing ceremonies.

*IOC members must be greeted with a smile upon arriving at their hotels.

*Hotels for IOC members must be pre-cleaned “particularly well,” and hotel management should be prepared to correct the slightest problem posthaste.

*All meeting rooms must be kept at 68 degrees.

*The usual car and driver at the beck and call of IOC members.

When I was growing up I always enjoyed watching the Olympics, and the exploits of athletes like Michael Johnson and Usain Bolt remind us all that we can count on greatness from the competitors. Nevertheless, as time goes on, the excess of the ceremonies, the celebrity and personality focus of the coverage, and the sheer bloat of the entire event has led me to conclude that I don't really care if they have another Olympics ever.

At a minimum, I would expect the people of Boston to be saying "Not here".

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Wednesday, January 07, 2015

Cowardice: Did it ever go out of style?

It was just over five years ago that we were writing about censorship at Yale. On that occasion Yale University decided to excise the Danish cartoons from a scholarly work examining freedom of expression and the cartoon controversy.

As we said at the time: So what does it say when one of our greatest universities lacks the courage of a small newspaper in Denmark?

Again it's a tiny publication in comparison to one of our great institutions of journalism, and again the terrorists and murderers have won.

Yes, the New York Times has decided that it won't publish the cartoons published by Charlie Hebdo that apparently led to the murders of twelve free people. The same is true of NBC News. And the Washington Post.

Here's one of them:

Pretty crude and juvenile, right? Muhammad is depicted as saying, "100 lashes if you don't die of laughter."

The voices of "responsible" journalism have the usual things to say: they're not being intimidated, they're being sensitive; they are never in the business of being offensive just for the sake of being offensive; how can they justify putting their employees at risk?

The thing is, though, that freedom of speech is important to us here in America. We figured out a long time ago that we can't have a democratic, civilized society without it. If some people are offended, so be it.

And the other thing is that there's no limit. There's no way a writer, an editor, or a publication can say, "If I just give in to them on this one point it'll be okay." There's never just one point. Once you let the terrorists decide what you can publish they'll be making that decision for you and your readers every day, and all of a sudden you're out of the journalism business and into--well, I don't know what you call it at that point.

Coincidentally, down in Maryland we just observed the case of an idiot politician threatening to sue a local newspaper any time they published his name. They didn't back down, and they made him a laughing stock. Rightly so. That was an easy one, though, because the entire world knew that he couldn't make it stick: his was a hollow threat.

The threat to kill journalists who publish pictures someone doesn't like has repeatedly been shown not to be a hollow threat at all. Still, the fundamentalists and terrorists don't get to win, because after they win one, what's to stop them from winning all of them?

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