Economics & Finance

Quote of the Day

by

In an era of general acceptance of deregulation and privatization, Mr. Spitzer has introduced the world to yet a new form of regulation, the use of the criminal law as an in terrorem weapon to force acceptance of industry-wide regulations. These rules are not vetted through normal authoritative channels, are not reviewable by any administrative process, and are not subject to even the minimal due-process requirements our courts require for normal administrative rule making. The whole process bears no resemblance to a rule of law; it is a reign of force. And to make matters worse, the regulatory remedies are usually vastly more costly to the public than the alleged evils.

–George Mason law school dean emeritus Henry Manne

Unions for the 21st Century

by

In this post, Lexington Green talks about the Retro-Left’s infatuation with old-style labor organization and law. Unions are a 19th and early-20th century solution to the problem of protecting workers and enhancing overall social and political stability. One can argue whether they represented the best solution in the past, but I don’t think that in the modern economic climate anybody can argue that they remain the best solution going forward.

Read more

EMH Vs. “Irrational Exuberance”

by

WSJ ran an article today (subscription required) on the continuing debate between efficient market theorists and the so-called behaviorists who have set up shop at Friedman’s old office. I don’t know about the “boyz” but I continue to split my funds three ways in both my personal account and in 401K: International Index, Russell 2000 Index, and SP 500 Index. As the “behaviorists” concede, I find it hard to beat the market over the long-run. And in my case, long-run is when I die most probably in about 40 years or so.

Addressing the Social Security problem will be one of the most important domestic issues in the next four years regardless of who wins the November election. I suspect we will be hearing more of this topic in forthcoming years.

-Sulaiman

More on Manipulated Markets

by

In a previous post I speculated about politically driven manipulation of online political futures markets. As I noted then, other bloggers also thought something was amiss.

Today’s Intrade press release acknowledges attempts at manipulation:

A wave of heavy selling hit the George Bush re-election contract on
Intrade Friday driving the market down to all time lows before recovering.

“Our exchange operations staff continuously monitors our markets and
reported that a very large sell order hit the Bush Presidential contract at
approximately 1:30 pm EST on Friday October 15th”, said Chief Executive
Officer John Delaney.

“The sell order caused the market to trade at new lows before
recovering to earlier levels. The exchange has more than 40,000 members,
after assessing there was no news to cause the decline, traders quickly
started buying and within 3 minutes the market fully recovered to price
levels seen prior to the sell order being executed” says Delaney.

Some question if the market can be manipulated with such heavy selling
or buying.

“All emerging markets will experience volatility, we are gratified
that the market recovered so quickly and without any intervention on our
part. This demonstrates the market’s resiliency, that the Intrade exchange
is the destination for serious traders in political contracts and that the
utility of the market as a price discovery mechanism is firmly intact” says
Delaney.

Post-debate sell off hits Bush contract

The Intrade Bush contract has become the battle ground of wills between
a cadre of large, well financed rogue traders seemingly bent on driving down
the Bush re-election contract and a growing list of financial traders who
think they can predict the outcome of this election.

Some question if George Soros is behind these market moves.

[. . .]

And Don Luskin further develops his argument.

I have an increasingly strong feeling that Bush will win overwhelmingly.

(Related posts: Here, Here and Here)