Author Archives: buddy

Look Honey, Short Sellers Aren’t Evil After All

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In an article sure to not surprise the short sellers of the world, the NY Times shows the research that proves short sellers aren’t evil and actually know a thing or two about investing, which is how they make their money. And not “taking” down companies or manipulating the markets for the hell of it as people like Patrick Byrne want people to believe.

These concerns are largely unfounded, however, according to the new study, titled “How Are Shorts Informed? Short Sellers, News and Information Processing.” Its authors are Joseph E. Engelberg and Adam V. Reed, both finance professors at the University of North Carolina at Chapel Hill, and Matthew C. Ringgenberg, a Ph.D. student there. The study has been circulating since January as an academic working paper.

Their work suggests that the average short-seller has done well through astute research and analysis, not market manipulation.

The researchers analyzed a database containing all short sales involving stocks listed on the New York Stock Exchange from January 2005 to July 2007. The database showed the exact time and price at which each short sale was executed. That enabled the researchers to compare the timing of short sales with the publication of news articles about the companies whose stocks had been sold short.

It’s a good story. It shows that short sellers tend to, you know, actually research the companies that they short sell. They have a good idea of their targets and know what they’re doing.

Now that we have some proof that short selling isn’t evil, I won’t hold my breath waiting for the SEC to retract it’s short selling regulations. They get way too much cash from BOA and Goldman for that ever to happen.

The Return Of The Bond Vigilantes?

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There was a short story earlier in the week on Yahoo! that mentioned the bond auctions earlier in the week did not go over well with the buying professionals. It seems things did not go better on Thursdays auction.

The FT has a story and it seems, regardless of Helicopter Ben’s announcement, that higher rates may indeed be on the way.

For more than a year, analysts have been warning that record sized debt sales by the US Treasury were at odds with a 10-year yield sitting comfortably below 4 per cent. This week, the yield on 10-year notes jumped from 3.65 per cent to a peak of 3.92 per cent on Thursday. On Friday it was 3.87 per cent.

That is a huge jump in rates in one week. That sort of move makes people wonder what’s going on in the market.

“The environment for debt auctions has turned negative,” says Rick Klingman, managing director at BNP Paribas. “Long-term rates are rising and it is no coincidence that this has occurred after the passage of healthcare reform and the end of Fed buy-backs.”

It does seem fairly coincidental that the health care bill passes and then for the first time in almost a year the Treasury auctions do not do well. And if they continue to not do well, then we really will see higher rates. I see there’s some more auctions coming up this week, so we should have more of an idea of how the market is behaving.

One never knows about the market. This could have been a one week hangover due to the health care vote. But, if we see continued weakness for Treasuries and a piling into the TIPS then we can safely say that inflation is here, regardless of what the Fed says.

Gotta Get Me A Government Contract

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No seriously. How do these people justify the amounts they are pulling down?

The city is paying some 230 “consultants” an average salary of $400,000 a year for a computer project that is seven years behind schedule and vastly over budget.

Eleven CityTime consultants rake in more than $600,000 annually, with three of them making as much as $676,000, city records obtained under a Freedom of Information request show.

The 40 highest-paid people on the project bill taxpayers at least $500,000 a year. These enormous salaries are coming out of a $139 million extension to the CityTime contract that began July 1 and runs to Sept. 30.

Sounds like the New York version of the big dig.

And the damned project doesn’t even work. They should be ashamed. How hard is it to create a time entry system for city employees?

Pssst… Wanna Buy Some Detroit Junk?

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Get this, the city of Detroit is trying to sell some bonds. I know, who isn’t. But here’s the kicker.

The city, which warned investors in its preliminary official statement of the possibility of filing for Chapter 9 bankruptcy protection, provided a June 30, 2008, financial statement, its most recent, to investors. A fiscal 2009 report is expected to be complete by May 31, said city spokesman

Because as we all know, nothing big has happened in the Detroit area in the past couple of years, right?

You’ve got to have your head on backwards to participate in this. I mean, this is madness. The city’s on the brink of bankruptcy and people are buying the bonds with no financials. Risk management anyone? I guess no one’s learned anything from the past couple of years.

How Not To Respond To A New Law

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I realize that the airline industry is a difficult industry. But I have to believe that the following is a truly bad way to respond to a new law.

Several airlines, including Fort Worth-based American and Houston-based Continental, say they will cancel flights rather than risk paying stiff penalties for delaying passengers on the runway.

Continental’s CEO told investors Tuesday that the airline will opt to cancel flights rather than chance being fined.

And the genius behind this is due to the following law.

Under new federal guidelines that take effect next month, airlines can be fined up to $27,500 per passenger if a plane is stuck on the tarmac for longer than three hours.

Mind you, the law, that shouldn’t have to been passed to begin with is purely and solely due to the incomptence and stupidity of the same airlines. It’s nice to see them double down on stupidity.

Remember a few years ago when people were being stuck on the tarmac for 6 or 8 hours due to issues. The correct and humane way of dealing with those situations would have been to bring people back to the gate. But being completely and utterly incompetent, the airlines decided to keep people on the plane and make them suffer.

Needless to say their stupidity backfired and cause the law to come into effect. Think of the big picture here. The airlines, had a situation and they responded poorly to it. They repeatedly responded poorly to it and to the detriment of their customers. Instead of, you know, working to do right by their customers, they acted like asses. And now? They’re going to act like even bigger asses. Is it no wonder that people hate airlines and flying?

Flash In The Pan?

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Cisco released the news they have a new monster router coming out shortly.

Cisco’s CRS-3 carrier-grade router can deliver up to 322 terabits per second — which means it could enable delivery of every movie ever made in just 4 seconds. It’s that kind of capacity that will form the foundation of the next-generation Internet, said Cisco CEO John Chambers

Is this a flash in the pan or will it really increase bandwidth?