Suitably Flip

Media Prima Donnas Gone Wild

The recent emergence of some choice on-air moments by Sue Simmons and Bill O'Reilly inspired this sensational compendium of the 10 best on-camera meltdowns (including both Bill and Sue's respective tirades).

F-bombs galore, so observe this *blue content* warning before clicking.

With Deepest Condolences To the AP Economics Desk

According to the Philadelphia Fed, economists are climbing down off the recession ledge (that minority of economists who thought we were on the brink of recession are, anyway).

The so-called "Anxious Index" now indicates less than 28% of economists surveyed believe the economy will slip into recession next quarter.  Having peaked at 43% this cycle, the AI failed to reach even its lowest of recession-era peaks observed over the last 40 years.

This might seem like cheerworthy news, but please try to keep in mind the recessionistas and professional gloomsayers whose lives become ever drearier when beset by such good news.

(HT: Odd Numbers)

CNBC Million Dollar Portfolio Challenge - Tuesday, Week 1

[Scroll for answers to today's Bonus Bucks trivia questions.]

Let's give this another shot, shall we.  Yesterday, things got off to a bumpy start, as technical difficulties prevented many traders from accessing their portfolios and/or making trades and/or avoiding Spontaneous Disappearing Order Syndrome.

Equity orders seem to have been processed normally (at least for my portfolios they have - let me know if you're seeing differently), but all currency trades from yesterday have slipped down the CNBC memory hole.  This morning, currency trading thus far remains unavailable:

Due to technical difficulties related to currency trading, we have cancelled [sic] all currency transactions submitted throughout Monday, May 12th and currency trading is currently unavailable. All traders' currency allocations will be reset to $100,000 CNBC Bucks until currency trading resumes.

Which suits me fine.  I wasn't in love with this addition to the game in the first place.  Last year saw sufficient technical difficulties that it would have been an achievement just to debug the existing format.  In any event, this can't be the kind of exposure CNBC's currency trading platform provider FXCM was intending when they partnered up.

As for the comparatively stable equity trading end of things, if you're logging into your account and noticing your positions haven't budged, that's normal.  Yesterday was the first day of trading, but that means the first trades were processed at yesterday's trading bell.  Those initial allocations will re-price for the first time at today's closing bell, at which point you should see your first move up or down (excluding the effect of your bonus bucks ).  You'll notice the top-ranked players are all tied at $1,017,000 = the initial allocation + $5,000 in refer-a-friend bonuses + $12,000 for yesterday's Bonus Bucks.

For you volatility hounds, below is the list of eligible stocks reporting earnings either after today's close or before tomorrow's opening bell (i.e. stocks you can trade today before 4 pm and get exposure to during tomorrow's session).

                       

Symbol	Name
CVLT	CommVault
WFMI	Whole Foods Market
CGV	CGGVeritas
AMAT	Applied Materials
DE	Deere & Company

Yesterday's volatility picks are shaping up to be a mixed bag, but there appears to be one big winner - Canadian Solar (CSIQ), up 24% shortly after the open.  The company blew out revenue and earnings estimates (EPS was $0.61 per share, compared to the consensus of $0.31).

Happily, I gave CSIQ the maximum 25% allocation in two of my portfolios, the better performing of which is up 6.6% intraday.  So, Canadian Solar, let me be the first to say:

Applied Materials (from the above about-to-report-earnings list) might be an interesting pick for one of your portfolios, if Canadian Solar was any indication of how solar stocks fared this quarter.  The whole sector isn't doing as well as CSIQ today, but overall it seems to be trending well.  Analysts are expecting a down quarter from AMAT, but the company has a tendency to exceed analysts' expectations.

CommVault might also sate the volatility jones, as it's the smallest cap company on today's earnings list.  With a market cap of less than $600 million, it's barely eligible for the contest.  Analysts tend to peg its earnings on the nose, so there might not be as much opportunity for upside surprise, but the shares have pulled back decently in recent months, so there might be room for a jump.

(Consider all of the above to be for entertainment purposes and not meant to be used as real-world investment recommendations.  The goals and strategies of the Portfolio Challenge are not to be confused with those of sensible investing.)

See all related posts in the CNBC Portfolio Challenge archive.

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Throughout the contest, each day's answers will be at the top of the CNBC Portfolio Challenge archive as soon as the questions are published, so bookmark accordingly.

Daily Trivia:

Squawk Box: "CNBC.com Video: On May 5, analyst Elaine Kub discussed a possible commodity cartel. What commodity was it?

  Answer:  Rice 

Squawk On the Street: "Market Insider blog: On May 9, what did John Kilduff say was his upside target for crude oil?"  

  Answer:  $138

The Call: "Web Video: On May 5, strategist James Altucher said three stocks may be the "next Berkshire Hathaways." Name one of them."  

  Answer:  Otter Tail

Power Lunch: "On May 9's "Stop Trading", Jim Cramer warned NOT to buy certain stocks. Which one did he call a "travesty"?"

  Answer:  AIG

Street Signs: "According to Rebecca Darst, what "slammed" the Pawn-and-Payday firms?"

  Answer:  Wham-bam legislation

Closing Bell: "How did Larry Kudlow's blog “Bush Whiffs on the Dollar” end? "

  Answer:  McCain, are you listening?

Obama Once Again Wearing Flag Pin, Star Count Unclear

Well, that didn't take long.  Just 24 hours after the Obama-edition 57-star flag pins went on sale, the candidate himself is found sporting a patriotic lapel pin voluntarily for the first time in months.

It's hard to tell from the resolution of the photo, but I think it's safe to assume it's one of ours.

(HT: Hot Air)

CNBC Million Dollar Portfolio Challenge - Technical Difficulties, Orders Cancelled

I noted in this morning's post that among the Day 1 technical difficulties were stock orders that would suddenly disappear from portfolios.  Based on an email that just arrived from the contest admins, this must be a somewhat common affliction, because they're asking everyone to double check all pending orders.

They've also noticed the horrendous non-performance of the currency trading section and have apparently given up on getting it fixed today.  So if you sat around endlessly refreshing the page like a sucker (like me) until you were finally able to enter your currency trades, you've gone and wasted some time.

We apologize for any inconvenience you may have experienced today, Monday May 12th, while playing the CNBC.com Million Dollar Portfolio Challenge.

We encourage you to check your stock transaction history to ensure all stock transaction orders you have submitted are entered correctly.

In addition, because of technical difficulties related to currency trading, we have cancelled all currency transactions submitted throughout Monday, May 12th. All traders' currency allocations will be reset to $100,000 CNBC Bucks when currency trading resumes. Please check back at http://milliondollar.cnbc.com for updates.

Last year, it took a whole week for everything to fall apart.  They're getting more efficient.

Previously:
CNBC Million Dollar Portfolio Challenge - Monday, Week 1
CNBC Million Dollar Portfolio Challenge - Kicking Off Monday
 

CNBC Portfolio Challenge Archive

CNBC Million Dollar Portfolio Challenge - Monday, Week 1

Trading started today at 9:30 am (you can still sign up), though things are already a bit squirrelly.  Accessing the portfolio manager page sometimes returns an error screen (though that problem seems to be less frequent if you're using Internet Explorer rather than Firefox) and clicking on one of the portfolios returns a "portfolio not found" error.  Also, the first round of trivia questions was supposed to be posted at 6:00 am, but is thus far unavailable. [Update: problems solved (mostly) and trivia questions added, see below.]

I've put in a support request to the contest admins.  Hopefully this is just first day gremlins, but given the way last year's contest quickly descended into mayhem with the multiple account debacle, we're off to an inauspicious start.

While we're waiting, let's strategerize.  (Consider all of the following for entertainment purposes and not meant to be used as real-world investment recommendations.)

I mentioned last week that this year's contest has remedied some of the issues that tended to encourage moon-shooting strategies last year.  Specifically, they no longer allow multiple account creation (beyond the 5 portfolios available to a single player) and they've eliminated the "finals round" which allowed each weekly winner to compete against the overall high scorers (meaning there was little incentive to avoid massive downside during any given week).  A good strategy last year was simply to allocate 100% of the portfolio into a single name where you could expect high volatility (i.e. a company that would report earnings the next day).

Volatility for volatility's sake is a riskier way to play it this year, but still perhaps an interesting strategy.  After all, there's still something to be said for shooting the moon when the prize structure is still a Ricky Bobby style "if you're not first, your last."  In fact, you can be up to 6th in overall performance and still share in the million dollars, but given the large number of players (roughly 600,000 portfolios already registered), you'll still need a blowout performance.  Plus, there are still some valuable weekly prizes, so volatility is still your friend this year.  That said, the game limits your allocation to any single stock at 25% of your portfolio value, so it's harder to do well with a single good guess.

And remember your portfolio has to be worth at least $250,000 to be eligible for any weekly prize, so if you lose more than 75% of your initial allocation, you're in the penalty box until you recover above that threshold.

If you do elect to play the volatility strategy, you've got several options today.  The following companies all report earnings either after today's closing bell or before tomorrow's opening bell.  So any position taken today before 4:00 pm will process at today's close and see its first market exposure tomorrow (Tuesday).

                                           

Symbol	Name
DRL	Doral Financial
WNR	Western Refining, Inc.
HIT	Hitachi Limited
NSANY	Nissan Motor Co. Ltd.
STO	StatoilHydro ASA
CCJ	Cameco
CSIQ	Canadian Solar Inc.
TJX	The TJX Companies, Inc.
GU	Gushan Environmental Energy, Ltd.
REP	Repsol YPF

That timing issue is one that warrants a little closer attention, since it'll be important throughout the contest.  Whenever you enter a trade, it gets processed at the next closing bell.  So if you enter a trade at 11 am on Monday, it'll process at 4 pm Monday, so the first day of exposure you get is Tuesday.  If you enter a trade after 4 pm on Monday, it'll process at 4 pm on Tuesday, and the first day your position can move is Wednesday.

That 1-2 day lag in the actual price change is a little nonintuitive.  It also means each weekly marking period (as used to determine the winner of the weekly prizes) is based on the trades you enter between Friday at 4 pm and Thursday at 4 pm (rather than Monday-Friday, as would seem logical).

See all related posts in the CNBC Portfolio Challenge archive.

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Update: The system now seems to be working.  Trade away!

Update:  I take it back - the system is not precisely "working" in the strictest sense of the word.  You can enter trades and they seem to go through, but they seem prone to blinking out of existence without warning, forcing you to re-enter your orders.  This doesn't bode well.

For what it's worth, the currency trading section seems to be more stable.  Sadly, I'm afraid you're not going to find any worthwhile currency trading advice here.  I'm just taking the maximum short position in EUR/USD (betting on the dollar strengthening versus the euro) and letting it ride for the next 10 weeks.

Update:  Scratch Gushan Envrionmental (GU).  It should be eligible (NYSE-listed, market cap >$500 million, average volume >10,000/day), but it's not.  It's the ADS of a foreign company, but so are others on the above list, so I'm not sure why it's ineligible.

Also, if you're having trouble with the currency trading (specifically, it takes several minutes to load your portfolio or you get the error "Service is unavailable now. Please try again later."), you're not alone.

Update: A reply from CNBC Customer Care regarding the various site problems:

Due to overwhelming interest some users may not have been able to access the Contest this morning. We are aware of the page errors on portfolio challenge and are actively working to fix. We regret any inconvenience this may have caused.

If these problems persist, it ought to take care of that "overwhelming interest" problem in a hurry.

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Throughout the contest, each day's answers will be at the top of the CNBC Portfolio Challenge archive as soon as the questions are published, so bookmark accordingly.

Daily Trivia:

Squawk On the Street: "In his Trader Talk blog, Bob Pisani had one April entry entitled Hot Fertilizer. Name one of the stocks he discussed."

  Answer:  CF Industries

The Call: "On Monday, April 28, James Altucher of Formula Capital recommended which food-inflation trade to CNBC viewers?"

  Answer:  Sadia

Power Lunch: "On April 25, Tech Check's Jim Goldman blogged on Microsoft’s Yahoo bid. How did he describe Microsoft CEO Steve Ballmer’s “rule”?"

  Answer:  Iron-fisted

Street Signs:   "Mark Travis said he likes "redneck stocks." On April 24, The CIO of Intrepid Capital Funds recommended:"

  Answer:  Comcast

Closing Bell:  "Jim Cramer has a cameo in Iron Man, judging the mythical Stark Industries. What is Stark's make-believe ticker symbol?"

  Answer:  SIA

Weekly Bonus Quiz:

Question:  An MACD crossover reading above ____ indicates upward momentum.

  Answer:  0

Battle Of the Proxy Incumbents

Having long struggled to find a stump message more specific than Hope and less nebulous than Change, nominee apparent Barack Obama seems to have finally found a unifying theme for his campaign, as he sets his sites on the general election.

In case your cable's been out for a couple weeks, the grand, unifying, post-partisan argument in favor of electing this New Kind of Politician is that John McCain, the "Maverick", the Gang of 14er, the pathologically centrist aisle-crosser and frequent thorn in his own party's side, represents George Bush's third term.

Fiction can be fun!  Ultimately though, this fanciful bit of twaddle is unlikely to stick, what with McCain's voting record so thoroughly refuting it.  And in a lot of ways, that's too bad.  If only we could look back at McCain's votes and comments on the wildly effective investment income tax cuts and find a man who embraced pro-growth fiscal policy as eagerly as Bush, we might be better assured of the continuity of certain beneficial policies that Obama so laments.

Still, Barack assures us that John McCain's and George Bush's policy stances are indistinguishable, so let's so stipulate.  Is that worse than the alternative?

After all, what President in the modern era does Senator Obama's agenda most resemble?

Click for larger size.

Huge expansion of the federal government?  Check.  Letting entitlement spending run wild?  Check.  "Windfall profit" taxes on oil companies?  Strong desire to meet with dictators and state terrorism sponsors?  Big doofy grin?  Check, check, and check.

Do political fashions run in 30-year cycles?  If so, then get ready for the fabulous comeback of energy crises, stagflation, high unemployment, and national malaise.

(Obama caricature by Cox & Forkum)

Obama Campaign Introduces Customized Lapel Pins

Update:  Due to overwhelming demand, we have taken the Obama lapel pins from concept phase to the real-world, buyable phase.  Get yours for only $1.99 (cheap!).

It's the perfect accessory for the ironic Obama supporter, and a wonderful "substitute for true patriotism"!

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In celebration of his having traveled to an impressive 57 states in his bid for the Presidency (and to finally put to rest the notion that he abhors patriotic accessories), Barack Obama's campaign has introduced a custom line of American flag lapel pins.

Get yours today and show your support for the least senile candidate in the race!

Let's all give a warm, manifestly destined welcome to what I assume are our 7 newest states:

51.  Puerto Rico
52.  Guam
53.  Northern Mariana
54.  American Samoa
55.  St. Croix
56.  St. Thomas
57.  St. John

I guess we should've seen this coming when Obama was reported to be meeting unofficially with the Governor of the U.S. Virgin Islands when he took his family on "vacation" to St. Thomas.

(HT: Hot Air)

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Update:  It's just been announced that two superdelegates from the Virgin Islands have pledged support for Obama, giving him his first-ever superdelegate lead over Clinton.  Interesting timing, no? 

You scratch my back, I grant you statehood.

CNBC Million Dollar Portfolio Challenge - Kicking Off Monday

If you haven't registered yet, and if you enjoy playing with fictional money for an opportunity to win a heap of actual money, there's still time.

Trading starts Monday, as will an at-least-daily series of posts here.  Last year, we did some Portfolio Challenge posting, but it was sporadic.  This year, in addition to general contest commentary, news, and trading ideas, we'll be putting up the answers to the daily trivia questions and the weekly bonus quiz (good for thousands of fake dollars/day), shortly after the questions are released.

For those who may have played or observed last year, there are a few notable changes this year, some good, some bad.  To recap, last year, it was a 10-week contest, during which you could re-allocate your portfolio however you want, once per day, among publicly traded stocks with a minimum market cap of $500 million.  Every week, the biggest percentage gainer would win $10,000.  At the end of the 10 weeks, the 10 highest aggregate gainers over the whole contest, as well as the 10 weekly winners, would have their portfolio values reset and compete in a final round.  Whichever of the 20 finalists put up the best performance in that round won the million dollars.

A huge flaw in the game presented itself almost immediately, when many traders (including myself) registered hundreds and even thousands of portfolios.  CNBC required only that a unique email address was used for each.  If you had control of a domain name through which you could register thousands of email aliases or forwarding accounts, it was easy enough to create as many portfolios as you cared to.  One such trader (one Nancy Beaumont) wound up winning the first weekly prize, but it was clear to other traders that she had multiple portfolios because at one point, she'd occupied several slots on the leaderboard.  The contest admins deliberated and ultimately ruled that multiple portfolios were not forbidden by the rules, which is when I got busy creating my thousand or so accounts (yes, I waited until they ruled in kosher).  Nancy's win was upheld (though they also gave a weekly prize to the single-portfolio trader who would've won that week) and the game continued.

This year, it's explicitly forbidden to trade under multiple accounts (don't try it - I guarantee they'll look for this, given how much of a mess it caused last year, and you'll get booted).  But they are allowing each manager to register up to 5 portfolios under a single account.

(This is a huge relief.  I really wasn't looking forward to the countless hours it takes to reallocate hundreds of portfolios every day through what was a frequently maddeningly slow web site.)

Another big change this year is the introduction of currency trading in addition to equity trading.  I'm not thrilled with this, only because currency trading is in no way my bag.  If they were going to expand the trading realm, why not the more logical (and requested) extensions like enabling short selling or options trading?  The cynic in me wonders whether they're just trying to create demand for their new online currency trading educational series.  The allocation is 90% equities, 10% currencies and the respective money (its virtualness notwithstanding) is not fungible, so you can't transfer from one to the other.

The prize structure has also changed (for better or worse, depending on how well you plan on doing).  Instead of the winner getting all $1 million, the pot is split 6 ways:

1. $500,000
2. $250,000
3. $100,000
4. $50,000
5. $50,000
6. $50,000

And instead of the weekly winners getting $10,000, they get an assortment of fabulous merchandise and travel packages (r.g. home theater, watches, Superbowl trip, various beach and golf getaways, a seat at the 2009 World Series of Poker) with approximate retail values of $5,000-$32,500.

There's also no final round - your eligibility for a share in the million dollars is based solely on the value of your portfolio at the end of the 10 week contest.  So there's a lot less incentive to shoot the moon in an attempt to win the weekly contest and an automatic bid in the final round.  Of course the multiple account prohibition ought to take care of most of the moon-shooting that plagued last year's contest (my preferred, occasionally successful moonshot method having been to allocate 100% of each portfolio to one of a handful of companies reporting earnings the next day (i.e. stocks likely to have big one-day moves), then take the batch with the best return and repeat on Tuesday, and so on throughout the week, leaving the hundreds of losers to languish since all portfolios would effectively reset each week if you were gunning for a weekly winner's pass to the final; worked well enough to get me on the leaderboard once or twice, but alas, never well enough to hold the top spot).  The elimination of the finals round, and thus rendering the weekly prize that much less valuable, should further improve the gameplay (assuming good gameplay means approximation of rational real-world trading strategies).

So... that's about it, other than all the things I'm missing.

Trading begins on Monday (May 12th) at 9:30 am.  No need to get starting line jitters though.  Like last year, portfolios are only reallocated once per day.  So any trades you submit will get processed at 4:00 pm Eastern at that day's closing price.  (If you submit a trade after 4:00, it gets processed the next day at 4:00 at the next day's closing price).  Bear in mind, this means the first trading session your portfolio will actually be exposed to is Tuesday, May 13, since trades placed immediately after the contest starts Monday morning won't execute until the closing bell.

Make sure you've got your account set up and all 5 portfolios activated, read through the rules to remedy whatever I got wrong, marvel at the spinning sign guy, and check back here over the weekend for some Day 1 trading thoughts.

Once we're into the first day of trading, we'll be able to put up a more specific schedule of the time each day that we'll be posting the answers to the bonus questions.

Good luck!

Update: I've set up a new CNBC Portfolio Challenge category for handy archiving purposes.  All posts related to the contest will be accessible at that link.

Surprise! Oliver Stone's "W" Actually About William Frist

Drudge is linking this first look at Josh Brolin in full makeup for Oliver Stone's upcoming biopic "W".  It had been widely believed that the film would be a "controversial movie about George W. Bush's rise to power."

But based on the sneak peak at Brolin's mug, it's clear he's actually playing former Senate Majority Leader William Frist.

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Update:  Greg Gutfeld has a nice take on Stone's newest tripe, including:

Stone only makes movies for people who already agree with him. He doesn't just preach to the choir – he gives them a tongue bath.

Stone is like a child who puts on skits for his family in the living room over the holidays. He's playing to a besotted crowd - they won't tell him he sucks. It's worse than saying the gravy's too thin.

Emerging Consensus Among Economists: McCain Is the "Least Horrible" Candidate

The Wall Street Journal's latest Economic Forecasting Survey found 75% of responding economists favoring John McCain over Hillary Clinton and Barack Obama when it comes to responsible fiscal policy.

But the results don't amount to an unqualified endorsement.

Almost half of the economists in the latest Wall Street Journal forecasting survey decided against answering a question on which presidential candidate offers the most responsible fiscal policies. However, Sen. John McCain was the clear favorite of those who answered the question. Twenty-one economists of 75% of the respondents chose the Republican contender. However, they weren’t exactly enthusiastic. “His [policies] are the least horrible,” said James F. Smith of Western Carolina University and Parsec Financial Management.

McCain's support of the likely feckless gas tax holiday didn't win him any points among the group.  But it didn't hurt him enough to cast him down with the others.

“The gas price break scheme is stupid,” said Mark Nielson of MacroEcon Global Advisors. “However we don’t trust Clinton. Obama is an unknown entity, but should he favor vast social programs he has championed as a young man we cannot assume he will be fiscally responsible.”

Is it really a lack of trust in Clinton that's most worrisome, though?  I can't argue with the contention that she's untrustworthy, but if we do take her at her word, she'd re-inflict Jimmy Carter's disastrous "windfall profit tax" on the oil sector, kibosh the pro-growth investment income tax cuts, unwind her husband's free trade accords, and socialize healthcare, an industry that accounts for 16% of GDP.

Those aren't all strictly fiscal, but they certainly carry massive economic consequences.

In light of her stated policy intentions, I'd find Clinton a lot scarier if she weren't so frequently truth-challenged.

All We Are Saying... Is Give Clarinet Whale Prayers a Chance

Good news, humanity.  Peace on earth is not only possible, we now have the recipe.

(Hint: it calls for ambergris.)

Call me cynical, but I'm not sure I buy it.  When you mix freako-spiritualism with aquatic mammals, the result is typically not world peace, but those creepy paintings of dolphins and whales in outer space that you see in malls from time to time.

"Red-In-The-Face, I-Think-About-You-When-I-Go-To-Bed, Too Embarrassed To Stand Up, Sealed-With-A-Kiss Love"

MSNBC's Joe Scarborough and Tucker Carlson celebrate the media's blossoming affection for their candidate.

TUCKER CARLSON: It's gonna be such a great election; it has been so far.

JOE SCARBOROUGH: Especially when you have the media loving one candidate as much as they love Barack Obama.

CARLSON: But it's more than love. I mean, it's the kind of love that anybody who's been a 9th-grade boy understands this species of love. Do you know what I mean?

MIKA BRZEZINSKI: Wow.

SCARBOROUGH: No, it's the truth. It's all-consuming.

CARLSON: It's red-in-the-face, I-think-about-you-when-I-go-to-bed, too embarrassed to stand up, it's sealed-with-a-kiss love. I mean, it's real, it's palpable.

Video of the exchange at Newsbusters, via Ace and HA Headlines.

Update:  And there's the embeddable video, via Allah, who fingers a relatedly hilarious cover to this week's Time Magazine.

It's Beat-up-on-Time Day apparently.

A Neighborly Blog Grapple

On Tuesday, I put up an unminced rebuttal to a post entitled "The official word on whether capital gains tax cuts increase revenue (it's no)" written by Justin Fox at Time .  Fox's argument, which was based on an odd interpretation of a new Congressional Budget Office publication, I declared the "Worst Argument Of the Day".

Today, Fox has put up a counter-counterargument, one only modestly less unsound than the original, in which he claims not to have made the claim I claim he made.  My critique, it turns out, had amounted to the "Worst Reading Comprehension of the Day" (hoist by my own zinger).

I dunno.  I've re-read everything for double negatives I might've taken as singles and wiped my monitor off with my sleeve, in case the specific arrangement of dust and smudges had caused certain words in Fox's post to resemble other, roughly antonymous words.

No such luck.  On reflection, I'm confident I managed to grasp the case he presented (the subtle clues in the title of the post were a helpful starting point).  The original argument (along with its natural policy extensions involving the efficacy of capital gains tax cuts) remains so deficient as to be irresponsible, particularly for a financial journalist of Fox's pedigree.

I won't heave it on you here, but for sake of posterity, I offered a counter-counter-counterargument over at Fox's place this morning, in response to the "Worst Reading Comprehension" post.

Some of the points of contention begin treading into esoterica, but this issue is one of very high significance over the next several months.  The major capital gains tax reform enacted in 2003 will expire in 2010 if it isn't extended/made permanent and the results of November's elections (Presidential and Congressional) will likely determine that outcome.

As I've discussed here in the past, those tax cuts (which followed up the first Bush tax cuts in 2001) almost immediately ushered in the longest period of consecutive job growth on record and added fuel to a brilliant recovery from the mild recession Bush inherited from Clinton, despite the economic shock of 9/11 having occurred just as the recession was ending.

Given the economic stage that had been set, the economic growth (3% per year, with not a single negative quarter), unbroken job creation (52 months, 19 longer than Clinton's longest stretch), and stock market appreciation (the S&P gaining more than 50%) that we've seen since the capital gains tax cuts have been staggering.

No, it doesn't deductively prove that capital gains tax cuts were the cause (or a necessary condition) of the unlikely expansion.  Nor does the fact that tax revenues from individuals soared 44% since those capital gains tax cuts deductively prove that such cuts generally do - when rates are high - increase tax revenues (we have to make do with sound economic theory, common sense, and the preponderance of empirical data if we want to swallow that one).  But there's also no data out there definitively debunking that proposition (or even, as far as I'm concerned, refuting it in a remotely credible way).

In this case, supply-side theory and empiricism (while both inexact) tend to support the same conclusion.  And given the high significance of the policy choices such conclusions inform, these are points that warrant belaboring (and occasional grappling).

Battle Of the Bubbles

We've been treated to three major economic bubbles in the last decade - tech stocks, housing, and now oil.  And oil (which has yet to show a peak) just became bubblier than tech, putting on more than 600% in 4+ years.

Still a couple hundred points to go to eclipse homebuilders though, which would imply something like $166/barrel, so let's hope oil winds up settling for the silver.

Data source: Bespoke Research

The Godfather As Accidental Allegory For 21st Century U.S. Foreign Policy

As you might guess, it doesn't quite work.

The LA Times gave it a shot (with the upshot being that the current administration is the hot-headed Sonny Corleone).  See-dubya retooled it with somewhat more inspired casting choices (e.g. Cynthia McKinney as Fredo).

For my money, it still works better as an allegory for the mafia.

Clinton's Dewey Moment? [Update: No]

As of midnight, the Indiana Democratic primary was still in doubt, with Obama having gradually closed Cinton's early lead.  The holdout is Lake County, where only 28% of precincts have reported.  Earlier in the evening, when Hillary's lead was a little healthier, she got on stage to back in her triumph with a very satisfied victory speech.

Of the Lake County votes tallied so far, Obama is winning 75-25.  He still has to make up another 20,000 votes to overtake Clinton, but if that ratio were to hold, he'd gain more than twice as many, winning 51-49.  Reportedly, the votes that have come in are from the Gary area, a predominantly black population.  So the 75-25 spread won't likely hold, but county-wide, he only needs 60% or so to poach the state, so he's got some room to fall back a bit in the rest of the county.

If Obama manages to pull it off, Clinton's Indiana victory speech will be an instant classic (particularly as it nearly assures the superdelegates will find their tipping point and shortly hand Obama the nomination).  The significance of that prospective event begs the obvious photoshop, so here it is, just in case.

And if Obama doesn't manage to close the gap, my photoshop will still feel good about itself in an ironic way, for lampooning something that didn't actually come true.

You can watch Clinton's smugly celebratory address below.  In fairness to Hillary, Obama had effectively conceded Indiana to Clinton in his North Carolina victory speech earlier in the evening, so he would've been the first to call it wrong.  But it strikes me as easier to live down a win you'd previously written off than a loss you'd prematurely celebrated.

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Update: With 58% of the Lake County vote counted, Obama still leads the county 65-35.

Update: The Clinton campaign has doubled down, sending out this e-mail to supporters:

Tonight's victory in Indiana was close, and a margin that narrow means just one thing: every single thing you did to help us win in Indiana helped make the difference.

Every call you made, every friend you spoke to about our campaign, every dollar you contributed made tonight's victory possible. And I couldn't be more thankful for your hard work.

Every time we've celebrated a victory, we've celebrated it together. And tonight is no exception. This victory is your victory, this campaign is your campaign, and your support has been the difference between winning and losing.

Thank you so much for making this campaign possible. Let's keep making history together.

Sincerely,

Hillary Rodham Clinton

Update: With 98% of Lake County in the books, Obama's lead has shrunk to 55-45.  Not enough, even if he wins 100% of the remaining votes.

Update: Fox News calls it for Clinton.

Worst Argument Of the Day

Justin Fox at Time has squirted out an impressively useless rebuttal to supply-side economic theory.

The official word on whether capital gains tax cuts increase revenue (it's no)

The Congressional Budget Office issued a report Friday on Sources of the Growth and Decline in Individual Income Tax Revenues Since 1994. The gist of it was that the big gains in federal tax revenue from 1994-2000 had very little to do with changes in the tax code, while about half of the decline in tax revenue (as a share of GDP) between 2000 to 2004 was the result of the Bush-administration tax cuts.

You may already be feeling woozy from the illogic and that's normal.  Let's just concentrate on the last half of that last sentence and read it again slowly (take a drink of water first if your head is still swimmy from last time).

...about half of the decline in tax revenue (as a share of GDP) between 2000 to 2004 was the result of the Bush-administration tax cuts.

And therein, Fox assures us, is proof that capital gains tax cuts officially do not increase tax revenues.  You may have noticed the bolding in that second go-round.  These phrases are central to Fox's piffle.

Alert readers, keen fiscal policy observers, and anyone with Wikipedia access can attest that the Bush tax cuts, EGTRRA  and JGTRRA, were enacted in 2001 and 2003.  While the first round did address capital gains in a limited way (it reduced the rate on stocks held for 5+ years from 10% to 8%), it was much more significantly a package of income tax cuts.  It was the second round of tax cuts, enacted in May 2003, that really slashed capital gains taxes (and ushered in a 4+ year bull market and the longest period of unbroken job creation in recorded history).

Fox is disavowing the idea that reductions in capital gains tax rates can fuel so much investment and business activity that incomes and gains increase enough to offset the lower rates levied on them, thus raising revenues.  And Fox is leaning on the fact that revenues (as a share of GDP) decreased from 2000-2004.  But the primary capital gains tax cut wasn't enacted until 2003.  What's more, the tax cut did not apply to investments held for less than one year.  So any new investments made after the enactment couldn't be sold (and no corresponding gains could be realized or taxed) until May of 2004, if they were wanted to make use of the tax cut.

Looking at the 2000-2004 window to judge the effect of a policy whose earliest material impact couldn't begin to be measured until mid-2004 is a genuine head-scratcher.  I know, I know, you'd feel more satisfied if you could see a little uptick in 2004.  And I'm loathe to disappoint you, if you've already read this far.

That chart is right there in the paper Fox cites.  I'm not sure how he missed it.  It's true, you see, that tax liabilities declined (as a share of GDP) from 2000-2004, but that cleverly ignores the fact that they began increasing once the capital gains tax cut was enacted.

But asinine time window selection isn't the only fatal failing of the argument.  Recall the other half of Fox's troublesome phrase: as a share of GDP.  The Laffer Curve doesn't predict that lowering tax rates will raise taxes as a percent of GDP.  In fact, a tax cut - almost by definition - is precisely the opposite, a reduction of tax revenues as a share of GDP.  Supply-side theory argues that absolute revenues will rise, even if you reduce the ratio of taxes/gains or taxes/income.  And that's pretty much the whole point of the theory and the school of economic policy built around it.  (Not sure how Fox missed that either.  We know he's at least aware of Arthur Laffer - he graciously acknowledged him to be a "bona fide economist" in a similar "tax cuts don't increase revenues" piece a few months ago.)

Of course, that's also exactly what's happened.  Individual income tax revenues since 2004 have shot up more than $350 billion (a compound rate of 13% per year, or 44% cumulatively over those three years).

Empirically, it's generally a fool's errand to try either to prove or disprove (or at least to quantify) income's tax rate elasticity, 1) because there are too many factors you can't control for (exogenous macroeconomic changes, bubbles, wars, etc.), and 2) because it's hard to know where you're starting from on the Laffer Curve.  If you're already at the peak, then reducing tax rates won't increase revenues (of course, that doesn't mean it's not still a good idea - maximizing tax revenues certainly isn't equivalent to optimizing tax revenues).

Still, while even a well-reasoned argument for or against supply-side theory, based on a properly interpreted set of observations, is pointless enough to begin with, Fox has raised the exercise to a new level of fatuity by looking at irrelevant data and apparently failing to grasp the central thesis of the theory.  His rebuke was hardly the "official word" on whether capital gains tax cuts increase revenues, but it certainly was a singularly unsound one.

ISM Data Shows Service Sector Back In Growth Mode

Each month, the Institute for Supply Management releases a report on the non-manufacturing sector of the economy, along with an index meant to capture the rate of expansion or contraction in the service sector.  After spending the first three months of the year below 50 (suggesting contraction), the NMI index jumped to 52.0 in April, surprising economists who were expecting it to slip to 49.1.

Despite its general acclaim, I'm not the world's biggest fan of ISM's methodology (and have previously aired some grievances about it).  While I'd argue one does well not to put too much stock into the precise levels of ISM indices, they're somewhat more useful in detecting broad directional shifts.

Depending on whether you want to discount the January dip as noise in the data, the following three months' readings suggest the service sector (which accounts for 80% of jobs and 64% of GDP) either recovered swiftly during the first quarter and is continuing an upswing, or never dipped into contraction in the first place.  Either way, GDP still managed to grow (and perhaps to accelerate) during the January-March quarter, despite an average NMI reading of 47.8.

With the index now pushing significantly higher, it's another disappointing day for recession bandwagoneers.  Sensitive to the plight of economic doomsayers, the Associated Press has tactfully refrained from reporting on the surprisingly good economic news at all, opting instead to leave their un-updated pre-market dose of morbidity dangling out there as their final word on the subject.

Investors were awaiting a key reading on the U.S. service sector. The Institute for Supply Management is expected to say its April index of nonmanufacturing activity came in at 49.3, indicating a small contraction, after March's similar reading of 49.6, according to economists surveyed by Thomson Financial/IFR.

We'll see an update sooner or later - it may just take longer than usual for the AP economics desk to find a way to spin this unmistakably good news into a sign of certain economic ruin.

Heavy-Hearted Teen Documentarian Captures Baffling Global Warming Consequence

Disappearing pack ice?  Check.  Animals tapped on floes?  Check.  Antarctic creatures apparently displaced some 10,000 miles from their natural habitat by the ravages of man-made climate change?  You betcha.

ON THE NBC nightly news there was a heart-throb report of an attractive British teen-ager who had skied across the North Pole with her father to demonstrate how the Arctic ice pack is receding in the face of global warming. Oh, horror. Oh, how terrible.

The pictures were beautiful: Her pretty face, her gentle smile, her soft voice, her snow-crusted parka, the blue skies, the brilliant white ice, the cascading chunks of ice calving from glaciers, the two penguins standing on an ice flow.

Wait a minute. Penguins? At the North Pole?

Tragic.

You can watch the news segment here.  The wayward penguins show up about 12 seconds in.

In fairness, the not-shot-anywhere-near-the-north-pole video may not be from the young lady's film, but rather stock Antarctic footage that an ill-informed NBC News producer threw up over Lester Holt's shoulder to zest up the segment a bit.

(HT: Stop the ACLU)

Candidate Of Light and Hope Favors Deregulation?

It looks like Barack Obama has taken a page from the Republican playbook, as he's pledged to loosen the federal reins on American business.  And which industry does the Senator believe to be in most dire need of deregulation?  Nuclear power?  Healthcare?  Financial Services?

Nah - that's the "old politics".  A New Kind of Politician deregulates organized labor.  Specifically the historically corrupt, mobbed up Teamsters union.

Sen. Barack Obama won the endorsement of the Teamsters earlier this year after privately telling the union he supported ending the strict federal oversight imposed to root out corruption, according to officials from the union and the Obama campaign.

It's an unusual stance for a presidential candidate. Policy makers have largely treated monitoring of the International Brotherhood of Teamsters as a legal matter left to the Justice Department since an independent review board was set up in 1992 to eliminate mob influence in the union.

As for whether Obama's unusual endorsement bait represents a reasonable policy shift, the campaign notes that the Teamsters are in fact less mobbed up than in the past.

... John Coli, vice president for the Teamsters central region, who brokered the Teamsters endorsement, said Sen. Obama was "pretty definitive that the time had come to start the beginning of the end" of the three-member independent review board that investigates suspect activity in the union. Mr. Coli said that Sen. Obama conveyed that view in a series of phone conversations and meetings with Teamsters officials last year.

Obama spokesman Tommy Vietor confirmed the candidate's position in a statement to The Wall Street Journal, saying that Sen. Obama believes that the board "has run its course," because "organized crime influence in the union has drastically declined." Mr. Vietor said Sen. Obama took that position last year.
...
[Teamsters President James] Hoffa has spent much of the past month campaigning for Sen. Obama in Pennsylvania and Indiana, which holds its primary Tuesday. Mr. Hoffa has toured the state in a noisy brigade of 18-wheel trucks, stopping at warehouses and distribution centers along the way to praise Sen. Obama.

The special oversight to which the Teamsters are subjected was voluntary, a condition they accepted in order to escape a racketeering charge 20 years ago.

... Teamsters agreed to federal oversight in 1989, signing a consent decree to settle a racketeering lawsuit brought by the Justice Department. The consent decree required the direct election of the union president and other officers by rank and file members, in an election overseen by a court-appointed election officer. (Before, the president was elected by delegates.) It also set up a three-member independent review board to investigate corruption within the union.

But Teamster corruption and mob ties are a thing of the past, right?

Teamsters officials say that over the past 16 years, the influence of organized crime has been largely eliminated from the union, and the consent decree is now an unnecessary burden. The union says it spends $6 million a year to comply with the decree.

The review board's caseload has dropped significantly over the years, to eight cases in 2007, from 70 in 1992. In 2006, one union member was permanently barred from the union for associating with a known member of organized crime.

And if they've managed to whittle down the rate of suspicious incidents to a mere eight/year under a watchful Justice Department, just imagine how squeaky clean they could be if everyone just left them alone.

"Big Euthanasia" Resents the Competition

Prolific animal destruction group PETA has taken aim at the jockey who rode Eight Belles to a second place finish in Saturday's Kentucky Derby before the filly had to be euthanized.

Gabriel Saez was riding Eight Belles when she broke both front ankles while galloping out a quarter of a mile past the wire. She was euthanized on the track.

PETA faxed a letter Sunday to Kentucky's racing authority claiming the filly was "doubtlessly injured before the finish" and asked that Saez be suspended while Eight Belles' death is investigated.
...
Guillermo said if Saez is found at fault, the group wants the second- place prize of $400,000 won by Eight Belles to be revoked.

As we explored last week, the ostensible animal advocates maintain a goulishly high fatality rate among the animals they "rescue" (the prognosis for animals in PETA's care being more than twice as grim as for dogs shot into space in the mid-20th century).

I guess when the group sees a noble creature prematurely meet its maker in what ought to be a less lethal environment (i.e. anywhere outside PETA's custody), it perceives a threat to its dominance in the animal death trade.

(HT: Drudge)

Salad Is Murder!

Good grief.

Hillary Hexes, Slays a Pretty Horse

As a Philip, I find no humor in this situation whatsoever.

The filly Eight Belles finished second behind favorite Big Brown in the Kentucky Derby on Saturday, then collapsed with two broken front ankles and was euthanized after crossing the wire.

Eight Belles was the first filly since 1999 to run in the Derby; the last to win was Winning Colors in 1988. She didn't press 2-1 favorite Big Brown down the stretch, and he drew away to a 4 3/4-length victory.

Still, Eight Belles was a sentimental pick by 157,770 fans, second- largest crowd in Derby history. She even had the support of Democratic presidential candidate Hilary Clinton. Eight Belles repaid their faith by returning $10.60 and $6.40.

Dow Just Barely Scrapes Out Year-To-Date High

That was quite a photo finish to a somewhat nauseatingly volatile day, but the Dow Jones Industrial Average finished at 13,058.20, just 0.01% above the previous 2008 high close of 13,056.72, back on January 3rd.

I blame all that infuriatingly good news.