Chris Christie and Oscar Goodman: Holding the Line Against The Parasites

(h/t) Mish's Global Economic Analysis and The Las Vegas Review-Journal)

Just like my fellow blogger Mish, every time I see New
Jersey Gov. Chris Christie take on New Jersey's
parasitic teacher and public employee unions, I
want to stand up and salute.

As "The Great Recession" drags on into its twentieth
month, with continuing private sector job losses,
it's time to tell the truth about Unionized Public Sector
Employees - the third group of villains of this piece, along
with the banksters and their corrupt enablers in the
Congress.

In a time when private sector employees have been
battered by layoffs, outsourcing, job exportation, and
the "in-sourcing" of illegal immigrant labor, the unionized
public sector has only one answer - More.

More pay. More benefits. A more lavish retirement program.

There's only one problem. An eviscerated and
impoverished private sector, which pays the taxes that
fund all this generosity, has literally no more to give.

And unlike most elected leaders, Gov. Christie understands
this. That's why he's campaigning all across the state not
only for givebacks in wages and benefit contributions, but
also for caps on property and income taxes to prevent
further grabs by the greed-inspired public sector.

Here's Gov. Christie laying it on the line for everyone:



And in the question-and-answer session that followed a loutish,
overweight, overpaid parasite of a teacher has the gall to
complain:

Here's a partial transcript:

Overpaid, overweight loutish teacher: " You are not compensating
me for my education and experience". (Note: this parasitic lout
is paid $ 86,389 a year plus $20,000 a year in medical benefits
and $20,000 a year in retirement benefits).

Gov. Christie: "Well, you know what, you don't have to do it."
(Huge Applause).

Lout: " Teachers do it because they love it"

Gov. Christie: " Teachers go into it knowing what the pay scale is"
(More Applause).

And out west, here in Las Vegas, we are facing the same problem.

Next to Michigan, Nevada is Ground Zero not only for foreclosures
but for skyrocketing unemployment as well.

Nevada's overall unemployment rate is 13.7% - second highest
in the nation. And in Clark County (Las Vegas), the
unemployment rate is a Detroit-like 14.1%.

And Las Vegas Mayor Oscar Goodman, normally
an ebullient salesman for all things Las Vegas with an
ever-present martini in hand and a showgirl on his
arm, has been turned stone-cold sober by the economic
facts of life.

He has proposed the following to the Las Vegas
City Employees Association (the union representing
all non-uniformed city employees):

1) An 8% pay cut in all classifications, through a
giveback of the last two cost-of-living increases;

2) A freeze at this reduced pay level;

3) Suspension of all step increases, longevity pay,
and further cost-of-living increases;

4) Furloughs and a four-day work week;

5) A split between the city and the employee
of PERS (Public Employee Retirement System)
increases;

6) Abolition of right-of-restoration from layoff
lists and an allocation method for placing re-hired
employees at lower wages and job classifications;

7) An increase in the employee share of health
benefit costs and a reduction in the city contribution.

When you consider that the average non-uniformed
city employee makes from 25-30% more than his
private-sector counterpart and the city is facing a
$40 million budget deficit in the fiscal year beginning
July 1, Mayor Goodman has no choice.

Employee wages and benefits make up an astounding
80% of the city budget - it's the only place that can be cut.

The alternative - drastic permanent layoffs. And if you're
a laid-off city employee, I wouldn't want to be you trying
to get a private-sector job, trying to convince a skeptical
private employer how "efficient" you were in your last
position.

The image of the fat, lazy, overpaid and inefficient
government employee isn't just a stereotype - it's
an altogether accurate portrayal as anyone who has
ever had to deal with government at any level
can attest.

The private sector has already "restructured" by
wage cuts, firing its most highly paid and experienced
employees, placing its few new hires on drastically
lower wage and benefit scales, outsourcing and exporting
jobs to the Third World, and in certain industries hiring
illegal aliens "under the table" wherever possible.

The government has no choice but to follow suit -
because the private sector 's changes have left
nothing more to tax to feed an over-entitled public
sector.

There's nothing left to share but the poverty. And
the sooner public employees are subjected to the
same sort of wage and benefit competition that
happens every day in the private sector, the better
off we'll all be.

So Governor Christie and Mayor Goodman, here's a toast
to you.

I'd raise my martini glass, but as gin and vermouth
are "off-budget" for me for the foreseeable future,
a glass of ice water will have to do.

Cheers.

Deep Horizon, BP and The Gulf: The Oil Industry's Three Mile Island

It's been forty days now.

That's how long it's taken BP (British Petroleum) to try
to cap the runaway oil spill at its Deepwater Horizon site
in the Gulf of Mexico.

Ever since the Deepwater Horizon drilling rig exploded
and sank on April 16, the responses of BP to try to
contain the spill have ranged from the ludicrous to
the bizarre, reinforcing liberal belief in oil industry
venality and incompetence.

In point of fact, however, when it comes to
"incompetence" in dealing with the situation, the response
of BP is nothing compared to that of the government.
Be that as it may, there's plenty of blame for this mess
for all concerned.

To begin with, when it comes to deepwater drilling
competence, BP is not an industry leader. Rather, they
have a reputation in the Gulf and elsewhere for being
notorious cost-cutters and short-cut takers, especially
when it comes to environmental protection and safety
precautions.

In fact, when current BP CEO Tony Hayward (a former
investment banker), took over last year, he said that
BP's principal problem was that it had "too many people
trying to save the world" and not enough people focused
on improving BP's depressed stock price.

Given that sort of mindset at the top, it made a disaster
like Deepwater Horizon all but inevitable. Ironically,
the very depth and complexity of the Deepwater site
actually helped mitigate the disaster - had this event
happened in shallow water, the spill could have been
many times worse.

As matters now stand, we're waiting for "Top Kill" -
the latest in a series of seriocomic "fixes" attempted
by BP to cap the leak. But, laughable as BP's attempts
to fix the problem may have been, they have managed
to be outdone in clownishness only by the government.

Under the direction of renowned geologist and energy
expert Rahm Emanuel, the government did its usual best
not to let the crisis go to waste. In a speech to a Democratic
fund-raiser, President Obama announced an immediate halt
to all further offshore oil exploration, pending "stringent
environmental reviews" expected to last at least until 2014.
According to Emanuel, this to put the problem
"past the next two election cycles."

And, then, when Louisiana Governor Bobby Jindal wanted
to use his emergency powers to build dikes and sand berms
to protect endangered wetlands and marshes, Obama told
him no - no until a detailed "environmental review".
Results - the oil washed up on the marshes anyway,
destroying livelihoods along with an admittedly fragile
ecosystem, and the whole affair degenerated into that
favorite political sport- "the blame game" - with BP and
the Feds pointing fingers at each other with the people
of Louisiana caught in the middle, as usual.

And Congress, busy as always in selling itself out to
special interests for election funds, ran for cover and has
been nowhere to be seen during this whole debacle.
Even Obama, once the obligatory anti-oil-industry
speeches had been made, tried to distance himself
from the whole matter, only venturing down to
Louisiana Friday for a carefully scripted two-hour
"photo op", with press and public access carefully
minimized.

And how will this thing likely turn out? In my
opinion, four things will happen. First, I do
think BP and the rest of the industry will get the
leak stopped. The rest of the Gulf oil industry has
contributed men, materials and money to the effort,
in a not-so-surprising effort to defend their own self
interests. Second, this will wind up doing to the US
offshore drilling industry what Three Mile Island did
for US nuclear power. Only in this case, the industry will
just pick up and move to wherever Brazil, China, India
or Russia can use their expertise for difficult drilling
projects. Thus, while the BRIC countries move toward
energy independence, the U.S. will move to ever-greater
oil dependence on such friends as Venezuela,
Russia, and Saudi Arabia. Third, while "emerging
nations" move forward with "energy independence",
the U.S. will succeed in hamstringing all its energy
projects (not just oil) with ever-greater burdens of
bureaucracy and red tape. And finally, will BP
ever be made to pay for cleaning up the mess?
Don't count on it. Liability will be litigated forever;
and ultimately, the taxpayer will foot the bill
without recompense.

And why not? The one area where the U.S. excels is
in creating ever-greater levels of government waste,
mismanagement, and bureaucracy as the preferred
solution for any problem. Does the "government"
solution for healthcare, financial reform, or chronic
unemployment give you confidence that they can solve
this one?

I didn't think so.

The Class of 2010: Deep Trouble And No Way Out

(h/t Mish's Global Economic Analysis)

It's not easy being a new college graduate these days.

Just as most graduates of the Class of 2009 are resigning
themselves to more-or-less permanent unemployment
or underemployment, along comes another cohort of
new graduates to add to the competition.

According to the Wall Street Journal, these graduates:

"Will enter a labor force that neither wants nor needs them.
They will enter an economy where roughly 17% of people
aged 20-24 do not have a job, and where two million college
graduates are unemployed. They will enter a world where
they will compete tooth and nail for jobs as waitresses,
pizza delivery men, file clerks, bouncers, trainee busboys,
assistant baristas, interns at bodegas."

You can read the original article here.

Oh well, you might say. It's just what you'd expect of
sheltered, middle-and upper-class kids who went to
an expensive private college or Ivy League school,
who graduate with a "useless" Liberal Arts degree.

But, it's the kids with useful degrees (Science, Technology,
Engineering, Mathematics, Business and Finance) who
may be having the toughest time of all.

As my colleague Mish tells it:

"Ten months after graduating from Ohio State University
with a degree in civil engineering and three internships,
Matt Grant finally has a job - as a banquet waiter at a
Clarion Inn near Akron, Ohio.

" "It's discouraging right now" says, the 24-year-old,
who sent out nearly 100 applications for engineering
positions. "it's getting closer to the Class of 2010, their
graduation date. I'm starting to worry more".

And worry he should. Colleges from Harvard University
to Ohio State and everywhere in between are sending
almost two million young men and women a year into an
economy with almost 9.9% unemployment, up from
9.7% a few months ago.

And the problems don't end there. While the economy
is slowly "recovering", it has yet to create any meaningful
gains in employment. And, according to experts, this means
that those unfortunate enough to graduate in this recession
are likely blighted for life, as successive cohorts of graduates
compete with each other in an economy that is producing
progressively fewer and fewer entry-level jobs each year.

And then there's another problem. And that has to do with
the clash of values and perceptions between the new graduates
and those who would employ them.

For starters, let's take a look at the "typical" employing
manager at a company likely to have "professional
entry-level" openings. First of all, he's likely older - in
his 40's to his middle 50's. He doesn't "Facebook" or
"Twitter". If he "texts" at all, it's on one of those oversize
smartphones with a mini-keyboard. If he has a degree,
it probably took him more than four years to get it -
and his graduate degree (if he has one), is from night school.

The one thing he doesn't have is a sense of entitlement -
because when he graduated, between 1977 and 1982, the
economy from an employment standpoint was even
worse than it is today.

He bitterly remembers coming out of college in the
days of Jimmy Carter, with 10% unemployment,
18% inflation, and 21% interest rates. It probably
took him three to five years of trying before he
finally landed the professional-level career
position that gave him his start.

And now he's sitting across the table from
Mr. or Ms. Entitled College Graduate, wondering
just how he could be wasting his time talking
to this inhabitant of another planet, who has
nothing but expectations and no relevant
skills or experience to offer his organization,
regardless of the degree.

And, as he considers your application, he's
thinking of how his own college-graduate son's job
was outsourced to India and how his younger
kids can't find part-time jobs, having to compete
against adult illegal immigrants.

And then he remembers how it was "the college kids"
as much as anyone else that brought us The
Great Kenyan as President and the plethora of
job-destroying laws and regulations spewing forth
from Congress. And he knows all too well that The
Kenyan and his Congressional minions, while destroying
the real economy of Main Street, have given a free pass
to Wall Street and the large multinational corporations
who caused the current economic mess.

And, finally, he remembers the "informal" conversation
he had with his boss, hinting that the few positions they
might create this year should go to his family friends and
relatives, provided they have the right skills and
experience.

Translation: That means no job for you.

But, here's what you can do in the meantime. Take any job
you can find. Move back home if you have to. Keep applying
for jobs, even if you don't expect a reply right away. Try to
develop a new skill unrelated to what you studied in college;
it just might land you that job. And get politically active.

No, I don't mean join the Democrat or Republican parties.
The Democrats are socialists in sheep's clothing - and if
you'd like to see where their policies lead, just look at
Europe - street battles between the masses of private-sector
unemployed and "protected classes" of government employees,
and both of them fighting weak, feckless governments
that can deliver neither a social safety net nor social order.

And the Republicans are just as bad - hiding behind the
mantra of "free enterprise" and "property rights", they
conspired with Wall Street and the great Corporations
to outsource our production base and destroy the
real economy. In its place, they created a Ponzi Scheme
of Debt and Entitlements that we cannot afford and will
never be able to repay.

Outsourcing, job exportation, unchecked illegal
immigration, skyrocketing debt and a destroyed
real economy didn't just happen - they were deliberately
created by a Congress utterly and completely in hock
to the banksters, oligarchs and kleptocrats who profited
from them.

So, when you come home at the end of the day, after
another fruitless day of job hunting or doing your
shift at Starbucks or McDonalds, consider your
political options. Don't be afraid to go extreme -
at this point, you have nothing to lose.

If you are a "liberal" - that is, if you have "progressive"
views on the environment, race relations, class
and gender equity and so forth, you need to take
a good hard look at how those views impact you and
your future. If you look hard, you'll see that future
playing out in Europe right now - with street battles,
skyrocketing unemployment, and weak, indecisive
governments too bound up by "Political Correctness"
to take the bold, draconian, even undemocratic measures
necessary to restore order and a reasonable prosperity.

I'm not talking Hitler here - but a De Gaulle, a Franco, an
Adenauer or a Churchill would not shrink in an instant
from imposing whatever drastic measures might be needed.

And if you don't know who those gentlemen were, then
your education was seriously deficient.

And if you are by some chance a conservative, then you
need to abandon the Republican Party right now, as it
has become nothing more than a club of craven apologists
for Wall Street, the outsourcers, the unfree and unfair
traders, and large-corporation America, none of whom have
a place for you in their scheme of things.

And if the Tea Party isn't exactly your cup of tea (although
Tea is gaining more and more fans with each passing day),
you still have the ultimate weapon in your hands -The Vote.

And all you need to remember is one thing - the fate an
incumbent fears most is being turned out of office at
the next election. So just remember - this November,
if your Senator or Representative voted for the
bailouts, voted for the mess that is "healthcare reform",
voted against financial reform - indeed, if he voted for
anything that benefits the "big boys" rather than you,
your job is simple - regardless of party or ideology,
You Vote For The Other Guy.

It's that simple. Really. And if enough of us put enough
"other guys" (and gals) in office this fall, we just might
get change we can believe in - for a change.

Immigration - We're All Arizonans Now

Wow.

The last post on Immigration brought me more
e-mails and comments than almost anything else
I've written.

Obviously, the failure of the present Administration
to both secure the border and deal with the estimated
twelve to twenty million illegal immigrants presently
in the country has touched a raw nerve in this country.

And what are we doing about it?

With the brilliant exception of Arizona, we've decided
to do nothing, except turn a blind eye to the wholesale
violation of the border and murmur kind words about
the necessity of treating those already here illegally
"humanely".

Translation: The elites have decided. It is best to maintain
"open borders" - so we have the "right" sort of labor force,
and of course, since we can't deport ten to twenty million
people who have broken our laws, the only thing we can do
rationally is forgive them ... declare amnesty.

Here's faux-conservative Charles Krauthammer on the
subject:



And why Arizona? It's Ground Zero for the "Silent Invasion" ;
the uncontrolled flow of illegals into this country.

See the video below:



Illegal immigration is no longer a minor "labor" problem.
Add in the drug-fueled all-out insurgency now happening
in Mexico and the steady stream of migrants could become
an unstoppable human wave.

This isn't a "civil rights" issue, as some apologists
for illegal immigration want us to believe. Rather, this
is an existential threat to the territorial integrity of
the United States, and needs to be treated as such.

To cure the problem. we have to deal with two threats:
first, the migrant flow at the border, and second, the
"fifth column" of activists and apologists for illegals
in the media, in Congress, in academia, and yes,
in the business community.

If illegal immigration is brought under control, there
will be both winners and losers. The losers will include
the Democrat party, who will lose the electoral
advantage of another bloc-voting minority group.
The losers will include those sectors of the business
community, most notably agriculture, residential
construction, and hospitality, who have become
immigrant-dependent. And the losers will also include
the proponents of "racial identity politics", who have
become extremely powerful in the media, in Congress,
and in academia.

But the winners will include the Republican party
and the "Silent Majority" of Americans who pay the taxes
and foot the bill for the continuing failure at the border.
And if recent events are any indication, the "Silent Majority"
is remaining silent no longer.

Arizona Governor Jan Brewer's support has increased since
she signed the immigration law. And former Rep. J.D.
Hayworth, challenging incumbent amnesty-supporter
Sen. John McCain in the Arizona Republican primary,
has seen his poll numbers jump since the bill was signed.
And Sarah Palin has found both her voice and her footing
with her calls for a secure border and no amnesty, drawing
huge crowds in a joint appearance with Gov. Brewer.

On immigration, as on health care, financial reform, taxes,
and spending, institutional Washington and its apologists
in the media just don't seem to get it.

But, in November, when it appears likely that many of
them will be swept from office, our governing classes
just might start paying attention.

Eye on Nevada: Sue Lowden and "Cluckers For Checkups"

The Senate Race in Nevada has never failed to provide
its amusing moments.

But now, thanks to an almost unbelievable gaffe by
Republican front-runner Sue Lowden, Majority Leader
Harry Reid looks likely to prevail once more, and earn
a fourth term in the Senate.

According to the Las Vegas Review-Journal, Harry Reid,
once given up for dead, has surged to the front among
all candidates, leading Lowden 42% to 38%.

Now bear in mind two things: First, when paired with a
generic Republican candidate, Reid still trails 52& to 48%.
And, the poll cited by the Review-Journal comes admittedly
from a Democratic source. But when compared with the
numbers from the same pollster back in February, this is
a remarkable turnaround; back then, Reid polled an
anemic 35%, trailing both front-runner Lowden and
second-place Republican candidate Danny Tarkanian
in hypothetical matchups.

Now, those positions are almost exactly reversed.

And it all has to do with the utter myopia and cluelessness
of Sue Lowden. In a voter symposium on Health care, Lowden
suggested that, instead of health insurance or a national health
care plan, we should try something else - Barter.

Take a chicken to pay for your checkup. I'm not kidding -
I couldn't make this up if I tried.

Here's some video of the original meeting:



The media, of course, were quick to pick up on this. But,
instead of "walking the comments back" , or say that she
was misquoted, she instead re-iterated her comments, saying
"she wouldn't back down one bit".

Here's how the Tarkanian campaign played it up:



And, of course, the nation's comedians had a field day with it.
Here's Jay Leno on "Cluckers For Checkups":



But this isn't the first time Lowden's been in hot water on this issue.

A little background: A former Miss New Jersey, Ms. Lowden
originally came West to to make it in TV news, eventually
becoming a popular local evening news anchor.
Shortly thereafter, she left TV to become the much-younger
"trophy wife" of casino magnate Paul Lowden, who owned a
chain of locals-oriented casinos in Nevada, including two
sizable properties in Las Vegas.

At her urging, Mr. Lowden decided to make health benefits
and anti-unionization two big issues in running his casinos.
When the Culinary union decided to try to organize his two
Vegas properties, Lowden fired all those he could identify
with the organizing effort, and he cut off the health benefits
of all but a few of the remainder - in violation of federal law.

The union sued in federal court - and won. As a result,
the Lowdens were forced to divest themselves of their
Vegas properties in order to satisfy a judgment for damages
and their legal bills. Worse, it made Paul Lowden persona non
grata among his fellow casino operators, whose strategies for
keeping unions out center on good wages and benefits for
their full-time employees.

But the occasion made Sue Lowden a heroine to Nevada's
ultraconservative GOP, and she quickly parlayed the incident
into a career in politics, ultimately becoming Majority Leader
in the State Senate and afterwards Chairman of the Nevada GOP.

In short, she was ideally positioned to boot Harry Reid from
the Senate - until she laid an egg on the issue.

And I'm not surprised. To me she is typical of
the "Country-Club Republicans" - smug, secure in an
"I've Got Mine" mentality, and deeply resentful of
anyone else, especially anyone in her employ, trying
to "get theirs" by striving for better wages and benefits.

It's no wonder that the "Tea Party", which has actually
energized the GOP far beyond the wildest dreams of
the country-club set, wants nothing to do with Lowden
and her ilk. Rather, they are focusing on the "values"
that made America and taking on with equal
vigor the selfishness of the Republican oligarchs and
the thinly-disguised socialism of the Democrat party.

All the Tea Party needs is a credible Leader, and both
major parties could be in serious trouble.

If the Tea Party and Republicans generally can find a
credible re-incarnation of Ronald Reagan, watch out.
But, if Sue Lowden is typical of "mainstream" Republican
candidates, the GOP had best prepare for a long time in the
political wilderness.

The 1000 Point Market Drop - Two Really Great Videos

A couple of really great videos (Courtesy of Infectious Greed
and YouTube) which really depict the crash as it unfolded.

The first is one of shameless shill and all-around investment
Assclown Jim Cramer from CNBC.

How this guy (along with Dick Bove and Steve LIESman)
manages to keep his job I don't know. Suffice it to say if
you take Cramer's advice on anything at all you deserve
what you have coming. Here's Jimbo:




The next is some "stocktrader guy" giving a "webinar" on
day trading.

He's pretty full of himself at the beginning, apparently
referring to a previous session where he was saying
the market was overbought.

But as the market begins its freefall, he goes complete
Dick Vitale or Walter Sobchak with self-congratulation.

Take a look:




Lessons for everyone out there:

1) Be careful about who you take trading or investment
advice from. In most cases, you're better off doing it
yourself if you can. If you can do your own research,
and it makes sense to you, go with it. Before you invest,
investigate - it's your money, therefore it's your
responsibility. If you don't know how to trade or
invest, take some classes and learn;

A fellow I know who has been hugely successful
over the last three years didn't know anything about
investments at all except that he was now laid off and
had a 401(K) distribution and an IRA to tide him over.

Embittered by his treatment by Corporate America
and distrustful of brokers and financial planners, he
decided to do it himself - after he taught himself what
he needed to know. So, he decided to get his securities
license - just to acquire the knowledge he felt he needed
to be successful managing his own money.

Today, as an independent proprietary trader, he's more
than replaced his last full-time income and added to
his trading capital besides. All this in a down market.
He was one of my instructors in the trading course I just
completed. And no, he's not some high-powered Harvard
guy; he's the typical worker that Corporate America is busy
"outsourcing" - his background is IT/Computer Science.

Moral: Learn how, do it yourself, get a comfort level,
and trust your judgment;


2) If you don't understand a stock, a bond, or other
security, stay away. Being still in learning mode, I
stick with two basic trading models that almost anyone
can understand with a five-minute explanation.
I don't do options, futures or indexes - not that I
don't know what they are, but I'm not yet sufficiently
experienced or trained to work with them effectively.

This why Warren Buffet is so successful - you'll
notice he stays away from anything that isn't
traditional "plain vanilla" , that isn't superbly
managed, and that he can't get at a great price.

But, you might say, doesn't he use derivatives,
swaps, and other exotic things in his business?
Sure he does - to protect his real positions in the
real economy. Which is how they're supposed to be
used. Remember, twenty years ago he bailed out
a Wall Street casino - Salomon Bros - and he
propped up another -The Squid - after beating them
down for a below-market price and an above-market
return.

As the world's second or third richest man, who
got that way by taking only the most conservative
of risks, I would say he knows what he's doing.

And all along, he's stayed with what he knows;

3) Trade or invest with the trend - not against it;

4) Use position sizing and risk limitations in terms
of position size to apportion your portfolio. If you
must use leverage, adjust your risk parameters
accordingly. The more leverage (borrowed money),
you use, the tighter your risk tolerance must be;

Bear in mind that Wall Street, before the crash, had
extensively used leverage to expand , not reduce,
the amount of risk they could take on;

5) Buy on rumor, sell on news. Buy when others are
fearful, sell when others are greedy;

And finally, enjoy yourself - trading and investing,
as a full time job, a supplement to retirement, or
just as a hobby can be very rewarding.

And to my mind, reward comes in one color - Green.

The Market On Thursday: The Thousand-Point Bungee Jump

Just when you think that the markets couldn't get any
crazier, they continue to surprise us.

At 2:47 PM EDT on Thursday May 6, the financial
system's "autopilots" suddenly uncoupled and the
markets went into uninterrupted free-fall.

At 2;46 pm, the NYSE and the Dow were cruising along
to another down day in the markets, expecting a (-300)
down day. Profit-taking has been in order ever since
earnings week, and with declining volume, a mild
downtrend was expected. This was totally in line with
my own expectations as a trader, as declining volume
absent other considerations, usually means slightly
declining prices.

And I was expecting this. As a technical trader, I look
at the on-balance volume (advances vs. declines by volume),
in terms of support vs. resistance, comparing broad indexes
(SPY, $spx, $ndx) with trends of support and resistance for
the individual issues I cover. For you technicians out there,
it's a garden-variety OBV support-resistance model.

And I noticed one other thing. Tracing my stocks with
"candlestick charts", I noticed that the candlesticks
appeared to be growing long tails or downward wicks,
which tended to get longer as volume declined. So
I prepared. I stayed up until 2:00 am Thursday a.m.,
tweaking the model, closing out all my long positions
including the profitable ones, and loaded up "All Short"
for Thursday opening.

And at 11:48 am PDT, my patience was rewarded. Until then
most of my shorts were chugging along just fine, but some
had corrected slightly upside, putting me at a loss but not yet
hitting stops. And then - Free Fall!

at 2:48, the Dow dove fifty points. Then, a minute later, down
two hundred. Splitting screens to watch my stocks on one side
and the Dow on the other, I saw the Dow go into what can only
be described as a terminal-velocity dive, ultimately dropping
to 9869.62 - a drop of almost a thousand points in just seven
minutes.

Then, matters began to correct themselves. The Dow then
jumped two hundred; then fifty, then up another hundred,
ultimately closing at 10, 520.32 - a drop of (341.90) for the
day, in line with my expectations.

But during that period, all hell broke loose over here.
Both my cell phone and landline were jammed with calls
from trading pals. Those who couldn't get through were
filling up my IM message box. One trading buddy from
California told me how he could not get through to
Scottrade either online or by phone and couldn't get
either his buy or sell orders executed.

And then, after the markets closed, the explanations
started to roll in. At first, attention centered on a
Citicorp prop trader on the CME who shorted 16 billion
S&P e-mini futures instead of 16 million. And I think that
that was highly unlikely. If you've ever been in a trading
room, traders have assigned stocks or other securities to
watch, with fixed position limits and other parameters.

A mistype like that would have been immediately flagged to
both a manager and a "floor walker" - a roving supervisor, who
would be at the trading station in an instant to ascertain what
was going on. So scratch that explanation.

Next, there was an explanation of a mismatch between
automated "bots" not being able to match buy and sell orders
due to mismatches between allowed position limits and
'circuit breaker" sets between the NYSE, Nasdaq, and the
many "private" off-exchange exchanges such as NYSE
Euronext, Nasdaq OMX (Off-Market eXchange), BATS,
Direct Access, Liquidnet, and others.

These exclusive exchanges, and the closely related
"dark pools" in which results are not forwarded to the
governing exchanges until the close of trading,
are nothing more than "high-limit" private gambling
rooms for the largest automated "algorithmic" traders.
The object with all of these "private" gaming floors
is to prevent "price discovery" and "national best
bid and offer" rules from taking effect and allowing
the ordinary trader or small investor to fairly
participate.

This is what makes "front-running", "flash trading "
"subpennying" and the other abuses possible. If
I'm a deep-pocketed "algo" shop with off-exchange
access, I can do this all day knowing that because
of my private access elsewhere, I can fade any
bid or offer you make and beat you every time.

And that's what I think happened Thursday.
Certain important components of the Dow, notably
P&G and 3M Corp, came under heavy selling pressure
at about 2:40 pm, most likely as a result of related
off-exchange moves in the futures markets.

As it was after 2:30 pm Eastern time, the circuit breakers
were off, and it would take human intervention to
halt trading, which happened - at least on the NYSE.

But that didn't halt the "bots" - the robot traders
on the "sell" side, who simply moved their action
in a nanosecond to the private exchanges and
continued selling.

However, the "buy" bots, electronically noting
the halt on the NYSE, refused to make bids.
Thus the selling pressure continued, with some
truly absurd results - Philip Morris, Accenture,
and Boston Beer (all NYSE) all saw their prices
prices drop literally to zero - until the "front-running"
subroutine kicked in to make a token one-cent "front-run"
bid.

However, once the bots were shut off and humans
intervened, things were, for the most part reset.
In the absence of circuit breakers, The NYSE and
Nasdaq are going to disallow trades that exceeded
a maximum 60% drop or rise from previously
allowed clearings.

But some of these extreme trades are going to be
allowed to go through - most notably some trades
by Goldman Sachs who shorted some issues all
the way down to a penny (at which they covered),
and then re-entered on the longside to take
advantage of the reset.

Reason? They all happened off-exchange - and the
"counterparties" were all other "big boys" who could
take the hit.

Just what you'd expect from a rigged casino - only
this time, it was the "Big Fish" who probably got
hurt most.

If that's true, couldn't happen to a nicer bunch.

But there's also another explanation other than
"algos gone wild", which has to do with politics.
At the same time all this was going on, the
Brown-Kaufman Amendment to the Financial
reform bill was being debated in the Senate, and
this would negatively impact the too-big to-fail,
too-powerful to-regulate crowd on Wall Street.

So the Street might have decided to send their
would-be masters in Washington a message -
Mess with us, and we'll give you a taste of what
we can do to you and the country in the markets.

That message got through - after the markets closed,
the Brown-Kaufman amendment was defeated 33-61.

Lesson for the day? This whole thing needs to be
restructured. New rules are needed - especially
new rules governing "High-Frequency Trading" ,
which as we now see, can as easily "evaporate"
liquidity as they provide it.

No responsible government can allow the markets - the
heart of what's left of the economy - to be held hostage
to the electronic equivalent of a Gulf oilwell blowout.

But until Washington gets some backbone nothing will
change, and nothing will be done.