Croaks from an Unlikely Frog

Jack Handy rises from the masses

Emily Gallagher — Thu, 27 Aug 2009 20:33:39 +0000

I feel like Twitter permits all to fulfill their Jack Handy fantasies — short witty blurbs where the laughter only comes after a long pause…. I guess I could have tweeted that.

Colbert may be the master at this resurrection, of course.

There’s nothing wrong with stretching the Truth. We stretch taffy, and that just makes it more delicious.

This one is about a 28 year-old guy who lives with his 70-something year-old father. It’s like he’s channelling Jack.

shitmydadsays

“It’s watering plants, Justin. You just take a God damned hose and you put it over the plant. You don’t even pay rent, just do it. Shit.”

Health Care Fit for Animals

Emily Gallagher — Thu, 27 Aug 2009 20:17:15 +0000

I thought Kristof was a conservative? This is an article to send to your republican uncle.

A month later, Mr. Potter was back home in Tennessee, visiting his parents, and dropped in on a three-day charity program at a county fairgrounds to provide medical care for patients who could not afford doctors. Long lines of people were waiting in the rain, and patients were being examined and treated in public in stalls intended for livestock.

“It was a life-changing event to witness that,” he remembered. Increasingly, he found himself despising himself for helping block health reforms. “It sounds hokey, but I would look in the mirror and think, how did I get into this?”

Imogen Heap – Canvas

Emily Gallagher — Thu, 27 Aug 2009 20:12:51 +0000

If you’ve ever tried to put words to inspiration, try this song.

Grégoire

Emily Gallagher — Sun, 02 Aug 2009 18:30:26 +0000

Grégoire Toi + Moi MyMajorCompany
This guy became a superstar in France simply by uploading his cheap music video on youtube. Goodbye middle man.

The Pitfalls of Manufacturing a Carbon Market

Emily Gallagher — Sun, 02 Aug 2009 17:57:03 +0000

By Emily Gallagher

Go sit in the corner and think about what you’ve done, carbon! You’re driving us all mad and keeping hundreds of financial wizards employed, trying to figure out why you never follow the price models.

Since 2005, Europe has had the European Union Greenhouse Gas Emission Trading System (ETS). It’s a bizarre market that refuses to behave like that of other commodities – not like oil, natural gas or coal, nor like corn or pork bellies. Currently, the most obvious quirk is that carbon allowances trade cheaply in Europe – so cheaply that companies buy allowances rather than cut pollution. Furthermore, carbon prices do not seem to correlate neatly with traditional commodity drivers, such as long-term demand outlook or negative economic forecasts. This is true for a simple reason: government has a big hand both in the supply of carbon credits and the long-term demand for them. And nobody knows what the government might do.

No longer just a European enigma, this enfant terrible of a market will soon arrive in the United States. The “American Clean Energy and Security Act of 2009,” known as the Waxman–Markey bill, has recently passed through the House, and the Senate will soon take up debate on the matter. Understandably, business groups are squirming; some estimate the bill will have a $1 trillion price tag.

Meanwhile, the mostly-European environmental financial products sector is licking its chops. Last month the Paris-based carbon exchange, BlueNext, announced its plans to offer the emissions products of the U.S-based Regional Greenhouse Gas Initiative (RGGI) by the end of the year. A New York exchange for carbon allowances would give BlueNext a toehold in the American market in advance of the planned federal cap-and-trade scheme. Nevertheless, BlueNext is but one of the energy exchanges currently angling for a spot in the pending market.

ICIS Heren, an energy market news provider, reports that “brokers active in the EU Emission Trading Scheme (ETS) market are now looking to attract US companies…keen to test the EU’s ETS before their emissions are capped by a federal emissions trading scheme.”

Why would a company need to “test” a commodities market, especially considering most emitters already purchase, and, therefore trade in, an array of commodities (such as coal, natural gas, oil, alumina, lumber, etc…)? Because carbon prices simply do not adhere well to a rational trading model, and they never will. This should worry the captains of industry, who will need to navigate this thorny market. Who should polluters blame when carbon prices throw them for a loop? Perhaps they should throw their sludge at the basic economic theory of manufacturing a large-scale commodity market for a complicated negative externality.

While carbon cap-and-trade may succeed in reducing carbon emissions within the countries that practice it, the carbon market will always be riddled with inefficiencies. As a financial product, carbon will never be free of the political influences that reduce scarcity and, therefore, cause market players to trade carbon differently than they would the commodities that release it – making price forecasting an art best left to the gods.

Click here to read Emily Gallagher’s full policy paper.

In Defense of the Uptick Rule

Emily Gallagher — Sat, 01 Aug 2009 02:37:36 +0000

Limiting Volatility in a Market Stacked Toward the Downside

In Defense of the Uptick Rule

By Emily Gallagher

On April 9, 2009, the Securities and Exchange Commission (SEC) released five proposals for reinstating the uptick rule and initiated a 60-day public comment period. Now, nearing the end of that comment period, the opinions of senators and financial commentators on the proposed legislation must be ringing in the SEC’s ears. Jim Cramer, the host of the Mad Money TV program, spoke fervently in support of the uptick rule during his May 4th broadcast while Senator Ted Kaufman, another supporter, noted that SEC Chairwoman Mary Schapiro should “do the right thing and pass the regulation.” Senator Kaufman argued that the holdup to pass it may be a sign that “the SEC doesn’t want to acknowledge past errors.”

In 2007 the SEC suspended this depression era-regulation on short selling known as the “uptick rule.” Today, the commission is debating whether to reinstate a similar rule in order to reduce the kind of downside volatility that hit stock prices, most notably in financial stocks, during late 2008.

The uptick rule says that a stock may be shorted only after the last move in the stock price – the “tick” – was up, not down. It stops the “shorts” from piling on to a stock as it is falling, thereby speeding its fall.

Much criticism has been flung at a regulation that inhibits the short side but not the long side. Critics cite the inflationary bias that it would impart to stock prices. This criticism suffers from a flaw: forces of panic are stronger than those of euphoria. In a crisis, stocks fall much faster than they rise when good times return. The positive and negative movements of stock prices are inherently different. Given the effect that a panic-driven stock market crash can have on the rest of the economy, it makes sense to stop the shorts before they turn a market rout into a panic.

The “uptick rule” presents a mild mechanism to create bumps in stock price slides, and head off self-feeding selling frenzies made worse by spasms of shorting. The rule is particularly valuable in today’s environment, where the short selling market is so dominated by piggy-backing hedge funds.