Indy Telecom & Industrial Media

Here are some links for this week –

• Analysts Lose 17% for Investors in Brokerage Picks — Twice the decline of the Standard & Poor’s 500 Index.
• Warren Buffet’s bet against hedge funds — I agree with a lot of what Mr. Buffet has to say; this is just not one of them.

Here are some interesting links that I’ve been meaning to post for a while –

• Old-School Economics: An interesting article on the NYT on the current recession stagflation.
• Anti-bubble: What’s up with all these attempts to coin weird sounding terms, anyway?
• It’s not over until the fat lady sings.

Last week, it was revealed that a “rogue trader” named Jérôme Kerviel working at the French bank Société Générale managed to supposedly cause a loss of $7.2 billion (€4.9 billion) for the bank.

Now, while it is quite possible that Kerviel was far from innocent, it is not easy to believe that a single trader, who apparently had very limited authority and handled back and middle-office work could have lasted this long unnoticed while playing with billions.

If he’s caused a loss of ~€5 billion on the futures market, it is quite likely that the exposure of his positions were quite possibly ten times that amount — i.e €50 billion — or more. That’s half the total capitalization of the bank. It is disturbing to hear that a small trader who is a nobody could gamble with such large sums and go unnoticed.

Even worse is SG’s claim that Kerviel did this with no person gain for himself. It could be that like all rogue traders, all Kerviel wanted to do was to hide his losses, and if he had recovered from them, nobody would have heard of him. And it is quite possible that since Kerviel does do back-office work, he could have taken positions and verified them himself, for his own orders. That is believable if Kerviel were known to be either a financial or a computing whizkid, neither of which seems to fit his profile. So, it is very likely that he had at least one accomplice to help him along — which contradicts SG’s claim that he was supposedly working all alone.

Now, I’ve read another theory which seems a lot more interesting. SG probably has more losses than it lets up, and what better way to get it all written up than to find a fall guy and blame it on him? Once you do this, you can simply ask for an increase in capital and you are suddenly a very attractive buy-out/merger target.

Besides, who cares about accountability when you can have other banks pull you out in the spirit of camaraderie, right?

To quote the poster Rocket –

Sink the damn bank. We’ll find a fall guy and then call for a capital increase and now the bank becomes even more attractive to French banks because of it’s low price. Thus you create a monster like BNP-SOCGEN and France conquers the banking world with another giant.

SOCGEN didn’t need to increase their capital. They could have absorbed the loss in 2 years with the profits they make, so something is rotten in Paris. This is unheard of a company increasing their capital 5 minutes after they discover a “fraud”

This way. French banks keep one of their own and another French giant is artificially created “de toute piece”

In the past France manipulated the free market and competition through subsidies and Monopolies today it is through stinking financial “montages” “Liberation de la croissance” will be reduced to increasing the number of taxis. It sounds so phony. The good ol’ boys are all in it together.

I now understand why the French are nostalgic for Marxism with the kind of gutter capitalism they practice.

These guys make Nick Leeson look like an amateur.

Here are some interesting links from this week. Expect more Friday/weekend link-fests in the days to come.

• What does Goldman know that we don’t? — An interesting take on how Goldman Sachs escaped the subprime crunch that’s affected just about every other Wall Street major firm out there. (via Paul Kedrosky)

• CEO of the Princeton Economics Department? Goldman Sachs? It’s all the same to me! — Democrat Budget Committee Member Doesn’t Know the Difference between Treasury Secretary and Federal Reserve Chairman.

• You know you’re in a recession when they tell you to just take the clothes — Funny clip of Erin Burnett on Conan O’Brien’s show. (via DealBreaker)

The NYT has an excellent article by Professor Tyler Cowen on how a falling USD is not all bad news. The WSJ also has a related article that talks about how the USD may actually rebound.

The crux of both the articles is this that while the USD may have had a significant fall (~19.8%), it still isn’t grounds for fear. For one, it has definitely helped bridge the trade-deficit gap because imports coming into the US are becoming more expensive while exports going out from the US are becoming cheaper.

In fact, some of the people hardest hit by the falling USD are European businesses. As the USD falls, it becomes harder for them to compete in their own local regions because it is a lot cheaper to buy American stuff paid for in USD than it is to buy European stuff paid for in Euro.

Secondly, the WSJ talks about a 30% fall in the USD to equalize the trade deficit — and we’re almost at 20%. Now whether the USD falls another 10% remains to be seen, but once again, that need not necessarily be a bad thing all around.

Also, other economies in the world are in just as bad a shape (or worse) than the US economy. British, Canadian, German and French economies are also struggling, and the falling USD isn’t necessarily helping them, either.

Now, the Chinese are whole another story. That’s a mixed bag — while they have over a trillion in dollar-dominated assets, they aren’t too particular about dumping it all overnight, simply because of what it might do to their assets. It is in their best interests to have a strong dollar, especially since we are their largest consumer.

The biggest problem that’s likely to arise from a falling USD is of course worries about volatility. A shaky currency is not good for any economy, and ours is no exception. And of course, the middle-east, who make money off oil, no matter which way things go.

I think that over the next quarter or so, the USD will slowly stabilize, and that the fall in the USD that’s happened is not necessarily a bad thing for us.

Recently, the United Nations ruled that tasers are a form of torture. According to the UN’s Committee Against Torture, “The use of these weapons causes acute pain, constituting a form of torture.” And given the increasing number of taser disasters and deaths in the US and Canada, it was long due that someone took attention of this.

Now let’s think about this for a second. The moment you give a non-lethal weapon in the hands of someone, they are more likely to use it than a lethal weapon simply because it is non-lethal. And with everything else, you run the risk of abuse — when something is non-lethal, the abuse is likely to be more frequent.

For instance, a cop is less likely to shoot someone who is abusing him or her but a lot more likely to tase someone because he or she knows that the weapon is non-lethal and therefore, can be used a lot more frequently without (deadly) consequence. As a result, we have a lot of people who would otherwise not have used a gun use a taser.

So what does this mean for TASER International? I remember seeing a recent Wallstrip where they talked about how TASER International is trying to get into the regular consumer products industry.

One of the two points that they brought up was the potential for lawsuits when tasers start replacing the pepper-spray. It’s one thing for cops to use them — but it’s quite another when everybody and their brother starts using them. Imagine that frat party, with tasers thrown in for fun. Or imagine kids getting hold of them from their Mom’s handbag.

The other point was of course the NRA — they are perhaps one of the most powerful lobbies in this country, and having tasers replace guns in the home-protection market is probably not in the NRA’s best interests.

A quick look at TASR’s stocks tells us that they are a long way off from their 2004 high of $31.65, trading currently at $13.04. So, this UN ruling is probably not going to help them, either. After all, imagine a consumer product that’s deemed a torture device by the UN.

Of course, for all we know, it may have no bearing whatsoever on how the stock ends — everyone knows that cigarettes cause cancer, but that certainly hasn’t put a serious dent in tobacco sales around the world. Right?