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Laughing (or something) all the way to the bank

The action on the financial field is faster than a video of a football game played in fast-forward. This time yesterday, the market had a sinking feeling. Today, it's sniffing glue. Up, up, and away.

It's hard to follow from minute to minute what actually is happening, what is rumor, what is hope, what is sheer dementia. Apparently, the Fed and the Treasury have locked themselves in the panic room and decided to donate the United States to the banking industry. The government will take on all the toxic debt and radioactive derivatives that the financial names are sinking in like quicksand. It'll also guarantee money market funds, those ultra-safe investments, one of which just failed.

Of course, the government can't simply pay off the losses of the banks, savings and loans, and investment banks like Daddy writing a check. It is the biggest debtor of all, a Red Giant star of debt around which all the little overwhelmed institutions circle in orbit. So the Treasury rides in like the Cavalry, armed with two multi-megaton weapons: the power to borrow yet more money, and the power to print vaporware dollars. If you think your tires are inflated, just watch the U.S. currency — that'll show you inflation.

Bear markets proverbially end when the market "capitulates" — everyone decides it's hopeless and sells their investments, so there are no sellers left and nowhere to go but up. Not this time, though; this time it's the U.S. government that has capitulated, agreeing more or less to do anything the financial industry wants or needs.

That includes prohibiting short sales on almost 800 names. It's "temporary" until October 2, but can be extended. Supposedly this is to prevent speculation, which is claimed to be partly responsible for the recent carnage in the markets. I wouldn't know. For now, investors are taking it as a sign from heaven. In hoc signo vinces.

But like all forms of artificial share pumping, it has a potentially gut churning downside. Should the herd get spooked and run for cover again, there will be a huge vacuum under stock prices. With no short selling, in a decline there will be no one to buy to cover their short sales, which normally gives price drops some braking action. It would be ironic if today's madcap buying frenzy turned out to be the prelude to a crash.

It's rare that I link approvingly to the BBC, but I think this article sums up the situation well.

UPDATE 9/22: My mind was out to lunch when I wrote the next-to-last paragraph. Short sellers buy when the market goes up, not down, to cover their short positions. Still, disrupting the normal market mechanisms could have a downside: no short-covering rallies, therefore limiting the extent of share price gains.

Bust of future First Lady unveiled

Queen Michelle Oprahbama-Nefertiti

Just when you thought this presidential campaign couldn't get more bizarre ...

Bold sculpture of Michelle Obama with American flag
across her bare chest

... reads the headline in The Telegraph.

The powerful clay work shows Mrs Obama in the style of an African Queen, wearing large hooped earrings and an "afro pick" comb in her Egyptian-influenced hairstyle.

An American flag is tattooed across her naked chest and the comb is decorated with pearls, the traditional garb of a First Lady, and an American Eagle.

Assuming her consort wins the election, saves the world for all future generations of mankind, and Michelle Obama finally has reason to really feel proud of her country, whichever one that might be, the dress-up (or dress-down) inaugural ball should be very interesting, perhaps the first R-rated program broadcast from the Multi-Cultural (née White) House.

The work, by controversial sculptor Daniel Edwards, is clearly a nod to both Mrs Obama's ethnic roots and her position at the heart of American culture and politics. As her husband, Barack Obama, battles to win the next US presidential elections, she has come under intense media spotlight, and has been likened to former First Lady Jackie Kennedy.

However, Edwards said: "The goal is to create a look for Michelle Obama that eliminates excessive comparisons to Jackie Kennedy."

I don't think anyone will dispute that he has succeeded in that.

A gallery spokesman said: "Look out Oprah, a new 'Lady O's' in charge. Michelle Obama inspires a fashion template change that many First Ladies of the 21st Century may follow, as we witness minorities in this country becoming the majority."

The sculpture forms part of the Inspire America series by Edwards, which includes the Oprah Sarcophagus, and The Iraq War Memorial, featuring a work which depicts Prince Harry as if he had died in combat clutching the cameo-locket of his late mother, Princess Diana.

All hail, Queen Michelle!

The irrelevance of the mainstream media

With every passing day, our newspapers and TV news outlets demonstrate that they aren't worthy of the name. They have simply ceased to make any serious effort to sort the significant from the trivial. The "news" they deal in is a personality parade, combined with whatever is photogenic (hurricanes, floods, angry mobs, etc.).

The news media are like those CD changers set on "shuffle play" in restaurants. A random assortment of a few tracks: Palin, Obama, show business celebrities, identity politics, gas prices. News editors are essentially entertainment editors. They don't seek important stories; their job is to filter out any information that might confuse or bore a populace armed with channel-switching remotes.

Our mainstream news sources seem to be on an island designed by Hollywood and created by computer imagery, where every story must be in the script or it doesn't exist, and there's a star system with its A-listers like Obama, Palin, Hillary. Everyone else is just extras casting. The wider world isn't even atmosphere.

For every 500 stories about Obama versus McCain — neither of whom has any thoughts beyond campaign strategy, and neither of whom as president is likely to change the country's direction — you will find one or two about … well, let's see.

The government's ventures into state socialism in a desperate throw to stop the collapse of the economy aren't working. No one can say where it will stop — will the taxpayers soon own General Motors and Ford, Citigroup, Goldman Sachs? By the time the situation stabilizes, any pretense of an economic system based on private enterprise will be null and void.

Seven years after invading Afghanistan to prong the Taliban and set up a freedom-loving democracy, it was announced yesterday that we are sending 6,000 more Marines to support a Muslim government threatened by a revivified Taliban. Over in Iraq — ah, we're all tired of hearing about Iraq.

Does it matter that Britain's transition to a Muslim country is turning a corner and heading into the homestretch?

Five sharia courts have been set up in London, Birmingham, Bradford and Manchester and Nuneaton, Warwickshire.

The government has quietly sanctioned that their rulings are enforceable with the full power of the judicial system, through the county courts or High Court. Previously, the rulings were not binding and depended on voluntary compliance among Muslims.

Does it matter that U.K. social welfare now taxes what's left of its rapidly emigrating middle class to support Muslim polygamy?

Husbands living in a "harem" with multiple wives have been cleared to claim state benefits for all their different partners.

A Muslim man with four spouses - which is permitted under Islamic law - could receive £10,000 a year in income support alone. He could also be entitled to more generous housing and council tax benefit, to reflect the fact his household needs a bigger property.

Does it matter that at least one European country seems to be on the verge of taking a stand against Muslim colonization?

English former church

I would think all these things matter. But they don't to our American media types, who strut and preen, proclaiming themselves to be professionals, insiders, responsible fact-checkers in contrast to those loony-tunes bloggers without press passes.

"This just in! Sarah Palin … "

Party like it's 1929

I met a traveller from an antique land
Who said: "Two vast and trunkless legs of stone
Stand in the desert. Near them on the sand,
Half sunk, a shattered visage lies, whose frown
And wrinkled lip and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
'My name is Ozymandias, King of Kings:
Look on my works, ye mighty, and despair!'
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away."
— Percy Bysshe Shelley, Ozymandias

Controlled panic is what it looks like so far.

And that's not bad, considering. Over the weekend, two U.S. financial colossi crumbled. Merrill Lynch was acquired by Bank of America in a deal that looks suspiciously like a shotgun wedding: B of A appears to have paid well over the odds. You have to think that the government cut a shady deal involving some kind of whispered "guarantees" to B of A.

At the same time, Lehman Brothers, the 158-year-old investment bank and an A-list name in U.S. financial institutions, declared bankruptcy because no one was willing to buy it. And insurance giant AIG is reportedly paddling furiously against the current as it approaches Niagara Falls.

The Big Blow-Up has begun. It's the inevitable product of decades of an economy based on consumer credit in lieu of genuine prosperity, of institutions from the Treasury to the Fed to the banking system putting the credit pedal to the metal, calling for stronger wine and madder music, building to a demented crescendo like Ravel's Bolero.

Now that it's breaking down, the federales are desperately trying to keep it from crashing all at once and touching off a worldwide depression. Having served for so long as the industry's drug dealer, they are now hustling the patient off to the sanitarium while telling everyone who asks that the economy is resting while it recovers from stress, thank you for your concern.

The good news is that a few more big players will soon be extinct volcanoes. Washington Mutual is probably next. It wouldn't surprise me if Citigroup is being measured for the coffin. Why is that good news? Because it's better to pump the country's stomach and get the poison out. The national gag reflex needs a workout, and it's going to get one. Then, maybe, we can rebuild the economy on a saner, more austere basis — if citizens and, equally important, our politicians can resist the impulse to start a new round of borrowing and spending.

But first, this is going to be a dramatic week, or several weeks. Today is only the curtain raiser. It is not time to go bottom fishing because we have not touched bottom. In my opinion, it's still better to play defense. Shorting and buying puts are only for very experienced and sophisticated investors (I don't consider myself savvy enough to do either, except that I have a position in the ultra-short financials exchange-traded fund SKF), but anyone can sell and go to cash. You don't make money that way, but you don't lose (except to inflation).

As one of our very smart ancestors said, "Keep your powder dry, and don't fire until you see the whites of their eyes."

Disclaimer: I have no qualifications as a financial advisor and could be wrong.

The demography of terror

German sociologist Gunnar Heinsohn says that the West is doing everything it can to stop violent turmoil in the Middle East and Africa. The trouble is, everything it knows how to do is wrong.

If the leaders of the American-led "Coalition of the Willing" had known Gunnar Heinsohn's research, they would most likely never have left their troops in Iraq or Afghanistan. They would quickly give up any thought of intervention in Sudan's Darfur province. They would tell the Palestinian 10-children families that the West will no longer pay for their unrestricted childbirths. Western opinion-makers and politicians would also abandon their pet theory that virtually any act of violence in a belt from Northern Africa to the Philippines – in addition to miscellaneous acts of terror all over the world – are caused by the unsolved Israeli-Palestinian conflict.

And worst of all seen from the prevailing political consensus in the West: Heinsohn does not believe for a second that economic aid and hunger relief in countries with large youth populations can prevent wars, social unrest, terror or killings. On the contrary he is convinced that in some cases material aid may start the killings. This is because starving people do not fight, they just suffer. However, if you give a lot of young men enough to eat and a certain education in a society where there are too many young men so that not all can get the recognition and positions that they feel entitled to, it may lead to violence.

His argument recognizes one of the realities of human psychological and physiological development: young men with testosterone flowing like lava, and actuarially in their healthiest and strongest years, are the most prone to violence of any population group. As long as their societies offer them attractive options and a hopeful future, their most aggressive impulses can be damped or channeled into acceptable outlets. But when societies produce far too many young men above the numbers it can usefully absorb, the young men are frustrated and angry. They go nuts.

The problem starts when families begin to produce three, four or more sons. This will cause the sons to fight over access to the positions in society that give power and prestige. Then you will have a lot of boys and young men running around filled with aggression and uncontrollable hormones. And then we shall experience mass killings, until a sufficient number of young men have been eradicated to match society's ability to provide positions for the survivors.

According to Heinsohn, 80 per cent of world history is about young men in nations with a surplus of sons, creating trouble. This trouble may take many forms — a increase in domestic crime, attempts at coups d'état, revolutions, riots and civil wars. Occasionally, the young commit genocide to secure for themselves the positions that belonged to those they killed. Finally, there is war to conquer new territory, killing the enemy population and replacing it with one's own.

Most societies, including Western ones, have experienced this phenomenon at one time or another in their history. Many have overcome it, reaching a balance between the numbers of young men and available resources. But that isn't true in many Third World countries — especially Muslim ones, where the politico-religious culture encourages dysfunctionally large families.

As Heinsohn notes, "In recent years the West has been facing a gigantic youth bulge in large parts of the Muslim world. This bulge is created by a Muslim population explosion. Over the course of just five generations (1900–2000) the population in the Muslim countries has grown from 150 million to 1,200 million [i.e., 1.2 billion] — an increase of 800 per cent [emphasis mine]."

So-called "humanitarian" aid to desperate countries, given without any conditions to improve their demographic situation, does nothing except allow uncontrolled breeding — adding to what Heinshohn calls the "youth bulge," the cohort of young men with no future in a stable society and nothing to do with their raging energy except fighting and terrorism. It's trying to put out a fire with gasoline.

The standard liberal rejoinder is that we have to keep pouring in economic aid to create economically viable societies. That would be great if it worked. It doesn't. No country on earth — not the United States, not China, not Switzerland, not Norway, none — has or ever will have a need for six or eight or 10 young men per family. In the case of failed states, even less so. The very idea is laughable, so ridiculous that only someone who makes a good living in an international aid agency could believe it.

It's especially loony to keep lobbing resources into dark holes of fanaticism like Palestinian territories, which gives them the resources to breed more young violent madmen.

So you do not believe that the so-called peace process between Israel and the Palestinians is realistic?

"No, and the main reason is the big mistake that was made in Oslo in 1991, when the secret negotiations between Arafat and Yitzhak Rabin started. The error was that nobody took any notice of the Palestinian population explosion. The Palestinian population has multiplied almost 6 times within the last 50 years. We should have done two things: Israel should have stopped its settlements, and the world community should have said to the Palestinians: Every child in Palestine will be fed by the world community as before, because by accepting that every Palestinian child is a refugee, the world community has a responsibility for the number of children born. But from January 1st 1992 you will have to pay for your newborn children, just as a woman does in Lebanon, in Tunisia and in Algeria. That is what they should have told the Palestinians. Why am I mentioning these three countries? Because in those societies a women has fewer than two children on the average. Had we done that 15 years ago, we would have seen a generation of young Palestinian men with few reasons to commit violence against each other or against the Jews. But we did not, and therefore I do not believe in the peace process, even if Hamas should decide to sign everything. Their young men will tear such agreements to pieces."

Heinsohn offers a compelling argument for certain politically incorrect truths, and spells out why it is culturally suicidal for Europe to be welcoming large immigrant populations that can't fit into a modern society and become a burden on the welfare system and such productive natives who remain there. Before long, the welfare system will collapse under the weight.

But he is not himself free from doctrinaire political correctness — hardly surprising for a European, but disappointing in someone who has demonstrated the courage to go against the multi-culti dictatorship. When he says, "For that purpose they [European countries] need young people who have grown up in a high-tech society. It is not because Africans or Muslims are not as intelligent as others, they are just not socialised in a way that makes them useful in our societies," he is either practicing self-protection or is remarkably ignorant for a sociologist. The evidence is in — the average sub-Saharan African IQ is around 70. They are socialized in a way that is appropriate for a low-IQ society. They cannot, as a group (there are individual exceptions, of course) be socialized in a way that is appropriate for a European society.

Heinsohn also has a spectacularly naive idea of the immigration policies of non-European Western countries, which he imagines are based on "quality" rather than "quantity" of immigrants. As if.