Rossputin.com

Although I’m not European, I was happy to see the French get one right, voting “Non” on the EU Constitution. In typical French style, however, they got it right mostly for the wrong reasons.

The most reasonable opposition argument, but a minority of the no votes, came from people who believe it is a major mistake to give up national sovereignty to bureaucrats in Brussels. Imagine all our governors giving up their power to one non-American super-governor who worked from Toronto. A great reason to vote no, n’est-ce pas?

One could also have rightly objected to the length of the Constitution, well over 200 pages in total, making it impossible for almost anyone to understand and doing nothing to reform the over-regulated style of most European countries.

But the main impetus against the Constitution was from leftists who fear competition from other European workers as well as partial sale of government-owned enterprises to the public through stock issuance. In other words, the main reason the French voted no was because they want more socialism rather than less, despite the decades of evidence within and outside France that such policies are a primary source of unemployment and prevent increasing standards of living. The left argued in no uncertain terms that capitalism is bad for workers. Given the economic history of France, I doubt anyone making the argument has ever actually worked in a capitalist system.

The other argument which worked fairly well for the anti-Constitution forces was immigration, namely fear that the open borders laws within the Constitution will allow more Muslims to immigrate into France, either from countries currently within the EU or more worryingly, from the potential entrance of Turkey into the Union. France is now about 10% Muslim, a fact which the average Frenchman finds disturbing and frightening. Given the rise of anti-Semitism in France and the current state of Islam around the world, the are right to have concern. In fact, it is probably this issue more than any other that will cause the Dutch to vote down the Constitution on Wednesday as they are still outraged at the killing of a popular film maker by a gang of radical Muslim youth.

So while there were excellent reasons to vote against the EU Constitution, the French chose other reasons: Socialism and xenophobia. The strength of these motivating factors is not a cause for optimism about France or greater Europe. Leave it to the French to turn a smart political outcome into just another French mistake.

re: Judicial Nominees Compromise Was Hard-Won (Washington Post, 5/28/05)
http://news.yahoo.com/s/ap/20050529/ap_on_go_co/filibuster_behind_the_scenes

New reports of Senator Harry Reid asking "moderate" Democrats within minutes of their agreement on judges to filibuster two judicial nominees show Republicans what sort of person they are competing with. They should have known, and the moderate Republicans who joined in the compromise to prevent the nuclear option must now realize that their actions have turned into a clear loss for their party and the President.

Combined with the Democrats’ essential filibuster of John Bolton, we see that the ostensible good will of the “Gang of 14” is not shared by the leaders of either party, particularly not by the Democrats, and is thus nearly worthless.

For the Republicans it is actually worse than worthless, causing them to squander an historic opportunity to reset the judicial nomination process back on to its historical and constitutional track. The Democrats have successfully outmaneuvered the Republicans yet again while Bill Frist could only stand back and watch in dismay, understanding the consequences for his party and maybe for his own presidential aspirations.

Harry Reid’s behavior was devious, cynical and probably unethical. Given his recent history, however, the Republicans who supported this compromise have only themselves to blame for naively believing he would act any other way. Now they and the GOP will suffer the consequences until this same group of weak-kneed “moderates” realize that Democrats have violated the spirit of the agreement…and always planned to.

[I urge the Republicans to take the initiative as soon as they can politically to remove the ability to filibuster a Supreme Court nominee and to prove that they are not as politically stupid as the Democrats continually make them look.]

re: Owens Vetoes Gay Rights Bill (Boulder Daily Camera 5/28/08)
http://www.dailycamera.com/bdc/legislature/article/0,1713,BDC_16336_3813582,00.html

To the Editors:

I offer Governor Bill Owens a one-handed clap for his twin (fraternal not identical) decisions on issues regarding “protection” of homosexuals. In one of the goofiest pieces of legislation I have seen in a long time, the Democrat-majority state legislature approved a bill which would have prevented discrimination on the basis of “gender variance”. It was basically the Colorado Transsexual and Transvestite Protection Act.

Even its supporters acknowledged that the vast majority of complaints which would probably be filed under the law would have not been worthy of further action by the government, and most of those would be settled before such action was taken. But at least we would have had to create another bureaucracy to deal with a half-dozen real cases per year.

In fact, I think it would have been a great way for an unscrupulous person (with a sense of humor) to try to play our lottery…I mean judicial…system for some unearned income. Just have John dress like Jane for the day and then sue the boss when he tells you to go home and change.

So, I applaud Governor Owens’ veto of this insane nanny state bill….but you might not hear me because I’m only applauding with one hand following Owens’ signing a bill which defines certain crimes against homosexuals as “hate crimes”. Ironically, gay rights activists are also unhappy with Owens’ inconsistency…but that’s because they wanted both bills passed and I prefer neither.

I don’t object to this bill because I’m homophobic…far from it. I oppose any hate crimes legislation. If I beat somebody up, I should get punished the same way no matter what the reason (other than legitimate mitigating factors like self-defense.) This country has gone much too far in creating one victim group after another, the effect of which is to make a system where everyone who is not white, and especially white and Christian, is made to think that they have some claim on this majority of the country just by virtue of being different. [For the record, I’m white but not Christian and I don’t feel the need to be named as part of a group which wants to define itself as a victim.]

As odious as homophobia or racism is, people must be permitted not to associate with whom they do not want to simply as a corollary to the First Amendment’s right to free association. This is true whether or not you think their reasons are reprehensible. Similarly if someone commits a crime against a person, the punishment should be based on the crime and not on the race or sexual orientation of the victim.

Murder is wrong. Assault is wrong. They are not more wrong when committed against a minority group than against a Caucasian…even if committed against a minority because of his minority status.

So, in the weak-kneed style typical of recent Bill Owens, he caved in, presumably in the interest of getting along.

Owens, who was a political hero for his role in getting the Taxpayer’s Bill of Rights passed has become an enemy of economic liberty. Creating another group which can claim victimhood is another step down that nanny state road. Owens should be ashamed and even my one-handed clap is probably too generous.

See "Whose to Blame? Hedge Funds"
and "Hedge Funds Are Stumbling but Manager Salaries Aren't"
(both NY Times, 5/27/05)

To the Editors:

Your recent focus on hedge funds, including two articles on Friday (May 28, 2005), is interesting and concerning. Mainstream media often portrays hedge funds as wildly risky and the cause of every negative market event, and their managers as greedy gun-slinging cowboys…all of which is untrue for the vast majority of hedge funds.

The name “hedge fund” correctly gives the implication that these investment vehicles generally try to minimize risks through hedging and other creative strategies. Of course there are some aggressive managers who use leverage to take more risk rather than less…and that’s OK too.

Problems can occur, such as with Long-Term Capital Management where theoretically hedged positions turned out to have a soft underbelly ripe for attack, namely that markets which “should” correlate can at least for a time diverge wildly.

To take a simple example, imagine buying a gold stock and selling gold futures assuming that the gold mining company will do better than the metal itself, essentially trying to capture “outperformance.” It is possible that gold futures could rally but that some other news at the gold mining company could hurt the stock and this “hedged” position incurs losses on both sides. Although this sort of financial misfortune is possible, without knowing the outcome in advance the position is theoretically much less risky than an outright purchase of gold stocks or short sale of gold futures.

Most hedge funds are fairly small by financial market terms and go through clearing companies which add a further layer of risk management. It is a rare occasion where a fund gets so much clout that banks ignore their risk management duties for fear of losing the fund as a client…and it is even rarer now after “genius failed” at LTCM.

It is not surprising that hedge fund growth is slowing. The space is getting very crowded. In 1999 everybody’s next-door neighbor wanted to start an internet company and become a dot-com millionaire. (Unfortunately I invested in a few of these.) The hedge fund phenomenon is similar but much smaller. It is less risky to society as a whole because even if many funds fail they will cause a much smaller net loss of wealth than the bursting of the internet bubble. And they will cause it among people who can afford the losses more easily than the average brokerage customer who got sucked into buying CMGI at over $200/share just to watch it go to $2.

There are “accredited investor” requirements for hedge funds meaning that people have to be relatively wealthy and financially sophisticated to participate. So, other than prosecuting managers who commit outright fraud, government should keep hedge fund regulation to a minimum. Even Alan Greenspan agrees. It is not government’s job to prevent people from taking risk, particularly risk which is adequately explained to them.

As to fund manager compensation, class-warfare descriptions like “the rich keep getting richer” are inappropriate, and saying “It’s the salary, not the return” is simply wrong. Consistenly generating market-beating returns is a hard-to-find skill similar to being an all-star player in the NBA. Yet we don’t often see newspapers implying that Shaq’s pay package is unfair or that the team owner is making a mistake paying him. And hedge fund managers are helping other people get rich, not just putting a ball through a hoop.

Although the 1-and-20 fee structure can earn big paydays for managers, for many funds the 1% annual fee may not be enough to cover the costs of operating the business, and the 20% share of profits only comes if there are profits. The interests of a fund manager are thus much more closely aligned to the interests of his investors than in many other areas of finance…further reinforced by managers often having a large percentage of their own net worth in their funds. For a manager who earns millions, or hundreds of millions, the proper reaction should be a big “thank you” because of the massive wealth he has earned for his investors.

Hedge fund mangers with a notable exception in George Soros generally do not seek attention. I find it particularly interesting that the most famous fund manager has the worst performance among the most highly paid managers…and that he is the only one who has made a second career of bashing capitalism and free markets, but I digress….

PUBLISHED in the Washington Times (5/24/05):
http://www.washingtontimes.com/op-ed/20050524-093526-9220r.htm

re: Ehrlich vetoes Wal-Mart bill on job benefits (Washington Times, 5/19/05)
http://www.washingtontimes.com/metro/20050519-105208-9350r.htm

A Letter to the Editor which I wrote to the Washington Times was printed in yesterday's paper. Per their exclusivity policy I'll have to ask you to read it by going to their web site using the first link in this note.

Here is an excerpt:

Maryland residents should breathe a deep sigh of relief after Gov. Robert L. Ehrlich Jr. vetoed a bill aimed at the heart of the state's economy ("Ehrlich vetoes Wal-Mart bill on job benefits," Page 1, Friday).

The "Wal-Mart bill," yet another back-stabbing attempt by unions frustrated with Wal-Mart's success at keeping unionization out of its stores...

Jay Ambrose, former Washington director of editorial policy for Scripps Howard News Service, has written an article about the contrast between Middle Eastern Muslim behavior and Western behavior. You can read it here:
http://www.washingtontimes.com/commentary/20050521-100536-9923r.htm

In it he quotes me from my piece on "Flushing the Koran".

Click the link below for an excellent article by Peter Ferrara, once with the Cato Institute but no longer, about why wage indexing is not inappropriate and why fighting for price indexing is hurting the argument for personal accounts.

I must admit I've been inclined towards price indexing, and Mr. Ferrara's argument is a new one to me...I'll have to think about this again because he is quite persuasive.

http://www.townhall.com/columnists/GuestColumns/Ferrara20050524.shtml

re: AFL-CIO trust backs deal for affordable rental units (Chicago Tribune, 5/23/05)
http://www.chicagotribune.com/news/local/chicago/chi-0505230115may23,1,1476213.story

[Here's an amazing story about an AFL-CIO bribe...sorry, I mean investment, to get into building low-income housing in Illinois.]

The AFL-CIO is buying a jaw-dropping $250 million in Illinois bonds...in return for which the state guarantees that the required building will be done by union workers. In any other business people would go to jail for this barely-concealed bribery, but between the fact that it's the AFL-CIO and Illinois it just seems to be business as usual.

I can't help but smile at the use of the word "collaboration" to describe this union-government relationship whereby a union pays the government not to allow competition which would allow government-owned housing to be built at lower cost. The Governor might claim that the state needs the union's "investment" to fund the housing. But financial markets would almost certainly fund such projects at lower interest rates if the building was done using fully competitive bidding. If it's true that the state needs the union money it is only because the state improperly gives a guarantee to the union which would make the investment a bad idea for real investors...meaning that it's a bad idea for Illinois taxpayers as well.

I wonder how union members will feel when they see their union dues bills knowing that their leadership is sitting on a measurable fraction of a billion dollars.

In the meantime, citizens of Illinois bear the burden one way or another of the much higher costs of using union labor and should be outraged that Governor Blagojevich has the nerve to demonstrate so overtly that still another part of Illinois government decision making is for sale.

see Beef Makers Can Be Forced to Pay for Ads

In another disappointing ruling from the Supreme Court, the Justices ruled 6-3 that beef cattle farmers can be required to pay into a fund for the purposes of advertising that beef (and not just American beef) is good food.

The case ended up being argued around whether the program is government-run or run by a private industry group; the majority ruled that it is government run and that the government has full authority therefore to require these types of contributions.

But for me, it's irrelevant whether it is a government or private program. Just as people must have the right to say what they want to, they must also have the right not to say what they don't want to. This is the flip side of McCain-Feingold. Today's case was about a rule which should have been found a violation of the First Amendment by requiring unwanted speech and campaign finance restrictions should have been found a violation of the First Amendment by preventing free speech.

Our Republic is in trouble when our Supreme Court does not correct what most clear-thinking Americans would consider to be obvious challenges to our basic Constitutional rights.

re: America Wants Security (Paul Krugman, NY Times, 5/23/05)
http://www.nytimes.com/2005/05/23/opinion/23krugman.html?

To the Editors:

Paul Krugman’s characterization of Maryland’s “Wal-Mart bill” as “pro-worker” turns economics and free markets on their heads. The bill would have required any company over a certain size to spend 8% of payroll on health care benefits. It is hardly a surprise that only Wal-Mart happened to meet the size requirement of a bill pushed by unions.

This proposal is an outrage on many levels. It is anti-worker as it would cause thousands of Marylanders to lose their jobs. It is anti-consumer because Wal-Mart is a major source of consumer goods at affordable prices. It is anti-free-market as the government has no business telling a company how to structure employment contracts voluntarily entered into by Wal-Mart and workers.

Wal-Mart’s low price strategy causes it to run a gross operating margin of less than 6%. This means that higher health care spending could only come by lowering workers’ salaries and not by taking from the profits of Krugman’s constant target: businesses which provide nearly everything American shoppers want.

This would suit the unions well, allowing them to use the lower wages as a reason to encourage unionization in a company that has succesfully avoided it, a key reason they can keep their prices so low.

This cynical bill should have been titled the “Coercion to Unionize” bill. Krugman’s claim that the bill was pro-worker is simply union propaganda.