Category Archives: markets

A Fatal Flaw

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In a piece for Wired, FCC MFWIC Tom Wheeler offered rationalization for his decision to dismantle the Internet. He opened his apologia with this remarkable claim:

This proposal is rooted in long-standing regulatory principles….

That’s the problem. Regulatory “principles” proceed from the assumption that government regulation is a universal and primary good.

Of course, that’s precisely backward—and backwards. A free market is almost universally self-regulating: make a bad product, people find out and stop buying—the producer goes out of business. Lie about a product, people find out and stop buying—even if the product itself might be sound—and the producer or seller goes out of business. And so on.

Almost universally: yes, there are conditions within which government regulation is warranted. But such regulation must proceed from the fundamental assumption that regulating is bad or unnecessary, and the regulation proposer must prove—not merely justify—why this proposed regulation is necessary (not merely useful in some sense).

Wheeler’s regulatory travesty must be halted. Even its mere suggestion is sound reason for Congress to act—perhaps unsuccessfully until 2017 with a Republican President, too—now to reign in, to severely circumscribe, the regulatory authority of all Departments and Agencies.

NYSE Auctions

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In the bad old days of stock auction markets [sic], owners of shares of companies—companies nominally public by their status as a shareholder company—would meet in a crowd, face to face, and offer their shares for sale at a price or offer to buy another’s shares at a price. Bid prices and asking prices would converge, and sales would be executed.

Only the rich could play this game, though; Middle America (and Middle Netherlands where such auctions got an early start some hundreds of years ago, and Middle You-Pick-the-Nation) couldn’t afford to play. To be sure, Middle America (and the others) in those early days had little interest in playing, and the matter was a no harm, no foul situation. Then the broker industry developed, and brokers would act as middle men in these auctions, doing the mixing and matching of buys and sells—for a small remuneration, of course—and the shareholders didn’t need to meet in person. But those remunerations—commissions—kept Middle America priced out of the game.

Then discount brokers developed (think Charles Schwab), and Middle America (and Middle xyz) could play. The broader breadth of participation both increased stock prices themselves, and they gave companies all across the economy access to tons of additional money, from us little people, with which to do R&D, sales, production, etc. After all, little peoples’ nickels and dimes add up—it’s how the earlier Five and Dime stores prospered and how today’s deep discount stores prosper. It also gave us little people additional ways to save and to build our nest eggs.

Today, there are even brokerages that operate entirely online, for a song: typical remunerations for effecting a buy or sell today range from $5 to $10 per some number of thousands of shares traded (when Schwab was starting out, they charged $35 per hundred shares traded).

Now the New York Stock Exchange wants to

introduce a midday auction

ostensibly to

draw trading away from private venues such as dark pools….

Never mind that those dark pools are capitalist, free market responses to excessive interference in today’s financial industry (of which stock markets are only a part) by the Security & Exchange Commission and the myriad mechanisms spawned by Dodd-Frank.

The new NYSE auction would take place in the middle of the day, when trading is at its slowest. One draw of such auctions is they allow big investors to put in large orders without immediately moving the price of a stock[.]

Auctions work differently than continuous trading on markets, which match orders as they come in at an ultrafast pace. In an auction, buyers put in a maximum price and quantity they are seeking to fill and sellers put in a minimum price and size they are willing to sell over a period of time. At the end of the period, orders are filled at a price set by supply and demand for shares.

Just like those original bad, old days.

I’m not sure this isn’t a return to those bad old days when only the rich could play. I’m not sure it is, either; it’s something that needs to be watched very carefully—even by the SEC.

Return of the Excess Profits Tax

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Excess profits taxes are taxes on profits that government decides for itself is too much. They were first tried in the US by individual states during our Civil War. They went national under Progressive governments during WWI and WWII and were not repealed until after WWII. Another Democratic administration revived them for the Korean War, and that one disappeared at the end of 1953—over 60 years ago.

Now another Progressive President, Barack Obama, wants to revive it, and without even war as justification: he just wants the money because he Knows Better the use of that money than do those companies that actually earned it. Under his 2016 Budget Proposal, Obama insists that companies

would be subject to a 14% tax on up to $2 trillion of overseas earnings they have already accumulated[.]

Obama claims he wants “more revenue” from our multinationals in order to help pay for infrastructure—you remember, all those shovel ready jobs he joked about not being so shovel ready after all.

Companies accumulate profits—earnings—for a number of reasons: saving for economic disaster or industry downturn, planned very expensive capital expansion, planned very expensive R&D, planned…whatever. They also simply hold onto funds during economic or regulatory climates that make it infeasible to spend the money.

The reasons, though, are none of the government’s business. Government has no place dictating to a private company what its purpose is in accumulating and retaining earnings. This impropriety plainly includes saying to a business, “You have too much cash on hand. Give it up.”

Here’s an alternative, albeit one inconceivable to Democrats: get more revenue from our multinationals, and get more revenue from our domestic companies and from us citizens, by cutting tax rates, reducing regulation, generally getting government out of our way. The resulting growing economic activity will generate lots more total revenue for government. Especially when tax reform makes it useful for companies to bring home the trillions of dollars they’re holding overseas.

They’re still holding all those trillions, after all, because there are no viable projects there, either, on which to spend the money.

Privacy Misbehavior

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Andrea Peterson of The Washington Post has a warning.

Recall that ‘way last November, Verizon was exposed as using a supercookie that they’d developed for the purpose: it sits on your cell phone and tracks, ostensibly for their own use, your cell usage (supposedly limited to your use on the Internet). And you can’t delete it.

It turns out that Turn, an online advertising company that works with Google and Facebook,

uses [the Verizon supercookie] to collect data that makes it easier for advertisers to place targeted online ads, according to the researchers.

Verizon says they’re “looking into this,” but they don’t say they’re putting a stop to it.

We are evaluating how third parties are using the UIDH in this evolving ecosystem and considering any appropriate response[.]

Peterson suggests that

Turn’s use of the identifier highlights how data about someone’s online tracking practices can sometimes be deployed beyond its original intent—making it harder than ever for consumers to control who has knowledge about their online activities.

And

Turn’s General Counsel and Chief Privacy Officer, Max Ochoa, confirmed Mayer’s analysis of how its program worked in an interview with The Post.

Ochoa also thinks this is perfectly jake [emphasis his].

Clearing cookies is not a reliable way for a user to express their desire not to receive tailored advertising….
…
It is vital to note that clearing a cookie cache is not a widely recognized method of reliably expressing an opt-out preference.

Yeah—because the user didn’t use a bureaucrat’s special hoop. This, of course, is nonsense. The user didn’t clear the cookies because he didn’t have anything better to do with his time, so he just started putzing around with his cell phone. Leave it to an advertiser—and one that does his data collection for his clients in an entirely behind-the-scenes way—to pretend to this level of obtuseness.

Just as disappointingly, Verizon is pretending innocence in all of this.

“[I]t is unlikely that sites and ad entities will attempt to build customer profiles for online advertising” and noting that the identifier “changes frequently.”

Never mind that

While you have a Turn tracking cookie and are on the Verizon network, it kept track of the linkage between your Turn cookie and that Verizon Wireless tracking header,” he explained. “But if you get rid of the Turn cookie, the back end of that system would notice and reinstate that cookie based on the header.

It strains my credulity to think that the IT experts at Verizon wouldn’t understand this as they developed their supercookie and deployed it.

Hmm….

Another Reason

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…not to do business through ObamaMart and to get rid of Obamacare and with it ObamaMart. Even the AP has the tale.

When you apply for coverage on HealthCare.gov, dozens of data companies may be able to tell that you are on the site. Some can even glean details such as your age, income, ZIP code, whether you smoke or if you are pregnant.

The data firms have embedded connections on the government site. Ever-evolving technology allows for individual Internet users to be tracked, building profiles that are a vital tool for advertisers.

Connections to multiple third-party tech firms were documented by technology experts who analyzed HealthCare.gov….

Additionally, former Chief Information Officer for President George Bush the Younger and current corporate cybersecurity consultant Theresa Payton was cited by the AP as saying

[T]he large number of outside connections on HealthCare.gov seems like “overkill” and makes it “kind of an outlier” among government websites.

It’s hard, too, to look past the idea that the ObamaMart designers from Kathleen Sebelius on down didn’t know this was a player at the time they chose not to put any security protections into the thing.