Monthly Archives: June 2007

What’s at stake in Stoneridge

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golfplated%20scales061107.jpgI’ve been meaning to pass along this Peter Wallison/American.com article that does an excellent job of summarizing what is at stake with regard to the U.S. Supreme Court’s review of the Stoneridge Investment Partners v. Scientific-Atlanta case involving the issue of secondary liability for companies that do business with a company that commits securities fraud:

It is an old legal saw that hard cases make bad law, but Stoneridge should not be a hard case. The legal principle advanced by the plaintiffsóthat persons unrelated to the statements that constituted securities fraud could be held liable for the plaintiffsí lossesówould be impossible to restrict or cabin in any effective way. Every party that engaged in ordinary commercial transactions with a public company in the United States could later be accused of participating in a securities fraud if the commercial transaction itself could be characterized as fraudulent or deceptiveóeven if the commercial transaction was not understood by the defendant to be part of a securities fraud.

Like this.

Stros 2007 Season Review, Part Three

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Berkman%20throwing%20ball%20on%20field.jpgBack when the Stros were close to a .500 ball club, I concluded the previous periodic Stros season review (all previous 2007 reviews are here) as follows:

Thus, my sense is that Stros management, for all their declarations of trying to field a playoff contender, is really biding its time this season as Biggio trudges toward his 3,000th hit. There is simply no way that this club will be much better than a .500 ballclub with its current starting pitching staff and Biggio, Everett, Ausmus and the pitcher burdening the hitting lineup on most nights. The Stros should be honest and concede that the club is attempting to compete as well as possible while supporting Biggio’s climb toward 3,000 hits and dispense with the ruse that this club, as presently configured, has any meaningful shot at the playoffs.

Well, as if on the cue, the Stros (26-35) went into the tank immediately thereafter, posting a 6-14 record during the past 20 games (after going 9-12 and 11-9 in the first two eighth segments of the season), including an excruciating 10 game losing streak in which the club gave up a total of 72 runs while scoring only 20. To make matters worse, overmatched Stros Manager Phil Garner panicked as the streak worsened, using nine different lineups, four right fielders, three first basemen, three third basemen and three leadoff hitters. The Stros responded by scoring fewer than two runs in a game five times and allowing eight or more runs in a game five times.
So, just a little over a year and a half since the club’s first World Series appearance, the Stros have turned into one of the worst teams in the National League — only the Reds (24-38) and the Nationals (25-36) have worse records through 37% of the season than the Stros. In fact, the Stros are not much better than the worst teams in all of Major League Baseball, the Rangers (23-39) and the Royals (23-40).
The Stros have continued their long trend of poor overall team hitting, scoring 12 fewer runs than an average National League team would have scored using the same number of outs as the Stros have used through this point in the season (“runs created against average” of “RCAA,” explained here), which is 10th among the 16 National League clubs. But the pitching overall has been even worse, giving up a total of 21 more runs than an average National League staff would have given up through this point of the season (“runs saved against average” or “RSAA,” explained here), which is 12th among the NL clubs. When a club is running a net deficit of -33 runs to what an average National League club would generate hitting or give up pitching, you know that team’s record will be decidedly below-average.
The season statistics for the Stros to date are below, courtesy of Lee Sinins‘ sabermetric Complete Baseball Encyclopedia. The abbreviations for the hitting stats are defined here and the same for the pitching stats are here. The Stros active roster is here with links to each individual player’s statistics:

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Is Barry Bonds this era’s Jack Johnson?

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Inasmuch as I have never been comfortable with the characterization of Barry Bonds as a fraud because of his steroid use (prior posts here), this Skip Sauer/Sports Economist post comparing Bonds’ situation to that of former heavyweight boxing champion Jack Johnson caught my eye:

This week’s Chronicle of Higher Education has a piece worth reading by historian Warren Goldstein, on the simmering feud between Barry Bonds and his critics in baseball and the media. Goldstein sees an analogy between Bonds and the black superstars who were run out of sport in the 19th and 20th Century as racism became institutionalized in American society. The list, borrowing from William Rhoden’s recent book, $40 Million Dollar Slaves, includes Isaac Murphy, a three-time winner of the Kentucky Derby, Major Taylor, the top cyclist exiled to France, and boxer Jack Johnson. Since watching Ken Burns’ documentary on Johnson a few years ago, I’ve viewed Bonds and Johnson as soul mates of a sort. So I am predisposed to both Goldstein and Rhoden’s take on this.

Bonds plays in an era where overt racism is much diminished, and banishment akin to his predecessors seems unlikely. But he is caught front and center in the anti-drug witch-hunt, and he — like just about every other player of his cohort — is unapologetic. Indeed, I sometimes wonder if Bonds would not mind being immortalized in a manner similar to Murphy, Taylor, and Johnson. Just as Bud Selig and various members of the media shrink from celebrating Bond’s pending achievement, it is likely that Bonds finds the prospect of sharing the moment with his detractors to be repulsive. For reasons both valid and perhaps a bit petulant, he’d rather figuratively hang with his homies Murphy, Taylor, and Johnson. I can see his point: they’re an accomplished group.

The folly of regulation through criminalization

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conrad_black%20060907.jpgIn this recent blog post on the closing days of the Conrad Black criminal trial in Chicago (prior posts here), Mark Steyn explains why criminalization of merely questionable business transactions is a manifestly unfair and arbitrary way to regulate business:

How many times does Jim (The Skim) Thompson, four-time Illinois Governor and serial skimmer, get a pass?
Yesterday, hostile witness Pat Ryan of KPMG testified that at a Hollinger International Audit Committee meeting he asked and received confirmation from Governor Thompson that the non-compete payments had been approved.
Today, late in the morning, Chris Paci, a lawyer for Shearman & Stirling, had been doing some “due diligence” work for the Wachovia bank and requested a meeting with the Audit Committee to ask specific questions about the non-competes and other related-party transactions. He asked the Big Skim explicitly whether the disclosures on Hollinger 10K and proxy statements were correct. “He said that yes, the related-party transactions had been approved by the Audit Committee and that the disclosures were correct,” testified Mr Paci. “I recall that I came away satisfied that I had got the answers I needed.”
How many times does a four-term Governor get to skate on this? Risible as it is, he can just about get away with testifying that he “skimmed” the 11 official documents put his name to and missed the same passage on 11 separate occassions, and it just coincidentally happens to be the same passage that his two fellow members of the Audit Committee claim to have missed 11 times, too. As I said at the time, that’s Olympic-level synchronized skimming, but if he can say it with a straight face good for him.
But does he skim human conversations, too? Can he plausibly claim not to have confirmed his approval to Pat Ryan? And, even more of a stretch, can he claim not to have known what he was doing at a meeting where he was asked explicit questions about the approvals and in which Mr Paci had been invited to participate in order to receive confirmation of those very approvals?
Why are four men facing the rest of their lives in jail for these allegedly non-approved non-competes but the guy who approved them in writing and verbally multiple times gets to skate? How many different approvals and confirmations does the Serial Skimmer get to disavow?

In civil litigation, all of the Hollinger directors and executives involved in the allegedly questionable non-compete payments to Black and his associates would be included as defendants. Thus, in such a case, responsibility for the payments — if they were found to be wrongful — could be allocated among all of directors and executives involved. But the sledgehammer effect of criminal prosecution focuses all of the responsibility for the transactions in question by hanging the threat of long prison sentences over Black and his associates even though it is clear that the allegedly wrongful payments were disclosed to and approved by Hollinger’s directors. This is not the way a truly civil society would resolve such issues.

Toughest baseball ticket in town

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reckling%20park%203-2006.jpgNo question about it — the toughest ticket to a series of baseball games in Houston this season will be to this weekend’s NCAA Super-Regional baseball tournament series between the Rice Owls and the Texas A&M Aggies at Reckling Park on the Rice University campus in the shadow of the Texas Medical Center. The winner of the best-of-three series moves on to the College World Series in Omaha, Nebraska, which begins on June 15. Ryan over a Texas A&M & Baseball INPO provides a good preview of the matchup.
Inasmuch as Houston is one of the most prominent high school and college baseball hotbeds in the country, the series sold out shortly after tickets went on sale earlier this week. The Owls (52-12) have been a college baseball power over the past decade under the driving force of Coach Wayne Graham, while the Aggies (48-17) this season revived a generally strong program that had been underperforming for the past several seasons. Game times are today at 6 p.m. (ESPN); Saturday: 5 p.m. (ESPNU); and Sunday, if necessary at 6:35 p.m. (ESPN2).
I’ll be pulling for the hometown Owls in this series because I had the privilege of coaching a couple of the Owls’ players — LF Jordan Dodson and C Danny Lehmann — during their youth baseball days in The Woodlands. Both players were able to overcome my coaching to become starters at The Woodlands High School and at Rice, where they have already enjoyed one trip to the College World Series over the past three seasons. Although I cannot take any credit for either Jordan or Danny’s baseball accomplishments, I am proud of the fact that both of them are high on-base percentage guys with solid slugging percentages who understand that the teams that create the most runs are the ones with players who get on base and hit the ball hard a high percentage of the time.
By the way, this earlier post reported on pointed criticism that Owls Coach Graham was receiving around some baseball circles for the high injury rate of minor league baseball pitchers coming out of the Rice program over the past several years. The Chronicle’s John Lopez recently wrote this profile of Coach Graham in which he addresses that criticism head on. Check it out.

Snow Fall

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cocaine.jpgRobin Moroney over at The Wall Street Journal’s Informed Reader blog picks up on this interesting Ken Dermota/Atlantic ($) article that reports on the weird economics relating to the demand, the supply and the price of cocaine:

Demand for cocaine stays steady, Colombiaís coca fields are destroyed, yet the drugís street price in the U.S. continues to fall . . . [as] drug smugglers and dealers have eked out efficiencies in their operations to keep their prices low. The U.S. Coast Guard has been able to catch only a small percentage of the drugs entering the country since President Nixon declared a ìwar on drugsî in 1971. In 2000, the U.S. decided to switch tactics and take the fight to Colombia, which produces 90% of the cocaine sold in the U.S. Since then, it has spent $4.7 billion fighting rebels who grow and sell the crop, as well as spraying coca fields from the air.
The price of cocaineóthe pure version, not crackóhas kept falling. In the early 1980s, the price of a gram of cocaine was about $600. By the late 1990s the price had fallen to about $200. According to the Drug Enforcement Administration, the street price of a gram of cocaine in 2005 was $20-$25 in New York, $30-$100 in Los Angeles and $100-$125 in Denver.
Some of the price decrease has come from more efficient distribution networks. Some New York smugglers have chosen to eliminate the middleman and pick up their drugs directly from Colombia, offering ìfactory-to-youî prices. The surging trade with Mexico has increased the nooks and crannies for drugs to be hidden as they cross the border, making smuggling both safer and cheaper.
Labor costs also have decreased. Street vendors take a smaller cut of the drugís proceeds. A lot of the drug dealers who fell prey to an aggressive imprisonment campaign in the 1990s are now leaving prison. Their felony conviction and minimal job experience means they have few other ways to make money and are willing to take a pay cut.
The falling street price also reflects the lower risk of handling the drug. The violence of the 1980s crack boom has faded and, since 2001, federal drug prosecutions have fallen 25% as agents get diverted to the hunt for terrorists.

While the Atlantic article focuses on why the price of cocaine continues to drop even though the supply sources are declining, what’s particularly interesting is that the demand for cocaine is not rising dramatically as the price declines. Given its addictive nature, it makes sense that the demand for cocaine would be somewhat price inelastic, but it seems logical that demand would increase at least to some extent as the price falls. This does not appear to be happening. Sounds like a good exam question for an economics course.

It’s not been a good week for federal agencies

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fcc.GIFFirst, it was the dubious decision of the Federal Trade Commission to sue to enjoin the proposed merger between natural foods grocers Whole Foods Markets and Wild Oats Markets.
Then, as this Daniel Drezner post notes, Federal Communications Commission chairman Kevin Martin chose a rather interesting way to criticize the Second Circuit Court of Appeals decision this week striking down the FCC’s policy governing “fleeting expletives” on television.
So it goes in the wacky world of governmental regulation.

Giuliani’s hypocrisy

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giuliani.jpgDoug Berman notes that Rudy Giuliani thinks that Scooter Libby got a raw deal. That is unquestionably correct, but what Giuliani failed to mention is that he is one of the politicians primarily responsible for the culture of criminalization that gobbles up productive citizens such as Libby.
As noted earlier here and here, Giuliani’s politically-motivated prosecution of Michael Milken and related destruction of Drexel Burnham during the late 1980’s ignited the criminalization of business interests that reached its peak with the destruction of Arthur Andersen, the prosecution of former Enron executives Jeff Skilling and Ken Lay last year and the ongoing trial of former Hollinger CEO Conrad Black this year. Indeed, the Bush Administration’s willingness to toss business interests into the cauldron of internecine criminal prosecutions for transient political purposes has largely undermined the Republican Party’s credibility in challenging the motives of dubious white collar prosecutions of businesspersons or politicians.
And lest you think that rich and powerful people are the only ones affected by what Giuliani has helped wrought, remember the name of Lisa Jones. As Daniel Fischel brilliantly explains in his book Payback: The Conspiracy to Destroy Michael Milken and his Financial Revolution (Harper-Collins 1995), Jones is a remarkable American success story — a teenage runaway and high school dropout who worked her way up through the ranks of Drexel to become the top assistant to one of Drexel’s most successful traders. Giuliani threatened to indict Jones in an effort to get her to turn on Milken (sound familiar?), but Jones refused to give in and remained loyal to Milken and Drexel to the end. Giuliani eventually prosecuted and convicted Jones for crimes that were never proven (sound familiar?) and she was sentenced to a year and a half in prison, later reduced to ten months. Other than Milken, Jones was the only longtime employee of Drexel Burnham who ever spent time in prison.
I don’t know about you, but that’s not the political legacy I’m looking for in a presidential candidate.

Ron Paul shines on The Daily Show

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Ron%20Paul.jpgRepublican Congressman and GOP Presidential candidate Ron Paul from the Houston area exhibits a deft media touch while handling an interview by Jon Stewart of The Daily Show.
Banjo Jones must be proud.

Paul’s political warts and quirks — and there are many — will become exposed as the campaign wears on. However, his willingness to speak his mind — a rarity in American Presidential campaigns — is refreshing.

And you think Houston freeways are dangerous?

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BULLSHARK_450.jpgAll you folks who enjoy swimming in coastal bays and inland waters close to the Gulf, take a look at what was caught in one of those over in Florida.
Meanwhile, when you have 8 minutes or so, watch the remarkable YouTube video below about a very tough buffalo calf’s difficult day. HT to Jane Galt: