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Archive for June, 2006

Sunday Battleship Blogging: HMS Royal Sovereign

[ 0 ] June 25, 2006 |

The Royal Navy followed up its outstanding Queen Elizabeth class battleships with five of the “R” class. Royal Sovereign was second of the class, carrying 8 15″ guns, displacing 27500 tons, and capable of 21 knots. Royal Sovereign and her sisters were a step down from their predecessors, being slightly smaller and quite a bit slower. Although commissioned in April 1916, Royal Sovereign missed the Battle of Jutland.

Royal Sovereign and her sisters were retained under the terms of the London Naval Treaty, but, unlike most other battleships of the interwar period, were not subjected to an extensive modernization. The design had three major design flaws that limited their expected future effectiveness. First, the slow speed, while also characteristic of American battleships, left them incapable of performing many of the missions that would be necessary in the Second World War. The “R” class would rarely conduct a mission other than shore bombardment or convoy escort. Second, the armor scheme was obsolete almost as soon as the ships were completed, as it left the ships vulnerable to long range plunging shells. Winston Churchill referred to the R class as “coffin ships”, and the Admiralty strove to keep them as far away from enemy ships as possible. Finally, the ships were designed with reduced stability in order to induce a rolling motion conducive to good gunnery. Unfortunately, this made reconstructing them almost impossible. All in all, I suspect that the Royal Navy would have been much better served by disposing of one of the R class in favor of the battlecruiser HMS Tiger, which at least could have hunted raiders and escorted fast carriers.

Royal Sovereign had a remarkably dull career. The early part of her war was taken up with convoy escort, and she never got terribly close to an enemy ship. From 1942 on, one of the major duties of the Royal Navy was to escort convoys to Murmansk against German surface ships and submarines. After the destruction of Tirpitz in 1944, the German Navy could pose little threat to the convoys. Some of the older battleships, like Royal Sovereign, were placed in reserve even before the war ended because of a manpower crisis. Instead of retiring Royal Sovereign, it was decided to transfer her to the Soviet Navy in an effort to give the Russians some responsibility for protection of the northern convoys.

I haven’t found any account of why Royal Sovereign specifically was chosen for transfer, but I would like to think that Churchill or someone in the Admiralty, evincing a particularly dark sense of humor, thought that there was some amusement to be had in the tranfer of a ship named Royal Sovereign to a nation that had massacred its last monarch and his family. In any case, Royal Sovereign was renamed Arkhangelsk, assigned to the Northen Fleet, and served in the Red Navy until 1949, when she was replaced by Giulio Cesare. Upon her return to the United Kingdom, she was almost immediately sold for scrap.

Trivia: What Japanese battleship was once operated by an American crew?

I had really hoped to avoid thinking about this…

[ 0 ] June 24, 2006 |

…but someone asked and I suppose it involves the minor “beat” I’ve carved out for myself, so I should say something.

The whole DKos/Jerome Armstrong brouhaha — the details of which I have studiously tried to avoid because I can gaze at my own navel without outside assistance, thankyouverymuch — apparently began with the news that Jerome Armstrong once pled no-contest to an SEC civil complaint alleging stock fraud.

The case is described here, but, hell, that’s no reason for me not to describe it again.

The complaint alleges a couple of different kinds of fraud, and the DKos post linked above correctly notes that Armstrong only had a tiny piece of it and most likely was unaware of the rest. The complaint is civil, not criminal, which is very common — the SEC doesn’t often charge criminal violations of the securities laws and usually the conduct has to be particularly egregious or intentional to qualify.

Some background: The securities laws generally forbid public sale of stock unless the company registers with the Commission and files all kinds of documents detailing the company’s operations. There are certain exceptions, however, that will allow limited amounts of stock to trade, if they meet certain requirements, even without a registration statement in effect. Here, it appears the defendants began their scheme by trying to conceal the origin of their shares to make it look as though they could legally trade publicly without a registration statement. They also tried to make it appear as though the stock was widely held, instead of concentrated among a few people, so that they could manipulate the price upward and the public would think the increases represented true demand for the stock.

Anyway, the owners of the company and some crooked brokers got together and started engaging in pre-arranged trades at really high prices, so that anyone following the stock would think there was this big demand for a new hot company. Once they got the price high enough to interest the public, they began selling — and the price collapsed.

While this was going on, the defendants apparently engaged Armstrong to assist them in generating public interest in the stock. And here’s essentially the complete allegation against Armstrong:

Markow and Goelo orchestrated a scheme to arrange for individuals, including Armstrong, to tout the BluePoint stock. Armstrong posted over eighty times on the BluePoint message board located on the Raging Bull website in the first three weeks. He praised BluePoint’s investment value and encouraged traders who were having trouble getting their orders filled to keep trying. Armstrong never stated in his posts on the Internet that he was being compensated for making the postings. However, Goelo and Markow compensated Armstrong by transferring stock in three separate companies to Armstrong at below market prices during the relevant time period.

Armstrong made at least $20,000 from selling the shares of the three securities he received from Markow and Goelo.

What law did this violate?

According to the complaint, Armstrong was charged with a violation of 15 U.S.C. § 77q. That statute reads:

(a) Use of interstate commerce for purpose of fraud or deceit
It shall be unlawful for any person in the offer or sale of any securities … by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly—

(1) to employ any device, scheme, or artifice to defraud, or

(2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or

(3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.
(b) Use of interstate commerce for purpose of offering for sale

It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof.

Armstrong wasn’t charged with a direct violation of subsection (a), which forbids fraudulent statements. Instead, he was charged with violating subsection (b) — namely, the requirement that you ‘fess up when you’re being paid to promote a stock. That kind of provision is something of a prophylactic: It requires disclosure of compensation in all cases, no matter what, even if there might, theoretically, be some instances where the disclosure isn’t necessary to avoid misleading people.

Anyway, given the fact that the allegations against Armstrong encompassed one paragraph in a much larger complaint, yu have to assume that Armstrong didn’t know about the greater scheme. And, the DKos post says, there were lots of other people doing the same thing, but apparently the SEC couldn’t get enough evidence to justify a lawsuit.

But, come on, he was a grownup. He knew something was fishy and simply didn’t ask questions. And you have to wonder how the corporate defendants knew to approach him. According to the complaint, he made a living from stock trades at the time, and probably was something of an internet presence. We should also keep in mind the context: These were the wild fraud-fueled days of the internet stock boom, when stock touting for concealed compensation was practically an industry standard.

The DKos post points out that Armstrong defended himself and ultimately pleaded no contest. For the record, it’s not unusual for defendants in SEC civil suits to proceed without representation. The nuts and bolts of SEC work isn’t Enron — it’s little cases of smalltime stock fraud, and many of the defendants involved can’t afford counsel, which is likely what happened here. Maybe he pled no contest simply because he couldn’t afford to fight the charges, but I tend to think everyone is guilty in white collar cases and it wouldn’t do for me to change that policy just because he’s liberal, so yeah, I think he did it.

What’s the upshot? At the end of the day, we have Jerome Armstrong, who, at the time, derived all of his income from day trading, who, at the height of the boom — and it was really a wild west out there as far as internet trading and promotion went — likely engaged in some unethical conduct involving an internet payola scheme that was one tiny portion of a much larger fraud. Conservatives argue that this is another piece in the puzzle establishing a history of internet payola for Kos and Armstrong, and I haven’t paid enough attention to have an opinion on that aspect. I guess it comes down to whether you think this kind of behavior evidences a pattern of conduct or a one-time aberration.

If you even care.

The Vice-President Loves Surprises

[ 0 ] June 24, 2006 |

Dr. Strangelove: Of course, the whole point of a Doomsday Machine is lost, if you *keep* it a *secret*! Why didn’t you tell the world, EH?

Ambassador de Sadesky: It was to be announced at the Party Congress on Monday. As you know, the Premier loves surprises.

Peter Howard at Duck calls out the transparent stupidity of this statement:

The White House vigorously defended today a secret program of combing through a vast international data base containing banking transactions involving thousands of Americans. Vice President Dick Cheney and other officials said the program, whose existence was revealed on Thursday night by The New York Times, was both legal and necessary to deter terrorism.

As Peter notes, secret programs cannot, by definition, deter anything. The Vice President should be falling to his knees and thanking the media for revealing this little gem.

[ 0 ] June 23, 2006 |

Friday Cat Blogging… Nelson

It’s like they’re living the American dream

[ 0 ] June 23, 2006 |

Drilling Firm Seeks Favor as Expatriate

The language in the House measure seems innocuous enough. Tucked into the Coast Guard budget bill, it says merely that Section 608 ( c ) (1) “is amended by striking the second sentence.”

But what that language would do is allow one company, Nabors Industries, to gain permanent access to business open only to American companies. The language is needed because Nabors, a big oil drilling company, moved its tax headquarters to Bermuda and its legal headquarters to Barbados in 2001 to avoid American taxes.

Competitors argue that they will be slowly strangled if Nabors is allowed to vie for contracts while paying little in taxes. Nabors is a well-run company, said Ken Wells, president of the Offshore Marine Service Association, and its tax advantages allow it to underbid other offshore supply companies. The association, therefore, opposes the provision as a favor to one of its 101 members at the expense of the others, Mr. Wells said.

Two years ago, after extensive negotiations with its competitors, Nabors won from Congress what amounted to a temporary exemption that ends in August 2007. So now the company’s chief executive, Eugene M. Isenberg, is asking Congress to make the exemption permanent.

My favorite part is where we find out why the law, as it currently stands, ordinarily forbids offshore companies from winning contracts:

Deleting that one sentence from the Coast Guard budget law amounts to giving Nabors Industries a permanent waiver from the Jones Act, a law enacted in 1920 that was intended to protect national security. The Jones Act requires that all ships moving people and cargo between domestic ports be American-owned, American-built and sailed by American crews.

When the Lord closes a door, some way he opens a window.

The Cantwell Problem

[ 0 ] June 23, 2006 |

Apparently she’s in a lot of trouble. And while officially I still maintain that voting for a third party is stupid given the high stakes involved, and even though I have some residual goodwill for anyone who could get Slade “Skeletor” Gorton out of the Senate, I must say that even I can’t muster much enthusiasm for the argument. It’s not just the war; it’s had to say much good about someone who comes from perhaps the strongest pro-choice state in the country and votes for cloture on Alito. I understand that if a Senator from Nebraska or Louisiana does it you have to suck it up, but this seems almost as stupid strategically as it was appalling on the merits. With Bush’s approval numbers where they are, about the only way an incumbent Democrat could botch a statewide election is to piss off the base for no conceivable reason.

So Overrated It’s Underrated

[ 0 ] June 23, 2006 |

Many people I spoke to about seeing the Lourve pretty much said that it wasn’t terribly exciting. I guess it’s sort of like Citizen Kane; once a reputation reaches a certain point a lot of people are inevitably going to be disappointed. But granting that if I could only see one Paris museum in a visit I would probably stick with the D’Orsay, it’s nonetheless pretty spectacular. The thing is that a large percentages of the admittedly large crowds (even early on a Friday morning) at any given time are falling into the arms of Venus De Milo, and that atrocious book and Ron Howard movie seems to have also increased the lines around the Mona Lisa, leaving one free to browse the exceptional second-floor collection in relative peace (you might run into a big tour group, but there’s just so much worth seeing that you can just skip a room and hit it on the way back.)

And maybe I’m just an easily pleased Francophile, but with the partial exception of the Rodin (which is just because neither sculptures nor gardens are really by thing) I can’t say I was disappointed by anything. The D’Orsay is just incredible, of course, but the Picasso, the Cluny (medieval museum) and the Cinematheque (terrific Almodovar exhibit, screening of Duck Soup)…all pretty great despite difficult to meet expectations. Plus, wandering around Le Marais today I stumbled across a free Paris Au Cinema exhibit, which involved a whole bunch of film clips featuring Paris and organized thematically. If that doesn’t inspire me to get a Netflix queue going, I don’t know what will.

Scientists confirm: "If you can’t dazzle them with brilliance….

[ 0 ] June 23, 2006 |

….baffle them with bullshit.”:

Apparently there’s a simple reason why [corporate] annual reports are hard to read: managers, in many cases, are trying to hide something.

The study, Annual Report Readability, Earnings and Stock Returns, found that the annual reports of underperforming companies are harder to read than those of companies that are performing well.

Feng Li, an assistant professor of accounting at the university, measured annual report “readability” using a sample of more than 55,000 company reporting years. He examined syllables per word and words per sentence in reports filed with the Securities and Exchange Commission.

According to the study, annual reports of companies with lower earnings were more difficult to read. Similarly, companies that had volatile earnings were more likely to produce abstruse reports.

“Opportunistic managers may have incentives to make the annual report harder to read, if good earnings of this year are not persistent or if poor earnings are very persistent,” the study said.

“On the other hand, firms with better future performance may want to disclose information more precisely to distinguish themselves from the ‘lemons’ by making their annual reports easier to read.”

Alito v. Civil Rights: A Foreshadowing

[ 0 ] June 22, 2006 |

Several of the cases recently handed down by the Supreme Court have been interesting more for what they tell us about the future than for the cases themselves. An excellent example is today’s decision in Burlington Northern v. White, the case where a woman was suing under Title VII of the Civil Rights Act because she was removed from her primary job as a forklift operator by a overtly sexist supervisor and assigned to much worse positions. The case was anticlimactic in a good way; the Court unanimously ruled that White had a case under the law and upheld the jury’s verdict in her favor. However, note that Alito filed a concurrence in which he gave a (highly strained) reading of Title VII that would both narrow the definition of what constitutes “retaliation” and confine it strictly to workplace-based retaliation (although of course other forms of retaliation could have the same disincentives to report illegal behavior that the CRA is trying to prevent.) In other words, Alito wants to chip away the statutory civil rights of litigants accepted by those radical civil rights activists Clarence Thomas and Antonin Scalia. Which couldn’t have been more obvious at the time of his nomination.

What’s the Point?

[ 0 ] June 22, 2006 |

One has to wonder what the point of this editorial is. Carter and Perry assert that the United States ought to attack North Korea in an effort to prevent the launch of the Taepodong II ballistic missile. What this would accomplish is unclear. One does not test a missile unless the likelihood of success is quite high, especially when the test would be as high profile as this launch is likely to be. So, given a limited (and this is what they propose) attack on North Korea, the basic distribution of capabilities would remain the same; North Korea would have missiles that probably (but not definitely) could be armed with nuclear warheads and launched at the United States. That’s it. Since the North Koreans are planning to launch the missile anyway, there would be literally no change in the ability of the DPRNK to launch on the United States.

So, why this editorial? Two reasons, I suspect. One, by advocating a preventative attack (and this would be preventative; no one is suggesting that this missile is being launched at the United States), we Democrats demonstrate to the American electorate that we are just as tough and even more stupid than the Republicans on national security. Tough and stupid, it is thought among some circles, plays well in the heartland. Second, we demonstrate “resolve”. Our allies, none of whom would be expected to support such a strike (Carter and Perry allow this) will nonetheless be impressed. The North Koreans will be so terrified that they’ll do, uh…. something. American “resolve” will have been demonstrated. Then we go home, eat a steak, and sleep with our beautiful wives.

I kind of wonder when the poisonous meme of “resolve” found its way into American foreign policy thinking. Interestingly enough, an obsession with resolve is not characteristic of all foreign policy establishments. Europe, today and in the Cold War, does not seem to suffer from resolve based arguments. As far as I know, no one in political science or any other social science discipline has ever managed to demonstrate that a reputation for “resolve” had an independent effect on the decisions of any purported enemy anywhere. Yet the infection persists…

Via AG.

Lexblogging: Ashland

[ 0 ] June 22, 2006 |

Three weeks ago Davida and I visited Ashland, the Lexington home of Henry Clay. As an historical site the estate was quite interesting, although the original house had been torn down shortly after Clay’s death, and replaced by a near replica. Ashland was furnished entirely with artifacts either from Clay’s life or the lives of his descendents, the last of whom left Ashland in the mid-1950s. Of course, the estate is much smaller today that it was during Clay’s time, but it remains a very lovely park, a nice place to have a picnic or listen to music.

The exhibit is very Kentucky-centric, mildy odd given the portion of his life that Clay spent in Washington. Nevertheless, I got the feeling that Clay had a hand in most every element of the early development of Kentucky. Clay was a drinker of bourbon, and reputedly introduced the mint julep to Washington D.C. Clay also played an important role in the early equine industry; several of the horses in the Preakness Stakes could trace their lineage back to horse that Clay owned, including the winner. The exhibit was also quite forthright regarding Clay’s lack of success in his attempts for the Presidency. He was defeated three times in the general election, and three other times in the primaries.

Clay is an odd figure, one of the second generation giants that no one really talks about anymore. I am told that there was a flurry of interest in Clay, Calhoun, Webster, and other of their colleagues around the end of World War II, but the recent popular fascination with the Founders seems ready to skip clean over this generation and move right on to Lincoln. I don’t think that the reasons for this are all that complicated, as the story of the Second Generation is one of endless flawed compromise and eventual failure. While Lincoln can be understood to redeem the sins of the Founders, Clay and his cohort simply had to deal with them. The Founders left this generation with two enormous problems. The first of these was slavery, a difficulty that the Founders (and Clay) tried to wish away, but one that loomed larger as time passed. The second was a constitutional system utterly insufficient to the task of solving big problems.

Clay himself was a middling supporter of slavery. He was willing neither to engage, like Calhoun, in an ideological defense of the peculiar institution, nor was he willing to do anything productive to end it (other than waiting for it to go away). It was as apparent to Clay as anyone, though, that slavery was an enormous political problem for the United States, even if he found it uninteresting on the merits. Clay was critical in constructing and maintaining the various compromises that held the Union together between 1820 and 1850, and his work on these problems was genuinely masterful. All told, it probably was a good thing that the Civil War was fought in 1860 instead of, say, 1835, as the power of the North was steadily growing, as was the general international disapproval of slavery as an institution. Of course, this did not enter into Clay’s thinking; the last thing he was trying to do was delay long enough to provide the foundation for a Northern victory. Nevertheless, delaying the final resolution of the slavery problem probably had the practical effect of pushing that solution in a progressive direction.

I think that a Clay-like figure can be found in almost any political context. They lack vision, but are masterful political operators. Because they lack any sort of vision for the future, they tend to be mildly, but not overwhelmingly, conservative. Cicero might have been the first Henry Clay. The most recent Clay, if you will, was probably Bob Dole. Edmund Burke was kind of a Clay figure, but people forget that Burke was, by and large, on the progressive side of most political questions of his day. Then again, the parallel might be apt, as Clay was a big supporter of the American System, the Hamilton-esque program to bring infrastructure and capital improvements to what was then the American West. This effort certainly played a role in the expansion of capitalism and of the industrial, commercial North, indirectly undermining the slave-ocracy.

The academic world narrowly avoids a tragic error

[ 0 ] June 22, 2006 |

…by, at quite possibly the last possible moment, providing a well-deserved full time position for Russell Arben Fox. Which, amongst other things, means the political theory blogosphere will not lose its most challenging traditionalist left communitarian voice. Go join me in congratulating him, and remember to start checking his blog regularly again.

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