Wind-Up Wednesday

As in wind-up doll, since we're starting with Mr. Paul's Office this time.

Jennifer Baily (got her name this time; I didn't write it down before; my bad) called again yesterday afternoon, and boy was she upset. She seemed to think I was going to be, as she put it, "more reasonable."

I guess that means she thought I wouldn't tell the world that one of our elected Representatives doesn't want to hear from his constituents, and is in fact the only member of Congress who has made that request.

From where I sit, having the distinction of being the only elected official out of the entire United States Congress to explicitly ask that faxes from constituents be blocked is an act that bears wide public disclosure and scrutiny. In fact, in our first conversation (reiterated yesterday) Jennifer was told that when we've had communications problems in the past with some offices, including a number of high-profile Democrats (whom you'd expect would be rather hostile to the content in these petitions) those offices have gone so far as to give me an alternative fax number on different equipment, typically in a district office, specifically to guarantee that their constituents voices ARE heard.

Whatever is being smoked in the Cannon Office Building, Room 203 these days can't possibly be legal.

Its rather obvious that someone forwarded yesterday's Ticker to her and she took offense to how I characterized our conversation.

Life's tough.

Calling me back to whine yesterday just guaranteed Mr. Paul a second run, and this time, with top-of-the-fold billing.

Hint to Mr. Paul's office: When in a hole, the usual advice is to stop digging.

Second Hint to Mr. Paul's office: Arrogance is extremely common in Washington DC. When you attempt to "strut your stuff" in front of people trying to help your constituents, you should expect a strong response. Believe it or not, some of us "ordinary peons" understand that you serve at the pleasure (and expense) of the electorate, not the other way around.

I think I perfectly represented the position that Ms. Bailey elucidated as the official position of Mr. Ron Paul, Republican Texas, in yesterday's Ticker, and absolutely nothing in our conversation changed any of my conviction in that regard, nor did it do a thing to sway my viewpoint from the previous day.

In fact that conversation strongly reinforced my opinion that Mr. Paul, despite his attempt to "hold court" as "a friend of the common man", and "in favor of sound money" instead notched another tick mark in demonstrating that he's just another forked-tongue fast-talker embedded in the joke that is Washington DC.

In short, here's the deal as I understand it after two discussions with Ms. Bailey:

• They consider the fax number at his office "only for their constituents."
• Ms. Bailey claims that "nobody in their office gave me the number" and demanded to know how I got it. (Hint: I called and asked for it, explaining that I had a fax from a constituent; whoever answered the phone gave it to me.)
• Someone transmitting a fax at the express request of one of their constituents (as the petition system does) "is not welcome to send that transmission", even though it went out at the explicit request of someone living in Mr. Paul's district. The obvious logical disconnect that arises if you don't own a fax machine and walk into Kinkos to transmit a fax appears to be lost on them. Since I fail to believe that Ms. Bailey is actually that dense, I am forced to conclude that this is just another example of mendacious behavior emanating from our nation's Capitol.
• Ms. Bailey claims that their office never got a copy of The White Paper (even though my fax log shows that all pages were sent and acknowledged), nor the signatures from constituents in Mr. Paul's district. She was aghast when I told her exactly what equipment they had at their end and demanded to know how I discovered that fact. Hint to the peanut gallery: When you connect with a remote fax machine, it identifies itself by manufacturer and model number. If I had not sent those faxes successfully, that information wouldn't be in my logs. It is.
• Despite claiming not to have received them, she explicitly refused me permission to retransmit the signatures or White Paper. That is, she told me NOT to send to Mr. Paul the petition signatures of people in his district who believe he has already received their message (yes, I WILL be emailing those people separately tomorrow, pointing them to this Ticker so they know that Ron Paul has, as a matter of policy, told them to "Go To Hell" with regards to their desire that he work as their representative to enact The White Paper.)
• I further explained that if 100 constituents were to, for example, print a copy of The White Paper and fax it to Mr. Paul's office individually, they would receive about 1,500 pages of fax transmission. If, on the other hand, I batched up the signatures and sent them all at once, which is what the software usually does, Mr. Paul would receive about 15 pages instead, or a savings to the taxpayer of about 99% in consumables, staff time and telephone congestion. Ms. Bailey did not care; despite the obvious greater efficiency, Mr. Paul still does not want to hear from constituents in this fashion. So much for Mr. Paul being "a steward of the public budget." I guess he's not much of an environmentalist either; shall we go saw down some more trees for you Ron?

Ms. Bailey then asked why I don't use email to send these out. In truth there are several reasons, with the first being technical - the fax server works with Postscript documents. 99% of PCs out there cannot display a Postscript document on the screen as they lack a viewing program. Second, a huge number of printers, including virtually all inkjet and many laser printers, cannot print Postscript, especially HP models.

For obvious reasons what you can't print will simply get tossed away unread.

The more compelling reason, however, is plausible deniability - something that I find repugnant when it comes to elected representatives.

Ms. Bailey unwittingly stepped right into that Bear Trap all on her own, without being prompted.

Let's deal with the innocuous problem first - if I have a petition with 20 signatures on it from 20 people, who do I say the email came from? Do I send 20 copies? We're back to being wasteful and clogging people's inboxes if so. If not, who do I identify the transmission as having come from?

The more serious problem, however, is accountability.

With email the fact that I have a "sent" confirmation does not mean you got the email nor that someone actually looked at it, no matter how briefly. It is trivially simple to set up Thunderbird, Outlook and other email clients to "silently discard" mail with specific subjects, senders, or other keywords in it.

If you do this the sender is never notified.

The SMTP email protocol provides no way to return "enforced" return receipts. As a programmer who writes spam filtering software, I am acutely aware of this limitation, as it has bit some of my clients in the past.

Fax machines don't work that way. For each page of a fax that is sent, the receiving machine confirms "in good order" receipt with a specific protocol message.

An example:

May 19 11:40:14.18: [45681]: REMOTE NSF "00 00 56 55 55 00 8C 90 80 B1 06"
May 19 11:40:14.18: [45681]: NSF remote fax equipment: Brother MFC-3100C/MFC-8600

We got connected to Mr. Paul's fax machine, and that's the capabilities it told us it had, along with who the manufacturer is (see, Ms. Bailey, that's how I found out!)

We send a page and then get this sort of exchange back:

May 19 11:40:37.93: [45681]: SEND send MPS (more pages, same document)
May 19 11:40:39.29: [45681]: SEND recv MCF (message confirmation)

We sent a "we have more pages, please tell us when you've confirmed the last one is safely printed or otherwise guaranteed delivered", and got back a "I've got it, go ahead."

This goes on until we get:

May 19 11:40:50.07: [45681]: SEND send EOP (no more pages or documents)
May 19 11:40:51.43: [45681]: SEND recv MCF (message confirmation)

In other words, I send a "We have nothing more, please confirm that the last page is there and safe" and get back "All good; your transmission was received and is confirmed."

Note the timestamps. They're accurate within a few hundredths of a second, and will, if checked, match my phone billing records.

In addition, "message confirmation" means something very specific in the case of a fax. It means the message is safe. A machine that is both out of paper and buffer memory (to hold pages until someone comes along and reloads the bin) will not send that back. It will send back a negative acknowledgement, which I am told about immediately. The system will in turn defer that message and try again later. After a number of attempts, it will error out and warn me.

So when you get back a "MCF" to an "EOP" message on a fax transmission, it is reasonably certain that, absent idiocy or intent on the other end, your transmission really did get through.

This example above, by the way, was a transmission of signatures - from constituents in Mr. Paul's district - to his office.

The fax that his assistant says he never got, doesn't want, and explicitly refused the retransmission of.

Isn't that grand?

Now let me point out that of the 535 "regulars" in The House and Senate, there is exactly one who has asked me not to send petition signatures by calling me and asking me to stop.

That would be Mr. Paul.

Of course I will honor such a request. There is no point in spending my hard-earned money (and I spend a lot of it!) sending material to so-called "elected representatives" who are not interested in their constituents' viewpoints.

If you're going to stuff your ears full of cotton I will not waste my energy on speech - that's pointless.

I have, in fact, had a few Reps and Senators who, when the petitions started going off back in the fall, programmed their fax equipment to intentionally refuse transmissions from the system. But as noted above in that nice protocol exchange, I was notified immediately of that foolery, and called those offices to ask why.

There were a few people in those offices who tried to be less-than-honest with me about what was going on. A couple, after being pressed, confessed and removed the "go away" parameter on their end. A couple more claimed ignorance ("we're not doing that") but the block magically disappeared immediately after my call (fancy that!) All were warned that I was more than willing to "out them" in public.

But only one - a Mr. Ron Paul - has ever told me that he doesn't want faxes from his constituents, and, in effect, "called my bluff" on making noise in the public square.

And thus, Mr. Paul's office is the only one that has been "outed", because all of the rest of the fine folk on Capitol Hill have been willing (even if, in a few cases, begrudgingly) to receive communications from their constituents, no matter who foots the bill for physically transmitting the message.

Ms. Bailey is welcome to contact me again if she'd like me to remove the block and send messages - only from Ron Paul's constituents - to his office by fax in the future. Should she do so, I will note Ron Paul's official "change of heart" here in The Ticker. After all, having blasted him twice, its only fair to note if he changes his mind in an equally-public fashion.

However, let me make this request - if there is a change of heart on Ron Paul's part, how about if Mr. Ron Paul write me a nice little letter, sign it, and.... wait for it..... fax it to me.

Yes, my fax machine is on, the number is on all the cover pages he's received (along with my voice number) and no, I won't change the number if he faxes me - even though he's not my Congressperson.

I may, however, publish it.

In addition, I believe that Mr. Paul should be interested in items that bear directly on his committee work, but again, I respect his decision to tell the rest of the nation to pound sand in that regard. Of course that might have an impact on whether someone would support him when he chooses to run for a national, instead of a district, office.

He was doing that recently, wasn't he?

Until the attitude in Mr. Paul's Congressional Office changes, I stand my ground. The person physically paying a phone bill has exactly nothing to do with the matter at hand, which is that a constituent of an elected representative would like to express his or her opinion to that representative via a commonly-accepted form of formal business communication.

That representative has and is literally telling that person to stuff it where the sun doesn't shine because they don't like the idea of someone else picking up the phone bill for the call.

That's a load of crap, and those who take such a position need to be voted out of office.

Period.

Never mind the clear misdirection that Ron Paul has up on his web page; specifically, the "press release" of May 14th in which he claims to have "decried" the ability of The Fed to buy up student and car loans.

Sounds good, right?

It would be, except that Mr. Paul was ridiculing Mr. Volcker, and the last time I checked, he's a former Fed President. When faced with the opportunity to decry the actions of one Ben Bernanke, who is the SITTING Fed President, with regards to "buying up" Bear Strearns, Ron Paul explicitly passed on the opportunity to point out that Bernanke's actions were almost certainly extra-legal, not to mention ill-advised!

In fact, if you're one of those people who believes that "sound money" is in fact a sound fiscal policy for America (you can count me among that group) you have to be stunned at the absolute lap-dog performance that Ron Paul put on during the Bear Stearns hearings, despite multiple opportunities to grill all of Geithner (NY Fed), Bernanke (Fed President) and Jamie Dimon (JP/Morgan.) If you missed it live and are a Ron Paul supporter, go over to CSPAN's web site and view the videos (warning: they're long.) Make sure you bring your puke-bucket in case uncontrollable retching sets in when Mr. Paul goes off into moonbat land with his allotted time instead of drilling these clowns, squandering the best opportunity he has ever had to make his point (and more importantly, to make a difference for The American People!)

Ok, this horse is dead - let's go after Hillary next.

Sore Loserman II? C'mon. You lost. Get over it. Barack has enough delegates and that's the end of it. There are no "next steps", unless your intention is to play pure disruption and/or threat. Not that I'd be surprised, but if she pulls something like that then she will have destroyed any chance of ever running for President in the future. In addition, if she tries for some sort of "nuclear option" at the convention (and you can bet your last nickel she's considering it), she's putting any political future she may have at severe risk. "Sore Loser" doesn't go over well with the electorate and a spoiled child's temper tantrum will bring back memories of Al Gore in 2000.

If Hillary has a lick of sense she'll bow out gracefully, shake Obama's hand, and work to unify the party - without conditions. The graceful thing to do would have been to concede last night. The clock is ticking on this one, and it has a short half-life. Do the right thing Hillary.

Lehman.

They continue to protest that they have "plenty of liquidity". Uh huh. That's what Bear Stearns said a few days before they blew up. To be blunt - I don't believe them. I am especially skeptical when there are 1500 contracts on the $2.50 strike for July PUTs transacted - and yesterday, there were, with the stock trading over $30. Now granted - they were worth a whole nickel - but that those garnered any activity at all is more than a bit surprising.

Someone thinks they're going under, and honestly, given the lack of candor of late among the banks, I can't say I believe a thing that comes out of any of these firm's PR departments - or their executive's mouths.

What's worse, they're spending whatever capital they have to buy back their own shares! Never mind that both Bernanke and Paulson basically (although not directly) told us twice that this wouldn't be allowed - that there would be no games like this where investment (and commercial) banks went and hit The Fed's "extraordinary" facilities and at the same time were buying back their own shares to prop the price, essentially buying their own shares with Fed Money.

Why not?

This sort of behavior was one of the things that happened during The Depression during the crash of '29, and it contributed to the bank failures of that era.

See, when you're capital constrained and you expend that capital buying back your own shares, if the price continues to fall you take a very real and immediate loss on that transaction - a loss you cannot avoid! Countrywide did this last year, buying back its own stock while issuing preferred in one of the more outrageous "circle jerk" moves seen during this little round of credit crunchies, and it turned into part and parcel of their undoing.

In a sense, this sort of behavior is akin to dousing yourself in gasoline to drive away the "evil spirits", praying that nobody has a match. Unfortunately in a volatile market lit matches abound and odds are that all you'll accomplish is self-immolation.

This sort of attempt at manipulation - while Lehman is said to be shopping for more capital in Korea - is precisely the sort of destabilizing act that caused a lot of the damage to the banking system in The Depression.

Is Ben Bernanke once again going to be proved a liar, or is he going to immediately slam the door on Lehman's fingers, smashing them to bloody pulp and closing off their access to the TSLF and other Fed Credit?

ARE YOU A LIAR BEN OR ARE YOU A MAN OF YOUR WORD?

"Next up" is the obvious question - if Lehman is in trouble, who would/could take them?

See, in order to take over someone like this, you need both ability and need.

Need?

Yep - you need to be up to your eyeballs with them as a counterparty - that is, you must have a solid reason to take on what might be a millstone around your neck with inadequate time to really do any sort of diligence on the books. Without need you'd have to be flatly out of your mind to play "rescue diver" on a company in this sort of trouble.

At the same time, you need the depth of balance sheet to absorb whatever might come, less whatever "put" you can negotiate.

Who has that in the case of Lehman?

I argue the answer is "nobody."

That's a rather serious potential problem.

All this boils down to two words, when you analyze it:

Got KaPUTts?

ADP claims we're going to see employment gains come Friday, and in fact financial firms are hiring. Uh huh. The market got a nice little pop off that on the release, but it quickly faded as soon as the 1Q Final employment cost indices (from the GDP series) came out and tempered enthusiasm. They showed growing productivity but also no gain in unit labor costs, which is more consistent with a recessionary environment. Of course in this world of "spin the number", who knows what the truth is when it comes to so-called "statistics."

ISM came in at 51.7 .vs. 52 last month, down a bit but not awful. The bad news embedded in the report was prices paid, which was up significantly. How do you spell "price inflation"?

I still say the best survey is walking around. Go to the store, got to a restaurant, observe as you drive. How's traffic? Lots of bags, or lots of people 'hanging out' but not buying? If your usual restaurant has a 30 minute wait at 6:00 PM, how is it now?

I can tell you what I see here, but of course that only reflects our regional area.

Business is very slow. Traffic is down virtually everywhere, with the only real exception being WalMart, which has the usual amount of business. You could shoot cannons down the aisles of Home Depot and most other retailers and not hit anyone. The "Available" signs and boarded-up businesses are sprouting like mushrooms. We went out last night to eat at Olive Garden and, right at the peak hour (6:00 PM) there was no line, no wait - and plenty of empty tables.

This is a tourist haven and in past years traffic levels have been much higher, restaurants all had 30 minute to hour-long lines for weekday seating at peak hours, and the stores were packed. In fact, the standing joke around here is that "if this is tourist season, how come I can't shoot 'em?"

Not this year; the slowdown was amazing this last Christmas and the situation has deteriorated further since that time.

As always, the spinmeisters will eventually lose. In 2000-03 they did the same thing, and of course election year political considerations keep people trying to pump both the economy and market lest public anger be reflected in the voting booth.

This time around, however, the pumpers may be making a critical mistake.

The American People have had it with the lying when it comes to so-called "government statistics" and consumer surveys show that when it comes to price inflation, in particular, consumers simply don't believe ANY of what they're being told. This has extraordinary implications for the future, in that the government's agencies may very quickly lose control of both expectations and consumer behavior, leading to an immediate and severe downward spiral in both.

My political prediction stands - an extremely strong Democrat showing is on tap for November, with a decent probability that The Senate becomes filibuster-proof.

Bring it on - America needs to wake up, and I suspect this will do it. Buy your tin cup for the soup line now, so as to avoid the price inflation later.