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Sunday, December 30, 2012

Stock Market Plunge Monday on Fiscal Cliff Approach

Midday Sunday reports out of Washington DC indicate that "negotiations" on resolving the fiscal cliff have broken down.  This presages a major stock market drop in all worldwide markets starting in about five hours when Far East markets open around 7pm Eastern time.

Stock market futures were already down significantly after the market close Friday, following a sharp Friday afternoon selloff.

Monday is not a stock market holiday.  American stock markets are open between 9:30 am and 1:00 pm tomorrow.  This may be a fun day to sit at home and watch the action.  Expect lots of loss-taking because institutional investors like hedge funds and mutual funds will want to protect their gains (or cut their losses) as much as possible.  This is a form of "window dressing" as fund managers try to protect their annual and quarterly results.  To a lesser extent, there may be tax-driven selling as tomorrow is the last day in 2012 in which one can sell and realize taxable events (gains in 2012, to capture a presumably lower rate since rates are expected to rise sharply starting January 1st; taking losses is also advantageous as a writeoff against any realized gains).  

We may see a manic panic rush to the exits as people covering the trading desks for others still on vacation get panicked calls from higher-ups to dump stocks, bonds, possibly any asset class.  One notable asset class exception may be derivatives and exchange-traded funds which attempt to move inversely to the market.  Holders in those funds -- or others which fled stocks in anticipation of a fiscal cliff crisis actually occurring -- may be partying well in advance of the ball being dropped tomorrow. 

Small Businesses Fighting ObamaCare

The mainstream financial media is already out with articles suggesting ways for small businesses to circumvent the costly burdens of the Patient Protection and Affordable Care Act (which you and I know as ObamaCare).  However, the anecdotal evidence of these survival strategies gets really interesting.

Perhaps the most obvious trigger of the ObamaCare mandates on businesses to provide health insurance to employees is the headcount, that is, the number of employees a business has.  Here, the tragic number is 50.

In Manhattan, I do a lot of walking around.  The reason is that walking -- or running -- allows me to avoid cross-contamination from unclean surfaces and, in particular, unclean people.  In the process, I will sometimes step into a food establishment, and I enjoy going into the so-called mom-and-pops.  I get a different read on the economy than I do when I enter a chain store like the ubiquitous Qdobas, Chipotles or -- heavens forbid -- Starbucks.  

A glance into the so-called independent stores began to spark in me a curious sense of deja vu.  As in, I've seen this food before, the same display, the same rotating LED screen.  Soon, I've discovered that many purported independent stores are connected and must have some common ownership or management; certainly, drilling down several layers uncovered circumstantial evidence (which I won't disclose) indicating that there's either one heck of a coincidence, or a concerted effort by a big group to separate each of more than one dozen establishments into individual companies, each likely with fewer than 50 employees and hence avoiding the ObamaCare employee trigger.

Arguably, this could be construed as an evasion of the law.  The regulatory and even prosecutorial decisions starting in 2014 may be very interesting (or terrifying).  The situation bears watching.   As the legal and financial burdens mount, expect more efforts by business owners and managers to respond -- with cost cuts, staff reductions, store closings and other legal maneuvers -- in order to compete and preserve their slim profit margins and competitive positions in an uncertain and what some fear will be a possibly hostile-to-business second term Obama Administration.

This is News? New York City Full of Dangerous Crazy People!


In the wake of two subway deaths in the past month, this New York Post report claims that New York City is full of thousands of mentally ill homeless people.

This is NOT news to anyone to works or lives in New York City -- and specifically, the People's Republic of Manhattan.

I've been chronicling for years how Manhattan's major transportation hubs and other public places have become overrun with the homeless, the mentally ill (the two groups don't always overlap), and the opportunistic who prey upon the misguided altruism of New Yorkers and particularly, stupid tourists who are spending other people's money.  But a pharmacist friend of mine (who to his credit never divulges patient information) confides that in his professional opinion, many seemingly and outwardly normal white-collar professionals are really seriously overmedicated, flying high as kites on prescription meds, and engaging in worse drug abuse than some addicts hooked on so-called hard, illicit drugs.

(PS -- Recommending reading: Here is a recent Wall Street Journal story on the number of deaths from opiods -- painkillers like Vicodin.  This danger is one likely reason for the number of federal prosecutions of pill mills.)

But today, I just stick to the certifiable nuts.  Unlike the Post's article (see the link above), here's the real deal -- a compilation of my extensive observations over the past several years:
  • Grand Central Station's relatively new underground food court may have a nice selection of food, but you'd be advised to never, ever sit down anywhere, as a homeless person may have been sitting there just minutes ago.  Beware the perils of cross-contamination.  The stinking, revolting homeless regularly circle customers waiting to intercept leftovers before they are tossed in the trash.
  • As I detailed in an article two years ago, the Port Authority bus station at 42nd Street is headed back towards the dark days of B.G. -- Before Giuliani.  The cops chase the vagrants out of the station at 1 A.M., with the unintended consequence of encouraging the bums to sleep on chairs, couches and floors in the station during the rush hour!  
  • Penn Station has enough nooks and crannies to allow vagrants to evade detection, and is generally the nicest of the transportation hubs, but still requires caution.
  • Central Park has a motley crew of homeless, mentally ill, opportunistic criminals preying on clueless tourists, and an assorted bunch of deviants.  It's still safe to run there -- if you're a man and you're not wearing headphones.
  • There is a homeless box-dweller who is so permanently entrenched across from Madison Square Park's Shake Shack that she should be paying rent.
  • Early morning and late night trains to the Bronx and Brooklyn reveal that many of these apparent vagrants are headed outbound, presumably to real residences.  Their day job is preying on the altruistic guilt of working Manhattanites (or their suburban counterparts, homo sapiens stupidus Snookius), much like the so-called Occupy Wall Street protestors went home to luxury condos after marching around the fetid Zuccotti Park last year.
It is clear that, in Mike Bloomberg's illegitimate third term, New York City has continued its regression back to the dark days of the 1980s.  Fear does not rule, not yet, but the utter cluelessness of the white-collar professional set makes many of the under-40 set particularly vulnerable to unexpected crime.  Those of us who grew up in New York B.G. grew up in a climate of fear (remember the 2,000-plus homicides in 1989?) but out of that fear rose vigilance.  Today's young adults and teenagers, lollygagging around Manhattan as urban playground, are unaware of the dangers that are increasing.

The recent subway attacks, the random mindless mayhem, are a shock to this under-40 set.  Those of us who remember the days of Abe Beame and Ed Koch remember a different New York.  

This indicates a serious challenge for the next mayor.

Friday, December 21, 2012

When Crime DOES Pay: The Moral Hazard Of Too Big To Fail, Too Big To Jail

See my latest research report, published by the nonprofit economic think tank Financial Policy Council on Friday, December 21st and on the nationally-recognized financial equivalent of the Drudge Report,, on Christmas Eve, December 24th in its Research Reports section.

Thursday, December 20, 2012

New York City Marathon Finally Offers Refund for 2012 Race

The New York Road Runners Club will announce today (December 20th) that it will offer full refunds to all entrants for the 2012 New York City Marathon, which was scheduled for November 4th but cancelled after Hurricane Sandy.

The decision comes weeks after a disastrous and horribly insensitive attempt by both the Bloomberg Administration and New  York Road Runners to allocate supplies, including portable generators, to the race, which begins in Staten Island less than one mile from the heavily damaged South Beach section which is at sea level and was inundated by the record 20-foot storm surge.  Make no mistake about it, the race was cancelled only after serious public protests, including by some runners.  And serious runners (such as myself) felt that running the race was not only grossly insensitive but also would have been counterproductive for serious runners and would basically eviscerate the very reason for a serious athletic competition.

And the New York Road Runners Club, a nonprofit organization which is overseen by the New York State Attorney General's Office (and to whom I asked to investigate the NYRR's initial attempt to retain runners' entry fees) has suffered possibly permanent brand damage.   Read these quotes from the Times' initial article:
Mary Wittenberg has also had to mend relations with sponsors of the race. As a nonprofit, Road Runners does not have a large financial cushion, and it no doubt wanted to avoid paying refunds. As a result, some partners, like ABC and ESPN, which was going to broadcast the race, may have their contracts extended for an additional year at no cost.
The larger question is how much the fiasco surrounding the cancellation of the race, which included planned protests, online petitions and attacks by local politicians, damaged the Road Runners brand. Road Runners is now in talks with ING, the Dutch bank that is the title sponsor of the race. If the bank decides to end its affiliation with the race, Road Runners could be forced to scramble for a new lead sponsor.
A victory for runners.  But this ten-time marathoner still recommends you run the Philadelphia Marathon -- a superior race and running experience -- next November.  (PS: Time to brag. I finished the 2012 Philadelphia Marathon in an okay 3:49:59.)

Wednesday, December 12, 2012

Is New York Attacking Free Speech?

The office of New York Attorney General, Eric Schneiderman, has released proposed rules that would require so-called 501(c)(4) "social welfare" organizations and certain other non-profit organizations that engage in any political activity (whether issue-specific or candidate-related) to disclose their donors.  Is this an attack on political free speech?

The proposed disclosure rules appear to target anonymous political speech -- that is, they intend to force any group raising and spending money on campaigns or issues to disclose who their contributors are and how much they've given.  The rationale behind people wanting to be anonymous, to avoid disclosure, is not to circumvent the limits on political contributions, but rather to avoid negative publicity, reprisals, retaliation and the like.  Some people will be at risk of losing business, of losing their jobs, or receiving other harassment if their political inclinations become known.  There is already a chilling effect on free speech and political participation, and that's without this new rule.  

Notably, the Attorney General concedes that this fear of political reprisal is legitimate.  The explanation for the rules includes a provision that organizations whose donors fear reprisal if they are disclosed publicly can napply for a waiver.  But this option admits that such reprisals and "blowback" can and does occur.  Now, since its occurrence is admitted, doesn't it then make sense to acknowledge that there is a value to one's privacy and anonymity?  Isn't there a right to anonymous speech?

And, to be real, isn't that chilling effect the very point behind this rule?  Isn't this all about discouraging unpopular political speech, to kneecap your political opponents by cutting off their funding source by threatening their supporters with being revealed?  

Saturday, December 8, 2012

Sleep Deprivation Not a Crime: Tragic Bus Driver Acquitted

A New York jury acquitted the bus driver of manslaughter and criminally negligent homicide for a tragic March 2011 accident in which the driver fell asleep -- or was barely alert -- and the bus struck the highway median and tipped over, killing fifteen passengers and seriously wounding many others.

The driver walks out a free man, after having served more than one year in jail for crimes for which he was found not guilty.

This prosecution illustrates the danger of the trend of overcriminalization, when bad judgment or accidents become the excuse for charging people with serious crimes. 

More ominously, we are seeing crimes being charged for actions which really are just serving as the pretext to mask a real animus -- racial, sexual, ideological -- against the defendant.  You know, like what used to happen in the Jim Crow South before the 1970s.

Friday, December 7, 2012

Are Cats Making You Schizophrenic?

I've never liked cats...or people who like cats...but here's new evidence supporting my bias.  

Naturally, this appears only in the British press.  Still real journalism "over there."

Thursday, December 6, 2012

Trenton Mayor Indicted


On a separate note, I observe that the lawyer for Trenton Mayor Tony Mack has been way too free with his comments to the news media.  In my mind, there should be no comments regarding the status of plea negotiations (if any), or even the admission (if true) that plea discussions are even taking place.  These comments imply or indicate some degree of guilt on the part of the client.  I fail to see how such public statements serve the best interests of the client, even if he is a public figure as the mayor of Trenton, NJ.

Monday, December 3, 2012

Second NJ Foreclosure Transformation Act Passes, Awaits Christie Decision

A second iteration of the infamous New Jersey Residential Foreclosure Transformation Act has passed both houses of the New Jersey Legislature and heads to the desk of New Jersey Governor Chris Christie.  Christie, facing re-election in 2013 in an admittedly "blue" state, has not indicated his decision, but a veto is no sure bet given the political considerations at play.

The first version of this Act was roundly criticized by me in the spring of 2012 (browse the archives) and despite its passage, was ultimately vetoed without comment by Christie in late June 2012.  I testified against the original version before the Assembly Appropriations Committee in June 2012.  My concerns about the original bill are equally applicable to the second, revised version.  

Saturday, December 1, 2012

Redistricting of NYC City Council Districts Back To Square One?

The currently proposed redistricting of the New York City City Council's 51 districts may be scrapped, according to a letter from the chairman of the New York City Districting Commission.

The letter, from Commission chairman (and former Manhattan United States Attorney) Benito Romano to City Council President Christine Quinn, states that withdrawal by the Commission of the currently proposed redistricting plan would allow for the public to have additional input on redistricting.  Presumably, such input would result in revisions to the current redistricting lines.

One consequence of the continued delays in adopting new district boundaries is that many candidates or potential candidates will be unable to determine in which district they live in or wish to run in, or to size up potential competition.  Many potential candidates who have registered with the New York City Campaign Finance Board have not specified the city councilmanic districts in which they intend to run, and instead have opted to declare themselves as candidates for an undetermined office and undetermined district.  Continued delays may affect fundraising, particularly for insurgent candidates.  Potentially, such effects could prompt an additional wave of complaints to the Department of Justice, which still has to "pre-clear" election law changes and district changes affecting New York City because most of the city is still a "covered district" under the federal Voting Rights Act.  These complaints, or federal constitutional litigation, could allege racial or ethnic discrimination and use the Voting Rights Act as the basis for the complaint.

Stay tuned.

Eric Dixon is a corporate lawyer who handles complex investigations and political matters for businesses, candidates and other individuals, and practices in both New York and New Jersey.