Rojo

This is not the first time in our adult life that we are proud of our country. Accordingly, we are pleased to wish you a Happy Fourth of July.

DealBreaker won't be publishing today in observance of Independence Day. We'll leave the comments section open so those of you stuck at your desks can chat. As always, the Community forums section is a great place to start new discussions. We promise not to call you anti-American.

Enjoy the three-day weekend. We'll see you on Monday.

$$$ The Upside Of Being Downsized [Portfolio]

$$$ Israel told the court he tried to commit suicide by swallowing pills two days ago. "I thought it was better to do myself in than to turn myself in."

"I ate the balance of my fentanyl patches because I thought it was better to do myself in than to turn myself in," Israel said. "I woke up battered and bruised and I realized God didn't want me to do that and I turned myself in."

When that attempt failed however, Israel said he thought God had wanted him to surrender. This and his mother's pleas, made him leave the campground where he had been hiding out in a mobile home and ride his blue scooter to the nearest police station in Southwick, Massachusetts, officials have said. [CNBC]

$$$ Why They Should String Samuel Israel Up On Wall Street With A Note Saying "Fraud Isn't Painless" [Timothy Sykes]

$$$ Newspapers [WallStrip]

Worn out by another ugly week in the markets? Don't worry, you still have time to sign up for BeachComber, DealBreaker's summertime email-only special newsletter. Even if you missed the first two editions, by now you've probably heard DealBreaker launched a weekly newsletter focused on escaping work and engaging in leisure, especially in the Hamptons. Every Friday afternoon we'll update you on the expected weather, traffic and parties you'll be encountering in the East Egg of the twenty-first century. We might throw in a couple of links to business stories too.

The third edition of BeachComber will published over email in a few minutes. Sign up below by simply entering your email address. It's free!

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Someone at BusinessWeek recently decided that short sellers are hot, and something should be done to acknowledge that hotness beyond staring into the dreamy eyes of (a picture of) David EinPorn and self-gratifying. But it's hard to write an article with only one hand so they went with a slideshow instead. It's called "The Wizards of Short Selling," which is apt because while long investing involves diligent research and fundamental analysis, short selling involves immersing oneself in the dark arts and sacrificing live goats following a bestial ceremony.

All the usual suspects are there (a group of people who, when the moon is full, show up to their respective trading floors in full attire, i.e. robes and those pointy hats with the stars). You've got your Tice, you're got your Paulson, you've got your Einhorn, you've got your Ackman, and of course you've got your Chanos. Additionally, you've got your deceased Winslow Jones, who is often summoned in candle-lit Ouija board sessions. Sadly, a few pretty important names o' the short selling game were left off the list, which we've taken the liberty of including after the jump.

Morgan Stanley commodities chief John Shapiro has decided to follow Michael Lewis advice about what "the really shrewd people" do when times get tough on Wall Street. They "abandon the big firms for which they have happily worked for many years, and sneak off," according to Lewis.

Shapiro is stepping down from his positions as the head of Morgan Stanley's huge commodities trading desk. He's been with the firm since 1984, and gets credit for building its energy-trading business. But lately Morgan Stanley has seen a sharp decline in revenues from commodities. Shapiro's surprise retirement will inevitably be read as a signal that things haven't improved.

As the Wall Street Journal tells it:

The firm recently said a decline in commodity revenue from the first to second quarter of this year was due in part to wrong-way bets in the power sector. But a person familiar with the matter said the overall commodities business in the first half of 2008 is running on a par with the first half of the prior year.

Writing on the wall seen.

Morgan Stanley's Shapiro Resigns as Commodities Chief

He grew the beard for the egret and the verdict? The egret likes. [NYT]

Henry Paulson focused on market discipline yesterday, saying we need reforms that would allow the unwinding of failed financial institutions. Speaking at Chatham House, the British think tank, on the financial markets and regulation, Paulson said that the Treasury Department and other policymakers were focused on "the immediate turmoil," seeking to promote market stability and minimizing the negative impact of stresses in the capital markets. However, further regulatory reforms, such as the Blueprint put out by the Treasury in March, were also necessary, both to fix problems exposed recently and to head off future problems.

Paulson delivered an accurate state-of-the-union on the financial markets, commenting on deleveraging and noting that US and UK financial institutions had recapitalized greater than 95% of their losses to date. Frankly, It's nice to see a policy maker so-grounded in the reality-base community.

The new fad these days among parents trying to make their children even more savvy is sending them to finance camp, where they are learning slick little phrases like "Assets feed you, liabilities eat you."

In the past such camps were limited to "high-achieving high school students," which we read as, "those trying to puff up their college resume." Now, the audience has expanded to grade-school students.

Many of the camps "[teach] campers how to rebalance portfolios, invest in real estate and use credit cards without getting dinged on fees."

Camp Millionaire, over a five day period, has its campers build a minieconomy , where the kids use mayo moola as their mock currency.

One little fucker, Andrew Adams, 10, told his mommy that "her credit-card billing cycle had changed, and that she wasn't keeping up with payments. Her delays were racking up late fees, jacking up her interest rate and hurting her credit score." Roughly translated as, "Mommy, you numbnuts! Get your shit together and pay the bills on time."

On the other hand, I guess it's not a bad idea to teach kids some financial sense now, so that they won't take out mortgages that they can't pay and rack up massive debt in the future.

--Senior Camp Counselor Travis

Two Goldman Sachs funds launched to take advantage of the credit squeeze saw serious losses last month, according to a person familiar with the situation. Goldman's liquidity fund and its credit opportunities fund were meant to capitalize off bad situations, buying distressed assets in the credit and mortgage markets. Both were down in the high double digits for June, the person said.

GS Liquidity Partners was launched when the credit crunch first hit last fall, with $1.8 billion to make investments in distressed credit. The credit opportunity fund is a more recent creature, launched this year to invest in mortgage market dislocations.

Oil prices near $146 (AP)
Iran, US stockpiles, comments from the Saudis about not boosting production, etc. etc. Also, interest rate hike possibilities in Europe, potentially weakening the dollar.

ECB hikes key rate to 4.25% (Market Watch)
The European Central Bank lived up to its promises this morning, hiking interest rates by a quarter of a point. The move initially inverted yield curves in Europe, traditionally a signal that an economic recession may lay ahead. It also highlights the differences between the missions of the Federal Reserve and the ECB. The Fed is charged with maintaining general economic and financial stability, balancing growth, jobs and inflation. The ECB is charged solely with monetary stability, making it institutionally more hawkish on inflation. The Euro will likely rise against the dollar, as will oil.

Gelato Goes Gourmet (WSJ)
The gelato industry is going global, using fancy names and fancy ingredients to tout itself as the discerning man's ice cream. Of course, it's always just been ice cream with a fancy name, but whatever. Nonetheless, we were thinking last night, as we walked by a gelatoria: hasn't gelato lost its moment? For awhile there, it was the frozen dessert, but it just seems like the gourmet frozen yogurt wave, characterized by a million Pinkberry clones, continues to hold onto its grip of dessert seekers. Unless that's peaked. As much as you might roll your eyes everytime you see a new Pinkberry, from our vantage point, it still has a ways to go before it crests.

A Lucrative Deal for Rush Limbaugh (NYT)
This is the Drudge effect in action. Yesterday, he "reported" that the NYT Magazine was going to announce this weekend that Rush Limbaugh had signed a deal in the hundreds of millions. That seems to have prompted the paper itself to run this piece today, spilling some of the beans from the magazine. Anyway, good for him. And he's not even exclusive on either XM or Sirius. Pretty impressive.

India Bans Corn Exports to Control Domestic Prices (Bloomberg)
We had no idea that India was the world's sixth largest corn producer. Anyway, it doesn't matter now, because we won't be eating any Indian corn anytime soon (not that we would, since it's pretty much the sugariest vegetable there is... but that's a digression). In an effort to cool prices, which are up in India (probably not due to the flooding in Iowa, and possibly not even to US ethanol policy, though maybe), the government has banned the export of the golden stuff. The ban will run from now until October 15th.

New Steps to Aid Economy Are Advocated (WSJ)
As the last batch of counterfeit money stimulus checks rolls off the printing press, politicians are already discussing what can be done next to boos the economy. Hey! What about more stimulus checks?

Predictably Irritating (Infectious Greed)
We're pretty tired of all the Freaknonomics-clones out there, too. It's not that the books are wrong, or that they don't have some interesting examples of stuff that make you go "hmm" it's really just that the whole genre has gotten stale. As Paul Kedrosky puts it: "More broadly, however, I had a deeper problem, and it has to do with the whole subject. Because I just don't care anymore. I'm not interested in more freakonomo-clones about those nutty human satisficers. I've heard the stories. Over and over. And I've heard enough to make me wonder how all we supposedly idiotic humans manage to step off sidewalks without being killed if we're so dumb. I'm really, really tired of carnie cognitive sideshows about stupid mind tricks. I get it. We're dumb. We're flawed. We take mental shortcuts. I get it. Really. Now stop telling me that, and tell me something how we idiots survive in our chaotic world." But if you must know, he was reading a book called, predictably, Predictably Irrational, which sounds like it has the exact same premise of another book that's out Sway: The Irresistible Pull of Irrational Behavior.

Picks to win Nathan's Hot Dog Eating Contest (SportsOdds.com)
Pretty much the main thing we look forward to every 4th of July is the Nathan's Famous Hot Dog eating championship. Sadly, we won't be there this year, though we'll obviously be watching on ESPN from a pool party in New Jersey. You know the backstory, right? Last year, world champ Takeru Kobayashi went down to the American Joey Chestnut, though both broke Kobayashi's previous world record was amazing. The two are back this year, and now Chestnut is the favorite. In fact, the Vegas odds on him are 5-6. Meanwhile, according to Gambling911, the line on the winning hot dog number is 68.5.