NastyBrutishAndTall

Non-Farm Payroll (NFP) Predictions for July

2008-07-31T14:52:00.000-07:00

Consensus: -75k
ADP: 9k

Last: -62k

Just like in May the ADP and consensus number diverged. Last time the consensus was closer. But does it really matter?

Will NFP continue to be such a big market mover, or will it being to take a back seat to inflation numbers?

To see how the market has reacted to the number vs expectation DailyFX.com has a writeup on the last three months of NFPs.

Support Online Poker

2008-06-23T13:00:00.000-07:00

This is from Professor Bainbridge, linked on Volokh:

The Poker Players Association has an urgent action item:

Tuesday, the House Financial Services Committee will review a bill, H.R. 5767, that would block the implementation of UIGEA regulations. In order to get this bill out of Committee on onto the House Floor, we need your help. We need you to contact the committee and express your support for H.R. 5767, as well as the King amendment which will refine the bill language. PPA strongly supports H.R. 5767 and the King amendment, but this important bill and amendment won’t pass without your help!

Call or Fax the House Financial Services Committee* Democrats’ Committee Office:* Ph: (202) 225-4247 - FAX: (202) 225-6952 Republicans’ Committee Office:* Ph: (202) 225-7502 - FAX: (202) 226-4301

Click Here To Contact Via E-mail

The UIGEA regulations will demand that banks block “unlawful internet gambling” but there is no definition of this vague term. Banks will be forced to block millions of transactions that are not in fact illegal. As a result, you may not be able to play poker or any other game of skill online. HR 5767 will prevent this regulatory nightmare. The King amendment will force the regulatory agencies to define “unlawful internet gambling” through a formal rulemaking, with due process and opportunity for input from affected parties.

Groups that oppose your right to play poker are working to defeat this important bill. Don’t count on someone else to take action for you – call today, there’s no time to waste!

Tennis Probe Finds 45 Suspicious Matches

2008-05-19T12:22:00.000-07:00

We first talked about the story here. Chris Masse blogged the story here.

You can read the full update from Bloomberg here:

Tennis investigators found 45 matches in the past five years that need to be studied because of ``unusual betting patterns,'' the sport's governing bodies said.

The matches, identified in a study started in January, ``require further review to ascertain if they affected the integrity of professional tennis or if there were other tennis reasons for the outcome of the matches,'' the International Tennis Federation, the ATP Tour and the WTA Tour said in a news release.
…
Tennis had ordered the review to assess the threat posed by gambling after suspicious betting on a match involving fourth- ranked Nikolay Davydenko of Russia in August sparked an investigation. More than a dozen players said publicly last year that they were approached to throw matches and the men's ATP Tour suspended three Italian players for betting on matches.

Non-Farm Payroll (NFP) Predictions for April

2008-05-02T05:13:00.000-07:00

Consensus: -78k
ADP: 10k

Last: -80k

DailyFX on the number:

Nearly everyone in the market seems to agree that non-farm payrolls will fall for the fourth month in a row, but will the job losses be more severe than what has been reported over the past 3 months? Job growth has been a sore point for the US economy for sometime and in March, the labor market reported its worst performance since March 2003. Analysts are currently looking for a mild improvement, but we believe that the conditions in the US labor market will worsen. In fact, non-farm payrolls could have even drop by 100k last month given the level of layoff announcements that have been announced.

NYT Flubs Deferred Prosecution Reporting

2008-04-11T10:45:00.000-07:00

In one paragraph it is suggested that a deferred prosecution agreement would have been the best way to deal with Arthur Andersen:

The agreements, government officials say, also avoid the type of companywide havoc seen most acutely in the case of Arthur Andersen, the accounting firm that was shuttered in 2002 after being indicted in the Enron scandal. The firm’s collapse threw 28,000 employees out of work.

What the NYT doesn’t mention is that Arthur Andersen should never have been prosecuted, but by the time their conviction was overturned the firm had collapsed. This was the definition of abusive prosecution, but during the rush to blame following the Enron scandal no one seemed to care. Basically, the DoJ thugs screwed up. According to the Supreme Court’s reversal:

The court found that the instructions were worded in such a way that Andersen could have been convicted without any proof that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents. The opinion, written by Chief Justice William Rehnquist, was also highly skeptical of the government's concept of "corrupt persuasion"—persuading someone to engage in an act with an improper purpose even without knowing an act is unlawful.

So would have a deferred prosecution agreement been a better alternative? No, since AA didn’t do anything wrong in the first place.

The article then suggests that DPAs are get out of jail free cards.

Some lawyers suggest that companies may be willing to take more risks because they know that, if they are caught, the chances of getting a deferred prosecution are good. “Some companies may bear the risk” of legally questionable business practices if they believe they can cut a deal to defer their prosecution indefinitely, Mr. Khanna said.

The general theme of the article is that DPAs are corporate giveaways. Well they are, but not in the sense that the article puts it. DPAs give prosecutors a way to hand something back to their cronies and get credit for “wins” without winning anything. After all, why shut down a perfectly viable business when it’s so much better to extort it?

This is a classic Spitzer-tactic. Make accusations to back the accused into a corner, then cut a deal. The businesses involved can’t risk even a small chance of being shutdown, but that doesn’t matter to the prosecutors who won’t hesitate to claim victory regardless of the outcome. They get away with it because the prosecutors have no intention of following through with the expense of a trial, but the system is so stacked in their favor that they never have to.

Amazingly, the NY Times points out the Ashcroft scandal involving DPAs, but not the obvious conclusion: The biggest winners from DPAs are the prosecutors.

Non-Farm Payroll (NFP) Predictions for March

2008-04-04T05:15:00.000-07:00

Consensus: -50k
ADP: 8k

Last: -63k

DailyFX on the number:

Now more than ever, the change in non-farm payrolls for the month of March will determine the outlook for the US dollar and US monetary policy. All but one of our leading indicators for non-farm payrolls point to another month of job losses, which means that a negative print alone will not be enough to drive the US dollar lower. The dollar has been rebounding in the days leading up to the non-farm payrolls report and interest rate expectations for the FOMC meeting at the end of this month are strongly skewed in favor of a 25bp versus 50bp cut. We have seen these expectations change on a dime in reaction to incoming economic data and given the fact that the non-farm payrolls report is the most market moving indicator for the US dollar, there is no question that a weak release could alter market expectations significantly.

Non-Farm Payroll (NFP) Predictions for February

2008-03-07T05:17:00.001-08:00

Consensus: 30k
ADP: -8k

Last: -17k

The most recent fundamental releases have been coming out to the downside:

The consensus compiled by Thomson's IFR Markets indicates economists are expecting payrolls to have increased 25,000 and unemployment to have increased to 5 pct. Since the consensus was finalised last Friday, however, there has been a host of poor economic indicators released in the week.

Super Bowl Betting – How the Bookies Lost

2008-02-14T05:23:00.000-08:00

Great article from Bloomberg shows how the linemakers are reluctant to change the spread from where it’s set, even when they know its wrong.

Why, if the sportsbooks could see all the money flooding onto the Giants, did they simply not move the point spread? In financial markets, if all the money is short then the market will move down and if all the money is long then the market will move up.

The answer is that in sports betting, once the line has settled then the books will only move away from that point spread if there is major injury news. If Tom Brady had an injury so serious that he missed the game then the line might have moved from favoring the Patriots by 12 to favoring them by only 5, or perhaps less.

But if the line had been moved because of the weight of money, then the books may have found themselves taking early action on the Giants +12 and late action on the Patriots -9.
If the game then ended with the Patriots winning by 10 points they would have had to pay out to both sets of bettors, which would have been seriously expensive. In bookmaking terms this is known as getting ``middled'' and it is what linesmakers try to avoid doing, at almost any cost.

Non-Farm Payroll (NFP) Predictions for January

2008-02-01T05:18:00.000-08:00

Consensus: 70k
Range: 5-160K
ADP: 130k

Last: 18,000

DailyFX on the number:

Of the 7 leading indicators for non-farm payrolls that have been released ahead of the NFP number, only 5 favor stronger job growth. The biggest reason to believe there will be a strong rebound is the ADP survey which reported 130k private sector jobs in the month of January. ADP has overestimated private sector job growth in the past 2 months, but directionally they tend to be fairly accurate. Help wanted ads also increased slightly and the four week moving average of jobless claims dropped from 343k to 325k.

PM Chart of the Day

2008-01-30T11:20:00.000-08:00

Chart and quote from Volokh

Consider the figure below. It aggregates a total of 145,388 trades on Major League Baseball games in 2005. Each contract would pay off $10.00 if the specified team won the game.
The x-axis represents different transaction prices, and the y-axis shows, for all trades at that price or up to 10 cents higher, the probability that the team in fact won the game. Note that the points conform fairly closely to a 45-degree line.

This doesn't prove that prediction markets are perfect predictors....

Hubdub Debuts at DEMO 2008

2008-01-28T06:17:00.000-08:00

The Digg of PMs has launched. Zdnet blog on the firm:

“Hubdub lets people follow news over time and get forecasts on how news stories turn out,” company co-founder Nigel Eccles told me.

Hubdub, founded in November last year and headquartered Edinburgh, UK, allows users to formulate questions–such as ‘Will Apple introduce a tablet PC?’ or ‘Who will win the Florida Republican primary?’–and the community wagers on predictions with Hubdub dollars.

The New Breed of SPE’s

2008-01-24T18:30:00.000-08:00

This WSJ article about ACA Capital Holding, shows financial firms adeptness in managing their balance sheet. ACA, ostensibly an insurance firm, was undercapitalized from the beginning. Based on the firm’s ‘A’ credit rating, the firm has a veneer of security which fell apart when S&P downgraded them to triple-C in December – a canary in the subprime coalmine. To avoid collapse, the firm is negotiating with the banks to avoid posting collateral.

Why would a bank go to such an undercapitalized firm for insurance? The WSJ gives this answer which sounds very much like SPE’s Enron used before its own collapse:

Investment banks paid ACA annual fees for bearing the risk in their debt securities. This shielded them from the impact of market-price fluctuations, so the banks didn’t have to reflect such fluctuations in their earnings reports.
As long as ACA kept its single-A rating, the banks didn’t require ACA to post collateral even if the securities it insured slipped in value. It’s different if a hedge fund, which doesn’t have a credit rating, is selling the insurance. In that case, each time the security insured falls in value, the hedge fund may be asked to put up more collateral.

Enron followers remember Special Purpose Entities as companies which were used to manage earning and to avoid reporting losses. They weren’t illegal. These related parties met the letter of the law, while violating the spirit and were instrumental in the collapse of the firm.

Essentially, they existed so Enron could avoid posting certain debts and showing less volatility. If the SPE’s had enough outside equity (3%) to be considered independent they did not have to be consolidated on Enron’s balance sheet. Enron crammed the SPE’s full of junk it didn’t want and couldn’t offload anywhere else.

ACA’s performed the same function. If everything is going up, the system works. ACA profits since they don’t have to make good on any policies, and the banks get to move junk (and its volatility) off their balance sheets. But when the market turned sour and all of the subprime securities moved down in unison, the equity was quickly used up and the firm collapsed. As Enron’s SPEs weren’t really independent, ACA was never really an insurance firm.

WeatherBill's Success

2008-01-18T20:35:00.000-08:00

While it's not a PM, WeatherBill seems to be doing well. This article mentions trade sizes in the tens of thousands, much larger than any weather-based contracts available on intrade.

On WeatherBill.com there is nothing about trading or contracts. The focus is on what a customer is interested in: a custom solution to hedge against weather.

Unlike companies that sell weather insurance or futures based on the weather, San Francisco-based WeatherBill lets companies create weather-specific coverage for their business.
Initially, energy companies used them as a hedge against unusually cool summers or warm winters, when energy consumption might be low.

Soon, corporate America embraced the concept and weather futures began trading on the Chicago Mercantile Exchange. But at that level, the contracts were complex and expensive, shutting out small firms.

That's where WeatherBill and others stepped in with customized derivatives. Clients pay a one-time premium that amounts to a percentage of the revenue the company wants to protect. WeatherBill has hundreds of clients, so the odds of payouts are in WeatherBill's favor.

Five Reasons the Prediction Market Critics Are Wrong.

2008-01-12T17:47:00.000-08:00

New PM post excerpt below. Read the full post at Midasoracle

1. It really was an upset – As it has been pointed out elsewhere, the Clinton victory was a surprise to everyone....

2. Pundits/Critics are NOT traders...

3. PMs are not polls – This common mistake is exemplified by this quote from the Chicago Tribune, “The New Hampshire primary was a reminder that prediction markets, where bettors are putting money on the line, can have no more value than opinion polls, where participation costs nothing.” This critic missed the point and doesn’t realize he is comparing apples and oranges....

4. Regulations have hurt the accuracy and liquidity of PMs – The inconvenience of opening a trading account at Intrade has excluded many Americans from participating....

5. “Serious people who study or work with these markets are not in the ‘markets are magic’ camp” – Prediction markets are like other financial markets: fat tails, black swans, bubbles, “manipulations” etc. ...

2008 Presidential Nominee - Search vs Price Trend

2007-12-12T06:23:00.000-08:00

NatWest 3 Plea Could Have Affect on European Online Gambling Operators

2007-12-05T05:55:00.000-08:00

We posted earlier about Tony Blair's shameful conduct of allowing his citizens to be snatched and held in the US for gambling crimes. The recent plea bargain of another group of UK citizens in a US court may have implications for upcoming gaming trials. The US has come down hard to force pleas on foreigners; just yesterday Gary Kaplan from BetonSports was denied bail. Gambling911 examines the issue:

"The greater UK business community is up in arms," points out Joe Brennan, Jr. of iMEGA.org. "How the US can unfairly reach into their country (Great Britain) to prosecute their people. This is a pretty big precedent being set."

And many now speculate that the NatWest 3 (plea bargained) and David Carruthers (still awaiting trial in the States) are just the beginning to a long string of arrests that could be coming down the pike.

Immediately following the Carruthers arrests, the online gambling community and those in the entire European business sector, were stunned to learn that a former Chairman of Sportingbet was taken into custody at New York's JFK Airport. Peter Dicks was wanted on an arrest warrant from the state of Louisiana. The warrant charges Mr. Dicks was running a gambling enterprise by computer, a crime under Louisiana law. Yet Dicks was hardly active on the Sportingbet board and was in the US on "unrelated" business.

Tennis Corruption in The NY Times

2007-11-25T20:14:00.000-08:00

The NY Times has a follow-up article on the after effects of the tennis betting scandal for the pros. During the August match strange betting patterns alerted the authorities that something was amiss. BetFair ended up voiding all the bets on the match. Tennis pro Nikolay Davydenko is still being investigated according to this latest NY Times article on the scandal:

Kris Dent, an ATP spokesman, also acknowledged that a “highly subjective” list of 140 suspicious matches dating from 2002 had been compiled by a European bookmaker and provided to investigators.
“There is a clear risk to the sport because players are being approached,” Mr. Dent said. “We take this incredibly seriously.”

UPDATE: The NY Times got the chart wrong, see more info here: http://blog.hubdub.com/ Thanks Nigel for the heads-up.

Casino Fact of the Day

2007-11-14T08:14:00.000-08:00

Which US states generate the most tax revenue from casino gaming?

Nevada is obviously first. Not so obvious is that Indiana, Illinois, and Missouri all generate more tax revenue from casinos than New Jersey - mainly due to the lower tax rate.

The Failure of the Corporate Fraud Task Force

2007-11-08T13:31:00.000-08:00

An article in The American Lawyer digs into the numbers behind the decline of corporate indictments and finds that the CFTF was mostly PR.

...we found several high-profile acquittals, hung juries and appellate reversals -- and some of those prosecution failures were due specifically to questionable tactics by the Justice Department. In all, 27 of the defendants whose cases we examined, including executives from Adelphia, America Online Inc., PurchasePro.com Inc. and Qwest Communications International Inc., were acquitted at trial. Another 28 cases were dismissed. There were 22 mistrials. And nine convictions were overturned on appeal, including those of such high-profile defendants as Credit Suisse First Boston Corp. banker Frank Quattrone and the Enron "Nigerian Barge" defendants from Merrill Lynch & Co. Inc.

...And while many of the lawyers we interviewed say that the task force's directives did result in more corporations cooperating with the government, defense lawyers and even some federal judges came to believe that that cooperation was won at a high cost: the erosion of such basic defendant's rights as the attorney-client privilege and the right to counsel.

The decline in corporate prosecutions should be celebrated. It seems as if the bureaucrats have move onto other ways to justify their existence.

Non-Farm Payroll (NFP) Predictions for October

2007-11-01T08:27:00.000-07:00

Consensus: 82,000
ADP: 106,000

Last: 110,000

DailyFX on how to play the number:

Trying to trade a long dollar position on the employment data should be done conservatively considering the steady downtrend the currency. On the fundamental front we will look for consistency across the various indicators: a strong NFP number for October, an upward revision to September, perhaps a downtick in the jobless rate and sustained rebound in the annual earnings report. Of course, the headline number and revision take precedence, but the fewer points of support for the dollar, the more suspect dollar momentum will be. On a strong fundamental release and a green five-minute candle, we will look to take a short EURUSD position on two lots at the close of the 12:35 GMT bar

New PM Site for Marketers - Predictify.com

2007-11-01T08:19:00.000-07:00

Predictify allows any user to post a basic question for free, while premium questions cost $1 per response and come with detailed demographic data. Users are incentivized for accurate predictions with cash and status rewards. Uniquely with this site, accurate predictors are paid more for their responses that less accurate users.

The site is aimed at people who want to use the demographic data and is a unique take on an increasingly crowded PM field. Despite the sports contract section, Predictify won’t substitute for Tradesports just yet.

Are certain types of questions prohibited?
Yes. Predictify may not be used for securities replication, odds-making, betting, gambling, or wagering.

More information about the firm here.

Free Dennis Kozlowski

2007-10-26T07:15:00.000-07:00

Excellent piece in the WSJ from Dan Ackman:

… But even if you believe the worst about Kozlowski and his co-defendant former Tyco CFO Mark Swartz, they were paid according to a contract, and that is not stealing.
…
There is no question that Kozlowski was paid according to the incentive compensation plans that were duly approved by the Tyco board in 1994 and again in 1997. The plans rewarded the CEO and CFO with bonuses based on improvements in company earnings, cash flow and earnings per share. Excessive? That's an understatement. But though the record-keeping was careless, nothing was secret: The contract and the payments were all on the books.

US Delaying WTO Online Gambling Settlement

2007-10-24T08:32:00.000-07:00

Negotiations continue on concessions after the US lost its WTO case on online gambling. The settlement amount discussed was $100 billion, which may have been exaggerated. Even so, its shocking how little press this case has received. So far most of the coverage has been from online gambling sites and an editorial in Bloomberg

The United States has been forced to negotiate the compensation package because of a 2003 case filed by the Caribbean nation Antigua and Barbuda, which challenged U.S. Internet gambling restrictions at the World Trade Organization.

A WTO panel ruled two years later that a U.S. law allowing domestic companies to provide online horse race gambling services discriminated against foreign providers.

Dershowitz on the Gaming Ban

2007-10-24T08:26:00.000-07:00

Two unusal opponents on the gaming ban in the WSJ Law Blog:

Gaming law is in vogue. Indeed, there’s a Harvard Law course taught on the subject, by visiting professor Keith Washburn. “This class will address questions like these in dealing with an industry that lies at a shadowy and uncertain gray area where law meets morality, commerce and social problems,” reads the course description. “The evils attributed to gambling are subject to widespread disagreement and the justifications for prohibiting or regulating gaming have varied across time and across particular gaming industries.”

Nesson told the Herald and says here he was “affronted” when Congress banned online poker and other types of Internet gaming last year. Said Nesson: “The idea of Internet freedom is a core notion of modern political freedom.” As for Dershowitz, he argues that because poker is game of skill it should be legal. “It’s certainly not a game of chance,” Dershowitz told the Herald. “It is ridiculous to call either poker or sports betting a game of chance.”

Gore Beating Obama in Nobel Prize Surge

2007-10-13T05:08:00.000-07:00