Will 2016 bring Clinton’s past trading activities back into light?

In the Spring of 1994, the Clinton White House faced questions amidst a newly developing story centering on the First Lady’s commodity trading activities as her husband sought the governorship of Arkansas. How did Hillary Clinton, with no related education or experience, happen to turn a $1,000 investment into nearly $100,000 in less than a year?

What role did her broker (previously suspended from traded and later fined heavily by the exchange for multiple violations), and her trading advisor (who represented the state’s largest employer) play in her fantastic success?

As the 2016 presidential race heads into full swing, the events in question are nearly forty years old, occurring in 1978-1979, while Bill Clinton served as the Arkansas Attorney General and Hillary Clinton worked for the Rose Law Firm. Yet the Clintons had also by that time fully embraced public life, so her private business dealings from the time would still seem to be relevant in an evaluation of her fitness for higher office. Furthermore, the couple’s legal credentials (they met at Yale Law School), would certainly preclude any potential wrongdoing as being characterized as simple youthful indiscretion.

I’ve traded commodities – including cattle futures – and in my own initial review of this case, it’s hard to conclude how Hillary Clinton could’ve achieved the returns she did. It seems far more likely that the Clintons accepted the largesse of a major corporate interest,  relying on a shady broker and advisor who used accounting gimmicks to book phony profits that Hillary later withdrew as cash. That’s my working theory, anyway.

Two recent articles cover this topic in greater depth and are recommended reading for anyone wishing to explore further details or consider their relevance to the 2016 campaign: a piece by Caroline Baum and Victor Niederhoffer, originally written in 1995 and republished this month in National Review; and another by Marc Joffe earlier this year in the Fiscal Times.

 

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Clinton proposes tax on trading

Democratic presidential candidate Hillary Clinton is proposing new taxes on large-volume trading in financial markets, one of several measures designed to appeal to the party’s liberal nominating base as she squares off against insurgent rival Sen. Bernie Sanders (D-Vermont). The challenger’s left-wing economic populism has won him traction in some early nominating states, putting pressure on Clinton to maneuver her campaign to guard against a repeat of 2008, when a relatively unknown Barack Obama swept the party off its feet with an appeal to passion and principle.

Hillary Clinton on the campaign trail. (Photo: www.hillaryclinton.com).

Hillary Clinton on the campaign trail. (www.hillaryclinton.com).

Clinton’s strength is seen as her experience and pragmatism, although clearly the campaign is focused on the nomination, and not the inevitable pivot to the center (rhetorically, at least) that marks most presidential bids as they begin to look towards the general election.

I hope to dissect some of her proposals in greater detail in the coming days. The tax on so-called high-frequency trading, is actually a tax on order cancellations in financial markets. This is designed to penalize large-volume, computer-driven trading strategies, which Clinton and some other critics blame at least in part for market meltdowns and flash crashes; it is also designed to discourage “spoofing,” a technique that can involve submitting open orders in an effort to push the market one way or the other, and later canceling them.

Debate will no doubt ensue as to whether imposing new taxes on market trading is likely to achieve the “fairness” and stability proponents claim to desire. These new costs would however, very likely do two things:

  • Reduce market liquidity, by making it more expensive to trade. Lower liquidity means higher spreads (the difference between bid and ask), which also makes transactions more costly. These direct and indirect costs will hurt both institutional and individual investors.
  • Increase the cost of risk management. Small and large traders alike often rely on series of continually adjusted stop orders to protect profits and cut losses. These systems can rely on orders that are placed and later canceled and replaced with a new order to reflect market movement. Taxing order cancelations will make it more expensive to manage risk in this way, thereby potentially injecting even more risk into capital markets.

Politico and others have reported that former Secretary of State Clinton is relying on former Rep. Barney Frank (D-Massachusetts) and Gary Gentler (who helped craft Dodd-Frank) to advise her on economic matters.

 

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Drudge Report app flap continues, ads a new problem

The latest version of The Drudge Report app retains its signature feature - incredibly small font sizes.

The latest version of The Drudge Report app retains its signature feature – incredibly small font sizes.

About a year ago I reported on the Drudge Report’s troubles with its app, which garnered universally negative reviews from users. One of the main gripes was the incredibly small font size used to display the daily headlines, linking readers to stories from every corner of the web.

Today I checked in with the App Store to see if any changes had been made, and the developer notes that “general maintenance” was performed and a new version released on September 4th.

Unfortunately, the app still suffers from minuscule font sizing and will be useful only to the ocularly gifted.

The latest version continues to earn poor ratings from users in the iTunes store, who note the font

An ad in the app sends users to the Candy Crush game in the App Store

An ad in the app sends users to the Candy Crush game in the App Store

trouble but also cite a new problem: full page pop-up ads frequently accost readers, often redirecting them to buy games in the App Store. At the moment, the updated app averages a paltry one star rating from more than 100 reviews.

I downloaded the app (using an iPhone 5s) and can confirm these problems. It also seems to be a bit slow in loading and navigating, although without testing it on different networks, I can’t confirm with certainty that the issue is caused by the app and not by a slow wi-fi connection or some other local network issue.

It remains a mystery why a new media pioneer like Matt Drudge would be plagued by these types of ongoing technology problems.

For iPhone users, the site is best viewed with a browser at www.idrudgereport.com.

For iPhone users, the site is best viewed with a browser at http://www.idrudgereport.com.

For now, a better option for reading The Drudge Report, at least for iPhone users, is to visit http://www.idrudgereport.com using Safari, and bookmark the page.The fonts are still small but basically readable, and there are no pop-up ads. 

 

 

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Chicago Tribune scrutinizes CPS bond deal

The Chicago Tribune published an extensive, front page feature on the Chicago Public School District’s use of innovative borrowing strategies over the last decade, which appears to have backfired and inflated borrowing costs by $100 million.

Appearing in the Sunday print edition of the newspaper, the story centers around the district’s practice of issuing auction-rate bonds, paired with interest rate swaps, to reduce the cost of borrowing money. In contrast to more traditional, fixed-rate bonds issued by school districts and municipalities, the variable rate instruments were subject to future market conditions and in this case, ultimately moved against the district. Servicing the debt became more costly, and breaking out of the contract required large lump-sum payments.

Several academics, financial professionals and public officials contacted for the story said greater consideration should have been given to the potential risks involved. The district’s financial advisors who crafted the deals defended them, disputing the newspaper’s analysis that concluded that they cost the district $100 million.

A couple notes: first of all, reporters Jason Grotto and Heather Gillers did a great job with this story. It’s a serious, in-depth piece on a local topic of real civic importance, showcasing one of the strengths of newspaper journalism. That’s not to say I endorse every sentence or every shade of tone and nuance in the article, but that’s beside the point. The point is that this is important, engaging reporting. Definitely worth my Sunday subscription price.

Secondly, it should be noted that the district and its financial people weren’t crazy or irresponsible for considering the new type of deals that were being used more often during the early 2000s. Innovation occurs in the financial industry just like every other industry, and just because something is new and more complex, doesn’t mean it’s wrong or irresponsible.

Thirdly, that being said, I believe (and I think most reasonable citizens would believe), that a school district should generally take a conservative approach to resource management and financial planning. That might mean you don’t try to shake a point or two out of every deal, if it means incurring an unpredictable future liability stream.

Fourthly and finally, I thought that the reaction of the CPS advisors in response to this article was lacking, at least in terms of what was published. The competing analysis they submitted in response to the Tribune analysis omitted key information, leaving their defense of the deals less credible. Again, it’s not always wrong to take calculated risks, but if the deals don’t work out, just say that, rather than stretch or skew an analysis stating that they did.

But worst of all was Adela Cepeda‘s attempt to strike back at the newspaper for investigating the public school district’s finances. “I consider the slant of the reporters for this article to be absolutely biased and outright sexist,” she said in a letter to the Tribune. She also criticized the paper for consulting a New York firm to review their own analysis before publishing, only to then use a New York firm herself to submit her own analysis.

Cepeda earned an MBA at the University of Chicago, and was in banking for ten years, according to the article. She married into a politically connected family on the city’s South Side, and very shortly after forming her firm won contracts with CPS. Her partner, David Vitale, is a former Chicago Board of Trade president and currently serves as president of the school board.

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Drudge silent on app flap

It’s been five days since the latest Drudge Report app was released, and fallout continues to collect in the form of disaffected fans who say the update fails to deliver even a readable version of the website. As of tonight, 286 users have slammed The Drudge Report – Version 5.0.2 in the iTunes store, nearly all of them rating the app only one out of five stars.

So far, there are no new updates on offer after 5.0.2.

The Drudge Report mobile app has been plagued by problems and poor user reviews.

The Drudge Report app has been plagued by problems and poor user reviews.

I emailed the Drudge Report several days ago with several questions, and have not yet heard back from anyone. Granted, it was a public email, so Drudge and the team no doubt field a large volume of messages. However, I have sent another message tonight in hopes that my questions will be seen and responded to by Matt Drudge or an associate.

One thing I believe Drudge could do is simply to draw more attention to his mobile version website. Currently, if an iPhone user visits http://www.drudgereport.com using the Safari browser, the user is not automatically redirected to a mobile version of the page at http://www.idrudgereport.com. There’s a tremendous difference between the pinching and scrolling required required to read headlines on the desktop version of the site with a smartphone, and using the relatively smooth, user-friendly mobile version. In fact, right now, idrudgerport.com is vastly superior to 5.0.2.

Major news sites typically use what web developers call “responsive web design,” allowing users to access access the site from various devices (desktop, tablet, smartphone) with equal clarity and ease. A simpler technique is to build a stand alone companion site for mobile users and automatically redirect readers there. A third, even more basic way to go is to build a companion site or even a site within a site, and let users click a button on the desktop homepage to let users go to the mobile version if they desire (no automatic rerouting required).

The Drudge Report doesn’t utilize the first strategy (a responsive site), but should be able to incorporate the second or third strategy without a terrible amount of effort and expense. Unless and until Drudge puts out a good mobile app, smoothly escorting phone and tablet readers to a mobile-optimized experience is the only decent thing to do.

 

 

 

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Drudge doubles down on dismal app

Version 5.0.1 of the Drudge Report app was released October 9, 2014.

Version 5.0.1 of the Drudge Report app was released October 9, 2014. It was widely criticized for its small font.

New media icon Matt Drudge has resisted the pleadings of hundreds of loyal readers, and re-released The Drudge Report app without substantially changing the layout of the ill-received version released only nine days earlier. Version 5.0.2 was released in the iTunes store this past Thursday, October 18 and marks the third update this month to the mobile app for one of the most popular online destinations for news and politics.

More than two hundred users have reviewed the update in the iTunes stores, collectively giving this version of the app the lowest possible one star rating. Several days before the latest release, nearly six hundred reviewers had already given the prior version, 5.0.1, a lowly one star. In the Google play store, the newest version debuted today and nine reviews have been been published. Google doesn’t break down the reviews by release version of the app, but if you do the math, the new release scores a 2.8. Higher than the iOS edition, but still quite lacking overall.

What is shocking is that Drudge payed no attention to the major criticisms of Version 5.0.1, which was that it was essentially no different than opening up http://www.drudgereport.com in the Safari browser on iPhone. The font size was so small that it required lots of zooming and pinching, and there were no usable features. This new version incorporates no new features and does nothing to make the page more readable – the font is still tiny and not suitable for reading on a smart phone.

Version 5.0.2 of the Drudge Report was released October 20, 2014. The update contains no major changes from the previous version.

Version 5.0.2 of the Drudge Report was released October 20. The update contains no major changes from prior version.

Strangely, developer Siren Tech LLC declares in the publishing details that “this app is optimized for iPhone 5,” a statement which is patently and demonstrably false. The update summary flatly asserts that the new version has been released for “bug fixes.” Siren Tech’s moniker (connoting a direct connection to the Drudge Report, which uses a siren to signal breaking news) and its inexperience (no other published apps to its credit) raise the question of whether somebody very close to the Drudge Report – perhaps Matt Drudge himself – has developed this app.

The disarray and apparent lack of a clear, mobile strategy stands in stark contrast to the well-earned status Drudge enjoys as a digital media pioneer. While mobile app users make up a small percentage of overall readers, they represent a loyal audience base and most likely account for a disproportionate amount of visits. It’s incomprehensible as to how and why The Drudge Report would not have a usable mobile app in 2014.

I have reached out to Matt Drudge seeking comment and will publish an update should he respond to shed light on this situation.

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UPDATE: Drudge demotes app advertisement

Matt Drudge has lowered the profile of the new Drudge Report app, pulling it from the top headline spot in recent days to put it down near the bottom of the page. It’s unclear whether that decision was planned in advance or whether it is a response to withering criticism the latest version of the app has received in the iTunes and Google play store.

Yesterday, the top spot in the third column advertised the newest version of website's app for iPad and iPhone.

Yesterday, the top spot in the third column advertised the newest version of website’s app for iPad and iPhone.

Today, that headline with a link to the app store had been pushed down to the bottom of the column.

Today, that headline with a link to the app store had been pushed down to the bottom of the column.

I am staying on this story and will publish developments as they become available.

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