Expanding on the temporary rule put in place during the height of the fall of 2008′s  financial crisis, last night the SEC made a rule banning “naked” short selling permanent.  Short sellers bet that stocks will fall in value.  Short selling occurs when traders borrow stock, sell the borrowed stock, buy real stock when the stock loses value, return the borrowed shares, and pocket the difference (and that’s the simple version).  While the SEC does not view short selling as a evil, it does believe that “naked” short selling, or selling shares when there are no shares even borrowed, to be highly manipulative.  The SEC finally realized that there was something inherently wrong with selling things you down own, don’t have a right to, and don’t even have access to.  Nice work.

 Summary of the ruling: 

http://www.cnbc.com/id/32174786

Full Release: 

http://www.sec.gov/news/press/2009/2009-172.htm

Bank of America Goes on a Diet

Dan Fitzpatrick reports that BofA chief, Ken Lewis, announced plans to scale back it’s American branch network by 10%.  Mr. Lewis cites consumer demand shifting away from traditional branch banking to more convenient online and mobile outlets.  BofA’s chief rivals, Wells Fargo and J.PMorgan Chase, have no plans to follow suit saying that they will continue to continue to branch as aggressively as they have done in recent years.  Bof A’s trimming down comes as it attempts to appease Uncle Sam while swallowing Merrill Lynch and Countrywide and seeing continued pressure on earnings from souring loans. 

Full Article:  http://moneywatch.bnet.com/economic-news/video/bofa-to-shed-10-of-branches/325535/

CFTC Reverses Itself on Oil Speculators

Jeanne Dugan and Alistair MacDonald report in today’s Wall Street Journal that the U.S. Commodity Futures Trading Commision plans to issue a report stating that oil speculators played a large role in the extreme surge in oil prices in 2008.  In a clear departure from Bush-era free market idealism, the agency states that previous studies and conclusions were based on incomplete and possibly erroneous information.  The reversal stands in clear opposition to the U.K’s Financial Services Authority who says it has found no evidence that speculators caused the bubble. 

Full Story: http://www.cnbc.com/id/32183731

Silverman Strikes Out (On His Own)

Sam Schechner and Shira Ovide report that Ben Silverman, co-chairman of NBC Entertainiment and Universal Media Studios, will leave the company  to begin a new media venture withIAC/InterActiveCorp. NBC’s chief executive, Jeff Zucker, stated that the departure and NBC’s reorgainzation come as part of a “confluence of events.”  Silverman leaves with a mixed track record.  The network lost 155 of its prime-time viewership under his watch while producing hit shows such as “The Office” and “Ugly Betty.” 

Full Article:

http://online.wsj.com/article/SB124870053062783671.html

Noted: Home prices fell 17.1% in May 2009 over May 2008.  This is a slight improvement from April 2009′s yearly decline and further indication of the bottoming of the housing bust.

I say all this to set up the new daily blog I’m going to attempt to create.  I’ll house it here on FrontlineFinancials while maintaining the less regular, much more in depth posts that I try to put out on at least a weekly basis.  This new series will be modeled after the Yahoo!Finance’s former “Best of Today’s Business.”  If I run into any copyright issues, I’ll change it up.  I’m not sure why Yahoo! decided to cancel the column, but I and many others used to begin each day with it to get a quick run down of important, influential, or downright hilarious business articles and blog posts.  To that end, here’s the difference between mine and Yahoo!’s old one: I encourage you make comments and post your own favorite articles/blogs each day.  I’ll update the blog throughout the day based on your comments and suggestions.  So, here’s the innaugural version of the “Best of Today’s Business” (the reincarnation).

July 27,2009

A Durable Competitive What?

The “Huffington Post“ and “Business Wire” (among many other business publications) report today that billionaire Warren Buffet is teaming up with a new media group, A Squared Entertainment, LLC and AOL.  They’re producing  a series of financial education cartoon shorts.  “The Secret Millionaires Club”  debuts in Buffet’s interview on CNBC.com (click here to see the clip).  It details a “proper” investment decision-making process regarding a local candy company (See’s Candy, anyone?).  While the theme song isn’t exactly catchy, the short lesson provided should be on the agenda at everyone’s first day of Business School. 

Full Story: http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20090724005103&newsLang=en

The “Town Hall” Approach Works for Uncle Ben, Too.

As part of his efforts to ensure that the Federal Reserve becomes more transparent and accountable, Chairman Bernanke reaches out to the general public with an “Obama-esque” town hall Q&A on Jim Lehrer’s “News Hour”.  In it he details how he thinks the Fed and economy are doing,  his belief that the Fed is best suited to manage both Consumer protection and systemic risk regulation, and how sickening the bailout of the financial industry has been.  This is a three part series airing Monday , Tuesday, and Wednesday evenings at 6pm on PBS.

Full Article with clips: http://www.pbs.org/newshour/updates/business/july-dec09/bernanke_07-26.html

Not a Complete Disaster = The New “Good News”

Everyone knows the housing market is in shambles, but AP’s Alan Zibel reports that the market appears to be showing new signs of life.  New home sales are up 11% from May levels.  Additionally, resales of existing homes were up 4%.  This good news comes against the backdrop of continued downward pressure on pricing.  The median home price fell 6% to $206,200 from May’s level of $219,000.  Many are calling this the final bottom of the market, but with government tax subsidies running out at the end of the year, we’ll need the economy to pick up some steam in order to keep the momentum going.

Full Article: http://www.newsvine.com/_news/2009/07/27/3076052-june-new-home-sales-rise-11-percent

Blue Light Special:  The United States

Reuters‘ Chris Reese writes about the impending week of Treasury debt auctions.  The sheer size is shocking: over $200 Billion for this week alone.  Just like everyone else in America, buyers of bonds are becoming more and more skeptical of the ability of America to meet its future payment obligations.  Bond yields are moving upward while prices are (naturally) moving downward.  This could create major issues for future generations if this fiscal trend is not stopped.

Full Article: http://www.reuters.com/article/companyNewsAndPR/idUSN2737787420090727

Noted:  Jack Welch surprises America by *gasp* saying that you have to work a lot to get ahead. Click here for the shocking details!

Throughout the course of the global financial crisis, I have loosened most of my tightly held beliefs concerning market/capitalist economies and all ideas therein. Like many others, I was on board the Free Market train though out the majority of the decade. Letting go of this has been sobering to say the least, but it is becoming increasingly evident to me that we as a nation are dealing poorly with our enormous hangover.

In econ/philosophy we study a simple term called the “slippery slope.” In this term we come to understand that any deviation from a defined dogma or practice creates a greater propensity to continue to move farther away from the original position. This concept is troubling in terms of market economies with everything from universal health care, and more obviously now, governments taking ownership interests in private entities.

While I have acquiesced to the concepts of “systemic risk” and “too-big-to-fail,” I have struggled with each step. The article mentioned above highlights what happens when we go down the slippery slope. “Dr. Doom” asserts that a major reason for nationalization is because we have effectively done it already. This is of course partially true, but his assertion and reasoning are deeply disturbing. It is now, more than ever, that governments and the populace should most fervently resist outright socialism. If we set the precedent of nationalization, we lose credibility on every front. Investors will be even more reluctant to purchase equities and provide private capital. Just look at Venezuela’s most recent economic troubles resulting directly from socialism and lack of foreign investment. If continued and outright nationalization were to occur, the government would turn into a true Leviathon, and set the table for all manners of other socialist policies. If the media, major economists, and the Obama administration want to not only preserve the heart of our capitalist integrity, but also the “moat” around America that makes it so attractive for investment relative to other countries, they will ardently work towards market solutions- not government ones.