I now try to avoid telling people how many years I’ve run both my own accounting practice and helping my much larger private sector clients prosper in one of the most competitive industries in our economy so I don’t betray the fact I’m on the fast downhill slide to the big five-oh. That said and in light of true participation in the market economy of this once great nation there are times I read something in a national finance publication and I wonder which ivory tower these people have been smoking crack in. So along those lines through time I’ve blogged here on Slabbed the folks over at the Wall Street Journal have come up a time or two.
Sadly I must report I did say the WSJ Editorial Board were a band of “lit and hallucinating buffoons” but that was only because they were unfavorably comparing a solvent state-run insurer of last resort in Florida Citizens with an insolvent one in Louisiana Citizens. The stupidity was simply stunning folks but these Ivory Tower sellouts are the same bunch that gave us the 2008 market crash and 10+% unemployment with their self-serving no-regulation rhetoric so I frankly should have never expected much from ’em.
And it is also true that late last year I skewered a couple of the WSJ beat reporters for passing off PR fluff from Allstate as a serious news story but again this group probably also buys into the concept of big business being able to impartially self investigate their own misdeeds but hey don’t take that from me as Sam Antar aka of “Crazy Eddie” infamy and one of the most famous fraudsters of all time discusses that issue in-depth on a sister new media website to Slabbed, the Business Insider. The bottom line is it is against that backdrop that I highlight another incredibly clueless Hurricane Irene/Insurer of Last Resort story by the WSJ dynamic duo of Erik Holm and Leslie Scism where their main source was some cat named “Critics“. A search of our Slabbed files revealed one of the Insurance disInformation Institute’s Bob Hartwig’s aliases was indeed “Critics” so it is easy to identify what industry PR outfit fed Holm and his sidekick this “Hurricane Irene” story which rests on the following undisputed assertions from Mr Critics: Continue reading “Why Paige St John won’t have to worry about the Wall Street Journal taking her Pulitzer Prize for insurance reporting.”
These past 2 weeks we’ve periodically gotten a huge number of worldwide referrals from what appears to be a pornographic website, based on the verbage contained the referring URL. Running the link through a Whois search reveals it is in reality a Forex scam site. As is my custom I checked the wiki entries to see if the explaining could be made easy for me and sure enough the two wiki entries had a wealth of great information. (Those wondering about the Forex proper can click here.) For the balance of this post we’re going to concentrate on the scam I linked first and the implications therein so is there we now visit:
A forex (or foreign exchange) scam is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading “has become the fraud du jour” as of early 2008, according to Michael Dunn of the U.S. Commodity Futures Trading Commission. But “the market has long been plagued by swindlers preying on the gullible,” according to the New York Times. “The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records” according to The Wall Street Journal. The North American Securities Administrators Association says that “off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud.”
With the scam set let’s visit with the assertion it is possible to beat the Forex. I’ll note these same concepts apply to the stock markets too in varying degrees:
The forex market is a zero-sum game, meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a “negative-sum” game.
…………..there are many experienced well-capitalized professional traders (e.g. working for banks) who can devote their attention full time to trading. An inexperienced retail trader will have a significant information disadvantage compared to these traders.
Retail traders are – almost by definition – undercapitalized. Thus they are subject to the problem of gambler’s ruin. In a “Fair Game” (one with no information advantages) between two players that continues until one trader goes bankrupt, the player with the lower amount of capital has a higher probability of going bankrupt first. Since the retail speculator is effectively playing against the market as a whole – which has nearly infinite capital – he will almost certainly go bankrupt. The retail trader always pays the bid/ask spread which makes his odds of winning less than those of a fair game. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade may be “resettled” each day, each time costing the full bid/ask spread.
Although it is possible for a few experts to successfully arbitrage the market for an unusually large return, this does not mean that a larger number could earn the same returns even given the same tools, techniques and data sources. This is because the arbitrages are essentially drawn from a pool of finite size; although information about how to capture arbitrages is a nonrival good, the arbitrages themselves are a rival good. (To draw an analogy, the total amount of buried treasure on an island is the same, regardless of how many treasure hunters have bought copies of the treasure map.)
So it is the middle men who always make the money. Often the middle men also are taking a trade position too so the game truly is rigged. I mention this because the entry properly mentions information advantages. Indeed in my closest circle of stock trading friends we often discuss price/volume movements in issues we own in terms of buyers/sellers “with superior knowledge” or “access to information” the retail investor simply does not have. Properly analyzed the data can confirm previous buys or signal that it’s time to sell. These concepts also underpin the business of insurance where “information advantages” has a more proper name: Information asymmetry. Continue reading “A peek inside Slabbed as we set up some important financial concepts and introduce the ol’ Forex Scam. Anyone else remember Russell Erxleben?”
I’ve always said the consumer bar could do a better job educating the public about the good the profession does for society, especially after years of being demonized by big business and their lackeys at the US Chamber of Commerce and various special interest trade groups such as the III.
Speaking of the III and Head Shill Robert Hartwig, here is a perfect example of the ol’ fallback line of demonizing trial lawyers after Allstate was literally caught with its hand in the NFIP cookie jar. Sadly the vast majority of the media is not equipped to tell the kind of in depth story on a complex subject as insurance and how it interfaces with the world of high finance and the legal system.
Instead, helped by lazy reporters happy to uncritically repeat big business talking points, cases such as the McDonald’s coffee case become caricatures with no basis in reality except to the extent the illusions were bought by an equally uncritical public, who generally believe most of what they are told. The same mechanics are in play today in the Palins, who once were only seen on TV shows like Jerry Springer but are now able to gain a wider public acceptance. Continue reading “A World Without Lawyers. The California consumer bar takes a step in the right direction.”
I have a super busy day ahead but wanted to throw up a few links for the Slabbed Nation because I think we have another banner day shaping up here in cyberspace. Let’s start with Chip Merlin’s blog where he writes about the value of listening to other points of view:
Slabbed is a blog that grates on those in the insurance industry, its legal counsel and proponents. My impression is that because those from the insurance industry do not like the criticism, positions and strong rhetoric, they stop reading Slabbed and read only those that criticize policyholder advocates, policyholders, and others who pander to the insurance industry. Nobody likes to be criticized or cast in the role of the villain. That is human nature. Yet, I agree with comedian Chris Rock, who stated that “anyone who makes up their mind before hearing the issue is a … fool.”
I was thinking of this while reading the August issue of the Insurance Fraud Letter by Barry Zalma. Zalma, like many in the insurance industry, takes great glee in publicizing when the well known consumer champions fall. I appreciate that those that make a living serving the insurance industry have an allegiance to it and a utilitarian need to pander to those that provide for their living. Still, those self righteous antidotes have worthy lessons and, within the rhetoric, there are often a few jewels. Zalma gave one in his recent newsletter
Chip may be surprised to learn that we are read religiously by certain insurers and insurance professionals though our industry traffic count did take a hit when they started filtering us in Bloomington. His point is well taken though because we have experienced the other kind of reader as well; people so trapped by their beliefs and ideology they are incapable of seeing other viewpoints. Chip has singled out Zalma in the past for doing just that, which is part of what makes today’s entry over at his blog so rich. Continue reading “Slabbed news miscellany: Chip Merlin on the value of listening to other points of view, stealing beer and drinking what can’t be fenced, Swiss Re rings the Bell and the cash register, Michael Grimm to appear at the Silver Slipper in 2 free shows and “for sale” issue advocacy”
To some Robert Hartwig is a “man of integrity”, others (like me) think he is a sociopath. Behavioral economist Dan Ariely solves the mystery for us all on his blog. Thanks teach!
Many of my retail corporate clients and their general counsel have told me that if they advertised and then performed in the manner of their insurer, the federal and state trade commissions would be holding “bait and switch” hearings. But, this is exactly the type of treatment insurance executives are calling for when they support the propaganda against their own customers through spokespersons such as Hartwig.
I am not the only one to have noticed this…The editors of Slabbed were pretty blunt about what they think about Hartwig.
Chip linked two recent SLABBED posts – Bam Bam’s The Push Back on Corban – “You’re gonna pay for this” and Sop’s Da Corban spin continues: AIA prefers denial while the National Underwriter carries III press release calling it news – and added his thoughts as he raised the question Why Is the Property Insurance Industry Against Its Own Customers?
The response by Robert Hartwig of the Insurance Information Institute to the landmark Corban decision typifies how executives at many insurance companies feel about their customers. If not, Hartwick would be out of a job. Here is his quote taken from Anita Lee’s article: Continue reading “Chip Merlin asks Why is the property insurance industry against its own customers?”
Robert Hartwig isn’t the only prostitute (I mean shill) who will say or do anything (and I mean anything) for the right amount of money. Not to be left out and preferring denial over Hartwiggian threats the AIA issued the following press release: (Nowdy isn’t it about time we got some more hits out of Montana on my post about former Bush Groupie Marc Racicot)
The decision issued yesterday in the case of Corban v. USAA by the Mississippi Supreme Court confirms that the water damage exclusion and anti-concurrent causation (ACC) clause – two key issues in Hurricane Katrina litigation — are valid provisions of the insurance contract and will continue to be important to insurers in adjusting wind versus water claims, says the American Insurance Association (AIA).
“First, and most importantly, the Corban decision reaffirms the longstanding flood exclusion provision found in most homeowners’ insurance policies, that expressly excludes coverage for hurricane driven water (or storm surge),” said James Whittle, AIA Assistant General Counsel. “The water damage or flood exclusion has now withstood every post-Katrina court challenge, and remains a part of regulator-approved insurance contracts throughout the country.” .
“Second, the court upheld the use of the ACC clause that was at issue before the court,” said Whittle. “With this ruling the court has provided meaningful guidance to consumers and insurers. Nothing in this decision changes the important role that insurers play in recovery by adjusting claims according to their contracts with policyholders.”
Meantime the National Underwriter has emerged from their months long Corban slumber carrying a III / AIA press release billed as a news story. While I don’t necessarily buy into James’ harsh critique of Anita Lee’s report on Corban it is worth pointing out Anita Continue reading “Da Corban spin continues: AIA prefers denial while the National Underwriter carries III press release calling it news”
THE PUSH BACK ON CORBAN – “YOU’RE GONNA PAY FOR THIS!“
A few days ago Slabbed carried a Bam Bam post on State Farm’s new 45% rate increase, and the process of “whipsawing.” It explained how State Farm uses the media and purchased politicians to manipulate and scare homeowners in depleted Cat markets, who are compelled by lenders to buy adhesion insurance contracts, and pay ever escalating premiums.
The ink was still wet on that post when 2 days ago the Mississippi Supreme Court ruled that the ACC clause as interpreted by the notorious, corporation loving 5th Circuit ain’t the law in Mississippi. The tragedy is that hundreds of thousands of claims were illegally mishandled for 4 years before we got word. Anyway, State Farm, Allstate, Nationwide and USAA got bitch slapped, and they’re some kinda pissed. I knew there’d be press statements coming, all calculated to terrorize homeowners as soon as the shills got their poison pens loaded. We all know who they are: Robert Hartwig being foremost among them. So here’s what he comes out with after Corban:
“What this basically suggests is that the cost of claims is going to be higher than insurers anticipated,” Hartwig said, “so there are direct consequences for the price of insurance in Mississippi, and potentially for the availability as well. Continue reading “The Push Back on Corban”