If you are a “predator lender” (not as in a zoo that lends animals), you may want to consider the infamous monologue from New Jack City:

I’m not guilty. You’re the one that’s guilty. The lawmakers, the politicians, the Wall Street titans, all you who lobby to make housing a right. Just like you did with every other failed social program. You’re the one who’s guilty. I mean, c’mon, let’s kick the ballistics here: Ain’t no houses made for free. Not one of us in here owns a credit swap. This thing is bigger than [your name]. This is big business. This is the American way.

If anyone knows anything, it’s that Wall Street is the largest house of gambling in the United States. We don’t call it gambling but certain segments of the market are nothing but betting pools. Commodities (futures, options, derivatives) are pretty much nothing more than a place to wager bets and hedge bets you have already made. Oil is no different.

When we hear of so-called “speculators” coming in and manipulating prices, we often miss the point of what the market is and why it works the way it does. This is especially true of oil. When you hear of oil trading, you may picture large barrels of oil moving from port to port every day. Yet when we’re talking about futures, what you see are “bets” on where oil will be in price at a certain point in time in the future. These bets are always “matched”. For every person who expects oil to rise in price, there is a matched bet predicting a decline in price.

While it may be a gross over-simplification, the wisdom of such bets gives you a lot of information wrapped up into a numeric value. When prices rise, you typically expect a large sentiment of “negative” information in the marketplace. When prices fall, you typically have a balance of “good” information in the marketplace.

To illustrate this point, let’s quickly look at corn. With the heavy push towards cleaner fuels and the heavy support for ethanol subsidies, farmers had the incentive to plant more corn this year. This may seem like good news, but the subtle realities were immediately apparent to the market: While there is an expectation of more corn coming to market, the corn will need to meet the needs of both the food production market and the rapidly growing fuel market. This stress is reflected in the price of corn, which has shot up in price despite the probability of having more corn coming to market this year.

But what happens when farmers plant more corn than, say, soybeans? It means the farmer grows fewer soybeans. We’re already beginning to see these effects in the marketplace where other commodities have shot up in price because farmers are planting less of these other crops.

To someone who works in an exchange, they could probably care less about the physical corn or potatoes they are betting on. What they care about is the the information in the marketplace associated with the product being traded. The trader then carefully places a bet on which direction they expect the price to go based on as much information as they can gather about the underlying product. No one person can have all of the information at hand. These gaps are filled by others who and bet according to their information which may be similar, but not always the same as the next person.

The price of oil is not necessarily the real price of the product but reflects the sentiment of what price will be based on the information at hand. Recently USA Today and other media outlets reported that drivers in the United States are driving far fewer miles this year than prior years and the number is significant. If this is the case, and the supply of oil is constant, you would expect the price to fall. However, in this case you have several other factors involved: the Iraq war, difficulties with Iran, aging refineries and the slowing ability to expand refinery production, limitations on oil drilling, government policy and regulation, a retreat from the housing market and so on.

So when we hear what the price of oil will be in the future, it is based on the information in the marketplace today. Right now. This very minute!

When politicians push to put pressure on the market and lob accusations of impropriety into the marketplace, it essentially creates a scenario where your favorite politician is working under the assumption that he or she knows more about the collective interests of the marketplace than the collective marketplace knows about itself. But you have to think big; the collective information of the market is represented by millions of bets on which direction the market is going with millions of people and automated systems all responding to information accumulated. If you think a politician can fix the so-called problem of speculation, you are grossly uninformed.

Betting is one of the oldest forms of collective wisdom, oil or not. And complaining about a short losing streak is a surefire way to cause more problems in the marketplace when you invite politics into the game.

If there is one thing I hate about watching TV, it’s watching TV on the Internet. No bones about it, most major media outlets continue to get wrong what they can’t get right over the airwaves.

Commercials: bathroom breaks for some, pet peeve and bane to others. So why do larger media outlets think that their vision of video on the Internet is no different than that on the airwaves? This type of thinking will only lead to overall failure; failure to gain and retain viewers; failure to get marketshare; failure to provide anyone with any service that is worth spending time watching.

On the top of my pet peeve list is  those video sites that use Windows Media. Of course, I’m a Mac and Linux user so I can have some gripes with it. However To view video on the Mac, I need to download flip4mac which has its own “quirks” to say the least.

But back to advertising. I’ve gone to watch videos where the first 15 to 30 seconds of the video is an advertisement. Thanks for wasting my time and making me watch another dumb Microsoft commercial trying to sell me on the wonders of Word. A 30 second advertisement and a 2-3 minute video is a worse experience than watching live TV. Way to go… Way to leverage all the wonderful power that technology has given us by making the entire experience worse than what it was. Hopefully the post office won’t go back to using horse-drawn mail delivery.

Mass media execs have entirely missed the Internet boat. It sailed by them a long time ago. Is it really any wonder why people will spend a few hours watching videos on YouTube? Is it, aside from the dork factor of watching other people do stupid things, because the content is short, to the point, and generally entertaining without being draining?

I often wonder how many marketing execs would take a radio script and put the entire script up as print ad in a magazine or newspaper. It would generally be boring to see nothing but huge blocks of text and they would be mostly ignored. Good advertising is alluring within the media format it is designed for. Internet TV is not the same as “regular” TV (and I include cable), but that has not stopped marketing execs from applying one script to a different medium.

While I’m hardly one to pick on the business world and corporations, but for the bucks many of these institutions are paying for highly trained MBAs and/or consultants, very few of them have the wherewithal to think outside of the rectangular box (with a power cord).

An interesting article to say the least:

Unpaid Teens Bag Groceries for Wal-Mart – Newsweek

While some may bash Wal-Mart for these latest revelations on employing volunteer baggers at stores,  I believe this is a poignant example of free-will employment.

The money quote is:

In a country where nearly half of the population scrapes by on less than $4 a day, any income source is welcome in millions of households, even if it hinges on the goodwill of a tipping customer.

This points out a lot about the state of employment in Mexico. But Wal-Mart is allowing kids to enter the workforce, teaches them responsibility, and also teaches the value of exchanging their labor for the money people tip. So they don’t earn a wage. But they do have accident insurance. They can get bonuses. And Wal-Mart is encouraging a strong education by tying bonuses to educational performance. But because most Americans are used to a higher standard of living, they will pump their fists all the way to the sliding, automatic doors where they’ll then put them down and go on about their Wal-Mart shopping.

Interesting news from cNet. Feds were allowed to pass spyware through a third-party service (in violation of MySpace rules).

     FBI remotely installs spyware to trace bomb threat | Tech news blog – CNET News.com
The FBI used a novel type of remotely installed spyware last month to investigate who was e-mailing bomb threats to a high school near Olympia, Wash.

Federal agents obtained a court order on June 12 to send spyware called CIPAV to a MySpace account suspected of being used by the bomb threat hoaxster. Once implanted, the software was designed to report back to the FBI with the Internet Protocol address of the suspect’s computer, other information found on the PC and, notably, an ongoing log of the user’s outbound connections.

What is curious is that the FBI just didn’t get a subpeona for the user’s records from MySpace. Why a malicious tool was used when the courts already provide a means for acquiring data and information.

DeBeers is an interesting case study. When DeBeers controls a vast amount of the world’s diamond market it is funny how cocky they get. I’m watching “Diamond Road”, a show on Discovery Times. It is quite a study in the slow road of a diamond to market.

The show generally dwells on the two faces of the diamond market – the muddy fields of Sierra Leone and the high profile results going up for sale in New York (and various other places).

The one notable part in the first “episode” was that the producers did do their research and found out that diamonds, no different in composition and individuality, can be manufactured. I’m not talking about “moissanite”. I’m a talking about real diamonds. Gemesis can manufacture them – at even a price less than mining a real diamond. No blood, very little sweat and just a little bit of passion. Is it worth less because it is made by a man’s hand? If you didn’t know the difference – would it matter?

IHOP is buying Applebee’s. No word on whether Fajita crepes will hit the IHOP menu.

I love the “fabulously” wealthy, rich people who earned their stripes working from the ground up to build business empires. The modern business is truly a study in the success and failure of human groups.  So it is no surprise to see some wealthy people patting themselves on the back for a job “well” done.  And it is no surprise that there are those amongst their very ranks who tend to spank themselves for the wealth they have created and/or amassed over time.

A recent article in the NY Times interviews several business executives considered to be at the “pinnacle” of wealth.  There were those who compared their gains to the efforts of the early American industrialists (Carnegie, et al.) while the authors made no effort to diminish these comparisons. The oddity that struck me is how wealthy industrialists of the modern era appear to be largely mixed in their opinions regarding the re-distribution of their wealth.  Some feel that they should be taxed more. Others feel they should be taxed less. Yet still others think the current system is just fine.

What I found odd is that Warren Buffet seems to take a conflicted stance. As many books and lore about the guy state: he’s a simple guy who likes simple things who lives a simple life – and he never gave his kids any of his money. None of Warren Buffet’s money is going to his kids – instead he’s giving it all away to the Gates Foundation. The confusing part? He feels that (from my impression of the article) we need to distribute the income after it is earned. Redistribution is essentially a forceful method of taking one’s wealth and giving it to others.   In much the same way he wouldn’t give his children any money – they had to earn it independently, why should he give it to someone else? On either hand, you’re giving your money away so what does it matter whether it is your children or others? Neither group (family or government) earned it within the marketplace.

The Baltimore Sun reports: recent fee hikes granted by a royalty review board is knee-capping the bootstrapping Internet radio industry. The recent hoopla over the royalty hikes is causing many casual participants in the marketplace to drop out. So just what are the issues involved?

The Copyright Royalty Board has removed some of the caps on royalty fees. For some broadcasters, the fee increases amount to doubling their dues to the cult of the music industry. In some cases, I can understand and side with the music industry. They are seeking to gain on their investments. But more of my mind and heart fall on the opposite side, with the radiomen.

Music and entertainment are interesting things. In the case of radio, while many stations make money off marketing breaks, or in the case of Internet radio – off of advertising links or banners, etc, radio also does a double service for the music industry. Think about it – the music industry charges you to market their product for them; radio has long been a marketing driver of new music, not the end point on the marketing tool chain.

We have our blessed government who likes to step in and manipulate the marketplace: remove “payolla” marketing dollars from broadcasters hands, regulating radio frequencies to stratospheric price levels for access to airwaves, and other pieces of legislation that is, purposefully or not, keeping people out of radio instead of removing barriers to enter the radio market.

Bands and labels with lesser muscle can not gain traction, even in niche radio, that would put them in spots next to similar and more popular, if not equally talented, artists. Traditional mainstream radio is less apt to take large risks on unknown talent – an area that has been well served by Internet radio. All of the risk falls on broadcasters with little to no risk involved by the music industry. How they think they can cannibalize this marketing channel is beyond me. It makes for stupid business; at the same time, it makes more sense to use ideas such as Creative Commons.

If people ever wonder why I think Steve Albini is a god – here is why.