Belligerati: March 2009 Archives

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March 31, 2009

Am I still an angry young man?

I remember being at the Cato institute summer seminar in summer of 2001 and experiencing ferocious and visceral anger at the totalitarian actions of the state. I had recently taken Preston Covey's Conflict and Dispute Resolution class and I burned with rage over the government's action in Ruby Ridge and Waco. The government had recently won some major victories against the people's ability to buy and consume inexpensive tobacco under the guise of public financing of health care, and I felt righteous anger at the enormous domination of the state over our rights to life, liberty and happiness.

I don't spend as much time being angry these days. My disposition is generally happy, and it doesn't feel good to experience all that rage. Once in banking and continuing into my research, I was able to focus my intellectual efforts on areas where I could make a difference and it made me happier and perhaps calmer. The stakes may be far lower but the likelihood of changing the outcomes are far higher.

The time for anger has returned. The money being misused today is so enormous that if you aren't angry you are probably either a net beneficiary of that money or more likely just not paying attention.

Serious people are suggesting that if we fail to allow the major banks to fail we will enter financial Armageddon with the tiniest of evidence. They are using the fear of this outcome as justification for trillions of dollars of expenditures. These fears must not be indulged. Better to clean up the mess afterwards.

Trade barriers are rising. Trade is unquestionably the single most powerful force in transforming from the natural state of poverty and pain us from poor to rich. To allow the poor of the world to suffer so that (for example) teamsters in the southwest can make $40 an hour instead of $30 is monstrous. It is hard to think of anything less liberal than using the totalitarian power of the state to protecting rich workers at the expense of peaceful poor ones. This is the worst sort of nationalism and must be stopped.

Taxes are going up and government policies, no matter how ineffective, costly, or how unjustly they reward some minority, they so rarely seem to disapear. Say no. Demand a smaller, cheaper government where bad policies die and tax distinctions aren't made between those who by any global standard are among the wealthiest people on earth.

People are talking about changing the regulatory environment as though if only we had the right smart and thoughtful people in charge we could have avoided this crisis and prevented future ones. Yet no large economy has proven safe. Demand a realistic epistemology of regulation. Regulators face the same limits of knowledge that producers and consumers do. Anticipating things is hard and punishing people after the fact is unjust. Better to encourage a world where people work hard, keep much of what they make, and suffer the consequences of their mistakes.

Therefore, I'm angry and you should be too. I can't spend all my time being angry. However, it is important that honest men stand up and say that this stinks, that the current system is wrong and the proposed solutions of our leaders will mostly make our lives worse.

It isn't all bad. There is some hope on the freedom front. I'm especially pleased with the Obama administrations policy on medical marijuana in California and the repeal of the Rockefeller drug laws in NY State. Nevertheless, it is hard to see this crisis as anything other than a substantial victory for statism.

P.S.
The final motivation for this post was Cowen's post, The People's Pottage. It seems that billions will be given to GM dealers to motivate them to renegotiate their contracts with GM and close. In bankruptcy they would get little or nothing. Remember that next time Obama talks about an making the economy fairer.

Posted by OneEyedMan at 10:35 AM | Comments (0)

March 28, 2009

An interesting concept

Briefly stated, the Gell-Mann Amnesia effect works as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward-reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them.
In any case, you read with exasperation or amusement the multiple errors in a story-and then turn the page to national or international affairs, and read with renewed interest as if the rest of the newspaper was somehow more accurate about far-off Palestine than it was about the story you just read. You turn the page, and forget what you know.

That is the Gell-Mann Amnesia effect. I'd point out it does not operate in other arenas of life. In ordinary life, if somebody consistently exaggerates or lies to you, you soon discount everything they say. In court, there is the legal doctrine of falsus in uno, falsus in omnibus, which means untruthful in one part, untruthful in all.

Why Speculate

A friend tried to remember what this phenomena was called on Thursday, and I'd never heard of it. Here it is.

Posted by OneEyedMan at 3:11 PM | Comments (0)

March 23, 2009

What to do about corruption

reason: I was at a Cato Institute function where the British development economist Peter Bauer was giving a lecture, and I had a really smart-ass question: Isn’t the problem with a lot of poor countries, Africa in particular, that there’s corruption and we have to get rid of corruption? And he leaned back on the podium and smiled and shook his head, no. And he said when the United States and Britain were developing in the 19th century, their governments were as corrupt as anything you’d find in Africa, but the governments in Britain and the United States had control of 1 percent or 2 percent of the economy when those countries were growing. In many African countries, the government controls over 60 percent of the economy. That’s the difference.

or as Thomas Jefferson said, "A government big enough to give you everything you want, is big enough to take away everything you have."

You can fight corruption two ways, by making it difficult to be corrupt (say by punishing the corrupt we caught) or by reducing the opportunities for the corrupt to bother the non-corrupt (e.g. by scaling back permits).

Posted by OneEyedMan at 10:27 AM | Comments (0)

This thing is bad, really bad

The latest Geithner-Obama banking plan stinks. Do we really want to give these people 3% of the downside for 20% of the upside? Are they crazy? As others have pointed out, this is similar to funding a giant hedge fund with 5 to 1 leverage. It it is ever good to be the bank lending the 5 to 1 leverage, does anyone believe that

1) Proper controls will be in place to prevent inappropriate risk taking (just the opposite the whole plan seems to encourage it.
2) That this is the appropriate leverage for this asset class? Five to one might be okay for a government bond arbitrage fund, but this is highly speculative distressed mortgage products. This stuff moves around a lot depending on expectations of economic and property price growth.

3) That the banks organizing the funds won't game the auctions? Goldman participates in one of these funds. I'm not positive about this, but it seems If they overpay for Goldman assets, then they capture at least 80% of that overpayment. Say the new government fund has 100, 3 of which is from Goldman. Goldman's bond is worth 20 and the Goldman-US s hedge fund bids 50. Goldman makes 30 profit on the bond, the G-U loses 20, 3 of which comes from Goldman. Total profit for Goldman is 27, total loses for the US is 17.

This cannot be allowed. If subsidies are the only thing keeps the banks alive we must pull the plug. If we have to subsidize banks to avoid catastrophic failure, I want to subsidize banks that avoided these problems, not those that monkeyed with exotic junk or too much leverage.

How about we allow a list of banks and financial entities which have weathered the financial storm to bid on subsided long term loans up to and including negative interest rates. One way you could more easily allow rates to be negative is to make the positive in the present but allow the principle to not be fully paid back. For example, you borrow $100, you pay 5% in interest every year, but 10 years out at maturity you repay $88. If you want to combine this with the toxic asset auctions, you could additional require that no one could bid on assets they currently hold or you could force everyone to make two way markets.

One thing I don't quite understand about the plans like Krugman's to guarantee some or all bank debt is why it has to be for the debts total principal and interest. If you are going to guarantee assets, at the very most shouldn't they have the yields of similar duration US treasury bonds? These assets were attractive to investors because they had more return for more risk. Now that they don't they shouldn't. If you are concerned about the breach of contract aspect of it, make it voluntary. Anyone can trade in that asset for duration matched treasury.

Link round-up:
Geithner's Doomed Bailout Plan
At first I thought these numbers were a typo
Government Intervention in the Market for Toxic Cars
How will the Geithner Plan Ever Get Approved?
"Despair over Financial Policy"
The Geithner Plan FAQ seems to defend the plan.
Investor on Private Public Partnership: "One would have to be a criminal to participate in this" explains how to use this to turn the government into a money pump

Posted by OneEyedMan at 8:24 AM | Comments (0)

March 22, 2009

Did they just start using their own product?

Heinz ketchup has a little foil cap on the inside between the bottle and the cap. For many years it was completely flat, just simple airtight lid. It was phenomenally hard to remove. You could not remove it with your bear hands. The dual layer aluminum plastic material was too tough to pierce with a plastic knife, as many a public picnicker has discovered. You had to punch it out with a metal knife, inevitably leaving behind a mess of cap remains. Then one day, Heinz started attaching a small foil tab to the end of the cap. Now you could cleanly remove the cap without tools. One day at the dinner table my father pointed this out, and he noted that the many years this improvement took was a bad sign about Heinz management. He wondered if they even used their own products. He simply thought that no one who used ketchup and had the power to change the packaging design would had tolerated such a interface for so long. Some combination of managerial incompetence, failure to use their own products, or not caring because of enormousness dominance in the ketchup business (Heinz’s U.S. market share remained stable through the 1980s and 1990s with 43% share in 1998) must have caused this neglect. It is interesting to note that after packaging improvements put in place in 1999 their market share rose to 60%.

So it was through the lens of Heinz ketchup packaging that I viewed a persistent problem with Ebay. For as long as I could remember Ebay only allowed you to search for prices based on the current bids. You could not include shipping information. When Ebay was primarily for US customers selling to other US consumers, this wasn't a big deal. Most people charged the actual cost of shipping and packaging, and so the bid price was representative. That hasn't been true for a while now. Major resellers list much if not most of what is sold there. Huge overseas sellers provide a discounted product, but often with much larger shipping charges than American sellers would. And of course, knowing that many customers would not look carefully (or couldn't because of the Ebay interface) they lowered their reserves and buy it now prices to sell at a mild loss and make their profit on the shipping.

So I wondered, what is it, market (about 17% of online sales and about 95 percent of auction listings) giving it near monopoly) power, managerial incompetence, or was it just a failure to use their own products. It is hard to imagine Ebayers not using Ebay, but if Heinz's experience is an indication, your monopoly can still do better with a better product.

As I mentioned once, this shipping price annoyance is why I like Cooqy. That's a Flash application that I can use to view Ebay listings with the total price (bid + shipping) as well as other special searches like product color and country of seller origin. However, it is slower and generally speaking not as good a user experience as the Ebay website.

The other day I read that EBay Moves to Recharge Its Auctions. I didn't really know what this was going to mean for the customers. There weren't any details. But I noticed one thing when checking Ebay this morning,

price%20and%20shipping%20on%20ebay.png

You can now search based on price including shipping. Ebay just implemented a simple change that made their product much better. This is a sign of good things happening in that company. Their management is now awake.

Posted by OneEyedMan at 12:54 PM | Comments (0)

A good question

It is a bit hard to understand how a relatively small item like the AIG bonuses got to be such a mess. None of the usual excuses apply here. It took a while, but we found one that can’t be fobbed off on George W. Bush. This is not an overly complicated issue (i.e. how to balance reasonable compensation with political appearances). This was not even one involving huge sums of money or complex financial instruments.

Get Real by Jennifer Rubin

What a horrible mess. I may not know how McCain would have done, but so far Obama's economic policy is pretty bad.

Posted by OneEyedMan at 8:31 AM | Comments (0)

March 21, 2009

Rotating monitors

As an early birthday present I got a new 22" monitor to replace the 14" secondary monitor I'd been using for holding Outlook and a text editor. One major reason I bought the Dell Ultrasharp 2208WFP (besides my old one breaking) is that I wanted a monitor that rotates so that I could view an entire text page at once in a normal orientation. Unfortunately, text looked horrible on the rotated monitor. It seems that Clear Type and standard sub-pixel smoothing don't seem to work on rotated monitors. Therefore all text looked jagged and blurry at once. I still might occasionally use the feature for viewing images, but I plan to mostly leave the monitor in landscape so that I can have some usable fonts.

Posted by OneEyedMan at 2:45 PM | Comments (0)

Smoking and snorting Smarties

The fad at Summit Middle School died down after a few days and some harsh words from the lunchroom staff. But at other schools and across the Internet, "smoking Smarties," as the activity has been labeled, is gaining popularity. Some children have even taken to snorting it, all to the horror of parents, teachers and the 60-year-old company that manufactures the candy.
Through the years, other candies have endured misuse, such as a craze that began by mixing Mentos with Diet Coke to cause a frothy eruption. But few have involved such obvious mimicry of lethal adult vices.

The phenomenon of smoking Smarties -- a candy that has been around for six decades and is different from the candy-coated chocolates of the same name popular in the U.K. -- has led to dozens of how-to videos on video- sharing Web sites.

Just Say No....to Smarties? Faux Smoking Has Parents Fuming

Kids have been doing stupid stuff like this for some time. I recall some of the kids in my junior high snorting pixie sticks.

Posted by OneEyedMan at 9:37 AM | Comments (0)

March 20, 2009

What can I say about the AIG compensation issue?

On the political front, this is exactly what the libertarian economists warned. The money would be wasted, it wasn't as needed as it seemed, if you wanted to give the money away it wasn't to the right people, and when you did give it away you would end up politicizing a larger number of business decisions.

In the particulars of the AIG compensation issue, I would note that some of those people receiving bonuses probably made a profit for AIG last year even if the division and firm did not.
I see no moral reason to deny people gave the firm some profitable trades deserve collective punishment for the firm's failure. Perhaps there are pragmatic or legal reasons not to do so, but not moral ones.

I think people underestimate how many people would have quit last year without these retention bonuses. It is hard to know, but given the political fallout for the senior staff who are rich, the firm could have easily lost many of its most experienced staff. That said, I second the calls to make these retention bonus in AIG stock or in the very distressed assets that they are unwinding for AIG.

Posted by OneEyedMan at 9:10 AM | Comments (0)

March 19, 2009

A close shave

Intimate grooming seems to have gone from rare and un-discussed to common and an almost normal topic of conversation in less than two decades. I bet if you looked at Playboy playboy centerfolds at the number of pixels taken up by pubic hair you'd see it holding steady for the first three decades and then collapsing in the last two.

Posted by OneEyedMan at 10:23 AM | Comments (1)

March 18, 2009

Why not?

A better idea is to offer permanent residence status to the many foreigners who are clamoring to get into the U.S. -- if they buy houses of minimal values (not shacks). They wouldn't need to live in those houses, but in order to remove the unit from the total housing market, they couldn't rent them. Their temporary resident status granted upon purchase would become permanent after, perhaps, five years, if they still owned the houses and maintained clean records. The mere announcement of this program might well stop the ongoing collapse in house prices, especially in cities such as Las Vegas, Miami, Phoenix and San Francisco, where prices are down 40% -- but where many foreigners like to live. ... The blueprint for a program to sell surplus housing to immigrants is already in place with the EB-5 visa program. Each year, 10,000 EB-5 visas for this country are available for foreigners who each invest $1 million in a new enterprise ($500,000 in economically depressed areas) that creates at least 10 full-time jobs. After two years, the entrepreneur and his family can become permanent residents.

Immigrants Can Help Fix the Housing Bubble

If people knew about the EB-5 program, the average man probably wouldn't like it. This is a good idea though. We need to dramatically increase our immigration to afford our social security and medicare costs without prohibitive taxes or benefits cuts. It is unambiguously the right thing to do to let these home buyers in. To let people who obviously won't be a drain on our government and want to be here in, we'll expand American labor productivity and capital.

I don't think you should have to have $138,000 to buy your way into the US. Just a job, a lease, and some basic English and civics skills should be required for employment here. But I'd certainly take the housing/immigration plan discussed above as a big improvement. By sucking mildly affluent foreigners looking to immigrate off of the various visa lists the wait time for the needy and desperate will hopefully be shorter. The affluent immigrants will also benefit.

One detail to worry about is how the kin-immigration will work. If you buy a house and you want to bring over your 16 member extended family, will you be permitted to do that? Or is it one house per nuclear family? Or per adult? To strict and you won't get much participation. Too loose and it could end up costing tax payers money.

Another point the article makes is that can't rent the unit out. I don't see that as a problem. The rule should be that they cannot leave the house empty. Unoccupied housing can create terrible problems in communities. See for example All Boarded Up, a story about how Cleveland has wrestled with this problem. By forcing more units into the rental market we could improve many cities, as well as hold down rental prices. Yes, holding down rental prices would somewhat diminish the value of owning a home, but the possibility of a large number of unoccupied houses in marginal neighborhoods is worse. That said, if we encourage them to settle here we get the greatest benefit. the capital infusion, the occupied unit, and their labor force participation.

Would you set the price floor at the national average or based on regional averages? The former does more to prop up the high end of the market, while the latter does more to support the hardest hit areas. They could do a weighted requirement, at least 75% of the region's median home price or $75,000, which ever is more.

Posted by OneEyedMan at 8:55 AM | Comments (0)

March 16, 2009

Interesting fact of the day

Art Spiegelman, author of the famous and serious holocaust graphic novel Maus created the Garbage Pail Kids for Topps, the baseball card company.

Source: ART SPIEGELMAN WANTS A BLOOD TEST

Posted by OneEyedMan at 6:34 PM | Comments (0)

Maybe Bernanke is just talking his book

Ben Bernanke, chairman of the Federal Reserve gave an unprecedented interview with 60 minutes.
You can read the transcript at Bernanke Sees Recovery Beginning in 2010

My thoughts:

Bernanke was one of the people who raised the public alarm, asking for more money and power to do his job. That forced him to be more beholden to the public, and this is a symptom of that. I wouldn't be surprised if this is one more step in the decline of Fed independence. Once you start explain things in baby language and begging congress for more power in a crisis, it become harder to say make the difficult and unpopular decisions.

I don't understand what Bernanke has seen that could tell him that the recession is bottoming out or ending this year. I'm not claiming the opposite, I'm saying that the economy a year out is unknowable.

I had every expectation that the Fed would overshoot with monetary policy, leading to higher than normal inflation at the inflation end. If he thinks the recession is bottoming out soon he is less likely to do that. But then he mighty overshoot and we'll get a so called double dip recession. No good choices there, but you cannot stop land the American economy on a dime.

Posted by OneEyedMan at 8:40 AM | Comments (0)

March 15, 2009

At least our socialist future will be funny

NSFW (profanity)

The New F***ing Citibank - watch more funny videos

Posted by OneEyedMan at 2:13 PM | Comments (0)

From the department of similes that make no sense

If there’s an equivalent to Mount Rushmore in the computing world, then it sits at Lawrence Livermore National Laboratory.

Sighting Nehalem and Dawn in the Wild In what sense do they mean this? Rushmore is a monument to dead presidents, while even by the article's description LNL is home to some of the most current (and analogously living) super computers. LNL is more like the White House, the senate, or the University of Chicago economics department than it is like Mt. Rushmore.

Posted by OneEyedMan at 11:20 AM | Comments (0)

How did I miss this?

I'm a big fan of Nassim Taleb, and I think he's done us a good service by highlighting the importance of model misspecification and rare-event risk in financial trading strategies. But in Falkenblog's piece Taleb Blames VAR, Merton, Scholes for Crimes is a funny and substantive take down of the most extreme criticisms that Taleb provides. I think at some level Taleb must agree with Falken, in his book Fooled by Randomness, he buys treasuries, not bullets, rural land and bullets, so he must have some beliefs about America's ability to survive as a modern economy and since he doesn't spend all his money, some confidence that we aren't all about to be wiped out by an asteroid. As others have remarked, to maintain his status as a media darling he has to somewhat parody his probably more nuanced personal beliefs. It seems as though almost everyone who stays in the spotlight long enough does that. Just think what it has done to brilliant people like Krugman and reasonably smart ones like Gore.

Something to be concerned about if perhaps you are considering becoming a public intellectual or forecaster.

Posted by OneEyedMan at 11:04 AM | Comments (0)

March 14, 2009

Comparative stock market performance

In Blaming Obama without the data work, I said that I should hold off on part of my criticisms of the Obama administrations economic performance until I looked out how the US markets have fared since the inauguration in comparison with other global markets. I know that what is good for the markets need not be good for the economy, but it serves as probably the best tool we have for short term estimates of economic performance across countries.

I have to revise my prior beliefs some. It seems the broad US stock index has outperformed the weighted global stock market index (excluding the US) by about 3%.

Type	Index (Region/Country)	Percent Change from January 20 to March 13)
Domestic	Dow Jones Industrials	-3.79%
Domestic	S&P 500 Index	-6.04%
Domestic	Russell 3000	-6.07%
International	DJ World ex U.S. (World)	-8.86%
International	DJ Euro Stoxx 50 (Euro zone)	-10.51%
International	FTSE 250 (U.K.)	0.33%
International	Hang Seng (Hong Kong)	-3.35%
International	IPC All-Share (Mexico)	1.17%
International	Kospi (South Korea)	-0.07%
International	Nikkei Stock Avg (Japan)	-6.16%
International	Swiss Market (Switzerland)	-11.17%
International	DJ CBN China 600 (China)	9.37%
International	Bombay Sensex (India)	-3.78%

I understand that some might quibble with what day exactly we can start holding Obama responsible for expectations of future economic conditions in the US. I don't know the right answer and just offer this up as a first attempt. Under the fold you can see every international and domestic index I could get from the WSJ data source.

If this is true, I guess it doesn't mean that Obama is doing a good job, just that he is doing a comparably better job that leaders of other countries are doing. Having said that, evaluating Bush's presidency the same way could well paint him favorably as well.

Type	Index (Region/Country)	Percent Change from January 20 to March 13)
Domestic	100 Index	-5.70%
Domestic	500 Index	-6.04%
Domestic	65 Composite	-13.26%
Domestic	Alternext Biotech	-2.72%
Domestic	Alternext Composite	-2.23%
Domestic	Alternext Internet/I.W.Internet	9.88%
Domestic	Alternext Pharma	-8.05%
Domestic	Arca Tech 100	-0.75%
Domestic	Banks	-11.08%
Domestic	Barron's 400	-6.15%
Domestic	Biotech	-4.29%
Domestic	CBOE Internet	4.47%
Domestic	CBOE Volatility	-25.23%
Domestic	Composite	-3.66%
Domestic	Computer	5.34%
Domestic	Energy	-4.54%
Domestic	Financial	-4.39%
Domestic	Fox 50	-6.52%
Domestic	Health Care	-8.07%
Domestic	Industrial Average	-9.12%
Domestic	Industrials	-3.79%
Domestic	Insurance	-12.55%
Domestic	Internet	12.53%
Domestic	JPM Index (U.S. dollar)	2.96%
Domestic	KBW Bank	0.99%
Domestic	MidCap 400	-5.98%
Domestic	Morgan Stanley High Tech	6.50%
Domestic	Nasdaq 100	2.81%
Domestic	Ocean Tomo 300	-6.42%
Domestic	Ocean Tomo Growth	-1.08%
Domestic	Ocean Tomo Value	-7.73%
Domestic	PHLX Gold/Silver§	7.73%
Domestic	PHLX Housing§	-8.42%
Domestic	PHLX Oil Service§	7.35%
Domestic	PHLX Semiconductor§	10.57%
Domestic	Q-50	-0.58%
Domestic	Russell 1000	-5.80%
Domestic	Russell 2000	-9.35%
Domestic	Russell 3000	-6.07%
Domestic	SmallCap 600	-10.23%
Domestic	SuperComp 1500	-6.19%
Domestic	Telecommunications	1.29%
Domestic	Transportation Average	-18.23%
Domestic	Utility Average	-16.08%
Domestic	Value Line	-12.02%
Domestic	Wilshire 2500	-5.92%
Domestic	Wilshire 5000	-5.62%
Domestic	Wilshire Large-Cap Growth	-3.60%
Domestic	Wilshire Large-Cap Value	-7.75%
Domestic	Wilshire Micro	-10.42%
Domestic	Wilshire Mid-Cap Growth	-2.52%
Domestic	Wilshire Mid-Cap Value	-12.10%
Domestic	Wilshire REIT	-13.13%
Domestic	Wilshire Small-Cap Growth	-5.37%
Domestic	Wilshire Small-Cap Vaue	-11.74%
Domestic Average		-4.67%
International	AEX (Netherlands)	-11.82%
International	All Ordinaries (Australia)	-3.80%
International	All-Shares (Norway)	-5.74%
International	ATX (Austria)	-8.12%
International	Bel-20 (Belgium)	-7.82%
International	Bombay Sensex (India)	-3.78%
International	BUX (Hungary)	-16.40%
International	CAC 40 (France)	-7.51%
International	Caracas General (Venezuela)	8.02%
International	CASE 30 (Egypt)	-7.97%
International	Colombo Stock Exchange (Sri Lanka)	-9.80%
International	DAX (Germany)	-6.75%
International	DJ Americas (Americas)	-5.16%
International	DJ Asia-Pacific (Asia-Pacific)	-11.08%
International	DJ CBN China 600 (China)	9.37%
International	DJ Euro Stoxx (Euro zone)	-10.07%
International	DJ Euro Stoxx 50 (Euro zone)	-10.51%
International	DJ Russia Titans 10 (Russia)	41.52%
International	DJ Stoxx 50 (Europe)	-10.57%
International	DJ Stoxx 600 (Europe)	-9.22%
International	DJ World ex U.S. (World)	-8.86%
International	DJ World Index (World)	-7.49%
International	Dow Jones China 88 (China)	6.38%
International	FTSE 100 (U.K.)	-8.25%
International	FTSE 250 (U.K.)	0.33%
International	Hang Seng (Hong Kong)	-3.35%
International	IBEX 35 (Spain)	-10.25%
International	IPC All-Share (Mexico)	1.17%
International	Istanbul National 100 (Turkey)	-4.45%
International	Jakarta Composite (Indonesia)	-1.24%
International	Johannesburg All Share (South Africa)	-2.63%
International	Kospi (South Korea)	-0.07%
International	KSE 100 (Pakistan)	9.36%
International	Kuala Lumpur Composite (Malaysia)	-4.19%
International	Manila Composite (Philippines)	-2.20%
International	Merval (Argentina)	-0.13%
International	MSCI EAFE* (World)	-11.09%
International	Nikkei 300 (Japan)	-10.86%
International	Nikkei Stock Avg (Japan)	-6.16%
International	NZSX-50 (New Zealand)	-6.87%
International	OMX Copenhagen (Denmark)	-10.84%
International	OMX Helsinki (Finland)	-11.16%
International	PSI 20 (Portugal)	-4.22%
International	PX 50 (Czech Republic)	-13.34%
International	RTS Index (Russia)	26.88%
International	S & P/ASX 200 (Australia)	-3.78%
International	S & P/MIB (Italy)	-23.41%
International	S & P/TSX Comp (Canada)	-2.37%
International	Santiago IPSA (Chile)	-1.47%
International	Sao Paulo Bovespa (Brazil)	4.68%
International	SET (Thailand)	-1.94%
International	Shanghai Composite (China)	6.76%
International	Straits Times (Singapore)	-8.46%
International	Swiss Market (Switzerland)	-11.17%
International	SX All Share (Sweden)	8.08%
International	Tel Aviv (Israel)	-3.02%
International	The Global Dow (Euro) (World)	-6.95%
International	The Global Dow (World)	-7.11%
International	Weighted (Taiwan)	15.43%
International	WIG (Poland)	-8.41%
International Average		-3.56%
Grand Average		-4.10%

Posted by OneEyedMan at 7:59 AM | Comments (0)

More evidence that the Democrats don't care about reason either

I've discussed before that [b]oth parties are firmly tied to anti-intellectualism and that I stand by my position that the left is also anti-intellectual. I thought I'd provide another example.

Interior spokeswoman Kendra Barkoff said Salazar had followed the unanimous recommendation of Fish and Wildlife Service scientists in setting the new policy, rather than letting political factors influence him. "This was a decision based on science," she said.
...
One House Democrat, who spoke on the condition of anonymity, framed it in even more blunt political terms. "I just don't see what this does for us," the lawmaker said. "Here we are alienating people who did the most -- who did a lot to help us in the last election."

Salazar's Wolf Decision Upsets Administration Allies

Posted by OneEyedMan at 7:36 AM | Comments (0)

March 13, 2009

Rating agencies weren't all wrong

In Berkshire's Welcome Downgrade, Felix mentions that Berkshire Hathaway is joining GE (who fell off yesterday) in falling off the list of corporate credits with AAA ratings. AIG fell off in 2005. I think that leaves only four companies (American Data Processing, Johnson & Johnson, Exxon Mobil and Toyota) with a AAA rating

One of the success stories in the world of private regulation is the rating agency. Yes, I know they really messed up ratings on the mortgage backed assets. I mean specifically on corporate bonds. There were something like 40 AAA credits in the early 1980s. Firms then really did depend less on financing and leverage then they do today. Corporate credits are more dangerous. The credit ratings reflected that. Maybe not enough, but they were telling us things got more dangerous.

Posted by OneEyedMan at 9:21 AM | Comments (0)

March 12, 2009

Private benefits less than total ones

Tyler Cowen notes:

In Los Angeles County, cities are buying federal stimulus funds from each other at deep discounts, turning what was supposed to be a targeted infusion of cash into a huge auction.

In two cases $500,000 in stimulus funding was selling in the range of $310K to $325K. (What does that tell us?)

I'm not stimulus advocate, but I don't think this tells us much at all about the stimulus value. The point was that the social returns to the investment would be larger than the private ones. If the private (within city in this context) returns were positive then we'd presume that the localities would find a way to fund those themselves. Aggregate demand stimulus works (if at all) from the externalities generated by these expenditures. Since they have strings attached, and cash may in some cases have more value, this could well increase the power of the stimulus by sending the money to the areas with the highest value (if public value is proportional to private value) or 2) indicate what a waste the stimulus. It does however suggest the hurdle for these expenditures to have a positive multiplier. If these prices accurately measure local benefits for the who stimulus, then we need a multiplier effect of .35 to have the stimulus work at all.

L:Government spends $500k
A:Locality values it at $325k
A:Required national benefits to break even $175k

Posted by OneEyedMan at 7:11 AM | Comments (0)

March 11, 2009

Plus ça change, plus c'est la même chose

Remember signing statements under Bush? Those were the special caveats that he put on bills in a side document as he signed the bill into law. Well it seems that Obama thinks that they are okay, at least as long as in his words, "As I announced this past Monday, it is a legitimate constitutional function, and one that promotes the value of transparency, to indicate when a bill that is presented for Presidential signature includes provisions that are subject to well-founded constitutional objections."
Obama Makes Use of Signing Statements

Which goes to show that no matter who is in charge, executive power has its temptations. That said, I doubt there really is anything new here. Presidents have probably been quietly asking their subordinates to not implement various parts of laws forever. But we live in an age of greater transparency and government scrutiny, and this is what that sort of implementation policy looks like today.

Posted by OneEyedMan at 4:44 PM | Comments (0)

Maple syrup fact of the day

"Listen to this, we have 289 million maple trees in New York," Mr. Schumer said in an interview, "but we tap less than one-half of 1 percent of them. It’s a large, untapped resource, shall we say."

As Maple Syrup Prices Rise, New York Leaders See Opportunity

It could be that as the article suggests, that there are enormous deals to be had by home owners and farmers licensing the syrup harvest of their trees. However, I bet if you dig deeper into this story, you'll find that to have efficient economies of scale in syrup production you need a high density of maple trees in the land to be harvested, and the vast majority of maple trees are not found at this density.

Note that 43 gallons of sap are required to produce 1 gallon of syrup and over an entire season, one can expect about 10 to 12 gallons of sap per tree (Homemade Maple Syrup). Even at wholesale prices of about $50 a gallon implied by the high retail prices in the article, that's just $12 or so per tree per year. Factor in labor, energy, transportation, contracting, and capital costs and you begin to see how it is going to take many trees before this become economical.

Posted by OneEyedMan at 12:22 PM | Comments (0)

Can we increase our IQ with training?

It seems the answer is yes.
Can We Increase Our Intelligence?
About a half an hour of daily practice of a particular form of memory problem resulted in 4 points higher IQ among the treated.

This sounds like something worth making a video game out of.

Sound like too much trouble? Take the probability that you think this is true. Given that, a discount rate, and your hourly wage or perhaps the price at which you value your leisure, you can back out the price you'd pay for an additional IQ point

Not doing it implies value of additional IQ point < = P(true)*(365/2)* wage / (4 * (1-discount rate))

Posted by OneEyedMan at 9:22 AM | Comments (3)

March 10, 2009

Command line browser

Perhaps I am behind the times, but I recently discovered Links, a web browser you can run from a command line. Why in the world would anyone want a web browser without graphics? A few reasons. For one, the proxy server / VPN on my campus don't work very well and often websites (e.g. journals) that I can access from campus I cannot access from home. When I'm at home, I can SSH into my server at the office and I can quickly use Links to download the journal and copy it to my home computer for reading. Another reason is that my campus internet connection is an order of magnitude faster than my home internet connection. So when I have to transfer a large dynamically generated file that will be erased in 48 hours (such as those generated by WRDS), I use links to download the files to my server and then I copy them as needed later.

Until recently I had been using Lynx (get it?) for the same purpose. However, I see several reasons why Links is better than Lynx. It supports your mouse, but doesn't require it because both support keyboard navigation. Unlike Lynx, tables actually work. It supports application helpers for extensions. Options appear in drop down menus instead of weird lists of options at the bottom of every page. It generally looks nicer, including the color choices when you turn that on. The options are in some cases trickier (like changing the download files directory in links.cfg), but overall the experience is like using a browser without tabs or pictures, but otherwise functional. Both have no java script support, but only links makes it clear when this is messing up a page. Predominantly, It feels a lot more like a modern browser implemented in a terminal window.

Here is a handy Keystrokes Reference to Links.

Posted by OneEyedMan at 9:57 AM | Comments (2)

Why would this be?

The Monkey Cage has a piece, Want to Be Seen as a Better Leader? Just Die. that points out that we (or at least participants in the typical college psychology laboratory setting) seem to have a cognitive bias that predisposes us to think more fondly of dead leaders than living ones (The demise of leadership: Positivity and negativity biases in evaluations of dead leaders).

Here is the paper's abstract:

Five studies compared evaluations of living versus dead leaders. In Studies 1 and 2, participants
displayed a death positivity bias, forming more favorable impressions of dead leaders than of
equivalent living leaders. Study 3 demonstrated the death positivity bias in evaluations of real world
leaders in politics, sports, and entertainment. Study 4 showed that death polarizes
morality judgments: Moral leaders were posthumously judged as more moral while immoral
leaders were posthumously judged as more immoral. Study 5 demonstrated the St. Augustine
effect: Dead leaders who had changed from sinners to saints were judged more favorably than
living leaders who had undergone the same change. The implications of these findings for
theory and research on leadership legacy and organizational impression management are
discussed.

I've been trying to understand why such a mechanism would exist. Assuming that this is a partly evolved and therefore not a fully learned behavior, why might it have been advantageous for our ancestors to remember their leaders in an exaggerated way?

I see three possibilities. First, that this is part of a broader brain module related to making us religious and moral even when others are not watching. Under this theory, those who honor the dead are better at honoring commitments made to others. Perhaps because the dead cannot reciprocate, honoring them is the sort of costly signal that goes beyond cheap talk to signal the sort of trustworthy, committed, and hard working person you are. Second, this could be a side effect of a broader cognitive limitation we share. We can't remember everything about everyone, and remembering their most important features, even in exaggerated form, helps us learn the most important lessons from the behavior of others. Third, it might not be that we are biased against dead leaders so much as biased against living ones. We must remain vigilant over our living leaders because they have ongoing opportunities to cheat us out of mates, freedom, and resources. The dead are beyond monitoring. They can't be influenced by our vigilance. Therefore, we expend a lot of effort watching out leaders and highlighting their failings, while we comparatively ignore the failings of our dead leaders. I like this theory the best, but it doesn't seem to fit well with the results in study 4, which suggests that we would also see the villainous leaders as more so after their death. It could be that they lose defenders after they die, and so we gradually learn to hate them more. But that raises the issue of why they would lose defenders in the first place. It could simply be that even the most wicked of our leaders hold power over us, and so we are inclined to look for positive attributes so that we can interact with them with minimal hostility and secure their favors. When we no longer can get anything out of these wicked leaders, we gradually return to the base case of hating them for their misdeeds.

Posted by OneEyedMan at 8:02 AM | Comments (0)

March 9, 2009

A decent rendering of the bard

It seems the best image of Shakespeare has be fairly conclusively identified in a hitherto unremarkable painting hanging in a family's ancestral home.
Portrait of Shakespeare Unveiled, 399 Years Late

Posted by OneEyedMan at 6:53 PM | Comments (0)

Funny in its brutality

Jack-Out-of-the-Box Malcolm Gladwell, explainer. is a brutal take down by Joseph Epstein of the substance and format of Gladwell's books. If you've ever read one of hist mildly interesting and entertaining and highly formulaic and reductionist books, you'll get a kick out of this review.

Posted by OneEyedMan at 6:45 PM | Comments (0)

Some animals are jerks...

...but very few are able to plan to be jerks later:

The behavior started becoming a real problem in 1997, when the chimp threw stones at the visitors across a moat several times as part of dominance displays, when he became agitated.

Zoo officials found five caches in the chimps’ activity area, of three to eight stones each. Subsequent monitoring showed that in the early morning, before the zoo opened, Santino would collect stones and stockpile them. Later in the day he would hurl them at visitors. (Chimps throw underhanded and have terrible aim, Dr. Osvath said, so no visitors have been seriously injured, and the zoo has taken precautions to protect them.)

In the ensuing years, zoo workers have found and removed hundreds of caches, and Santino has also been observed knocking chunks of concrete off cracked walls, breaking them into smaller pieces and throwing them, too.

Zoo Chimp Plans for His Visitors, Stockpiling Rocks

Puts our cat's jerky behavior in perspective.

Posted by OneEyedMan at 4:49 PM | Comments (0)

March 5, 2009

All benefits and no costs

Tenants of a Vanishing World is an article in today's NY Times about the O’Neals, a family that has managed to live in rent controlled (technically rent stabilized) splendor since 1971 in an apartment that is 3,300 square feet. The current rent is $2850 a month. It goes on and on about the extraordinary life that having such an enormous home at great discount has afforded them, including bohemian guests from around the country over a period of decades.

This is cool and exciting sounding, and by omitting all details of the costs of such a rent policy, it suggests except for the cruel vagaries of market capitalism, we would all live such rich and interesting lives in huge apartments in great Manhattan neighborhoods. The only hint that such policies have costs is that others in the same situation in their building have been offered a million dollars or so to move out. They mention one market price on the apartments, $28,000 a month. That gives a sense of the magnitude of the subsidy. What remains ignored by the article is all those families that would pay more to live in a bigger apartment but are stuck paying their current rent in a smaller place because the O'Neals are paying below market.

The way I see it, some rich guy would give up his smaller, less fancy 4 bedroom that he rents for $15k a month to pay $25k or to live in the O'neal place. Some less rich guy would pay $14k to live in that last guys place, but instead is stuck in a smaller place for $10k, and so on down the line to the guy living in Morningside Heights with the cockroaches and rats. In each case, there are many welfare improving reallocations where each family would benefit. Add that to the tens of thousands of month in lost income from the building owners and you begin to see just how expensive it is to support the O'neal life style.

Think about this another way. A 3,300 square foot home is pretty common in mildly affluent American suburban communities. If you know people like that, how many of them do you know that have had long term boarders? I know that some of that is a tribute to the O'neal's generous personality (supply curve) but why do all those young and cool people want to live with them instead of finding their own places (demand curve)? The reason is that NY City is unaffordable for most bohemian young people and sharing a home you get for far less than it is worth and don't really need is an easy way to motivate you to share it.

The O'neals probablly are more generous and interesting than most people would be in their situation, but their lifestyle is only possible because of a massive subsidy born by another and at the additional cost of the suffering of others.

Posted by OneEyedMan at 6:07 AM | Comments (0)

March 3, 2009

Useless, even if accurate, which it is unlikely to be

A “time traveller’s phrasebook” that could allow basic communication between modern English speakers and Stone Age cavemen is being compiled by scientists studying the evolution of language.
Research has identified a handful of modern words that have changed so little in tens of thousands of years that ancient hunter-gatherers would probably have been able to understand them.

A handy little guide to small talk in the Stone Age

This would at best tell us (at best) a few words that were spoken by the tiny group of Indo-Europeans that grew to be a great nation. We don't know anything about the words of the groups that didn't succeed at spreading their language. Even if these words were right, trying them with the vast majority of ice age men would be useless because they spoke a language that was ultimately replaced by Indo-European.

I keep suggesting that I'm not sure that the premise is even possible because of the book Babel. Essentially, the probability of words sounding similar in multiple languages is partly a matter of chance, and so some would seem to be derived from a common ancestor, even if all languages had words that were independent rather than from a common mother tongue. Given that language families have a limited palate of sounds to draw upon, and we borrow words from our linguistic neighbors and not just our linguistic ancestors, there is a real that this list on ancient words is merely a statistical artifact.

Posted by OneEyedMan at 6:52 PM | Comments (0)

Blaming Obama without the data work

Recently I've been placing some to all of the recent stock market losses (since the election) on the policies put forth by the Obama administration.

But I just realized that I hadn't been fair, even under the semi-strong efficient market hypothesis I was operating under. What I really needed to do was see how the returns of the US stock market compared with global markets since the election. Since I'm busy with end of semester work I won't be doing that today, but I'm going to stop talking about that particular Obama performance evaluation until I do. And If I'm wrong and America has relatively outperformed since the election, I'm prepared to revise somewhat my evaluation of Obama's administration's performance.

Posted by OneEyedMan at 11:25 AM | Comments (2)

March 2, 2009

Renting as a solution to the agency problem

Ellickson's book pushes us to think more clearly about the benefits and the costs of homeownership. His book makes sense of one of the most striking facts in the homeownership literature: the extremely tight relationship between structure type and ownership. Roughly 87 percent of all single-family detached homes are owner-occupied. Roughly 87 percent of all homes in buildings with five or more units are rented. Multi-family dwellings have common spaces, such as lobbies, and common infrastructure; sharing joint control over these things can often be quite difficult. Landlord control over large buildings irons out the difficulties of dealing with the cacophony of collective control.

Foreclosing the Crisis

That's brilliant, and something I'd never thought of before. Condos, which are more like rentals in terms of the control that the residents have over building policies, sell at a premium to Co-Ops, and this could be one factor why. Before this I had assumed that the difference was fully attributable to the different limitations on borrowing money to purchase the apartments. Now I'm inclined to see it in part as an attempt to control the tyranny of the majority.