tag:blogger.com,1999:blog-16535207839869406712024-03-08T19:06:43.121-05:00Boring but SmartIt sounded a lot better after the third glass of champagneAmeethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.comBlogger59125tag:blogger.com,1999:blog-1653520783986940671.post-16817093599584768092012-08-21T10:59:00.002-04:002012-08-21T10:59:07.500-04:00What I'm Reading - First Toronto EditionI thought it would be interesting for me to note here, after a very long and good hiatus, what I was reading now that I am in Toronto. I will write in this vein occasionally, tracking with curiosity how my reading changes. For I expect it will, given that:<br />
<br />
1) I am now in business school, so I will likely read more extra-curricular business articles;<br />
<br />
2) I am in Canada, so I will likely start reading more Canadian political pieces rather than U.S. ones.<br />
<br />
Without further ado then:<br />
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<br />
1) <a href="http://www.scotusblog.com/category/special-features/alexander-bickel-symposium/">SCOTUSblog's </a><a href="http://www.scotusblog.com/category/special-features/alexander-bickel-symposium/" style="font-style: italic;">Alexander Bickel symposium on <i>The Least Dangerous Branch</i></a><br />
<br />
Specifically, I've read and been intrigued by the following contributors:<br />
<ul><ul>
</ul>
</ul>
<ul>
<li><a href="http://www.scotusblog.com/2012/08/online-alexander-bickel-symposium-an-affectionate-but-contrarian-remembrance/">Richard A. Epstein, <i>An affectionate, but contrarian, remembrance</i></a></li>
<li><a href="http://www.scotusblog.com/2012/08/online-alexander-bickel-symposium-bickel-and-bork-beyond-the-academy/">Roger Pilon, <i>Bickel and Bork beyond the academ</i></a><i>y</i></li>
<li><a href="http://www.scotusblog.com/2012/08/online-alexander-bickel-symposium-its-alexander-bickels-fault/">Erwin Chemerinsky, <i>It's Alexander Bickel's Fault</i></a></li>
<li><a href="http://www.scotusblog.com/2012/08/online-alexander-bickel-symposium-on-rereading-the-least-dangerous-branch/">Floyd Adams, <i>On rereading The Least Dangerous Branch</i></a></li>
</ul>
<div>
In particular, I enjoyed this quote from Epstein's piece. His examples on the majoritarian difficulty are worth thinking about too.</div>
<div>
<br />
<i>"Indeed, I think that it is fair to say that most of my beliefs were crystallized in direct and conscious opposition to the message that he pounded into us day after day."</i></div>
<div>
<br /></div>
<div>
2) <a href="http://www.hussman.net/wmc/wmc120820.htm">John Hussman's August 20th weekly market comment</a></div>
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<br /></div>
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In particular, here are two choice quotes:<br />
<br /></div>
<i>"The present confidence and enthusiasm of investors about the ability of monetary policy to avoid all negative outcomes mirrors the confidence and enthusiasm that investors had in 2000 about the permanence of technology-driven productivity, and in 2007 about the durability of housing gains and leverage-driven prosperity. Market history is littered with unfounded faith in new economic eras, and hopes that 'this time is different.'" </i><br />
<i><br /></i>
<i>"What’s fascinating about the present confidence and enthusiasm about central bank intervention is that investors have stopped actually listening for fact, and are increasingly hearing only what they want to hear."
</i><br />
<i><br /></i>
3) <a href="http://oilandglory.foreignpolicy.com/posts/2012/02/17/the_weekly_wrap_feb_17_2012?page=full">An old posting on shale oil from <i>Foreign Policy</i></a>, in particular the "Dispatch from the Oil Patch" section. Emphasis added where bolded.<br />
<br />
<br />
<i>By keeping up a steady drilling pace, the oil production from the field will rise rapidly at first because the production from the new wells will exceed the loss of production for the old wells. This is what has been happening in the Bakken. However, if the rate of drilling stays constant for a long time, the growth rate of field production will decrease, then plateau, then begin to drop, slowly at first, then accelerate to a higher rate[.]</i>
<br />
<i><br /></i>
<i>And if prices drop significantly during the time when you would normally expect to see a high drilling rate (or if drilling costs get too high), you could see a sudden decrease in the rate of drilling, and a field like the Bakken will go from high growth to high decline really quickly. <b>A drop of oil prices to $70 per barrel (of West Texas Intermediate) could create an extreme drop in drilling and field production really quickly.</b></i><br />
<br />
<i><b>Resource plays don't work if oil or gas prices are low. </b> A huge part of the risk is evidenced by the Barnett Shale. It worked great at $6 to $15 per thousand cubic feet, but it loses money like crazy at $2.50 per thousand cubic feet. The problem is that you really get clobbered when you drill the wells when gas or oil is high priced, and then the price drops and you have to sell your oil or gas at low prices. Billions and billions of dollars have been lost in the Barnett because of this. <b>If oil drops to $70 (WTI), a lot of people will lose money in the Bakken.</b></i><br />
<br />
4) <a href="http://brontecapital.blogspot.ca/2012/06/how-business-decisions-are-made-in-boom.html">John Hempton's piece on capital allocation in a bubble (iron ore and China, in his opinion), </a>with a view at Fortescue's balance sheet and income statement<br />
<br />
What I like from this piece is a view of how gross margins changed through the commodity cycle, and of course the question about what happens to the more marginal producers when the cycle ends. In all likelihood, this time really is not different, a point that I made during an orientation presentation; and a point I think both James Montier and he makes.<br />
<br />
<b>BHP's EBIT Margins</b><br />
<b>2001 2011</b><br />
11.9% 65.3%<br />
<b>Fortecue's EBIT Margins</b><br />
<b>2001 2011</b><br />
Irrelevant 41.5%<br />
<br />
I consider 2001 EBIT margins irrelevant for Fortescue because it also had a medical business at the time (albeit, it was in the process of divesting it). Hence the comparison to BHP might not be that reasonable. The comparison Hempton points to is 2011 margins for both. With simple math, you can see that Fortescue is a more marginal producer than BHP. So, the question, as Hempton puts it, is indeed what is the normalized profit and prices for iron ore and other mining. Is it going back to 2001 levels? Is it today's levels? Is it somewhere in between? I must note I default into "this time is [not] different" but other than that have no opinion, yet.<br />
<br />
Interestingly, pieces two through four have a commonality about "this time is [not] different". This is one of the most valuable lessons I've ever had. Given how short term minded we can be, it is also the most difficult of them. Hence, why I enjoy reading John Hussman, James Montier, Jeremy Grantham and John Hempton.<br />
<br />
Anyway, a good morning to everyone!<br />
<br />
<br />
<ul><ul><ul>
</ul>
</ul>
</ul>
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Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-44478522546349500662012-04-22T10:47:00.000-04:002012-04-22T10:47:00.088-04:00Overtaxed at the AirportTake a look at this round trip to Toronto from DC:<br />
<br />
<br />
<div style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 1.4em; font-weight: bold; text-align: left;">Fare Summary</div><br style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-align: left;" /><div class="floatLeft" style="color: #12273e; float: left; font-family: Arial, Helvetica, sans-serif; font-size: 13px; padding-left: 5px; text-align: left;"><b>Departing Flight</b></div><div class="right" style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-align: right;"><b>PD 724</b></div><div style="background-attachment: initial; background-clip: initial; background-color: #efefef; background-image: initial; background-origin: initial; border-bottom-left-radius: 5px; border-bottom-right-radius: 5px; border-top-left-radius: 5px; border-top-right-radius: 5px; clear: both; color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 12px; margin-top: 5px; padding-bottom: 5px; padding-left: 5px; padding-right: 5px; padding-top: 5px; position: relative; text-align: left;"><div class="floatLeft" style="float: left;"><span style="font-size: 13px;">Base Fare</span> <span style="font-size: 11px;">(1 x $ 129.00):</span></div><div class="right" style="font-size: 11px; text-align: right;">$ 129.00</div><div class="floatLeft" style="clear: both; float: left; font-size: 11px; padding-left: 10px;">$50 Discount</div><div class="right" style="font-size: 11px; text-align: right;">- $ 50.00</div><div class="floatLeft" style="clear: both; float: left;">Taxes & Fees</div><div class="right" style="text-align: right;"> </div><div id="depTaxAndFees" style="clear: both;"><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">NAV and Surcharges</div><div class="right" style="font-size: 11px; text-align: right;">$ 7.50</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">Passenger Facility Charge</div><div class="right" style="font-size: 11px; text-align: right;">$ 4.50</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">Sep 11th US Security Tax</div><div class="right" style="font-size: 11px; text-align: right;">$ 2.50</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">US Segment Tax</div><div class="right" style="font-size: 11px; text-align: right;">$ 3.80</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">US transportation Tax</div><div class="right" style="font-size: 11px; text-align: right;">$ 6.49</div></div></div><div class="floatLeft" style="color: #12273e; float: left; font-family: Arial, Helvetica, sans-serif; font-size: 13px; padding-left: 5px; text-align: left;">Subtotal</div><div class="right" style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-align: right;">$ 103.79</div><br style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-align: left;" /><div class="floatLeft" style="color: #12273e; float: left; font-family: Arial, Helvetica, sans-serif; font-size: 13px; padding-left: 5px; text-align: left;"><b>Returning Flight</b></div><div class="right" style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-align: right;"><b>PD 727</b></div><div style="background-attachment: initial; background-clip: initial; background-color: #efefef; background-image: initial; background-origin: initial; border-bottom-left-radius: 5px; border-bottom-right-radius: 5px; border-top-left-radius: 5px; border-top-right-radius: 5px; clear: both; color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 12px; margin-top: 5px; padding-bottom: 5px; padding-left: 5px; padding-right: 5px; padding-top: 5px; position: relative; text-align: left;"><div class="floatLeft" style="float: left;"><span style="font-size: 13px;">Base Fare</span> <span style="font-size: 11px;">(1 x $ 129.00):</span></div><div class="right" style="font-size: 11px; text-align: right;">$ 129.00</div><div class="floatLeft" style="clear: both; float: left; font-size: 11px; padding-left: 10px;">$50 Discount</div><div class="right" style="font-size: 11px; text-align: right;">- $ 50.00</div><div class="floatLeft" style="clear: both; float: left;">Taxes & Fees</div><div class="right" style="text-align: right;"> </div><div id="retTaxAndFees" style="clear: both;"><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">Air Traveller Security Charge</div><div class="right" style="font-size: 11px; text-align: right;">$ 12.70</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">NAV and Surcharges</div><div class="right" style="font-size: 11px; text-align: right;">$ 17.50</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">Airport Improvement Fee</div><div class="right" style="font-size: 11px; text-align: right;">$ 20.00</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">Harmonized Sales Tax</div><div class="right" style="font-size: 11px; text-align: right;">$ 2.60</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">US Agriculture Tax</div><div class="right" style="font-size: 11px; text-align: right;">$ 5.00</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">US Immigration Tax</div><div class="right" style="font-size: 11px; text-align: right;">$ 7.00</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">US Customs Processing Fee</div><div class="right" style="font-size: 11px; text-align: right;">$ 5.50</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">US Segment Tax</div><div class="right" style="font-size: 11px; text-align: right;">$ 3.80</div><div class="floatLeft" style="float: left; font-size: 11px; padding-left: 10px;">US transportation Tax</div><div class="right" style="font-size: 11px; text-align: right;">$ 7.24</div></div></div><div class="floatLeft" style="color: #12273e; float: left; font-family: Arial, Helvetica, sans-serif; font-size: 13px; padding-left: 5px; text-align: left;">Subtotal</div><div class="right" style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-align: right;">$ 160.34</div><br style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 13px; text-align: left;" /><div class="floatLeft" style="color: #12273e; float: left; font-family: Arial, Helvetica, sans-serif; font-size: 1.6em; font-weight: bold; padding-left: 5px; text-align: left;">Total</div><div class="right" style="color: #12273e; font-family: Arial, Helvetica, sans-serif; font-size: 1.6em; font-weight: bold; text-align: right;">$ 264.13</div><div><br />
</div><div>A flight to Toronto from DC results in nearly $25 in taxes and fees. A flight back to DC? If we exclude what I am presuming is a fee specific to Dulles (the Airport Improvement Fee of $20), taxes and fees come to $61.34, or 247% more than a flight to Toronto.</div><div><br />
</div><div>You may look and say that obviously we should be charging fees for immigration and customs. My retort would be, why? Canada sees no need to do so. Perhaps they have a more rational immigration system? I've previously stated that I believe this to be the case given their visa granting process for graduates from their universities. Basically, they do their best to retain talent, unlike the US, with its inane quotas to "protect American jobs" that result in talent we train from abroad returning abroad rather than staying here and creating new jobs! Or perhaps, to be more charitable to Immigrations and Customs, the fee is hidden elsewhere in the Canadian budget?</div><div><br />
</div><div>And then there are other questions I would have - why do I have to pay an agriculture tax? What does that have to do with flying into DC? Why the security charge for DC but not for Toronto? Presumably Canadians care about security, so why are we charging extra? Same with the NAV and surcharges, at $17.50 for DC versus $7.50 for Toronto. Are we that inefficient and bloated?</div><div><br />
</div><div>That is my opinion - we are bloated and overtaxed at the airport because of security theater.</div><div><br />
</div><div>I'll leave you with a few articles and blogs:</div><div><br />
</div><div><a href="http://www.schneier.com/essay-395.html"><i>The Economist</i> Debate on Airport Security</a></div><div><a href="http://www.schneier.com/blog/archives/2011/10/isaac_asimov_on.html">Isaac Asimov on Security Theater (short story excerpt)</a></div><div><a href="http://ogma.newcastle.edu.au:8080/vital/access/manager/Repository/uon:6893">Cost benefit analysis for full-body scanners</a></div><div><br />
</div><div><br />
</div>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-49191457442263081432012-03-18T21:03:00.001-04:002012-03-19T08:19:39.093-04:00My mother is awesome!I just have to say that.<br />
<br />
Okay, there's a reason why I'm saying that.<br />
<br />
I got into a debate today regarding why I believe that contraceptives should be sold over the counter. This includes the emergency pill, and this includes no age restrictions (i.e. no stupid laws that say that if a girl is younger than 18, she has to go through a physician to get the "day-after" pill because of some legislature's desire to dictate morality from the state house).<br />
<br />
Simply put, I could not convince the other parties that they were suffering from status quo and authority bias. Because contraceptives have been sold on a prescription basis throughout their whole lives (status quo) and they were brought up to respect medical authority, if doctors are prescribing contraceptives today despite their long history, that must mean that contraceptives are dangerous to have without a prescription from a doctor based on your medical history.<br />
<br />
Except, no.<br />
<br />
If we are to appeal to authority bias, then one authority I like to appeal to is my mother, as she's an OB-GYN. If any doctor would have an opinion that could be trusted regarding contraceptives, it would be an OB-GYN. So, when I discussed my thoughts with her later in the day, she completely backed me up, even for cases where contraceptives are prescribed for non-contraceptive use (i.e. to help with bleeding).<br />
<br />
I was at least willing to consider that there would be a simple diagnostic checklist that could be created to say what dosage a person should have based on medical history or a few simple questions, but apparently there's no need. For the cases where it is for non-contraceptive use, the simple dosage discovery is to start with the lowest, and test upwards if necessary; and switch if that still doesn't work. That honestly sounds simple, doesn't it?<br />
<br />
In other words, there is no need for access to be controlled by the prescription script. Continuing to keep this barrier is an illogicality that invites patients to fall through the cracks because a doctor or employer has a morality that does not want to allow the prescription to be written (i.e. Catholic employers). Removing this barrier would give more control back to the patient, where the choice should be in the first place.<br />
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N.B. Obviously this is my opinion, and not medical advice. This is not a medical blog, and even if it was, the advice would be general enough to provide some information, but require confirmation with a doctor or pharmacist. Maybe if I interviewed 100 doctors I would get a wider spectrum of answers that could be researched. I am just putting this out there because sometimes assumptions about the status quo need to be challenged. Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-63372865057417638192012-03-01T22:22:00.000-05:002012-03-01T22:22:36.058-05:00Dealbreaking Online Dating Questions...I was tempted not to go with the provocative title, since it gives a lot away about what I am doing at the moment. However, as you may know, <a href="http://boringbutsmart.blogspot.com/2011/11/bias-in-mba-questions-community-service.html">when I feel strongly about a subject</a>, I will deliberately be provocative<br />
<br />
As I go over these questions, I am reminded of Max Planck, who stated that "Science advances one funeral at a time." Well, so may ethics, since answers to these questions that subjugate liberty to prejudice and bias are rightly viewed as barbaric by more people nowadays than a century ago<br />
<br />
<b>1. Would the world be a better place if people with low IQs were not allowed to reproduce? </b><br />
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Anyone who answers this question with a "yes" automatically is tossed out of my list of prospects. It is as if they are fans of eugenics! Did they learn anything about respecting the liberty of other people? Did they learn about one of the most repulsive judicial decisions in Supreme Court history, <i>Buck v. Bell</i>? <br />
<br />
Perhaps they are fans of the line: "Three generations of imbeciles are enough." Never mind that the women in this case were being considered imbeciles because of their promiscuity. This is such a barbaric position that whenever I see this juxtaposed with someone who is religious and conservative, I have to wonder if they truly have any morals. And when I see it juxtaposed with someone who is liberal, I have to wonder if they have learned anything from their ideological predecessors, the 19th and early 20th century Progressives, who were fans of eugenics, much to their later shame. <br />
<br />
Maybe I am just too serious. Or maybe I truly have principles that I will not budge on, contrary to what some religious people believe about atheists and agnostics. That there are religious people on dating sites who consider eugenics acceptable when phrased as above suggests to be that they are the ones lacking a moral framework, not I. For a better write-up of why this is one of the most repulsive of Supreme Court decisions, see <a href="http://www.cato-at-liberty.org/one-generation-of-oliver-wendell-holmes-jr-is-enough/">here</a>.<br />
<b><br />
2. Is interracial marriage a bad idea? </b><br />
<br />
Those who think interracial marriage is a bad idea either never heard of <i>Loving v. Virginia</i>, the case that stated that Virginia's ban on interracial marriages violated the Equal Protection and Due Process Clauses of the Fourteenth Amendment, or for some reason think that airing this sort of consumer preference is still a good idea in this day and age. <br />
<br />
And perhaps it is, if only to dissuade relatively liberal people, in the classical sense, from considering associating with someone who thinks little of the liberty of other people. <br />
<br />
Perhaps a generation from now, not only will Chief Justice Earl Warren's opinion be more generally accepted for interracial marriages, but it will be applied to any marriage, with only certain pockets of the United States retaining bigoted consumer preferences.<br />
<br />
After all, to quote the man:<br />
<blockquote class="tr_bq">The freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men. Marriage is one of the “basic civil rights of man,” fundamental to our very existence and survival.</blockquote>Those are two deal-breaking questions for me, which I hope also demonstrate how important I think the notion of liberty is. There are more, but given the hour I am writing this, I will save them for another time.<br />
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N.B. Are there views that I would consider barbaric that are not yet in the mainstream? Of course. Just read any of <a href="http://econlog.econlib.org/archives/2012/01/why_should_we_r.html">Bryan Caplan's writing on immigration</a> to see why, empirically and morally, I feel anything other than unfettered immigration is to transgress upon the liberty of people who want to come here and improve their lives.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-13225612894627787722012-01-08T18:16:00.000-05:002012-01-08T18:16:50.022-05:00Random Thoughts Spurred by a LunchThe other day I had lunch with a colleague, something I do not usually do. In the course of the discussion, we had cause to discuss our fundamental beliefs about economics and the world. Imagine my surprise when he stated that the financial crisis demonstrated how free markets utterly fail and that without the government intervening, we would be much worse off today.<br />
<br />
To which, with my clearer head I would now retort (note I say now, there is a reason I was <i>not</i> part of the debate team):<br />
<br />
If your business did not serve its customers and investors well, and hence only survived 2008 due to a government bailout, how is that a sign that the free market failed? It would seem to me that the government stepping in prevented the free market from <i>succeeding </i>in punishing firms for not delivering value to consumers and investors.<br />
<br />
I will not name specific names, though I do not believe, unlike him, that the entire financial sector would have failed sans government intervention. Those companies who had adequate capital and excellent underwriting would still have been hit, but not to the point of bankruptcy. And let's be honest - wouldn't you want to have a downturn cull out the weak companies with poor decision-making?<br />
<br />
In other words, someone seems to have forgotten the notion that capitalism and free markets mean that not only are proper incentives there for success (the rewards of entrepreneurialism) but for failure too (less revenue, losses instead of profits, bankruptcy and insolvency instead of increasing wealth). <br />
<br />
Or how about this - <a href="http://www.freebanking.org/2011/10/22/once-more-central-banking-is-a-form-of-central-planning/">a centrally determined interest rate is central planning, not the free market.</a><br />
<br />
Or how about this - t<a href="http://thenewamerican.com/economy/commentary-mainmenu-43/7164-cei-target-regulations-in-annual-report">he very size of the Federal Register is an indication that we do not have unfettered free markets, but a mixed economy. </a><br />
<br />
To cast aspersions at the free market is rather misguided if we are in a mixed economy with growing government reach, <a href="http://www.cato-at-liberty.org/playing-politics-with-the-constitution-and-the-law/">potential violations of the rule of law by the institution that is supposed to uphold it</a>, and increasing regulatory cost.<br />
<br />
Whatever do they teach in schools these days? <br />
<br />
To summarize, I am continually amazed by the notion that the last crisis demonstrated the <i>failure</i> of free markets. From my cynical view, it seems to demonstrate yet another <i>government failure</i>.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-26923471015416343932012-01-01T17:08:00.000-05:002012-01-01T17:08:26.298-05:00Music I can not wait to ski toFirst off, Happy New Year to everyone! I rang in the new year last night in the company of good friends at an intimate party, one of the better ways to do so, in my opinion. <br />
<br />
I think the only two new year party options which would top my night last night are 1) New Year's Eve out in a foreign city, like Prague, Hong Kong, Nice or London; or 2) New Year's Eve skiing somewhere out west, like Whistler, Silver Star, Park City or Tahoe.<br />
<br />
On that note, I've been waiting, and waiting, and still waiting for winter weather to truly arrive here in DC. As I write this, I can walk outside my house without needing a jacket (except for the rain). As a result, whereas this time last year I had already sprained my left knee from a ski accident and hence could not ski for the next month, this year I have not had the dubious opportunity for such mishap.<br />
<br />
However, whenever and wherever I start skiing this year, I look forward to skiing to the following music:<br />
<ul><li><i>The Pandorica Suite </i>- 2010 BBC Prom #10</li>
<li><i>Twilight Princess Symphonic Movement</i></li>
<li><i>Mars</i> - Gustav Holst, <i>Planets Suite</i></li>
<li><i>Ride of the Valkyries - </i>Richard Wagner</li>
<li><i>Battle in the Sky - </i>Murray Gold, <i>Doctor Who Season 5</i></li>
</ul>There is probably more music on my iPod that I have not thought of but which I'll enjoy on the slopes. However, I would definitely like to augment this list, so if anyone has an addition, I would appreciate the suggestion.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-33943413194268228772011-12-31T15:15:00.000-05:002011-12-31T15:15:00.881-05:00Government vs. Private IncentivesFrom an article discussing the recent natural gas find by Noble Energy:<br />
<blockquote class="tr_bq">Communications Minister Efthymios Flourentzos struck a note of optimism, saying that as a public listed company, Noble would always announce a more conservative estimate of the quantities of natural gas, so as not to run afoul of the New York Securities and Exchange Commission.</blockquote>So what? Does that mean that a government company would announce a much more liberal estimate because it would not be penalized at all for being wrong? That sounds an awful lot like the rest of government functions.<br />
<br />
Further in the article:<br />
<blockquote class="tr_bq">University of Cyprus professor and member of the group of experts appointed to advise the government, Panos Papanastasiou agreed, saying the find was "possibly the second largest offshore gas find in the last decade". </blockquote><blockquote class="tr_bq">"Companies are usually conservative. They don't announce figures and then downgrade them because they run the risk of being penalized," Papanastasiou said.</blockquote>It almost sounds like there is no easy way to hold a government agency or company accountable (i.e penalizing) if they make a costly mistake or misrepresent matters. Call me a cynic, but people are still under the delusion that government officials and employees are public servants.<br />
<br />
Also in the article:<br />
<blockquote class="tr_bq">The minister added that some sort of national company needed to be created to manage the existence of hydrocarbons in Cyprus' EEZ, giving the state a "decisive role" in wealth management.</blockquote>With all due respect, why? A national energy company gives too much incentive to the government to perform mischief, taking the proceeds from exploration and production and wastefully spending on social programs, neglecting necessary reinvestment in fields to maintain production. See <a href="http://www.upi.com/Business_News/Energy-Resources/2011/05/31/Venezuela-oil-industry-performance-on-the-slide-amid-corruption/UPI-12071306841700/">Venezuela</a>, for example, where oil production is declining and they can not get international investors interested, though you would think that with them producing oil, they could surely fund reinvestment to maintain a cash flow stream... except for those social programs!<br />
<br />
The private sector would run the exploration and production better because they at least are accountable to shareholders (corporations have the agent problem, but governments are the <i>ultimate</i> example of the agent problem), and would probably maximize resources extracted from the field. The government can just take its royalties and taxes and be happy without having to manage a company.<br />
<br />
Except, of course, if Cypriots want more government involvement in their lives through a national company adding significantly to the coffers, resulting in a government likely to lavish them with social programs and handouts. If they want to disincentivize themselves even more from self-reliance, then I suppose they deserve the government they have. They will likely realize too late what a mistake that would be.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-26743521529508734392011-12-28T00:43:00.000-05:002011-12-28T00:43:31.214-05:00The first thing you must remember is to get the hell out of Brussels as quickly as you can<div style="text-align: left;">Somehow I do not think Michael O'Leary is going to be invited back to Brussels. Bureaucrats never like to hear how inept and idiotic they are.</div><div style="text-align: left;"><br />
</div><div style="text-align: left;"><br />
</div><div style="text-align: center;"><iframe allowfullscreen="" frameborder="0" height="315" src="http://www.youtube.com/embed/p4HYSsrlcq8" width="420"></iframe></div><div style="text-align: center;"><br />
</div><div style="text-align: left;">Amusing Points:</div><div style="text-align: left;"></div><ul><li>First three minutes and thirty-five minutes</li>
<li>Timestamp 5:30: "and British Airways, which used to be the world's favorite airline, isn't even the UK's favorite [airline] anymore, we [Ryanair] are!</li>
<li>Timestamp 6:45: "We got an email back last Friday saying, 'I'm sorry the [European] Commission can't pay for a Ryanair flight because there's a ban on low-fare flights within the Commission.'"</li>
<li>Timestamp 7:40: "The first thing you must remember today is to get the hell out of Brussels as soon as you can."</li>
<li>Timestamp 8:25: "[L]ower prices beats higher prices every time, unless you work in the Commission where, of course, by law you can only buy higher prices because, let's face it, the European taxpayer is going to pay for it anyway."</li>
<li>Timestamp 9:20: "...We take your bags from you on departure so we can carry them here and give them back to you on arrival, unless, of course, you flew British Airways, in which case we lose 50% of them in between.</li>
</ul><div>There are a few more humorous moments after, along with plenty of good ribbing at the European Commission. </div><div><br />
</div><div>Of course, the Commission flunky had to point out that the Commission deciding to deregulate the airline market as part of the single market allowed Ryanair to exist. Which begs the question of the use of regulation in the first place, eh?</div>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-68946441284296409292011-12-15T23:30:00.001-05:002011-12-19T15:39:13.478-05:00Christmas is Coming - Game of Thrones Edition<div class="separator" style="clear: both; text-align: center;"><a href="http://26.media.tumblr.com/tumblr_lw5tw631hl1qakqk7o1_500.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://26.media.tumblr.com/tumblr_lw5tw631hl1qakqk7o1_500.jpg" /></a></div><br />
Source: <a href="http://winteriscomingbitch.tumblr.com/">WICB</a> on Tumblr, originally from ONTD.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-81388271024819552322011-12-12T18:22:00.000-05:002011-12-12T18:22:09.146-05:00A Teachable Moment in Skyward Sword<div class="separator" style="clear: both; text-align: center;"><iframe allowfullscreen='allowfullscreen' webkitallowfullscreen='webkitallowfullscreen' mozallowfullscreen='mozallowfullscreen' width='320' height='266' src='https://www.youtube.com/embed/Jl5hyvSfd3Y?feature=player_embedded' frameborder='0'></iframe></div><br />
<br />
<br />
So when you first buy adventure pouches in Skyward Sword, the first one is 300 rupees. The second is 600, and the third 1200.<br />
<br />
Call me amused...thanks to Nintendo for a teachable moment about supply and demand (decreasing supply of pouches and increased demand from you buying them resulting in price increases for each incremental purchase until supply is exhausted). Pity that they couldn't give Beedle a better story to illustrate that point.<br />
<br />
Just think, if they had, how many fewer people would consider higher prices in abnormal times to be price gouging when in reality it reflects 1) the sudden scarcity of the product; and 2) the pricing mechanism use by store owners to ration it out to those with the most desire and ability to pay. That does raise another point: in normal times, it is cheaper to prepare for risks (insurance, stockpiling, etc) than in abnormal times...<br />
<br />
Want to read another example of pricing in chaotic times? Daniel Abraham's first few chapters of <i>The Dragon's Path</i> is a rather well written tale to that effect. If I was an economics professor, I'd look to real life and fiction to find good supporting anecdotes like that.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-68007709020133269882011-12-10T14:08:00.003-05:002011-12-28T01:05:41.406-05:00Status Quo Bias: The Devil Ye Ken versus the Devil ye don'tIt is that time of year when everyone is assessing where they are in their life, what they've done, what they've not done, and what they want to do next year. I find the whole effort somewhat amusing, because ultimately though people will want to change matters, they somehow decide not to at the last moment.<br />
<br />
At the heart of the matter is status quo bias. We prefer that which we know and have shaped ourselves around to that which we do not know. Certainty over uncertainty, minimizing pain through avoiding change even if it might be for the better.<br />
<br />
However, what if that change is for the better? Would you regret not having gone through the effort to execute it?<br />
<br />
For example, I refer you to one of my favorite passages in Diana Gabaldon's <i>Outlander </i>series (and no, it's not one of the romance novel moments, though Diana writes those amazingly well too...), since it calls out a two psychological biases (status quo and authority):<br />
<br />
<blockquote class="tr_bq"><i>"Better the Devil ye ken, than the Devil ye don't," Murdo Lindsay said, shaking his head lugubriously. "Handsome Harry was nain sae bad."</i></blockquote><blockquote class="tr_bq"><i>"No, he wasna, then," agreed Kenny Lesley. "But ye'll ha' been here when he came, no? He was a deal better than that shite-face Bogle, aye?"</i></blockquote><blockquote class="tr_bq"><i>"Aye," said Murdo, looking blank. "What's your meaning, man?"</i></blockquote><blockquote class="tr_bq"><i>"So <b>if Handsome was better than Bogle," Lesley explained patiently, "then Handsome was the Devil we didna ken, and Bogle the one that we did - but Handsome was better, in spite of that, so you're wrong</b>, man." </i>[Emphasis mine] </blockquote><blockquote class="tr_bq"><i>"I am?" Murdo, hopelessly confused by this bit of reasoning, glowered at Lesley. "No, I'm not!"</i></blockquote><blockquote class="tr_bq"><i>"Ye are, then," Lesley said, losing patience. "Ye're always wrong, Murdo! Why d'ye argue, when ye're never in the right of it?"</i></blockquote><blockquote class="tr_bq"><i>"I'm no arguin'!" Murdo protested indignantly. "Ye're takin' exception to </i>me<i>, not t'other way aboot."</i></blockquote><blockquote class="tr_bq"><i>"Only because you're wrong, man!" Lesley said. "If ye were right, I'd have said not a word."</i></blockquote><blockquote class="tr_bq"><i>"I'm not wrong! At least I dinna think so," Murdo muttered, unable to recall precisely what he had said. He turned, appealing to the large figure seated in the corner. "Mac Dubh, was I wrong?"</i> </blockquote><blockquote class="tr_bq"><i>The tall man stretched himself, the chain of his irons chiming faintly as he moved, and laughed.</i></blockquote><blockquote class="tr_bq"><i>"No, Murdo, ye're no wrong. But we canna say if ye're right yet awhile. Not 'til we see what the new Devil's like, aye?" Seeing Lesley's brows draw down in preparation for further dispute, he raised his voice, speaking to the room at large. "Has anyone seen the new Governor yet? Johnson? MacTavish?"</i></blockquote><i><br />
</i><br />
In case you did not figure it out, Mac Dubh, or Jamie Fraser, is the authority among the prisoners in this book. We'll leave aside a discussion about the magnificence of a man like Jamie Fraser.<br />
<br />
I sincerely hope that passage triggered some thoughts within you about the merits of sticking to your goals for the next year. I know that 2011 was predicated around various changes to my status quo. Some of those I executed more successfully than others:<br />
<br />
<ul><li>Career - I decided it was time to apply for an MBA, so my applications are currently out there</li>
<li>Personal life - sorry, but this is private! You can ask me in person.</li>
<li>Investing: reading more than ever, and starting to journal my thoughts (albeit inconsistently)</li>
</ul><div>So, for 2012, what will I be doing to change the status quo? Well, I certainly will not be protesting Wall Street or anything. And I view it as futile to protest the government, as if they'll listen and change things for the better (edit: <a href="http://www.politico.com/news/stories/1211/70878.html">Who knows, maybe they will, in some cases like SOPA</a>, though I'm still a pessimist overall here thanks to the <a href="http://www.cato.org/pub_display.php?pub_id=13944">NDAA 2012</a>, which continues the trend of the past 10 years).</div><div><ul><li>Career - the MBA, or plan B</li>
<li>Personal life - again, this is private! I may post a passage from the <i>The Dragon's Path</i> in the future to illustrate the risks I see right now which I will be mitigating via actions for my personal situation (hint, part of it has something to do with what the Medean Bank did as a counter to the notion that power tends to corrupt, certainly among sovereigns and conquerers).</li>
<li>Investing:</li>
<ul><li>Reading certain authors I respect on a regular basis (Jeremy Grantham and James Montier, though I think their Keynesian framework is wrong; John Hussman; and a few others)</li>
<li>Journaling on a weekly basis</li>
</ul><li>Education: </li>
<ul><li>Learning a foreign language (something I've never managed to do so far)</li>
<li>CFA studies</li>
</ul></ul><div>My plate is certainly full for next year! With discipline, I'll accomplish it. Whatever your desires next year are to change your status quo (and for most of us, I believe we ought to), I wish you the best of luck and determination in executing your plans.</div></div>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-75590551469307599582011-11-19T19:09:00.000-05:002011-11-19T19:09:53.441-05:00Bias in MBA questions: Community ServiceOne of the schools I am applying to, which shall remain unnamed, asks the question of how I shall give back to the community, as charitable service is one of the values they highly esteem. I believe this question is loaded with bias and misunderstanding:<br />
<br />
1) It assumes that the only way of giving back to the community is through charity, ignoring the value accruing to society through individuals specializing and taking advantage of comparative advantage through free trade:<br />
<br />
I.e. I specialize in medicine and you specialize in growing food; rather than both of us doing this, resulting in more medical services and more food available for society through each of us utilizing our talents and trading with others for goods it makes more sense for them to produce for us, as we produce a service for them.<br />
<br />
2) It fails to acknowledge the consumer preferences of the individual - perhaps no matter the mix of activities in his daily life, an hour of charity does not add value for him on the margin, meaning that "charity" performed by him would only occur if someone abrogated his liberty;<br />
<br />
3) It fails to consider the opportunity cost to society of an hour given to charity by the individual versus spent on activities where he has a comparative advantage:<br />
<br />
For example, what if he is an entrepreneur adding value through new products, services, or research? And what if, on the margin, an hour expended by him on those adds more value to society than an hour expended at the soup kitchen. Wouldn't it make more sense for him to spend his time on the former? Wouldn't that truly be giving back to the community, since he is adding value that otherwise would not have been created?<br />
<br />
I find this question sad, because it seems to indicate the university's preference for non-value added service over value-added voluntary trade among individuals, the latter which has caused the wealth of nations. Hence, this university is lower on my preferred school list.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-32651560168293646832011-11-13T23:21:00.000-05:002011-11-13T23:21:57.690-05:00Ideology MattersSuppose I presented an argument to you regarding why banks are not lending out nearly as much money as pre-crisis (never mind statements I have heard on to the effect that lending is tough because it feels like they are pushing on a string to pursue desired growth):<br />
<br />
1) The Federal Reserve is holding interest rates artificially low via open market operations, which may require the use of the printing press to sustain when the market becomes suspicious of the creditworthiness of the U.S. government, which is highly likely to result in high inflation, which to anyone who is not a numpty means that loans created at today's rates will sustain economic losses;<br />
<br />
2) The Federal Reserve will raise interest rates sometime in the next year or two because it can not sustain low rates without the threat of high inflation, which is not desired, meaning that any loans created today have a real chance of bearing losses since deposits (the funding source for loans) may ratchet up to a 3-5% interest rate whereas mortgages created now may have a 4.5% rate.<br />
<br />
Basically, I have presented to you a predicament: I do not see any real solution to the conundrum of what banks should do to lend profitably. No matter what they do, I believe there will be economic losses. The real questions would be 1) which scenarios are most likely; and 2) is there any way to make a profit based on the scenario?<br />
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Yet, for some ineffable reason, when I was explaining this to the EPA employee sitting to my right on the train back from New York, he said I was making an argument for nationalizing the banks! Anyone who knows me knows that is not what I believe. More importantly, how the hell do you get to that point from my argument, when I am trying to explain why banks are being cautious in lending?<br />
<br />
Basically, I think ideology matters. No free-market rational person would think that the scenarios above argue in favor of bank nationalization. However, a person who believes that government is a force of good (such as an EPA employee), and that banks are sitting on money that they should be lending out to help people who are hurting (rather hypocritical, since he ranted about how the banks were irresponsible in lending pre-crisis, ignoring the stupidity of Basel II, the hypocrisy of Barney Franks, Mr. "I want to push the string on subprime", and the negative real interest rate regime of Greenspan/Bernanke post dot-com bubble), maybe the scenarios above suggest that a private actor will not lend out money, so the government should nationalize banks for the good of the people.<br />
<br />
Never mind that the second scenario I described above would be a repeat of the savings and loan crisis, where the taxpayers footed the bill. Never mind that the first scenario I described above could be a repeat of stagflation.<br />
<br />
N.B. I should list my skepticism about the U.S. government's creditworthiness at another time. But I will add I was not surprised that this person focused on the rise in interest rates due to an increased risk premium as bad, while ignoring the <i>cause</i> of it, mainly Congress's propensity to expand the budget each year. If you have an accumulation of bad decisions, then at some point everyone realizes that. The realization is not bad - it is necessary. Sadly, he could not understand that.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-56500070423451966292011-11-06T12:50:00.002-05:002011-11-06T13:01:45.960-05:00Bring on contagion...One of my friends has been debating with me the fear of contagion in the eurozone. Quite frankly, any country with a debt to GDP threshold above 90% has faint hope of recovering without some damage inflicted on the public or holders of its bonds. <br />
<br />
Furthermore, from <a href="http://www4.gsb.columbia.edu/ideasatwork/feature/7224125">Professor David Beim of Columbia University</a>: <i> </i><br />
<br />
<i>European leadership needs to organize an orderly debt restructuring immediately, but is afraid that if it does so, Portugal will be next in line and others will not be far behind. The best way to control this contagion is to require that any country granted a debt restructuring must leave the euro. </i><br />
<br />
To be honest, wouldn't the contagion be warranted because of irresponsibility in those other countries? So are we saying that politicians want to avoid the consequences of their bad actions, that they want all the upside and none of the downside? How typical, to be honest.<br />
<br />
Perhaps we should differentiate first between deserved and undeserved medical contagion. Undeserved would be smallpox or the Black Plague before vaccines were invented and people did not understand hygiene. Deserved would be the numpties who refuse to give their children their MMR vaccines - if we have a resurgence of diseases like polio or measles, mumps or rubella thanks to idiotic parents, while I sympathize with the kids who suffer for their parents' idiocy, the parents' suffering will be well deserved.<br />
<br />
So, coming back to the financial market, we should ask if there is undeserved financial contagion? Absolutely. Autumn of 2008 and March 2009 were rife with solid companies trading at dirt cheap prices thanks to fear. This is when people who follow Buffett's maxim to "be greedy when others are fearful" make their money.<br />
<br />
However, with each of these countries, their debt situation is such that we have to be skeptical about their ability to make investors whole and keep their countries sound, especially considering that sovereign default is a lot more common than people think: according to Reinhart and Rogoff, between 1800 and 2000, eleven European countries had 67 instances of default, with Greece being in default for 50% of time since independence in 1829. Hence, I would place them in the "deserved financial contagion" category. Hence, why I told my friend to bring on the contagion.<br />
<br />
Any investor stupid enough to lend money to these governments deserves the mark-to-market pain, haircuts and possible default. Any member of public willing to buy into the irresponsibility of their politicians deserves their comeuppance, harsh as that sounds. Because last I checked, action without consequence breeds terrible decisions. Profits without losses born by the risk-takers results in terrible capital allocation. If there is one thing I am sad about, it is that the politicians will not receive the blame they should.<br />
<br />
If I appear more cynical, it is because I am re-reading <i>A Song of Ice and Fire</i>, in which government is nothing but a set of thugs and no one in power even cares about the collateral damage on the peasantry in their wars. If there is one thing to be said for today's politicians, they pretend to care.<br />
<br />
N.B. Please either kick Ireland, Portugal, Spain, Greece, Italy, France and any other relatively irresponsible government out of the eurozone, or let the responsible governments (Germany and Austria) get out and leave the rest to their shenanigans. A common currency is not essential for free flow of capital.<br />
<br />
Also, per this chart, if the drachma came back, I would be very excited about a holiday in Greece. Letting them resume their persistent devaluation would be awesome for me as a tourist, though I still would feel sorry for the Greek citizens who allowed it to happen.<br />
<br />
Who knows, maybe a vacation home in Greece could be come cheap thanks to government irresponsibility, if it triggers a serious bout of inflation. Though Greek is low on my list of languages to learn. I should probably consider Argentina first.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="http://www4.gsb.columbia.edu/ipimages/ideasatwork/beim-201110-figure1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="352" src="http://www4.gsb.columbia.edu/ipimages/ideasatwork/beim-201110-figure1.jpg" width="400" /> </a></div>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-83475501966711641882011-11-05T19:48:00.001-04:002011-11-05T22:19:12.031-04:00Winter is coming...I'm a bit (okay, I'm very) late on the whole <i>Game of Thrones</i> mania with the HBO show. Which is surprising since I've probably re-read <i>A Song of Ice and Fire</i> three times while waiting for <i>A Dance with Dragons</i>.<br />
<br />
So, without further ado, a lighter post.<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/--58tu9apdOc/Tou6jqJKI0I/AAAAAAAAMDo/94nbyC5zPIA/stark_forecast.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="320" src="http://1.bp.blogspot.com/--58tu9apdOc/Tou6jqJKI0I/AAAAAAAAMDo/94nbyC5zPIA/stark_forecast.jpg" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Though I think some people would have said winter was here during the "Snowtober" weekend. Sigh.</td></tr>
</tbody></table><br />
Winter is coming...how I would love to have this image on my credit card. Sigh.<br />
<br />
Or, this one, courtesy of <a href="http://lannisterblonde.tumblr.com/">Lannister Blonde</a>:<br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://30.media.tumblr.com/tumblr_low3v9tc9p1qmucdgo1_500.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" src="http://30.media.tumblr.com/tumblr_low3v9tc9p1qmucdgo1_500.jpg" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><br />
</td></tr>
</tbody></table>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-86614959430926393912011-11-05T09:46:00.001-04:002011-12-28T01:14:45.625-05:00If you're cynical about education and government...If you're cynical about education and government, then <a href="http://econlog.econlib.org/archives/2011/11/alex_tabarrok_e.html">Arnold Kling's latest blog post</a> over at Econlog may be of interest to you. Reading the first part of it, I consider myself fortunate that I concentrated in Economics and Mathematics at Georgetown. Quite frankly, the world does not need to hire someone whose academic work consisted mainly of essays on Beowolf and other English literature.<br />
<br />
However, the part where I have to wonder how idiotic our discrimination laws are came at the end:<br />
<br />
<span class="Apple-style-span" style="line-height: 16px;"><i><span class="Apple-style-span" style="font-family: inherit;">The NCRC (National Career Readiness Certificate) may face an even more serious threat than employer indifference: on September 1 the Obama administration filed a racial-discrimination complaint against Leprino Foods Co., which makes mozzarella cheese, over its use of WorkKeys assessments to screen job applicants at its plant near Fresno, Calif. According to the complaint, only 49 percent of black, Hispanic, and Asian applicants passed the tests, in contrast to 72 percent of white applicants (a Leprino spokesman declined to comment on the allegations). The federal action was perhaps inevitable. Decades ago many employers routinely tested applicants in basic math and English—but the tests began to disappear during the 1970s when courts made it clear that if the scores showed a "disparate impact" on blacks, Hispanics, and members of other minority groups, employers could be liable.</span></i></span><br />
<br />
<span class="Apple-style-span" style="line-height: 16px;">Think about it for a moment. An employer, seeking to hire the best employees, uses a test that is agnostic about race, but tests people on math and science skills. This is a merit based test, in other words. If a person does not pass, that person does not merit the job. That should be the end of the story.</span><br />
<span class="Apple-style-span" style="line-height: 16px;"><br />
</span><br />
<span class="Apple-style-span" style="line-height: 16px;">Why should an employer dumb down a test and potentially get less qualified employees just to show that the test rejects an equal number of minorities and majorities? Considering how dismal state education is, these tests are a proof that the government is a terrible educator. And so, the government has to argue that racial discrimination is occurring, rather than look at the root cause, itself.</span><br />
<span class="Apple-style-span" style="line-height: 16px;"><br />
</span><br />
<span class="Apple-style-span" style="line-height: 16px;">Thus, we come to a rather ordinary psychological bias at the end of the day, the ability to find blame in everyone else but yourself. Is it surprising that the government has this same bias? Or rather, faced with the evidence that various state and federal education initiatives are not truly working, in addition to the possibility that governments can not change cultural mores of certain groups that may de-emphasize the value of education, that the government can not acknowledge its fault and chooses to succumb to a rather ordinary bias while accusing an employer of racial bias?</span><br />
<span class="Apple-style-span" style="line-height: 16px;"><br />
</span><br />
<span class="Apple-style-span" style="line-height: 16px;">I would say it is ironic, but if there is one rule about government and bureaucrats besides the notion that "power tends to corrupt, and absolute power corrupts absolutely," it is that you can count on them doing the wrong, idiotic thing rather than understanding a common sense notion that an employer may just want to hire the most qualified individuals as part of maximizing his profits for his owners, which is what he is <i>supposed to do</i>.</span>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-34531744589249501402011-10-10T22:52:00.001-04:002011-10-10T22:57:27.677-04:00Thoughts on EuropeHonestly, I am too busy with more important matters to write much on Europe, through my recent perusal of the <i>Economist </i>on the eurozone crisis could provide sufficient material for another post criticizing the <i>Economist</i>.<br />
<br />
<a href="http://online.wsj.com/article/SB10001424052970204422404576594971418554358.html">John Cochrane's opinion piece summarizes my views best</a>. However, I wish to write them in my words.<br />
<br />
On the policy front, I can not help but think that the problem boils down to:<br />
<br />
<ol><li>No credibility that Greece will be able to pay its bills, and hence an inevitability of default;</li>
<li>Greece can not inflate its way out because it has no control over monetary policy (I'm shedding tears that they default on a payment plan via inflation... not really);</li>
<li>Eurozone banks that loaded up on Greek bonds because of the tempting yields and no need to hold capital against those bonds per Basel II capital requirements now are caught with their pants down because they do not have a capital buffer for defaults (honestly, doesn't that sound like the regulators giving a subsidy to eurozone nations by incentivizing banks to buy government debt, creating an artificial demand that reduces the interest rate those sovereign nations needed to pay to issue their debt?);</li>
<li>Funnily enough, no one has mentioned the insurance companies, but they likely hold government bonds too. They likely have some capital to charge off against, but they will still be affected.</li>
<li>"Those who do not remember history are doomed to repeat it," or <i>This Time is Different</i> syndrome: 2000-2007 was abnormal insofar as there was a paucity of sovereign defaults. We're really regressing to the mean, which was inevitable because of the stupidity/corruptness of politicians</li>
<li>Unlike prior default periods, because people suffered from <i>This Time is Different </i>syndrome and the regulators made matters much worse by not requiring any capital be set aside to back purchases of government bonds, the financial system is much more exposed to systemic risk, ironically the thing regulators are <i>supposed to prevent.</i></li>
</ol><br />
There is probably more to it, but that is what I am able to discern.<br />
<br />
I can not help but analogize this to the United States and California though. Why? Let's say that California had an excruciating amount of debt which it could not service. Naturally, it can not inflate its way out because it uses the U.S. dollar for its currency as part of its currency union with the rest of the United States. Naturally banks and insurance companies across the U.S. will have some Californian bonds in their liquidity portfolios or insurance float, and hence a Californian default will eat into their capital and hurt them.<br />
<br />
But the U.S. dollar itself won't be hurt by a Californian default - it will still be used in the currency union. California can still pay its debts in U.S. dollars as long as their government enacts austerity measures. If it does not, California can restructure and continue paying in U.S. dollars, but at higher rates.<br />
<br />
So the U.S. dollar would not necessarily be threatened by a Californian default. But it would likely be if California was bailed out, because nationalizing Californian debt would add to inflationary pressures on the U.S. dollar since the federal debt would go up.<br />
<br />
That to me is the Greek situation - a Greek default will be painful because the regulators created systemic risk. However, the euro itself, the currency, would not be threatened by this systemic risk unless a bailout occurred because of the added inflationary pressure of "Europeanizing" this debt.<br />
<br />
So ultimately, my thoughts are that the government was instrumental in creating this mess. To believe that they can fix the system when their prior fixes destabilized the system is to continue to run an experiment proving the definition of insanity.<br />
<br />
N.B. I sincerely hope that the Slovakian parliament can not reach a compromise on endorsement of expanding the eurozone bailout fund. Besides the fact that it is highly irresponsible of Europe to expect poor Eastern European nations to bailout a wealthier neighbor who could not control its spending, I clearly think a bailout will be worse for the system than letting the default occur, the banks which have bad assets to be hit, and people needing to learn the hard way that "this time is not different."<br />
<br />
Of course, I'm not a European, so why should I care?Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-71685643232772876382011-10-10T16:27:00.000-04:002011-10-10T16:27:58.310-04:00Stupid Environmentalists...Over the past year, I've become quite interested in the Canadian oil sector. I find the revolution in North American energy in general to be intriguing: fracking of shale gas resulting in a potential new normal of low prices for natural gas; the Alberta oil sands, and steam assisted gravity drainage (a friendlier extraction process for oil from the sands than current strip mining); and revisitation of light oil reservoirs with new technologies that can extract more oil from them than in the past (for example, some companies, like Crescent Point, believe that rather than a 5% oil recovery factor from reservoirs, new technology could lead them to have a 25-30% recovery factor).<br />
<br />
I would think that with high oil prices, people in the United States would welcome such developments, since the majority of that oil will come here. Canada does not have the access built to ship that oil or the bitumen for processing, to Asia yet.<br />
<br />
Of course, that does not account for the nutters in the environmentalist movement (actually, I consider them all to be rather inconsistent and illogical, but they have a right to free speech, so I get to enjoy the stupid gems that come out of their mouths).<br />
<br />
For example, from the FT (<a href="http://www.ft.com/intl/cms/s/0/7f78f588-edb9-11e0-a9a9-00144feab49a.html#axzz1aPTj7C2E">full article</a>):<br />
<br />
<span class="Apple-style-span" style="background-color: #fff1e0;"><div style="line-height: 18px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><i><span class="Apple-style-span" style="font-family: inherit;">Erich Pica, president of Friends of the Earth US, one of many environmentalist groups opposed to oil sands development, says: “Whether to approve this pipeline [Keystone XL, which will transport bitumen from Alberta, Canada, to the Gulf of Mexico, since Canada does not have enough refining capacity for the bitumen production expansion that is occurring] is the most important environmental decision President Obama will make before the election.</span></i></div><div style="line-height: 18px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><i><span class="Apple-style-span" style="font-family: inherit;"><br />
</span></i></div><div style="line-height: 18px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><i><span class="Apple-style-span" style="font-family: inherit;">“If he sides with greedy oil companies instead of people and the climate, he will essentially be urging a huge part of his base to sit out the election.’’</span></i></div><div style="line-height: 18px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><i><span class="Apple-style-span" style="font-family: inherit;"><br />
</span></i></div><div style="line-height: 18px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">Okay.</div><div style="line-height: 18px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"><br />
</div><div style="line-height: 18px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;">First, those greedy oil companies:</div><div style="padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"></div><ol><li><span class="Apple-style-span" style="line-height: 18px;">What's wrong with making a profit? That profit means that people value what oil companies produce.</span></li>
<li><span class="Apple-style-span" style="line-height: 18px;">Oil companies are composed of people. They aren't magical entities of robots. So when you say "greedy oil company," do you stop to think of the insult to the hard working oil field workers, engineers, and yes, executives, that are producing a product that people want?</span></li>
<li><span class="Apple-style-span" style="line-height: 18px;">Do they think of the people backing these oil companies, including hedge, mutual and pension funds? What about individual investors? In all likelihood, some of these environmentalists or their connections have a financial dependence on these companies doing well for their retirement portfolios to perform well. I suppose environmentalists are welcome to shoot themselves in the feet.</span></li>
</ol><div><span class="Apple-style-span" style="line-height: 18px;">Next, the people:</span></div><div><ol><li><span class="Apple-style-span" style="line-height: 18px;">If oil companies are making a profit, that means that people want or need their product. So, to restrict access to that product means that the U.S. may have shortages of that product, driving up oil prices. Is that really friendly to the U.S. populace?</span></li>
<li><span class="Apple-style-span" style="line-height: 18px;">There is no credible alternative for transportation, be it the short commute (or 2 hours, for me), or the college road trip, other than oil and natural gas (if you have a CNG vehicle). Even the electric cars coming on to the market in 2012 will have a capacity of 100-120 miles per charge. The technology has a long way to go. And if they think oil companies are deliberately slowing down electric technology development (which some environmentalists probably do think), they're even more idiots than I thought.</span></li>
<li><span class="Apple-style-span" style="line-height: 18px;">Oil and natural gas are used for more than transportation. Other goods, such as fertilizer (we need to eat, after all) and plastics depend on those inputs. Depriving the U.S. of incremental Canadian oil would raise the prices for these other goods, both directly via higher input prices and indirectly via higher transportation costs. Is it really people-friendly to advocate that people be forced to spend more money to buy their basic necessities? </span></li>
<li><span class="Apple-style-span" style="line-height: 18px;">Again on transportation, if oil prices in the U.S. are higher due to less supply from Canada and a harder time getting supply from elsewhere (or maybe Canada sells to Asia, and then Asia turns around and sells back to the U.S., which certainly adds to the cost), then leisure for the U.S. populace became more expensive. You wanted to fly to Tahoe to ski? That'll be $100 more dollars per airplane ticket, thank you very much. If that's people-friendly, then I'm scared to know what's people-unfriendly.</span></li>
</ol><div><span class="Apple-style-span" style="line-height: 18px;">Finally, the climate:</span></div></div><div><ol><li><span class="Apple-style-span" style="line-height: 18px;">Let's think about this. Canada is a developed nation with a sound rule of law, and respect for the environment, even in the corporate world. Do people really think that the Canadian government would let oil sands development occur without funds set aside to restore the land after the reserves are extracted? Maybe environmentalists do, but in that case, they are guilty of ignorance: according to<a href="http://www.ft.com/intl/cms/s/0/dee0bace-ee9a-11e0-9a9a-00144feab49a.html#axzz1aPTj7C2E"> Jeff Sundquist, CAD$1 billion in bonds</a> have been posted to ensure environmental reclamation.</span></li>
<li><span class="Apple-style-span" style="line-height: 18px;">Oil extraction in other countries we rely on, such as <a href="http://www.guardian.co.uk/world/2010/may/30/oil-spills-nigeria-niger-delta-shell">Nigeria, is a lot less friendly</a>. If we do not get oil from Canada, our demand is likely not going to go down, so we'll need to get it elsewhere. Maybe we'll demand more then from other nations with laxer environmental standards, and inadvertently contribute to environmental destruction there? Wouldn't that be climate unfriendly? File that under the law of unintended consequences.</span></li>
</ol><div><span class="Apple-style-span" style="line-height: 18px;">In my opinion, incremental Canadian oil will find its way to market, one way or another. Maybe it'll go to Asia. Maybe to the U.S. through a circuitous route. But it would be a damn shame to let environmentalists dictate our energy policy, as it seems they can not answer the question, "And then what?" </span></div></div></span>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-55387749304380283362011-09-15T08:39:00.002-04:002011-09-15T10:02:05.668-04:00An Excerpt Worthy of ThoughtFrom Jim Grant's <a href="http://online.wsj.com/article/SB10001424053111904836104576557360442970594.html?mod=WSJ_Opinion_MIDDLESecondBucket">review of "Grand Pursuit: The Story of Economic Genius"</a> by Sylvia Nasar:<br />
<br />
<i>There isn't room for every economist in this book or any other, but I myself missed the voice of Jacques Rueff, the 20th-century theorist who was able to demonstrate the superiority of the classical gold standard over the faux gold standard devised by Keynes (incorporated in the Bretton Woods system of 1944-71) or the paper-money regime advocated by Fisher and Friedman.</i><br />
<br />
<i>I missed, as well, Murray Rothbard, who blamed the Great Depression on the Hoover administration. It didn't intervene too little, Rothbard unconventionally sought to show in his 1963 book, "America's Great Depression," but rather too much. The economics profession just smiled at this contention, but the unsolved case of the depression of 1920-21 counts heavily for Rothbard's thesis. It was a deep and painful slump (a young Army veteran, Harry S. Truman, lost his Kansas City haberdashery to bankruptcy), with the wholesale price index dropping by 37% and the measured rate of unemployment tripling to 12%.</i><br />
<div class="insetContent insetCol3wide embedType-image imageFormat-D"><div class="insetTree"><div class="insettipUnit insetZoomTarget" id="articleThumbnail_7"><div class="insetZoomTargetBox"><div class="insettipBox"><div class="insettip"><i><a href="http://www.blogger.com/post-edit.g?blogID=1653520783986940671&postID=5538774930438028336"><br />
</a></i></div></div><i>But it ended. Why it ended will mystify anyone who has taken to heart the arguments of Keynesians for more fiscal and monetary stimulus to revive today's economy. To meet the crisis that spanned the administrations of Woodrow Wilson and Warren Harding, the Treasury ran a budget surplus and the Fed raised interest rates. Yet the slump did end, and the 1920s roared. </i></div><div class="insetZoomTargetBox"></div><div class="insetZoomTargetBox"><i> </i></div><div class="insetZoomTargetBox"><br />
Honestly, this seems to be an episode that everyone who is not in favor of government intervention, or who has some sympathy to Austrian economics, points out. This may be confirmation bias, but I look at it to and ask myself that if mainstream economics can not explain the Depression of 1920-21 and how it ended without intervention (and quickly too!), then enough is missing in their theory to doubt the contention that intervention will work here. <i></i></div><div class="insetZoomTargetBox"><i></i></div><div class="insetZoomTargetBox"></div><div class="insetZoomTargetBox"></div><div class="insetZoomTargetBox"><br />
See also<a href="http://www.freebanking.org/2011/08/18/an-austere-recovery/"> George Selgin's post on this</a>, which I had previously mentioned. There have likely been plenty of other austere recoveries in world history. It is a shame that economists, for whom world history is supposed to be the dataset off which they derive their macroeconomic theories, might have failed to consider evidence that contradicts their views. Or is it confirmation bias?</div></div></div></div>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-82928884034153295752011-09-03T12:51:00.002-04:002011-12-28T01:18:39.110-05:00Blending Teas...<i>Editor's Note: I originally created this blog to cover the spectrum of my interests, other than investing, which I've decided is best not to blog about, thanks to regulators and the like. So much for free speech there, eh?</i><br />
<br />
<i>While this blog has evolved into a somewhat cynical view on the government while also commenting of certain biases, such as scarcity bias, both an economic and personal interaction bias (I swear, I need to blog about it at some point, but only if the person in question allows me to do so!), occasionally I like to inject some of the </i>joie de vivre<i> aspects that dominated this blog in its early life, and which was the intention to keep here.</i><br />
<i> </i><br />
<br />
Recently, thanks to a colleague, I've rediscovered my penchant for drinking tea. Usually I eschew tea and coffee because of the caffeine - five years ago I absolutely needed it (coffee) because of two hour <i>daily</i> commutes each way followed by dance practice until midnight (I was competing in open ballroom dancing at the time - and therefore needed all the time I could get for practice). After doing that for a year or so, I stopped and had a saner commute and dance practice schedule. And today, I have a pretty sane commute schedule and dance only for fun now.<br />
<br />
At times I've picked up the coffee habit again - when one of my economist friends in the government introduced me to the Bialetti stove-top espresso maker. Or when I briefly reconsidered competitive dancing again, and the household I stayed at in New York was one where french-press brewed coffee was a regular morning and afternoon ritual. I still use that Bialetti if I'm absolutely tired from the night before and have a long drive ahead of me, but that's maybe once every two weeks. Hardly much compared to once or twice a day as in the past.<br />
<br />
As for tea, when I was in Hong Kong back in 2009 to visit a close friend from Georgetown and see the sights (and suffer hot weather and humidity that did <i>not </i>dissipate in the evening, mind you, making Hong Kong a place that I would probably not want to live in long term), we drank green tea with <i>every </i>meal. And my friend there introduced me to her tea habit, with a stunning variety of green and white teas. And some curious black tea blends, like a lychee black tea.<br />
<br />
But like the coffee habit, I discovered I didn't care for the sleep disruption by drinking all the caffeine. Maybe five years ago I would not have noticed, but even in 2009 when I went to Hong Kong I had weaned myself off caffeine enough that it was quite a jolt. And I preferred, at the time, to keep it as a potential jolt for fatigued days.<br />
<br />
So why the change now?<br />
<br />
For one thing, I've recently been enjoying taking my afternoon Sunday<span style="font-family: inherit;"> tea at Leopold's in Georgetown, but using the rooibos chai blend from Harney and Sons for my tea while also enjoying the gruyère </span>cheese and caramelized onion tea sandwich. And for another, my colleague introduced me to his <a href="http://www.eightcranes.com/perfect-steeper.html">portable tea steeper</a>. So, for the past week, I've been on a kick, brewing loose leaf rooibos chai tea and enjoying it.<br />
<br />
Incidentally, when it comes to tea, while I prefer loose leaf, I am not as much of a snob as some literary characters I know, such as Frank Randall in the <i>Outlander </i>series:<br />
<br />
<i>Frank made a face; an Englishman to the bone, he would rather lap water out of the toilet than drink tea made with teabags. The Lipton's had been left by Mrs. Grossman, the weekly cleaning woman, who thought tea made from loose leaves messy and disgusting</i>.<br />
<br />
And two other points in favour of loose leaf, in my opinion, are that 1) I can steep it two to four times, depending on the leaf, and still have good flavour; and 2) I seem to have more variety, and exotic ones at that, including exotic blends, than with tea bags.<br />
<br />
Recently though, I've reintroduced green and white tea back into my tea mix, but in small quantities. I've decided that I want to acclimate myself to small quantities of caffeine (useful for whenever I am at friend's house, where we cap off the night's dinner with espresso), and I also want to experiment with blending different tea varieties.<br />
<br />
Thus far, I've only mixed the rooibos chai with a green tea, and with a green tea and King Peony tea leaves. I prefer the latter blend. I think I may next try blending King Peony tea leaves with cinnamon and cardamom. Ditto the green tea leaves. And with all the mint and basil growing in my garden, I think an herbal tisane and green tea blend is on the list too.<br />
<br />
Anyway, it's a fun little thing for me to do while I am bogged down in studying for the CFA and pursuing other one year goals.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-44252551470458764402011-09-01T08:38:00.000-04:002011-09-01T08:38:08.298-04:00Lindy Hop and the Heisenberg Uncertainty Principle"Five minutes of embarrassment rather than an hour of wondering," I said to my friend in response to her invitation to join her in the intermediate/advanced lindy hop class yesterday evening. And found to my surprise that instead of five minutes and then skedaddling into the main dance room, I ended up in the class for the full hour.<br />
<br />
So, what happened? If I recall, the class I am referring to was supposed to be a class for non-beginners. And before last night, there were maybe one or two other times in my life that I had ever done lindy hop, and one of those times was a long time ago, as a sophomore at Georgetown. Hell, I've danced Argentine Tango more than I've danced lindy hop, and I definitely consider myself to be a beginner there. And I received confirmation after the class that I was a beginner still, by virtue of the voting apparatus known as dancing with a different partner to live music.<br />
<br />
If I had to guess, I would invoke the Heisenberg Uncertainty Principle, which basically says that for a pair of variables, if you attempt to measure one with more certainty, the other is less measurable with certainty. At least, that's how I remember it from high school chemistry.<br />
<br />
However, what was the pair here? There is class difficulty as stated, and my ability to handle the class. I am not certain that is a pair.<br />
<br />
Regardless, here's what I think happened:<br />
<br />
At the beginning of the class, we were asked to dance for a little bit, which allowed the instructors to see how we danced. Of course, you slap you your head, that's going to alert them to the presence of a rank beginner in their class and perhaps cause them to go slower. Which I feel they did.<br />
<br />
So if I had not been present (nor any of the other beginners, which I am certain there were there), would the class truly have been more skewed towards advanced and gone faster through the basic movement they wanted to teach before moving onto variations on it? My suspicion is yes.<br />
<br />
So maybe there was a pair there after all. And while my suspicion is yes, I can not be certain. If I was in the class, I know I could handle it because I did. But if I was not, I do not know if they would have taught it the same way, or it would have been more advanced. Hence, the uncertainty principle in life.<br />
<br />
Or you could just say its a misapplication of quantum physics to real life...<br />
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But you would be missing the larger point - the class was bloody fun!<br />
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N.B. If only I had pictures, but maybe from another night at Jam Cellar I will.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-2057885886909157672011-09-01T00:02:00.002-04:002011-09-01T01:16:52.851-04:00Some links...It's been a while since I posted, and while I am irked about the NLRB's strike <strike>against free, voluntary trade between employees and Boeing</strike> for the common worker against evil, corporate America, I'm not irked enough to blog in full.<br />
<br />
Or rather, since I like to talk about comparative advantage and free trade, to utilize a Ricardian model, my current comparative advantage lies in improving my financial skills via the CFA curricula, whereas others comparative advantages are in economics blogging, such as Don Boudeaux of <a href="http://cafehayek.com/">Cafe Hayek</a>, or George Selgin of <a href="http://freebanking.org/">Free Banking</a>. Clearly, if we traded, both parties would be better off:<br />
<br />
1) I would gain free time to pursue CFA studies (and to also work on one of my weaknesses that I view as essential to correct, Spanish), while getting to post top-notch content that is often wittier than mine; and<br />
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2) Any site I link to will likely have a gain in traffic. A very small gain, mind you, but the marginal cost of these blogs trading with me is nil, so the cost/benefit analysis for them is also in favour of them trading with me.<br />
<br />
Hence, why I am engaging in free trade today with these blogs. Known to some as outsourcing. Known to the NLRB as something to be discouraged because of hurting the American worker. But nevertheless, free trade that should be unfettered.<br />
<br />
Without further ado, the links:<br />
<br />
A) <a href="http://econlog.econlib.org/archives/2011/08/what_i_thought.html">What I thought, at Age 16, Academia was Supposed to be</a><br />
<br />
David Henderson posts the excerpts from Heather MacDonald's piece on the Great Courses product in the City Journal (published by the Manhattan Institute). Yet another article from an economist I admire pointing to the potential savings that can be accrued by letting market forces actually dictate how consumers (parents and students) get their product and what they learn (to a degree). How? 1) Content Delivery, allowing economies of scale through spreading of costs over a larger customer base than a university; and 2) tailoring the course to the desires of the audience (if they want to learn about the American Revolution, that's what they'll get).<br />
<br />
Is online content delivery bad? Well, I met a person recently who teaches physiology at Georgetown's School of Nursing, but as an online course. She loves it, her students love it, and so far it works. And then there's the next step, which is the content of a superstar professor becoming more available to a broader audience (what Greater Courses seems to do), such as Aswath Damodaran. So, it can work. Reason enough that experimentation here should occur, and would be more likely to occur if all college costs per paid by the consumers, and not via subsidies.<br />
<br />
Also, as an Indian, I quite frankly do not mind those "dead whites men of the Western world." Philosophy is universal, but I am a classical liberal, and therefore could care less about the race of a person compared to the person's actual ideas! Give me John Locke and "Life, Liberty and Property" any day!<br />
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<a href="http://www.freebanking.org/2011/08/18/an-austere-recovery/">B) An Austere Recovery</a><br />
<br />
Besides being a superb site for a crash course in free banking, a la Scotland before 1845 or so, I find it worth visiting for George Selgin's regular posts. One of his more recent ones takes a look at actual history, and recounts an episode of U.S. history where austerity was the solution - the Depression of 1920-21, during which unemployment went from 1.4% to 11.7% on the high end of calculations (Lebergott) and 3.0% to 8.7% (Romer) on the lower end.<br />
<i> </i><i>Did the U.S. government hasten the recovery by means of deficit spending and other "stimulus" programs? Not in the least. instead, it stuck to conducting business as usual which, in those naive days before Keynes revealed that prudence and thrift were shopworn Victorian shibboleths, meant reverting to its prewar budget and retiring its wartime debt.[...] Instead of spending more than it had been, <b>the Harding administration steadily <i>cut</i> expenditures, exclusive of debt retirement, from just over $6.4 billion in fiscal 1920 to just under $3.3 billion in fiscal 1923--a whopping 45 percent!</b> [Emphasis added] As a percentage of GNP, <a href="http://www.cato.org/pubs/journal/cj16n2-2.html">Randy Holcombe</a> shows, Federal outlays fell from just over 7 percent to well under 4 percent.* </i><i></i><br />
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</i><br />
Selgin has some other statistics in there - industrial production fell by 30 percent during that depression, and so on. The point being that the 1920s is remembered for the Roaring Twenties (and Prohibition). Who remembers being taught about the Depression of 1920? I believe the first I read of it was in <i>Security Analysis</i> by Graham and Dodd. And yet, we should be taught it, because it is a clear case that the Keynesian macro model of Aggregate Demand and Aggregate Supply and the need to stimulate to get the economy on track may well be false.<br />
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When history provides such a clear example of austerity and positive results - another being 1946 when government expenditures were drastically cut despite Keynesian cries that it would lead to another depression, but instead it hallmarked the start of a prosperous era in U.S. history (and why when we say "postwar", we mean post World War II) - I begin to doubt the intellect of people who would have us believe austerity is a bad idea.<br />
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Yes, I'm talking to you, <a href="http://www.economist.com/node/18928600?fsrc=scn/tw/te/ar/shameonthem"><i>Economist </i>editors</a> and <a href="http://www.businessinsider.com/shame-on-the-republicans-2011-7">Henry Blodget</a> (I never trusted you during the dot com bubble, why the hell should I trust you now?). If you thought the Republicans were reckless during the debt ceiling negotiations, then I suppose you think that Harding was what? Beyond reckless? Never mind the inconvenience of actual historical facts that belie your assertions.<br />
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N.B. The CFA curricula include Keynesian economics in its subject matter. Needless to say, you all know what I'll say when asked about it.<br />
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C) <a href="http://cafehayek.com/2011/08/quotation-of-the-day-48.html">Incentives Matter</a><br />
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From Cafe Hayek's Quotation of the Day, the note that the sons of merchants were the most eager to learn foreign languages.<br />
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That's it! I love free trade! Even if the NLRB doesn't. Thank goodness they don't regulate bloggers like me.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-75659687098125345412011-08-15T20:16:00.000-04:002011-08-15T20:16:34.322-04:00Why so slow?I helped my sister sign on for Online BillPay at Wachovia tonight. And then we tried to access it because we were going to use it to fund her investment account. But Wachovia/Wells Fargo stated that it will be 1 to 3 business days before she'll have access to it. Seriously? She's already enrolled in Online Banking. How hard is it to enroll her in the Online BillPay?<br />
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Maybe in the 90s this delay would have been acceptable. But this is an example, to me, of where servicing needs to continually be on its toes because of ever increasing expectations of customers. Wachovia just lost my respect for that long a delay for such a simple function. Granted, they already destroyed any respect I had for them when they screwed up so massively that Wells Fargo bought them on the cheap, but the Wells Fargo name had given back some reputational hue, or so I thought. Well, all it look was 5 minutes for them to destroy a decent reputation, again.<br />
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As an aside, I think it rather cool that the brokerage my sister and I use allows us to fund our investment accounts via a bank's billpay function. I do not remember having that option last year, so at least they are continuing to be on their toes.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-20872014870829245592011-08-06T15:18:00.000-04:002011-08-06T15:18:29.721-04:00About bloody time...The S&P rating agency downgraded the U.S. government debt (but not by much). My thoughts are:<br />
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1) Why did it take so long?<br />
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2) Given that we are already over the 90% Debt to GDP ratio threshold discussed with Reinhart and Romer in <i><a href="http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691142165">This Time is Different</a>, </i>implying less economic growth because of the drag of terrible fiscal policy on the economy, perhaps the rating downgrade should have been more than one rung down.<br />
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3) Given that you could see Debt to GDP rapidly increasing from 2002 to 2010 (from 58.5% to 89.9% - it's over 90% now given that we now have over $14.3 trillion in debt, and GDP was estimated to be $14.7 trillion by end of 2010), such that the ratio's growth rate was 5.5% annualized from 2002 to 2010 versus only 1.8% annualized from 1980 to 2002, it's really a shock why we did not get downgraded sooner.<br />
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Those rates seem small, but we're talking about compounding here. A 5.5% annualized rate for debt growth is not sound. Hell, with all the borrowing we've done, we should be aiming for a negative debt growth rate. Neither Congress nor the President really got that memo. Hence, the downgrade.<br />
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Much good as it will really do. Maybe it will be a wakeup call. But judging from what I saw on CNN this morning, with an administration official dismissing the downgrade, it will not be.Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0tag:blogger.com,1999:blog-1653520783986940671.post-62153680926250924532011-07-09T08:42:00.001-04:002011-07-09T10:39:57.691-04:00The end of the Space Age?<i style="font-family: inherit;">Author's Note: I read the Economist semi-regularly. Occasionally I really react to an article. The below is one of those occasions. Of course, my reaction could be incorrect. But I would not be writing it if I thought so.</i><br />
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The lack of imagination, or rather, the lack of faith in the market evinced by <i>The Economist</i> in its July 2nd edition is astounding. They seem to forget that the major inventions that changed our lives for the better were not the result of government spending (not all of them, and I am not convinced by those who argue that the Internet could only have come about because of government spending with DARPA, because in an alternative history, humans desiring to communicate better and better may have stumbled upon it themselves and commercialized it much sooner, perhaps having us enter into a dot com bubble in the 80s instead).<br />
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For example, the steam engine. The railroad. Oil and gasoline. Insulin (from Eli Lilly). The automobile. The telegraph. The telephone. The copier. I'm tempted to say the computer, but that may have been started because of the government, though again, in an alternative history, I see no reason why it couldn't have been privately innovated initially for private consumption. Actually, for every single innovation funded by the government, I pretty much see the potential that it could have been funded more serendipitously by a venture capital firm. More haphazard and uncertain, liberal central planners would say. More spontaneous, consumer driven, and sustainable, I say, as a believer in markets.<br />
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Or maybe the <i>Economist</i> believes we're now in an era that only big bucks, coerced from taxpayers, can fund space innovation and exploration. If so, then why the hell has NASA technology stayed so far in the past, running on 70s and 80s era computers? Why the hell have they not iterated in their space technology? Maybe because there was no real incentive for improvement (no profits on the horizon since they were not a company selling a product), they didn't really improve. And hence why the space program kept using such old technology. The <i>Economist</i> themselves point out the error of a lack of P&L incentives when they mention the "benighted International Space Station (ISS), surely the biggest waste of money, at $100 billion and counting, that has ever been built in the name of science." If it had been conceived in the name of profits though, it might have been a different story.<br />
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So, in my opinion, it's high time to shut down any space program. The <i>Economist</i> itself points out in another article that people in the United States do not particularly care about it, which matters because right now it is their money the government, which runs deficits, is spending, or perhaps wasting from their point of view. Let private entrepreneurs risk their capital making something commercially viable, even if only for the rich, which is what Elon Musk and Sir Richard Branson are doing. If anyone has a chance of it, then it is the entrepreneurs. For if they make it a luxury good initially, proving the concept, would not the drive for efficiency and expanding one's market, as well as general technological improvement in other fields that may become applicable to space, end up causing a private entrepreneur to reinvest profits to make his product more and more available to the general market? That's what happened with cars and computers, after all (actually, nearly any market driven product, so far as I can tell, including phones, as shown in the video below). Why not let that happen with space? It just may take longer than the phone that was $4,000 (before adjusting for inflation) in the 80s when introduced, and now can be obtained for $39 with a contract, and maybe $100-200 without a contract. (<i>Note: The prior example was a DVD player that sold for $300 and now sells for $50, or is unnecessary because you have a good laptop or just stream movies from Amazon, but I thought the cell phone example from the video was better. Also, note that the economy grew during this period when these products declined in nominal and real prices. So maybe, just maybe, price deflation is good, and does not necessarily lead to GDP deflation, unlike what central bankers seem to believe with their efforts to halt asset price deflation to what might be their equilibrium level.)</i><br />
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At the end of the day, maybe the <i>Economist</i> is too zero-sum. Or maybe they believe some problems just can't be solved by the market, by private entrepreneurs seeking to make a profit. (How many people really want to travel in space?). I, on the other hand, am more an optimist. And maybe many people don't care about space right now. But if the price becomes right, that market will probably expand, like other markets have. I am not ready to write off the end of the Space Age because indebted governments that have to borrow to pay their bills decide not to fund a space program any more. I believe that entrepreneurs have the best chance of delivering space to us, as has happened before. And while people may think the market is not there, that's why private people should risk their money - they're the only ones who lose if they're wrong, whereas everyone loses if it is the government spending the money.<br />
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NB: Ultimately, our society was not formed via central planning. The ships that navigated the Atlantic with colonists were privately chartered ships from England and the Netherlands (not sure about France and Spain). The colonies that arose that were successful were the ones with more freedom to do as they would. So it could be with space. Central planning is probably not going to create a vital, vibrant frontier that people want to explore. Private entrepreneurs who create the ships and make them cheap enough to charter ultimately will, and then those pioneering people with capital who always seem to emerge in a society allowing some freedom go ahead and create a life on that vibrant, dangerous frontier where a world of opportunity exists. They existed in the 17th and 18th century, why not now or in the future? It's happened before, after all. On Earth.<br />
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Also, I did not see this video until after I wrote this in an email to a friend, but I find that it eloquently expresses my point about markets and how they deliver valuable stuff we desire at incredibly cheap prices, given the chance. (H/T CafeHayek for the video)</span><br />
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</div>Ameethttp://www.blogger.com/profile/11364850780551776173noreply@blogger.com0