Credibly promising to be irresponsible...since 2004!
Tuesday, January 11, 2011
Duke v. MD--YYM is there!
Cliff Tucker tries to inbound the ball. But C-Crazies put that bad hoodoo on him. The YYM is circled. Exciting. Duke uses non-price rationing to allocate game tickets. They are all "free" to students, but you have to wait in line. Maryland game usually a tough ticket to get, since U of Maryland is basically an urban pentitentiary with chalkboards and we HATES them. But this game was on January 9th before classes started and the YYM only had to wait about six hours in line to get into a position where he could fling that hoodoo.
Here's a great video for a song off Danielson's upcoming album. The song is "Grow up". He is wearing some totally badass shoes in the video. Do you think they are John Fluevogs?
In a stunningly ignorant article in today's WSJ, Bret Stephens calls for the re-colonization of selected countries:
"some new version of colonialism may be the best thing that could happen to at least some countries in the post-colonial world"
He's not totally specific; he names Haiti, Ivory Coast & Sudan, but also says "Post-colonial Africa has seen the future. As often as not it looks like Zimbabwe".
Wow.
Then there's this:
"The colonialists of yore may often have been bigots, but they were also, just as often, doers. Their colonies were better places than the shipwrecked countries that we have today".
Holy Crap.
First, sub-Saharan Africa is actually improving on governance on the whole, not digressing. Second, colonialism helped create the conditions that plague the region like artificial borders, ginned up ethnic rivalries, diminished local capacities and so on. Third, "sure they were bigots, but they got things done"? Really? We are going to use "the trains ran on time" as a serious argument?
Finally, as to the colonies being "better places" than their current independent counterparts, I have to ask, better for who? Has Bret ever read about the colonial experience of the Congo? Has he ever heard of apartheid?
Deerhoof vs. Evil is coming out soon. Here's a video of a song from it:
From this small sample, it seems like they've been drinking the Spencer Krug koolaid; the song reminds me of "Paper Lace" by Swan Lake. Very melodic for Deerhoof.
So, the LMM and I tried leaving the house. She drove to the movie theater near our house, and we saw "True Grit." From now on, I want everyone to call me "Brewster Rugburn." I have the eye patch and everything.
(BTW: If I took off the eye patch, you could see my eye. But my eye, alas, could not see you. Unless you were a large very bright light.)
Apparently Al once said "if you can't explain what you are doing in plain English, you're probably doing something wrong", which I guess means the general theory of relativity is pure bullcrap.
Bob riffs off this to "If you can’t describe what your model says in plain English without provoking derisive laughter, it probably doesn’t say anything of value”, and says Macroeconomists should take heed.
KAAAAAHHHHHHNNNNNNNN!!!!
I must say though, that I've never thought it was hard to say what DSGE models were saying in plain English without getting laughs. I did find it so hard to say what textbook Keynesian models were doing with a straight face that I had to quit teaching intermediate macro.
Bob then returns to his main theme, an appreciation of all things Kahn:
"Many disgruntled air travelers remember him unfavorably as the chief architect of commercial airline industry deregulation. But as he was quick to remind critics, planes now fly with many fewer empty seats than they used to, resulting in much lower average fares, after adjusting for the sharp increases in operating costs that have occurred in the interim."
KAAAAAHHHHHNNNN!!!!!
Um, I'm pretty sure there was a lot more to airline deregulation than decreasing the number of empty seats on flights. There was entry, there were new routes, there was the opening of air travel to the middle class. In short the industry was transformed in a way that massively benefitted consumers.
I'm not sure why Bob is so conflicted that here in his homage to Al, he feels the need to take shots at Al's crowning achievement.
Bob then ends with a heartwarming story about how kind and beloved Al was:
"A story circulating at the time described an English professor’s complaint to him about the high salaries of economics professors. “Perhaps you should consider starting an English consulting firm,” he is said to have responded."
If I didn't know better, I'd think Bob didn't actually like Al very much.
Wow. Huge article in today's WSJ by Yale Law professor Amy Chua (of World on Fire "fame") called, "Why Chinese Mothers are Superior". Should have been titled "I am a raging, abusive, racist, a-hole".
It's terrific to read the whole thing. You think it can't get any worse and then it does.
Here's a lovely vignette involving her masochistic husband, Jed and daughter Lulu, that followed Lulu's inability to play a certain piece of music on the piano:
Jed took me aside. He told me to stop insulting Lulu—which I wasn't even doing, I was just motivating her—and that he didn't think threatening Lulu was helpful. Also, he said, maybe Lulu really just couldn't do the technique—perhaps she didn't have the coordination yet—had I considered that possibility?
"You just don't believe in her," I accused.
"That's ridiculous," Jed said scornfully. "Of course I do."
"Sophia could play the piece when she was this age."
"But Lulu and Sophia are different people," Jed pointed out.
"Oh no, not this," I said, rolling my eyes. "Everyone is special in their special own way," I mimicked sarcastically. "Even losers are special in their own special way. Well don't worry, you don't have to lift a finger. I'm willing to put in as long as it takes, and I'm happy to be the one hated. And you can be the one they adore because you make them pancakes and take them to Yankees games."
I rolled up my sleeves and went back to Lulu. I used every weapon and tactic I could think of. We worked right through dinner into the night, and I wouldn't let Lulu get up, not for water, not even to go to the bathroom.
Quantitative and empirical demonstration of the Matthew effect in a study of career longevity
Alexander Petersen, Woo-Sung Jung, Jae-Suk Yang & Eugene Stanley, Proceedings of the National Academy of Sciences, 4 January 2011, Pages 18-23
Abstract: The Matthew effect refers to the adage written some two-thousand years ago in the Gospel of St. Matthew: “For to all those who have, more will be given.” Even two millennia later, this idiom is used by sociologists to qualitatively describe the dynamics of individual progress and the interplay between status and reward. Quantitative studies of professional careers are traditionally limited by the difficulty in measuring progress and the lack of data on individual careers. However, in some professions, there are well-defined metrics that quantify career longevity, success, and prowess, which together contribute to the overall success rating for an individual employee. Here we demonstrate testable evidence of the age-old Matthew “rich get richer” effect, wherein the longevity and past success of an individual lead to a cumulative advantage in further developing his or her career. We develop an exactly solvable stochastic career progress model that quantitatively incorporates the Matthew effect and validate our model predictions for several competitive professions. We test our model on the careers of 400,000 scientists using data from six high-impact journals and further confirm our findings by testing the model on the careers of more than 20,000 athletes in four sports leagues. Our model highlights the importance of early career development, showing that many careers are stunted by the relative disadvantage associated with inexperience.
I think of this as a kind of path-dependence. Along the lines Adam Smith (WoN, Bk I, chapter 2) suggested:
The difference of natural talents in different men is, in reality, much less than we are aware of; and the very different genius which appears to distinguish men of different professions, when grown up to maturity, is not upon many occasions so much the cause, as the effect of the division of labour. The difference between the most dissimilar characters, between a philosopher and a common street porter, for example, seems to arise not so much from nature, as from habit, custom, and education. When they came into the world, and for the first six or eight years of their existence, they werea, perhaps,a very much alike, and neither their parents nor play–fellows could perceive any remarkable difference. About that age, or soon after, they come to be employed in very different occupations. The difference of talents comes then to be taken notice of, and widens by degrees, till at last the vanity of the philosopher is willing to acknowledge scarce any resemblance.
Both articles worth reading. If this be critique, give us more of it. Beam at least drills down a couple of levels, and correctly concludes (a) the Founders had real libertarian motives, in SOME ways, and (b) the modern Republicans couldn't see a real libertarian principle if someone wrapped it around their big porky necks.
According to the Economist, exactly 5 countries are forecasted to have a shrinking economy in 2011. Only two of them are PIIGS (Portugal & Greece). Two others are small islands (Barbados & Puerto Rico).
The other is Venezuela, who is forecasted to do worse than Spain, Iceland, Ireland, and Italy (among many many others).
I have been getting some angry emails from people who object to what I said in the David Lightman / McClatchy story about the new Congress. Here is what I said: "This is to make the tea party people happy. It's like a religious ceremony."
Anyone who reads this blog even occasionally knows I am a fan of the Constitution. The reason I think that the "reading ceremony" in Congress is idiotic is that I know for a fact the Republicans know they are LYING when they say they admire the Constitution. They have no intention of cutting spending, none.
Or maybe they don't know, and they are just idiots. Daniel Henninger explains the "perhaps they are idiots" position in today's WSJ quite nicely.
The Republicans are reading their little pocket Constitutions, and as soon as they get a chance they are going to increase the deficit dramatically. Because that is what Republicans do. You can't blame dogs for eating out of the garbage.
More trade is more good. Restricting trade is bad. It's not complicated. And even unilateral movements toward free trade are good. Reminds me of the way I introduce my talks on free trade: a matching exercise.
China ... USA
1. Which country has the largest amount of manufacturing, by value, in the world? 2. Which country lost the most manufacturing jobs, gross, between 1990 and 2005?
The answer to 2 is China, again by a lot. Think of it this way: Here is a Chinese manufacturing facility, in 1990... Here is a Chinese manufacturing facility in 2005... China lost tens of millions of manufacturing jobs. Just compare the two pictures above, and you know it is true. The automated facility can produce 100 times, or 1000 times, as much output, and do it with fewer workers. But only if trade is possible. Because as Adam Smith brilliantly noted, "The Division of Labor is Limited by the Extent of the Market."
The point is that all factories, all over the world, are "losing" jobs to productivity. Adam Smith called it "division of labor." So while China has increased manufacturing OUTPUT (though not as much as the US!), China is rapidly losing manurfacturing JOBS.
So, to be clear, total US manufacturing is NOT falling. It's going up. Yes, up. We are losing jobs, sure, because we are becoming more productive. Check Mark Perry's graph:
UPDATE: Yes, I recognize that the idea of "gross jobs" is nonsense. I don't disagree with the comments. But when US protectionists talk about "shipping jobs to China" that is exactly what they are referring to. I'll stop when that idiot Lou Dobbs stops talking that way.
Further, remember this: In the Stone Age, unemployment was zero. Our goal is to be wealthy, not employed. Employment is often a means to wealth, but it is not the same thing. As my man Alan A says, "jobs are a COST." Cool.
Quotes our longtime friend Caryl Rusbult, who was at UNC Chapel Hill for years (she was married to David Lowery, ex-editor of JOP and well-known political scientist).
The article actually does not do Caryl's theory justice. Caryl saw marriage as an institution that helped capture gains from exchange, and rewarded "investment." The NYTimes reporter is just genetically incapable of using a market metaphor in a positive way, and so ignored that part.
An end of year column from KPC friend "Thomas." A wide-ranging and fun column, I'd say.
I became a devout follower of Austrian economics starting in the late 90s, which, at the time, was on a par with joining NAMBLA. I must ensure that being a wingnut is not undermining my financial stability. As to why you might wish to keep reading I have several arguments. Whatever it is I am doing has worked remarkably well. In 31 years I had only one year in which my total wealth decreased in nominal dollars. (Peek ahead to Figure 3 if you wish.) In addition, any economist will tell you that when the free market fails a black market emerges. The blogs are the black market of information. Noted economist Russ Roberts once asserted that reading five blogs is probably better than going to an economics lecture. The blogs, in conjunction with a serious filter, protect you from those who traffic in financial products and misinformation. I ride the blogs pretty hard and am pretty good at distilling complexity down to the extracts of beets and carrots.
Donnie B picks up on the growing lefty-bedwetter meme about the inconvenient Constitution. A nice letter. (Nod to Angry Alex for pointing to this)
But the argument actually intrigues me, even on its own merits. Suppose you go with the EJ Dionne / Ezra Klein "Stop bringin' up old stuff!" view of the Constitution. That means it holds no essential truths, and has no moral force. I disagree, but suppose, for the sake of argument.
It is still a contract. A contract that would never have been signed unless the signatories thought that the contract represented a commitment. You don't have to believe that a contract is perfect to argue that it is binding. Here is what Mr. Dionne says: "...as Gordon Wood, the widely admired historian of the Revolutionary era has noted, we "can recognize the extraordinary character of the Founding Fathers while also knowing that those 18th-century political leaders were not outside history. . . . They were as enmeshed in historical circumstances as we are, they had no special divine insight into politics, and their thinking was certainly not free of passion, ignorance, and foolishness."
An examination of the Constitution that views it as something other than the books of Genesis or Leviticus would be good for the country."
Mr. Dionne appears to use the following argument as if it made sense:
A. The Constitution is not scripture, but rather is a set of "shrewd political compromises." B. Therefore, people on the left can simply ignore or distort provisions that they don't like.
I am willing to concede A, at least for the sake of argument. (Yes, my Burkean / Hayekian intuition warns me against changing things we don't understand, but let's go with this). But why oh why would B follow from A? The Constitution is a contract; you are bound by a signed and established contract unless you can elicit consent to change or ignore its provisions.
The Dionne / Klein argument is a non sequitur, revealing the appalling depth of the arrogance of the LBW ruling class. We have to pass the bill so we can all find out what is in it.
A Lagniappe: One can certainly argue that there IS no social contract, and the Constitution is NOT binding, because no one now living signed it. So those in the "Sovereign" or "Voluntaryist" movements can say they are NOT parties to the social contract. But that is not acceptable to Mr. Dionne, either. He wants a binding social contract, one that constrains all citizens to obey, but places no constraints on government. They are just making this up as they go along.
A flim-flam man turns philosophy professor only to be shocked by the company he now must keep. Well worth reading it all, here's a juicy excerpt:
"Bob, the professor business is even sleazier than the jewelry business. At least in the jewelry business we were honest about being fake. Plus, when I go to conferences, I've never seen such pretentiousness. These are the most precious people I've ever met."
"Come on, Clancy. Did you really think people were going to be any better in a university?"
"Um, kind of." Of course I did. "And it's not that they're not better. They're worse."
Can it really be better to make new bulbs, and destroy these without using them? How does that save energy? Can they be serious?
Answer: YES, if you understand that environmentalism has nothing to do with saving energy, and everything to do with religious ceremonies where cost is actually a signal of devotion. As soon as you start to think of environuts as religious zealots, it makes perfect sense.
(Nod to the Blonde, again. She just can't let these Heat Balls alone!)
"Well, it’s the absurdity of expressing it, the absurdity of commerce… making records is commerce and it’s about fooling yourself as a writer and a performer and fooling the audience into not thinking about it and accepting it. It’s like when you walk down the street, and you say, “look at that girl’s ass, it’s so great.” You’re ignoring also the fact that she farts and shits out of that ass."
What, these incandescent light bulbs? The ones outlawed by the EU ubernannies? Those aren't light bulbs at all! Those are small heating units that plug into an otherwise unused light bulb. Sure, they produce a small amount of light, but that's a bonus.
"University of Pennsylvania law professor David Skeel, writing in the Weekly Standard, suggests that Congress pass a law allowing states to go bankrupt. Skeel, a bankruptcy expert, notes that a Depression-era statute allows local governments to go into bankruptcy...A state bankruptcy law would not let creditors thrust a state into bankruptcy -- that would violate state sovereignty. But it would allow a state government going into bankruptcy to force a 'cramdown,' imposing a haircut on bondholders, and to rewrite its union contracts. The threat of bankruptcy would put a powerful weapon in the hands of governors and legislatures: They can tell their unions that they have to accept cuts now or face a much more dire fate in bankruptcy court." [Michael Barone, NRO Online]
Pelsmin's reason for sending it: "This is just the thing for the semi-immobile guy who needs to chase down his oxycodone with a frosty Bud Light." Yes, yes it is.
I want to go on record as being bullish on 2011 for the US economy. I want to predict average growth for the year of 4.2%.
Yes, de-leveraging is not over. Yes, housing probably has not hit bottom. But, my view is we are poised for a semi-robust expansion.
But I'm afraid to come out and say it.
Why?
Well I'm not proud to admit this but I'm afraid of the House Republicans and the crazy sh*t they will no doubt try and pull. Yes I know, checks and balances and all that, but they worry me.
If they go after the Fed, throw a lot of heat and light on rolling back HCR and the financial oversight bill, and try to shut down the government over the debt ceiling, we could be right back into economic doldrums.
Look, I am not a big fan of the Fed or of HCR as currently constituted, but my advice to the Republicans would be to wait until after 2012 when the economy should be much sounder and maybe you also have the Senate to try and make your move.
The biggest thing Washington could do right now to help the economy would be to take a 14 month vacation.
And, since my eye hurts too much to sleep, I have been up catching up on good blog posts. Like the ones at Popehat. So now my eye hurts AND I'm outraged. DUI is really tough, because it is like the war in Iraq: the right wants to do stupid shit, and the left is too big a bunch of pussweilers to stand up for the Constitution. Because half-wits like Ezra Klein have decided that talking about the Const is just bringin' up ol' stuff. And why you wanna bring up old stuff?
Separated at birth? Mungowitz and Nick Nolte... Lagniappe: The reason *I* look that way (Not sure what Nick's excuse was) is that I had this operation. With local anesthesia. Which means I got to watch (it's a 2 hour operation, by the way). If you want to see what it looks like from outside, check out this video.
It's amazing they can do that to an eye. It's even more amazing they did that to mine, and that I had to watch the whole thing. On the plus side: they prescribed oxycodone, the oxycontin plus other stuff pain medication. I was a little upset to learn that that was what they were going to prescribe, because they try to avoid it. It has to be clear that you are going to hurtin' before you get it. It does help, though. Gosh, have you ever looked at how your fingers bend? I mean really looked at your fingers. Whooooaaaaa.....
PS. One thing I really like about Latin American Spanish is the -azo. Take a soccer goal (gol). If it's spectacular, add the azo and call it a golazo! If Serge Ibaka busts open Josh Smith's pumpkin with a vicious elbow (codo)? That, people, is a codazo!
Sean Ehrlich, International Studies Quarterly, December 2010, Pages 1013-1033
Abstract:The embedded liberalism thesis, a major component of the trade policy literature in political science, argues that governments can build support for free trade by compensating economically those hurt by trade, usually with welfare or education policies. This strategy depends, though, onopposition to trade being driven by employment factors, such as job or income loss because of increased competition. The current fair trade movement raises many non-employment criticisms of trade such as concerns about the environment and labor standards but the literature tends to treat these concerns as traditional protectionism in disguise. This articleargues, instead, that for many, these concerns are sincere and that this presents a growing challenge to the compromise of embedded liberalism. The article demonstrates this by examining survey data in the United States and showing that those who support fair trade tend to have characteristics that are opposite those who support economic protection.
A clear problem with democracy. Idiots who are racist or homophobic get to decide employment and marriage policy. And idiots who have no idea how an economy works get to regulate the economy. Democracy is overrated.
I actually thought that Angus must be making up the thing about "old people should be ignored because they were retarded." After all, Arnold Kling is hardly a left-wing goober.
But the left-wing goobers are saying the same thing! Check this bon mot from the aggressively useless Ezra "History Begins With Me!" Klein:
He actually says that the reason no one should read the Constitution is that it is old, and no one can tell what it says.
To be fair, I'm sure he means that one has to read the "midrash" of Supreme Court decisions before you can know what the "torah" of the Constitution actually means. (At least, I hope he means that.)
But, consider the 2nd Amendment. Ten years ago I had lunch with a friend who teaches Con Law. I mentioned that the 2nd Amendment clearly creates a personal, individual right to have and bear arms. The only question is how much the state can regulate and limit the size and use of such weapons.
My "friend," with amazing condescension, suggested I should read some undergraduate books to learn what the Constitution really means. Clearly, given what the Court had said in Miller (for example) there is NO right to individual ownership. It doesn't really matter what I think the Constitution says, he told me in the patient tone of a parent lecturing a wayward and willfully ignorant child.
Well, my good friend Prof KM, given the recent decisions in Heller and in McDonald...HOW DO YOU LIKE ME NOW, SWEETIE! Maybe YOU should go read that old Constitution. It has some really cool parts.
Of course, some of it is very hard to understand, I admit. Take the first Amendment, where it says, "Congress shall make no law..." Opaque language, that, as Stephen Gutowski notes. Must mean that Congress can make pretty much any law it wants, right? As long as a majority approves, like in McCain-Feingold?
100 years ago, Ronald Coase was born. 20 years ago, I was privileged to write a book review of Ronald's book, THE FIRM, THE MARKET, AND THE LAW. Here is part of that review:
"The reason the collection works as a book is that Coase frankly recognizes that though his work (particularly "The Nature of the Firm" and "The Problem of Social Cost," Chapter Five) is often cited it is apparently little read or accepted. In fact, Coase seems frustrated at the misuse of his work, particularly regarding the apocryphal "Coase Theorem": The world of zero transaction costs has often been described as a Coasian world. Nothing could be further from the truth. It is the world of modern economic theory, one which I was hoping to persuade economists to leave . . . Economists [have] been engaged in an attempt to explain why there are divergences between private and social costs and what should be done about it, using a theory in which private and social costs were necessarily always equal. It is therefore hardly surprising that the conclusions reached were often incorrect.., their theoretical system did not take into account a factor which is essential of one wishes to analyze the effect of a change in the law on the allocation of resources. This missing factor is the existence of transactions costs. (pp. 174-175, red emphasis added.)
So Coase actually thought transactions costs could make social and private costs diverge. Does that mean Pigou was right? Well, yes, Pigou was certainly right, especially when he said:
It is not sufficient to contrast the imperfect adjustments of unfettered enterprise with the best adjustment that economists in their studies can imagine. For we cannot expect that any State authority will attain, or even wholeheartedly seek, that ideal. Such authorities are liable alike to ignorance, to sectional pressure, and to personal corruption by private interest. (1920; p. 296)
The point is that we should READ the classics, not just cite them. Especially when we cite them wrong. Both Coase and Pigou are much more subtle than the caricature they generally get in intermediate micro classes. Happy birthday, Dr. Coase.
I focus a lot of my historical reading on the first World War and on the 1930s. I think that people were really stupid back then. I take the Flynn Effect seriously, which suggests that the average IQ several generations back was what today would be considered to be mentally retarded. In my view, this helps to explain how cheerfully the nations went to war in1914. Yes, the war turned out to be worse than what they expected. But how were their expectations not influenced by the Civil War or the Franco-Prussian war?
--Arnold Kling
OMFG, people. World War I happened because world leaders 100 years or so ago were "mentally retarded"? Really?
REALLY?????
So going back another 50 years or so, Abraham Lincoln must have been the intellectual equivalent of a spider monkey?
Go another 100 years back from that. The founding fathers were the mental equivalents of dung beatles?
Or, saying things are bad has been very very good.
Item 1: Nouriel gives an interview on December 28th with CNBC saying housing prices can "only move down".
Item 2: Earlier this month, Nouriel bought a $5.5 million apartment in Manhattan! He got a $2.99 million dollar ARM (so I guess he made a $2.51 million down payment??)!
The Coase theorem, manners, and a variety of madcap exchanges like this:
A: I never liked having to maneuver around strange large dogs in tight offices in my suit
B: what was a dog doing in your suit?
I liked the whole thing. It's ALL good. Yes, I cheated to spend so much time on the computer. But I couldn't help it. I often took "Louis, King of Dogs" to the office in grad school. And Angus would get in some pretty good basketball-doghead-dribbling. Louie had a pretty solid upward head bounce, and was not smart enough to walk away.
"We've become a nation of wusses. The Chinese are kicking our butt in everything. If this was in China do you think the Chinese would have called off the game? People would have been marching down to the stadium, they would have walked and they would have been doing calculus on the way down."
Holy Moly!
I will say this though. If the Communist party wanted the game to go on, it would go on and the people would walk there if ordered to and would do calculus, or even the hokey pokey on the way if ordered to.
KPC is officially "short" on Ed Rendell AND China for 2011.
Christopher Mayer, Tomasz Piskorski & Alexei Tchistyi NBER Working Paper, December 2010
Abstract: This paper explores the practice of mortgage refinancing in a dynamic competitive lending model with risky borrowers and costly default. We show that prepayment penalties improve welfare by ensuring longer-term lending contracts, which prevents the mortgage pools from becoming disproportionately composed of the riskiest borrowers over time. Mortgages with prepayment penalties allow lenders to lower mortgage rates and extend credit to the least creditworthy, with the largest benefits going to the riskiest borrowers, who have the most incentive to refinance in response to positive credit shocks. Empirical evidence from more than 21,000 non-agency securitized fixed rate mortgages is consistent with the key predictions of our model. Our results suggest that regulations banning refinancing penalties might have the unintended consequence of restricting access to credit and raising rates for the least creditworthy borrowers.
It has been the maintained hypothesis here at KPC for some time that the PRIMARY burden of the new nanny regs on financial markets will be poor or risky borrowers. It's actually pretty obvious, when you think of it.
Gotta be tough for the young lady. Hayek is long dead, and she can't use ...well, let's call them battery-powered products. 'Cause no true Hayek-lover would accept artificial stimulus.
Competitive Markets Are the Enemy of Profits, So Wall Street Opposes Market Competition
Reputation, the SEC, and the requirements of SARBOX are extremely effective entry barriers. SARBOX doesn't apply to privately held companies, but no small company could hope to compete with the big companies.
"If Hertz sees much of its rental fleet lying idle, it will cut its prices to better compete with Avis and Enterprise. Chances are that Avis and Enterprise will respond in kind, and the result will be lower profits all around. On Wall Street, the price of various services has been fixed for decades. If Morgan Stanley issues stock in a new company, it charges the company a commission of around seven per cent. If Evercore or JPMorgan advises a corporation on making an acquisition, the standard fee is about two per cent of the purchase price. I asked TED why there is so little price competition. He concluded it was something of a mystery. 'It’s a commodity business,' he said. 'I can do what Goldman Sachs does. You can do what I can do. Nobody has a proprietary edge. And if you do have a proprietary edge you’ll only have it for a few weeks before somebody reverse engineers it.' After thinking it over, the best explanation TED could come up with was based on a theory of relativity: investment-banking fees are small compared with the size of the over-all transaction. 'You are a client, and you are going to do a five-billion-dollar deal,' he said. 'It’s the biggest deal you’ve ever done. It’s going to determine your future, and the future of your firm. Are you really going to fight about whether a certain fee is 2.5 per cent or 3.3 per cent? No. The old cliché we rely on is this: When you need surgery, do you go to the discount surgeon or to the one you trust and know, who charges more?'" [John Cassidy, New Yorker]
Now, you could say it would be hard for new firms to enter this market anyway. But our government makes it impossible.
Congratulations to the Mexican drug cartels, who've had a very good 2010. They now allegedly control 75% of neighboring Guatemala (with the deployment of only 800 operatives), and have muscled out the Colombians for the European cocaine distribution routes.
KPC is officially "long" on Mexican drug lords for 2011.
Mrs. Angus and I wait til just before Christmas and buy a live tree which we plant afterwards. Today was the day and we got an awesome Blue Atlas Cedar. Here's the before and after:
It's beginning to look at lot like Christmas at Chez Angus.
I decided to go with a different kind of top ten list this year:
1. Great music not found on many year-end lists.
Big Troubles: “Worry” If I had to pick one work as “album of the year” this would be it. Simply fantastic. “Bite yr Tongue”, “Georgia” & “Freudian Slips” are my current favorite songs from this album, but it is an absolute monster! You can stream the whole thing here, and buy it here.
Harlem: “Hippies”. Harlem blew me away with their debut album “Free Drugs” and “Hippies” is even better. Here's a video from the album:
No Joy: “Ghost Blonde” If it wasn't for Big Troubles, this would be my record of the year. Kevin Shields should be very proud. You can buy it here, and here's a video:
The National: “High Violet” I still can’t decide if I like this better than “Boxer”. I think “Boxer” is more consistently great, but the high points of “High Violet” are incandescent.
LCD Soundsystem: “This is Happening”. James Murphy outdoes himself. I loved “Sound of Silver” but have now grown to believe that “This is Happening” is even better. Not sure where Murphy can go from here.
Joanna Newsom: “Have one on me”. It’s a bit un-nerving how she keeps changing her voice, but this triple CD is a nice step forward for her.
3. Good music from old favorites
Clinic, Spoon, No Age, Teenage Fanclub, Wolf Parade, Phosphorescent & The Fall all put out very good, listenable albums. Just not their best work ever.
4. Biggest disappointments
I can’t put Arcade Fire as a disappointment; I expected them to stink it up and they did. So my two biggest disappointments are M.I.A.’s “Mia” and Sufjan Stevens’ “Age of Adz”. These are artists who’ve made some of my alltime favorite music and this year’s works are crap. Sufjan is a particularly troubling case; I guess he’s now “too good” for the kind of music he’s made in the past and wants to be a freakin’ composer or something.
5. Best 2010 discoveries of existing artists
Kurt Vile (discovered from “Eastbound & Down”). This guy is awesome! Highly recommended to buy his whole catalog and soak.
Radar Brothers (discovered by arriving unfashionably early to the Vaselines / Teenage Fanclub show in DC). The above advice also applies here.
6. Best live shows I saw in 2010
Dan Mangan / Wooden Birds
Radar Brothers / Vaselines / Teenage Fanclub.
7. Winter 2011 release I’m most looking forward to
Deerhoof: “Deerhoof vs. Evil”
8. Best re-issues
Orange Juice: “Coals to Newcastle”, and the double CD versions of Galaxie 500’s three albums.
9. Best rap/hip-hop (NB I am not an extremely qualified person here)
Earl Sweatshirt: “Earl Sweatshirt” All I can say about this is “wow”. Pretty amazing stuff.
10. Favorite artist on Twitter
Wayne Coyne of the Flaming Lips from right up the road in OKC. You should definitely follow him.
I have often joked that grandparents should strive to keep low achieving grandkids out of college because it can be very very bad for the grandparents' health, especially around exam times. I guess the poor seniors just can't take the stress of worrying about their progeny's academic progress.
Well, it turns out that the full extent of this insidious problem has been scientifically investigated, in a classic research paper entitled "The Dead Grandmother/Exam Syndrome and the Potential Downfall Of American Society" (ungated version available here).
Here is one of the many "shout it from the rooftops" results:
"The FDR (family death rate) is climbing at an accelerating rate. Extrapolation of this curve suggests that 100 years from now the FDR will stand at 644/100 students/exam. At that rate only the largest families would survive even the first semester of a student's college career."
People, it just never ends. Now a group in California is suing Mickey D's over their happy meals. It turns out that kids like them and get mad if mom says no. So mom is suing!!
I am not making this up.
Of course mom is not "just" a mom; she's an employee of a state funded vegetable advocacy group.
(We like the reindeer outfit for the BMW. And before you ask, Tanzi was off camera rolling in something disgusting, so nobody wanted to grab her and get her to sit down)
KPC has used its considerable influence to negotiate the following deals for its readers (just enter KPCROCKS as the promotional code when doing online check out):
I have been trying to lay low. In fact, flat. MAG brought me over a massage table, which is like a sturdy cot, but with a frame with a hole in the middle so I can lie face down and read through the hole.
The first procedure was 8 days ago; the second procedure was Monday, 5 days ago. There is an enormous bubble in my left eye (well, a small bubble, but it's all I can see). The retina appears to have reattached in a physical sense. The problem is that the nerves all need to mate up again, and of course only some of them will. So vision from left eye will always be dim, wrinkled, and unfocused. At BEST.
The primary variable that affects the improvement of vision over the next month is lying face down and motionless. The larger the proportion of time I can do that, the more likely I get back at least some vision in the left eye. (Have always slept on stomach, so that's a help). Anyway, all I can do is look down. And dr says to stay off computer. Eye movements are too rapid, and too large.
So, I read. May I recommend:
Chernow's GEORGE WASHINGTON: A Life Manchester's THE ARMS OF KRUPP Strasser and Becklund's SWOOSH: The Story of Nike
Three huge books. Only the Chernow one is remotely new. But all well done. Finished GEORGE and SWOOSH, just started KRUPP. Read it years ago, but thought I would give it another go.
"Bargaining. This stage usually begins as an earnest attempt to buckle down and grade. The instructor might say, “If I grade five papers, I can watch one episode of House,” or, “For every page I grade, I get to eat a piece of candy.” This process starts well, but as the instructor progresses the amount of work required to achieve the reward generally becomes smaller and smaller..."
You'll have to excuse me now, grades are due in on Monday so I'm off to buy a big bag of Reese's cups!
As my good friend Doug Nelson likes to say, "you have to be a very highly trained economist to come to that conclusion".
Now maybe the Fed is playing the long con and deliberately misinformed the public about the true purpose of their policy. Could you see the Ben Bernank announcing "We want to raise inflation expectations and long term interest rates"?
I think that they actually expected to lower long rates and the episode should be viewed as an example of the idea that the further out in the term structure the Fed aims, the less control they actually have over rates.
I guess there are two kinds of people in this world; those who think the Fed is always wrong and those who think the Fed is always right.
I guess I am the last person with an internet connection to see this video.
Yes he's an entertaining and enthusiastic guy. Yes, the rise of China and India is amazing and fantastic. Yes there is a large "middle class" of countries.
But people, have you looked at the horizontal axis of his chart? The distance between $400 and $4000 is the same as the distance between $4000 and $40000.
That is incredibly misleading.
Properly plotted on a linear scale, it would be clear that there was way way way LESS income inequality in 1810 or that magic year of 1948 than there is in 2010.
We are NOT living in an "age of convergence" with respect to per-capita incomes.
It is NOT only Sub-Saharan African countries stuck at the bottom.
Latin America is NOT catching up to the USA.
The whole thing is pretty much horse hockey.
Then the press grabs ahold and starts to exaggerate the exaggerations. Here's David Brooks:
"Then, over the last few decades, the social structure of the world changes. The Asian and Latin American countries begin to catch up. With the exception of the African nations, living standards start to converge. Now most countries are clumped toward the top end of the chart..."
Just keep repeating this to yourself people: "The left half of the chart covers a range of $3,600, but the right half of the chart covers a range of $36,000.
Rahm Emanuel as Coriolanus" "The price is to ask it kindly"
A bizarre modern remake of Coriolanus was enacted in a basement hearing room in Chicago yesterday. (nod to Anonyman for the NTY link)
Listening to the questions, and the tone of the answers, reminded me of this speech by Coriolanus, after he agreed to submit to the questions of the idiot voters of Rome. Coriolanus has asked one voter what is the "price" of the office he seeks; the voter tartly responds that "the price is to ask it kindly."
Later, Coriolanus says this:
Better it is to die, better to starve, Than crave the hire which first we do deserve. Why in this woolvish toge should I stand here, To beg of Hob and Dick, that do appear, Their needless vouches?
Coriolanus thinks he deserves the office; how dare the voters make him beg for it? Sorry, Rahm, democracy sucks.
(An aside: I was surprised the article author called the Chicago train the "L", because I always thought it was the "El", short for "elevated train." But the city of Chicago itself has gone with "L" trains. Who knew?)
Nick "The Jacket" Gillespie Prepares Balanced Budget
This is cute, for several reasons.
First, the content is good, and the video works just based on the premise.
But for the cognescenti, all of whom know that Nick's "nickname" (sorry) is "The Jacket", the fact that he is wearing the leather jacket UNDER the apron is terrific. Nick is 90% in on the joke, but the fact is that he DOES always wear "the jacket."
Angry Alex asks whether Nick EVER takes off the jacket. My understanding is that, like the Bandit's hat, he takes it off for one thing, and one thing only.
City come through with the money and the bases We let 'em know we bout that cake straight up the case uh We independent owners, some mistake us for whores I'm sayin‘, why spend mine when I can spend yours Disagree? Well that's you and I’m sorry Imma keep playing these cats out like Atari
LA Clippers owner Donald Sterling is many things, slumlord, racist, sexual harasser, astute business man (he bought the Clips for 12.5 mil, now worth over 200 mil).
It’s not uncommon to hear Los Angeles Clippers fans heckle Baron Davis. Of late, however, the jeers directed at the team’s struggling point guard are coming from a far more surprising source: The man paying Davis, Clippers owner Donald Sterling.
Sterling has expressed his displeasure about Davis’ play by taunting him from his courtside seat at Clippers’ home games, several sources told Yahoo! Sports. Among Sterling’s verbal barbs:
– “Why are you in the game?”
– “Why did you take that shot?”
– “You’re out of shape!”
While Sterling has also taunted other Clippers players since the middle of last season, none have received it worse than Davis, the sources said.
Why?
Sterling “started getting a lot more vocal during the second half of last season,” one team source said. “He never had done that before at games. Baron’s his pet project. He absolutely hates Baron. He wants to get his money back.”
Now it's true that B-Dizzle has been a big fizzle for the Clips, but heckling him during the game seems like a move designed to make sure he won't get any better.
Appalling American Propadanda Video, With Donald Duck
I laughed at first, but it becomes increasingly racist and disturbing. Still, an interesting piece of history...Donald Duck? Really? Plus, the song is catchy. But then so is syphillis.
Harry Reid and the Senate democrats think they know what President O and the Republicans evidently don't: how to lure the House Dems into supporting the tax deal.
And their answer is........
PORK!!!!
A few billion here and there for ethanol subsidies and wind and solar subsidies is all they figure it'll take to get the bill past the opposition of the Democratic Caucus in the House.
I bet it works, but I'm surprised they didn't throw in a lil bit more high speed rail money just to clinch it.
Of all the weird stuff surrounding the tax deal (Bill Clinton and President O, mortal enemies, now together??), I think the weirdest of all is the idea that cutting the payroll tax imperils Social Security.
Let's sort this one out right here, OK people?
First, at the meta-level, money is fungible. It's very difficult, if not impossible, to earmark funds even when you try. This is what makes humanitarian aid to oppressive dictatorships such a morally murky area.
Second and most relevant though, is the fact that payroll taxes are NOT dedicated only to paying social security benefits. That's right, not only are your personal contributions NOT saved to fund your social security benefits, aggregate annual payroll taxes are not used explicitly to fund social security. The money is spent, period. On what? it's really impossible to say (see the above paragraph).
Yes, I know, Al Gore told us there's a lockbox with our "contributions" safe inside.
People, it's a lockbox with a 100% skim rate (i.e. not a lockbox at all)! Get Al to let you look inside; that sumbich is empty!
In truth, there really isn't much "imperiling" social security; it's the stream of future health spending obligations that are unsustainable. A combination phasing in partial means testing for benefits, and phasing in a slight rise in eligibility age could easily solve any "problems" that might be conjured up.
But the cut in the payroll tax doesn't "imperil" social security any more than it "imperils" the defense budget or the Pell grant budget.
If benefits aren't altered, then the day that payroll tax revenues fall below benefit payouts, what will happen? Nothing! Benefits will be paid out of general revenues just like they've effectively always been paid.
While tax cuts may imperil future spending (that's the essence of "starve the beast", no?), there is no real link between the type of tax being cut and the type of spending being imperiled.
Angus has been called a "libertarian clown," and Mungowitz has been called a "vanity candidate." And
those are our FRIENDS. Still, here they are....
The Cheesiest!!
