Saturday, May 29, 2010

Libertarian National Convention

Neanderbill and I joined the NC state delegation to the Libertarian National Convention.

Here is a brief video of our arrival at the bar last night, greeting our fellow Libertarian Party members.

[Ponda Baba gives Neanderbill a rough shove and starts yelling at NB in an alien language which NB doesn't understand]
Dr. Evazan: [explaining] He doesn't like you.
NB: Sorry.
Dr. Evazan: [grabbing NB] *I* don't like you either. You just watch yourself. We're wanted men. I have petitioned for ballot access in twelve states.
NB: I'll be careful.
Dr. Evazan: You'll be de-credentialed!
Obi-Wan: [intervening] This gigantic one's not worth the effort. Now, let me get you something.
[Dr. Evazan shoves NB across the room and pulls out a quorum call]
Bartender: No quorum calls! No quorum calls!
[Obi-Wan pulls out his microphone, severing Ponda Baba's eardrum with a point of parliamentary inquiry]

Okay, no, seriously, here are some pix. Here is the view from the floor of the big screens up front. And here is David Nolan (yes, the chart guy, and founder of the LP) making a point. Oh, and don't forget StarChild. StarChild is the best.

Obituary for Neo-Conservativism

C. Bradley Thompson has an interesting new book.

Wow! News and Observer comes through...

Quite an editorial, in the News and Observer.

Check it out.

Inappropriate Anger Pays Dividends

If inappropriate anger explains success, that may be a big part of why Angus and I rule the world.

Cultural Variance in the Interpersonal Effects of Anger in Negotiations

Hajo Adam, Aiwa Shirako & William Maddux
Psychological Science, forthcoming

Abstract: The current research is the first investigation of how the effects of expressing discrete emotions in negotiations vary across cultures. In a hypothetical negotiation scenario (Study 1) and a computer-mediated negotiation simulation (Study 2), expressing anger (relative to not expressing anger) elicited larger concessions from European American negotiators, but smaller concessions from Asian and Asian American negotiators. A third study provided evidence that this effect is due to different cultural norms about the appropriateness of anger expressions in negotiations: When we explicitly manipulated anger expressions to be appropriate, Asian and Asian American negotiators made larger concessions to the angry opponent, and their concessions were as large as was typical for European American negotiators; when we explicitly manipulated anger expressions to be inappropriate, European American negotiators made smaller concessions to the angry opponent, and their concessions were as small as was typical for Asian and Asian American negotiators. Implications for current understanding of culture, emotions, and negotiations are discussed.

(nod to Kevin L)

Friday, May 28, 2010

Media Surprise

The Causal Impact of Media in Financial Markets

Joseph Engelberg & Christopher Parsons
University of North Carolina Working Paper, October 2009

It is challenging to disentangle the causal impact of media reporting from the impact of the information being reported. We solve this problem by comparing the behaviors of investors with access to different media coverage of the same information event. First, we use zip codes to identify 19 mutually exclusive trading regions, corresponding to 19 large U.S. cities and local newspapers (e.g., the Houston Chronicle). For all earnings announcements of S&P 500 Index firms, we find that local media coverage strongly predicts local trading, after controlling for characteristics of the earnings surprise, firm, local investors, and reporting newspaper(s). Reverse causation does not explain our findings. The local coverage-local trading effect: 1) holds for firms unlikely to be of local interest (e.g., remotely located, sparsely held by local investors) and 2) disappears entirely during extreme weather events, which leaves media content unchanged, but disrupts transmission to investors. The evidence supports the idea that media -- apart from the information they transmit -- affect investor behavior.

This is a little surprising to me. Though people watch shows about investing, so they must USE that stuff, even though it has no (and can't possibly have) any useful information.

(nod to Kevin L)

Darwin and the current account?

Sexual competition is a wonderful thing. Just ask any bird of paradise you happen to meet.

Now, in a new NBER working paper (gated version here), Du and Wei argue that it can have aggregate macro consequences as well:

"Large savings and current account surpluses by China and other countries are said to be a contributor to the global current account imbalances and possibly to the recent global financial crisis. This paper proposes a theory of excess savings based on a major, albeit insufficiently recognized by macroeconomists, transformation in many of these societies, namely, a steady increase in the surplus of men relative to women. We construct an OLG model with two sexes and a desire to marry. We show conditions under which an intensified competition in the marriage market can induce men to raise their savings rate, and produce a rise in the aggregate savings and current account surplus. This effect is economically significant if the biological desire to have a partner of the opposite sex is strong. A calibration of the model suggests that this factor could generate economically significant current account responses, or more than 1/2 of the actual current account imbalances observed in the data"

So there you have it people, rampant heterosexuality helped cause the crisis.


This paper certainly has some interesting policy implications, no?

Thursday, May 27, 2010

Oh Noes!

I got a Mac in the office now. It's a bit too much fun....

Tony, I promise I'll get that paper written up real soon!

How not to be a professional athlete

Here is a great "your doin' it wrong" from alleged American tennis pro Sam Querry:

Q. So do you feel like going in you're not in the frame of mind, or does it happen right in the middle of the fight?

SAM QUERREY: I think it happens in the middle. I think if you ask my coach, David, he might say otherwise. When I lost that second set tiebreaker and got broken in the first game, I was done. I wanted to be off the court.
I started thinking about leaving and pulling out of the doubles and how much I wanted to go home, how much I wasn't enjoying.
You're never gonna win a match if you're just being negative. I'm only hurting myself.

Q. Isn't that the definition of a professional, that you don't despair so fully as the match progresses, that you somehow control your feelings?

SAM QUERREY: Yeah, I need to work on that. I've not been a professional the last, you know, on and off for the last few months. You know, you're out there facing one opponent. I don't want to face the opponent and myself.
You know, I just need to be better than today, in this case, it was Robby. It's someone different every week. But I don't want to be fighting myself out there and also fighting the opponent.

Q. Yet, Sam, you've had some good results on clay. You won Belgrade, won Houston. Are you fighting sort of a Jeckyll/Hyde part of yourself here?

SAM QUERREY: A little bit. Those are 250s, and they're great. I love you know, a tournament win is a tournament win. A final is great. It builds my confidence, but I won Belgrade and my ranking didn't move. I'm kind of past that point right now. Those 250s do nothing for me ranking wise. It's all about the Masters Series and the Grand Slams.
That's where I just have not been playing well. You know, I just need to mentally get it together in my head. I need to enjoy myself out there. I need to enjoy playing. You know, if a guy has a breakpoint against me, I should know, Hey, I've got one of the biggest serves out there. Let's see you win this point off me.
But like I said, I just tank some points.


Full interview is here.

Machine Trading Good?

At a minimum, not bad.

The problem is that many people think stuff they don't understand must be bad. Of course, they still watch their plasma tv. Somehow, not understanding THAT must be okay.

Does Algorithmic Trading Improve Liquidity?

Terrence Hendershott, Charles Jones & Albert Menkveld
Journal of Finance, forthcoming

Abstract: Algorithmic trading has sharply increased over the past decade. Does it improve market quality, and should it be encouraged? We provide the first analysis of this question. The NYSE automated quote dissemination in 2003, and we use this change in market structure that increases algorithmic trading as an exogenous instrument to measure the causal effect of algorithmic trading on liquidity. For large stocks in particular, algorithmic trading narrows spreads, reduces adverse selection, and reduces trade-related price discovery. The findings indicate that algorithmic trading improves liquidity and enhances the informativeness of quotes.

(Nod to Kevin L)

Wednesday, May 26, 2010

When did Diego Maradona join Van Halen?

Is he the new new lead singer or something?

I can only assume that he is now in the group after looking at his demands for hotel services at the upcoming football World Cup in South Africa.

My favorite items are:

(A) 2 "e-bidet" toilets for his personal use, with heated seats, a blow dryer, and double fountains.

(B) 24 hour ice cream.

Argentina have the best player in the world (Messi), but I don't think they will get out of the first round with this gentleman leading them.

I was carried to Ohio in a swarm of bees

Whenever a favorite band of mine makes a move to a more "upscale" record label, I get scared.

However, the National have more than survived their move to 4AD. "High Violet" is a great record.

As always, the drumming and vocals are the most distinctive parts of the record, and while there is a little bit of 4AD-ish "fussiness" to the record, it is really fantastic. This is a highly skilled band, I guess at their peak.

When I first put the CD on, it brought Mrs. Angus right into the music room where she plopped herself down beside me and didn't leave until the album ended (she usually "listens" to music on the move).

For my part, I kept updating which song was my favorite and the music went by. High Violet hangs together really well as a cohesive album.

Highly recommended.

Don't Say "Bless You!" in Chapel Hill

Whoops! Forgot the "favorite past posts" this week.

So here it is, from November 2004. In which a Chapel Hillian is offended by my car.
TeeJaw conjures Joe Friday and Colonel Potter to discuss Obamacare.


Tuesday, May 25, 2010

You have to enforce the law

Even if you agree with the protesters, you have to enforce the law.

This is a bit scary...

(Nod and thanks to Wayne Rogers, for the tip)

Idiot Conservatives on Parade

The last two weeks has brought an avalanche, a deluge, a... well, a lot, of embarrassment for conservatives in terms of public relations. IF they were capable of embarrassment, or self-reflection, or introspection.

One bozo stole large sections of BHO's 2004 convention speech.

Another "family values" candidate, who values families so much that he has TWO of them, was selected by the GOP to run for the House.

The biggest idiot of all, IMHO, a pretty extreme family values guy, who actually hired his long-time mistress to (I'm not making this up) help film a video about the importance of family values. Don't want her to feel left out, right?

Earlier in the month, this fool was caught with a "RentBoy." Now, it's certainly all right with me if somebody wants to pay for sex. And it's true that the RentBoy looks quite hot. But you can't persecute gays with a Torquemada-like fervor, and THEN get caught with "Lucien". As Jon Stewart pointed out, RentBoy didn't even help with the luggage! It's hard to shock the Miami papers, but...

Jon Stewart does some fine television. Rekers story just after 7:30...

Anyway, the most important "family value" ought to be to respect other peoples' choices about their family, and to stop trying to RUN EVERYONE ELSE'S LIVES.

You right wing family values people: shut up, if you can't even keep your OWN families according to your own (admittedly puritanical) standards.

(Nod to Anonyman, who amazingly sent me every one of the above stories)

UPDATE: Another snippet (again from Anonyman) on the GOP right here in NC. The GOP is actually trying to repudiate this candidate, even if it means they lose the seat. Here is the guy's web site....Here's a picture, from Salon. It may have been photoshopped, but I think he may be looking at us... or not.

I'm Feeling Moody

Nice. Very nice. From Blue Matter:

Markets play a simple yet crucial role: they price (or 'rate') assets, so as to ensure societal resources are allocated efficiently.

Markets do this better than any other institution yet devised because people need to put their money where their mouth is; it is not enough to say 'I think Greece will default' - if you are going to have an influence on the price, you have to be willing to take the risk of losing money if your opinion turns out to be wrong, and you would only do that if you have confidence in your information and analysis. That way, the price of different assets, including sovereign debt, is determined by the people with the best information (or, as is the case when it comes to extremely deep and liquid markets such as sovereign debt, the best ability to process the information that is freely available to all).

So, it is a serious perversion of this basic principle when the credit ratings agencies spend 60,000 dollars a year (that's the annual wage of a junior analyst) on analyzing Greek debt while investing exactly $0 on it, yet the effect they have on the price of that debt is equivalent to their controlling billions in funds. What the hell does it mean to 'rate debt'? Isn't this what the market is supposed to be doing by setting the price?

I think there IS an answer to the question: the "skin" a ratings agency has in the game is its repuation. Underwriters' Laboratories, or Consumer Reports, can only survive if their ratings carry information. Information is a complex good, but if one person has information it is hard to sell without revealing the information. Imagine:

A: Is your advice on which blender to buy good?

B: Yes, I have excellent private information about blenders. I have tested hundreds of them.

A: Okay, prove it, before I buy.

B: All right, buy XXX and YYY, because of [reveals private information about blenders]

A: That's stupid! I'm not paying! [OR} Great info, thanks! I'm not paying!

Either way, not paying for a straight up transfer of information. So you get specialized firms, which can (a) charge subscriptions and (b) develop a reputation as a depreciable capital asset, a hostage against lying.

This only works because information about a blender, a car, or a movie, is not really very valuable. So a ratings agency can make sense by obtaining the information and selling it for a small price, like a subscription to CONSUMER REPORTS magazine, where they could never sell it piece rate.

But information on a bond? Or on the likelihood of default on Greek sovereign debt? Why would we think that a rating agency would tell us more than the price of the asset, in elite level financial markets? Good one, datacharmer!

Crime Rates Fall

Violent crime fell significantly last year in cities across the U.S., according to preliminary federal statistics, challenging the widely held belief that recessions drive up crime rates. The incidence of violent crimes such as murder, rape and aggravated assault was down 5.5% from 2008, and 6.9% in big cities. It fell 2.4% in long-troubled Detroit and plunged 16.6% in Phoenix, despite a perception of rising crime that has fueled an immigration backlash. The early figures, from the Federal Bureau of Investigation, indicate a third straight year of decreases, along with a sharply accelerating rate of decline. WSJ, Evan Perez.

bu...bu...but that can't be right? We all KNOW that crime rates are rising sharply, because of all those dirty immigrants.

Right? Wait, "Evan PEREZ." He's one of them eel-eagle immy-grants, right? So the story is made up.

Whoops. Guess not. Even an Anglo like "Charlie Savage" is writing this story, for the Times.

Darn it. That whole "immigrants are dirty criminals" was such a good story, too. Until the inconvenient facts got in the way.

Some facts: Markets like predictability, Politicians like chaos

Interesting and useful article, on world investment climate.

Two truths:

1. Markets like predictability. What tax system is best? Whatever one we have, if we keep it and are sure it won't change. What exchange rate is best? The current one, whatever it is. And so on.

2. Politicians crave chaos. What tax system is best? The one I am "reforming" to achieve. What exchange rate is best? I can't tell you, because central bank data are secret, but you'll see. What new policies will help the economy, save the poor, and improve health care? Just TRY to guess what I'm thinking now! Uncertainty is the preferred habitat of politicians and speculators. The politicians are the predators, and the speculators are carrion birds and hyenas that follow the predators around. Amazingly, after investment is destroyed, the politicians actually have the eggs to blame the speculators. Impressive, that the lion would blame the hyena, just because the hyena happens to be seen chewing on the deer the lion killed.

In a stable system, politicians are almost irrelevant. No one is afraid, things are getting better, and there is lots of investment. In an unstable system, we all hang on every word from our "leaders."

The Great Depression was caused by bad monetary policy, and an over activist response by Hoover. (Yep, I said Hoover. Look it up. He pressured the Fed to cut money supply, and worked behind the scenes to raise prices and force financial enterprises to "capitalize" losses. The "do nothing" description is a myth.)

Then Roosevelt, a political genius, realized that the chaos Hoover had created could be used to the advantage of the Democrats and their crony capitalist allies. So Roosevelt consciously choose taxes, pricing regulations, and make-work projects that would create a continuing crisis. (Read Amity Shlaes' fantastic book, THE FORGOTTEN MAN, for a detailed historical account).

The only reason we got out of the Great Depression was that anticipation of WWII made Roosevelt realize that chaos was bad for production and investment. And in a war, everybody listens to politicians anyway, so he was able to end the artificial domestic crisis in favor of a real international crisis. Roosevelt clearly called off the dogs in 1939 and 1940, as you can see from memos telling investors and manufacturers in plain language that they were now free to invest and make things without fear of government attacks.

Like Roosevelt, President Obama is a man of excellent political instincts and zero understanding of markets and the causes of prosperity. We are entering another stage of artificial continuing crisis, and it could last for years. Higher business taxes, a transactions tax, new regulations of finance, new federal ownership of manufacturing in automobiles, steel, and other industries. Anything to make investment returns less predictable, and preserve the power of the government.

You can pay me now, AND you can pay me later

States borrowing off the books? It appears so.

Most states have to run a balanced budget, by state constitution or by statute. But these "emergency" loans from Uncle Barack never have to appear on the state budget. Here is the list of states and borrowings:

Alabama $ 283 million
Arkansas 330 million
California 6.9 billion
Colorado 253 million
Connecticut 498 million
Delaware 12 million
Florida 1.6 billion
Georgia 416 million
Idaho 202 million
Illinois 2.2 billion
Indiana 1.7 billion
Kansas 88 million
Kentucky 795 million
Maryland 133 million
Mass. 387 million
Michigan 3.9 billion
Minnesota 477 million
Missouri 722 million
Nevada 397 million
New Jersey 1.7 billion
New York 3.2 billion
N.C. 2.1 billion
Ohio 2.3 billion
Penn. 3.0 billion
R.I. 225 million
S.C. 886 million
S.D. 24 million
Tennessee 21 million
Texas 1.0 billion
Vermont 33 million
Virginia 346 million
Virgin Islands 13 million
Wisconsin 1.4 billion
Total $37.8 billion

For North Carolina, that's about $210 per person in borrowing. Not very much, perhaps. But that's an additional $400 per person who is actually working and paying federal income taxes. And this is DEBT, not new taxes. How in the world can anyone think that borrowing on the credit of the US, and giving the money to the states, is a good idea? You hear this a lot: "Our state taxpayers can't afford this, so we are going to seek Federal money." IT'S ALL THE SAME MONEY. If you take money from my federal taxes, and give it back to me as a state benefit, there is no net benefit, and nothing of value is created.

But if you BORROW on Federal credit, and give the money to the states, it appears to be free money. Politicians can claim credit for it, and it won't have to be repaid until later. This is exactly the strategy that has worked so well in Greece, for example.

To be fair, this new off-the-books state borrowing appears to be something else: In the long run, this debt will take money from some people, in some states, who are dumb enough still to have jobs. And give that money to other people, in other states, who have figured out that it's cheaper to get free money than to try to earn a living by having a job.

(nod to Doug C, and the Economic Policy Journal)

Get a Job!

Get a job and keep it! High school employment and adult wealth accumulation

Matthew Painter, Research in Social Stratification and Mobility, June 2010, Pages 233-249

Abstract: Wealth inequality receives substantial scholarly attention, but mounting evidence suggests that childhood and adolescent traits and experiences contribute to financial disparities in the United States. This study examines the relationship between adolescent labor force participation and adult wealth accumulation. I argue that employed high school students gain practical life skills, abilities, and knowledge from work experience and business exposure that shape investment decisions and affect overall net worth. I use the National Longitudinal Survey of Youth, 1979 cohort, to empirically explore this idea. This study extends the wealth literature by
identifying adolescent employment as an important mechanism that improves adult net worth and financial well-being.

Plausible, but it may confuse cause and effect. If you get a job in high school, you are likely a bit more ambitious. Those jobs are NOT fun (not even if you are "Welder / Union Steward Angus"), and anyone who sticks it out is pretty tough, and willing to work hard.

Still, it is likely to staying with a job teaches you to be more hard-working, also.

(Nod to Kevin L)

Monday, May 24, 2010

Barter and Exchange Leads to Trucks

Interesting article. The reason that humans started to outpace Neanderthals is... exchange, and division of labor.

Nod to Angry Alex

P-Krug Gets Schooled

Tyler comes up really, really big here.

I particularly like point #3, both parts A and B. To paraphrase:

A. Offshore drilling WAS regulated. Why isn't the failure an indictment of regulation?

B. The standard public choice critique is certainly not that markets are perfect. It is that government agencies are subject to problems of information acquisition, capture by industry, and desire for increased revenue. I have almost never heard a libertarian say that markets perform perfectly. The core of the free market position is that government agencies can be counted on to perform less well than P-Krug imagines.

In short, you can't criticize the model of perfect competition unless you are also willing to abandon the model of perfect government.

As usual, and as has been argued here before, LvM said it best:

Scarcely anyone interests himself in social problems without being led to do so by the desire to see reforms enacted. In almost all cases, before anyone begins to study the science, he has already decided on definite reforms that he wants to put through. Only a few have the strength to accept the knowledge that these reforms are impracticable and to draw all the inferences from it. Most men endure the sacrifice of the intellect more easily than the sacrifice of their daydreams. They cannot bear that their utopias should run aground on the unalterable necessities of human existence. What they yearn for is another reality different from the one given in this world...They wish to be free of a universe of whose order they do not approve.

(Ludwig von Mises, Epistemological Problems of Economics)

P-Krug is a smart guy. But he has been whoring his intellect in service of his daydreams for a decade now.

UPDATE: I have to add this, from a comment by David--

Krugman's first foray into this was to argue that the oil spill was proof that liability didn't work. In other words, we have a disaster in a heavily-regulated industry with liability caps, and we conclude from that that liability doesn't work.


UPDATE: Related post.... Nicely done, sir. Thanks for the tip in comments.

Underwear, and Rowing

Went to the regatta in Tampa, for the YYM's rowing team.

I should note that the Mungowi have a custom. When we travel, the LMM brings three large suitcases, but forgets something, something important. Famously, when we were travelling to Fundman's wedding, with Neanderbill she forgot (wait for it) HER DRESS. So we were flopping about like fish, searching malls. That story has been told, before.

This time? Underwear. She didn't bring any underwear. (I'm playing this straight, not going to any of the obvious places I might go.)

(And I should note that the lovely Ms. Angus likewise once arrived in NC without undies (except the ones she was WEARING, I hasten to add.) So the Angii and I went to a Kohl's or something, and there in the ladies underwear aisle, a place I had not been before, we saw a very heavily veiled and robed Muslim woman, completely covered, shopping. She was shopping for some amazingly racy thongs and lacy little nothings. Holding up those little g-string looking undies to the light, while she was totally hooded in heavy black cloth. Strange. Anyway, Ms. Angus got some sensible American made-in-Mexico underwear, and we were off.)

So I had to find a Tar-shay, or something like that, and buy the LMM some undergarments. I did find a Target, and this time in the ladies undies aisle there were two elderly women, Brits from their accents, arguing fiercely about whether the double panels in the enormous granny style, come-up-to-your-neck, panties would "control spotting." EEEEWWWWWW! They were loud, and pulling back and forth and holding up the crotch panels to the light. (This, ladies, is why men don't like to buy that sort of stuff. One elderly Brit-women-arguing-about-spotting wipes out at least five Muslim-woman-holding-up-thongs experiences.)

Anyway, all is well, and the LMM no longer has to travel commando. (Or "true Scotsman"). But as soon as we get to the regatta site, we see ....this! Nice!

The regatta site is huge, and crowded. It looked like this, for more than a mile, solid.

Hard to see the actual races, out on the lake. But the YYM rows in a 4-boat, like this one:

Back at the airport, spirits were high. The YYM was dressed all in black, with sunglasses. He's in the middle.

One of our boats, the lightweight 2 men, made it to Nationals, by coming in 2nd in the finals and winning a silver medal. (Our team is Triangle Rowing Club, btw). Yay! Very exciting.

Sunday, May 23, 2010

YYM at the beach....

If you haven't seen the YYM for a while, that's him on the right.

NC Beaches.... nice.

Turn out the lights, the party's over

In my younger days, I tried to publish a paper entitled "How Dead is the Solow Model?"
Let me reproduce in full the abstract to that paper below:

"Stone dead."

Needless to say, I got nowhere, and it wasn't until Mrs. Angus came on board that a much revised, improved and toned down version got published in the Journal of Development Economics.

Undaunted, I rise this lovely morning to proclaim that Keynesian economics, despite recent wide spread reports of its revival, is indeed, "Stone dead".

People, we have seen a literal mountain of government spending around the globe. And what do we have to show for it? An avalanche of unsustainable deficits and sovereign debt levels.

In the long run, it is true that we are all dead. But meanwhile, until that blessed day arrives, we are all broke!

The smartest thing many countries could do right now is the old double D; Default and Devalue. However, the likely result will be a "lost decade" of immiserizing policies undertaken at the behest of Keynes' most horrible creation, the IMF.