Friday, November 30, 2007
I opined similarly, earlier this week. But hey, it's not easy to top Tyler!
In the wake of subprime losses we are hearing claims that the United States should have regulated its banks more. It is worth pointing out that the U.S. has some of the most heavily regulated banks in the world:
1. The Bank Holding Company Act of 1940, still in force, prevents bank from owning non-financial corporations.
2. The previous Glass-Steagall Act (repealed in 1999) discouraged banks from diversifying out of home mortgages.
3. The Office of the Comptroller of the Currency charters, regulates, and oversees banks, including with respect to risk.
4. Several rounds of the Basel accords, including subsequent fine-tunings, have regulated bank capital holdings and reporting requirements. These are international regulations and not the sole design of a possibly defective U.S. regulatory system.
5. Banks are chartered by individual states and subject to varying regulations, disclosure, and reporting requirements, including with respect to risk.
6. Banks are regulated and supervised by the Fed, especially with regard to their risk-taking.
7. Banks are regulated and supervised by the FDIC, especially with regard to their risk.
8. Banks face additional regulations, both at the state and federal level, to the extent they are involved in commodities and insurance markets.
9. The Federal Housing Finance Board regulates Federal Home Loan Banks, which are involved in mortgage markets.
10. The Sarbanes-Oxley Act applies to publicly traded banks.
11. The Gramm-Leach-Bliley Act, the revision of the Glass-Steagall Act, regulates bank assets, albeit less than in times past.
12. The Home Mortgage Disclosure Act "...requires financial institutions to maintain and annually disclose data about home purchases, home purchase pre-approvals, home improvement, and refinance applications involving 1 to 4 unit and multifamily dwellings." These regulations are intended to limit the ability of banks to discriminate against borrowers; in practice this encourages subprime loans.
13. The Community Reinvestment Act encourages banks "to reinvest in the communities they serve," which again in practice encourages subprime loans.
14. I believe this list is not complete.
I guess we didn't have enough bank regulation!
It is also worth noting that many European banks have suffered heavy losses as well, despite operating under different regulatory regimes.
We need only to look at broadcast ratings of the two leagues’ respective championships to underscore this local-national dichotomy between baseball and football. The Super Bowl’s broadcast ratings have virtually no connection to the participating teams, while World Series ratings rise and fall with the size of the market of the N.L. and A.L. champs. Whereas both leagues have seen solid appreciation in franchise values in recent years, the lower variability associated with N.F.L. revenues and costs yield a more favorable risk adjusted return than the up-and-down fortunes of an M.L.B. owner.
Baseball tends to favor the players, both stars and journeymen alike, with higher compensation, longer careers, and contracts that are guaranteed in the event of an injury. Also, because baseball is without a salary cap and many teams depend on winning to drive the revenue engine, owners tend to award lavish contracts to an impact player in the hopes that he will carry the team deep into October, unlocking future revenues. Baseball’s Alex Rodriguez has agreed to a contract worth nearly $30 million per year, while N.F.L. stars Peyton Manning and Tom Brady each make about $10 million per year. So it may pay to groom your young one to become a big league baseball player, but be sure to tell him to invest his spoils in the ownership of an N.F.L. team.
The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.Changing the rules before the game starts (or contracts are signed) is fine. Changing the way points are scored, penalties are assessed, or reneging contracts just increases uncertainty and decreases liquidity, as people cannot measure risks and rewards with all the shifting sands under them.
Let the markets clear, the holders of toxic paper to mark it properly, the denial to play out, the market to touch bottom, so more certain pricing can return to the market.
UPDATE: John Carney seems to be saying something similar.
Thursday, November 29, 2007
At one point, McCain gave a history lesson to libertarian-leaning Rep. Ron Paul, who wants to pull troops out of Iraq, saying: "that kind of isolationism, sir, is what caused World War II." He added: "We allowed (Adolf) Hitler to come to power with that kind of attitude of isolationism and appeasement."Paul needs lessons. But then, we all do.
DISCLOSURE: I am short 2008.GOP.NOM.PAUL
An earlier post on the Clinton News Network here. Why does her camp need to cheat? Are they afraid, or just used to cheating?
The retired general who asked about gays and lesbians serving in the military at the CNN/YouTube Republican debate on Wednesday is a co-chairman of Hillary Rodham Clinton's National Military Veterans group.
Retired Brig. Gen. Keith H. Kerr was named a co-chairman of the group this month, according to a campaign press release.
He was also active in John F. Kerry's 2004 campaign for president.
Kerr asked candidates “why you think that American men and women in uniform are not professional enough to serve with gays and lesbians.”
After the debate, former Education Secretary Bill Bennett said on a CNN panel that he was being told Kerr was involved with the Democratic presidential campaign of Clinton, a New York senator.
CNN anchor Anderson Cooper, who moderated the debate and the panel, said that if that was the case, CNN should have identified Kerr as such.
DISCLOSURE: I am short 2008.PRES.CLINTON(H) and long 2008DEM.NOM.CLINTON
It's just a rumor:
According to a report from Charlie Walters of the St. Paul Pioneer Press (who sources “a little birdie”) on Thursday, the Sox are now the frontrunners to land Santana as part of a trade package that does not include either Jacoby Ellsbury or Clay Buchholz. According to Walters, the Red Sox would receive Santana in exchange for Coco Crisp, Jon Lester, and minor league prospects Jed Lowrie and Justin Masterson, both of who rank among Boston’s top young talent. More from Walters: “Before a deal could be made, the Red Sox would have to have time to negotiate a contract extension with Santana, 28, who can become a free agent after next season and could have a market value as high as $150 million over six years."
Wednesday, November 28, 2007
His really big idea is a voluntary flat tax that would give every American the option of ditching the current code in favor of filing a simple tax return with two tax rates of 10% and 25%.
Mr. Thompson is getting aboard what has become a global bandwagon, with more than 20 nations having adopted some form of flat tax. Most -- especially in Eastern Europe -- have seen their economies grow and revenues increase as they've adopted low tax rates of between 13% and 25% with few exemptions.
The main political obstacle to such a reform in the U.S. has come from liberals, who favor punitive taxes for "class" reasons, and K Street corporate lobbyists who want to retain their tax-loophole empires. The housing and insurance industries, states and localities, charities, bond traders and tax preparers are all foes of low tax rates.
That's why the idea of a voluntary flat tax -- introduced on these pages a dozen years ago -- makes political sense. The Thompson plan would allow taxpayers to keep their mortgage and charitable deductions if they prefer, by adhering to the current tax code and rates. But it would also allow the option to abandon those credits and deductions except for a single allowance based on family size ($39,000 for a family of four). Most taxpayers would pay a 10% rate on income above that allowance, with a 25% rate kicking in at $100,000 for a couple. There would only be five lines on the tax form and most taxpayers could fill it out in minutes.
Liberals are already objecting that the plan is not "paid for," by which they mean it doesn't raise taxes the way they hope the next President will. But Mr. Thompson is right in refusing to play by the "static revenue" scoring game that demands that one dollar in estimated tax cuts be offset by one dollar in estimated tax increases somewhere else. "The experts always overrate the revenue losses from tax cuts," Mr. Thompson says, and history supports him going back to the Mellon reductions of the 1920s, the Kennedy tax cuts of the 1960s, the Gipper's in the 1980s, and this decade's success with President Bush's reductions.
Mr. Thompson's plan is based on one introduced by GOP Representatives Paul Ryan and Jeb Hensarling that is in any case not designed to lose revenue. It is intended to allow federal receipts to grow at the rate of the economy, which would leave them at some 18% or 19% of GDP -- roughly their average of recent decades. When critics object to revenue losses, they are really saying that the tax share of GDP should be allowed to rise to 20% and higher, which is where we are headed if the Bush tax rates expire.
DISCLOSURE: I'm long 2008.GOP.NOM.THOMPSON(F)
I first posted on this over the summer. Glad to see the WSJ is catching up with the blogosphere. Maybe some of the other old-fashioned press will pick this up before 2010.
In the span of one growing season, ethanol has gone from panacea to pariah in the eyes of some. The critics, which include industries hurt when the price of corn rises, blame ethanol for pushing up food prices, question its environmental bona fides and dispute how much it really helps reduce the need for oil.
A recent study by the Organization for Economic Cooperation and Development concluded that biofuels "offer a cure [for oil dependence] that is worse than the disease." A National Academy of Sciences study said corn-based ethanol could strain water supplies. The American Lung Association expressed concern about a form of air pollution from burning ethanol in gasoline. Political cartoonists have taken to skewering the fuel for raising the price of food to the world's poor.
Last month, an outside expert advising the United Nations on the "right to food" labeled the use of food crops to make biofuels "a crime against humanity," although the U.N. Food and Agriculture Organization later disowned the remark as "regrettable."
The fortunes of many U.S. farmers, farm towns and ethanol companies are tied to corn-based ethanol, of which America is the largest producer. Ethanol is also a cornerstone of President Bush's push to reduce dependence on foreign oil. But the once-booming business has gone in the dumps, with profits squeezed, plans for new plants shelved in certain cases, and stock prices hovering near 52-week lows.
Tuesday, November 27, 2007
Hey Schill, hope that popcorn is worth 2 million--Theo EpsteinBackground here:
Schilling agreed to an $8 million contract Tuesday with $3 million in potential performance bonuses. He also can make an additional $2 million by meeting weight clauses -- $333,333 for each time he passes one of six random monthly weigh-ins.
my data on the longest S&P 500 streaks (since 1950) without back-to-back up days. Considering that there have been 14,565 trading days since January 1950, you can see how we're waaay out in the tail of this particular distribution.
|Ending Date||Streak Length|
It starts with childbearing: social security systems seem to exert downward pressure on birthrates, in effect undermining their own actuarial base. This is one reason that Social Security, which used to have more than 30 workers for each retiree, now has only three, headed towards two.
Social Security also encourages people to leave the workforce earlier than they otherwise would. People are healthier than ever at 65, but while in 1950, almost half of all men over the age of 65 worked, that number is now less than 20%.
Finally, Social Security discourages private savings. This is terrible for two reasons. If future fiscal problems force the government to reduce benefits, the people who didn't save enough because they relied on those promises will be made much worse off than they would otherwise have been.
The other problem is that Social Security is not a productive investment. Privately saved money is mostly lent to corporations that mostly use the money to do things that make the economy more productive, such as R&D and capital equipment upgrades. Social security "contributions" are lent to the government, where they are mostly spent on things that could not be remotely described as improving our economy's productive capacity, such as farm subsidies.
This transaction would actually be neutral (except for deadweight loss on the "contributions") if Congress used the Social Security money to reduce other debt; in effect, they would be doing our national saving for us. But in practice, though it is difficult to tease out cause and effect, the best evidence is that Congress simply spends the extra money as if it were tax revenue. Social security thus reduces national savings.
The demographic transition we are currently undergoing to an older society means that we need policies to increase the workforce and productivity as much as possible. What we have, in Social Security, is a program which actively works against these aims.
UPDATE: More Sowell here (via Don Boudreaux):
At the highest income levels, people are especially likely to be transient at that level. Recent data from the Internal Revenue Service show that more than half the people who were in the top one percent in 1996 were no longer there in 2005.
Among the top one-hundredth of one percent, three-quarters of them were no longer there at the end of the decade.
These are not permanent classes but mostly people at current income levels reached by spikes in income that don't last.
These income spikes can occur for all sorts of reasons. In addition to selling homes in inflated housing markets like San Francisco, people can get sudden increases in income from inheritances, or from a gamble that pays off, whether in the stock market, the real estate market, or Las Vegas.
Some people's income in a particular year may be several times what it has ever been before or will ever be again.
Among corporate CEOs, those who cash in stock options that they have accumulated over the years get a big spike in income the year that they cash them in. This lets critics quote inflated incomes of the top-paid CEOs for that year. Some of these incomes are almost as large as those of big-time entertainers -- who are never accused of "greed," by the way.
Just as there may be spikes in income in a given year, so there are troughs in income, which can be just as misleading in the hands of those who are ready to grab a statistic and run with it.
Many people who are genuinely affluent, or even rich, can have business losses or an off year in their profession, so that their income in a given year may be very low, or even negative, without their being poor in any meaningful sense.
This may help explain such things as hundreds of thousands of people with incomes below $20,000 a year living in homes that cost $300,000 and up. Many low-income people also have swimming pools or other luxuries that they could not afford if their incomes were permanently at their current level.
People in the bottom fifth of income-tax filers in 1996 saw their incomes rise 91 percent by 2005. The top 1 percent — “the rich,” who are supposed to monopolize the money, according to the left — saw their incomes decline a whopping 26 percent. Meanwhile, the average taxpayers' real income rose 24 percent between 1996 and 2005.
Let the markets clear. Please.
Another way to look at it is as follows: all of the institutions from the 1930's, plus some created since then, have not solved today's problems. In fact, most of them contributed to the sub-prime frenzy.
The really bold thinking, in my view, would be to ask why we need to subsidize the heck out of home ownership. Saying we need to pour more government support onto the housing market is like saying we need to deal with obesity by increasing the allotment of food stamps.
With the eyes of the world focused on the Middle East peace talks in Annapolis, Md., President Bush's war tsar, Lieutenant General Douglas Lute, quietly announced that the American and Iraqi governments will start talks early next year to bring about an end to the allied occupation by the close of Mr. Bush's presidency.
The negotiations will bring to a formal conclusion the U.N. Chapter 7 Security Council involvement in the occupation and administration of Iraq, and are expected to reduce the number of American troops to about 50,000 troops permanently stationed there but largely confined to barracks, from the current 164,000 forces on active duty.
The sooner all the credit problems are fully disclosed, the sooner we touch bottom, and the sooner the healthy liquidity will return.
Monday, November 26, 2007
After a recent Democratic presidential debate, Barack Obama proclaimed that were he to become president, he would talk directly even to America's worst enemies. One could imagine President Obama as a kind of superhero taking off in Air Force One for Tehran, there to be greeted on the tarmac by the villainous Mahmoud Ahmadinejad.
Was this a serious foreign policy proposal or simply a campaign counterpunch? Hillary Clinton had already held up this idea as evidence of Mr. Obama's naiveté. Wasn't he just pushing back, displaying his commitment to "diplomacy" -- now the most glamorous word in the Democratic "antiwar" lexicon?
On its face, Mr. Obama's idea seems little more than a far-left fantasy. But perhaps it looks this way because we are viewing it through too narrow a conception of warfare. We tend to think of our wars as miniature versions of World War II, a war of national survival. But since then we have fought wars in which our national survival was not immediately, or even remotely, at stake. We have fought wars in distant lands for rather abstract reasons, and there has been the feeling that these were essentially wars of choice: We could win or lose without jeopardizing our nation's survival.
Mr. Obama's idea clearly makes no sense in a context of national survival. It would have been absurd for President Roosevelt to fly to Berlin and talk to Hitler. But Mr. Obama's idea does make sense in the buildup to wars where survival is not at risk -- wars that are more a matter of urgent choice than of absolute necessity.
I think of such wars as essentially wars of discipline. Their purpose is to preserve a favorable balance of power that is already in place in the world. We fight these wars not to survive but -- once a menace has arisen -- to discipline the world back into a balance of power that best ensures peace. We fight as enforcers rather than as rebels or as patriots fighting for survival. Wars of discipline are pre-emptive by definition. They pre-empt menace to the peaceful world order. We don't sacrifice blood and treasure for change; we sacrifice for constancy.
Conversely, in wars of survival, like World War II, we fight to achieve a favorable balance of power -- one in which a peace is established that guarantees our sovereignty and survival. We fight unapologetically for dominance, and we determine to defeat our enemy by any means necessary. We do not harry ourselves much over the style of warfare -- whether the locals like us, where the line between interrogation and torture might lie, whether or not we are solicitous of our captive's religious beliefs or dietary strictures. There is no feeling in society that we can afford to lose these wars. And so we never have.
America does not do so well in its disciplinary wars (the Gulf War is an arguable exception) because we begin these wars with only a marginal moral authority and then, as time passes, even this meager store of moral capital bleeds away. Inevitably, into this vacuum comes a clamorous and sanctimonious antiwar movement that sets the bar for American moral authority so high that we must virtually lose the war in order to meet it. There must be no torture, no collateral damage, no cultural insensitivity, no mistreatment of prisoners and no truly aggressive or definitive display of American military power. In other words, no victory.
If we have the greatest military in history, it is also true that we lack our enemy's talent for true belief. Our rationale for war is difficult to articulate, always arguable, and distinctly removed from immediate necessity. Our society is deeply divided and there is a vigorous antiwar movement ready to capitalize on our every military setback.The point is that wars of discipline will always have to be self-consciously fought on a moral as well as a military front. And the more we engage the moral struggle, the more license we will have to fight these wars as wars of survival. In other words, our military effectiveness now requires nothing less than a smart and daring brinkmanship of moral authority.
If Mr. Obama's idea was born of mushy idealism, it could work far better as a hard-nosed moral brinkmanship. Were an American president (or a secretary of state for the less daring) to land in Tehran, the risk to American prestige would be enormous. The mullahs would make us characters in a tale of their own grandeur. Yet moral authority would redound to us precisely for making ourselves vulnerable to this kind of exploitation. The world would witness not the stereotype of American bullying, but the reality of American selflessness, courage and moral confidence.
If we were snubbed, if all our entreaties to peace were flouted, if war became inevitable, then we would have the moral authority to fight as if for survival. Either our high-risk diplomacy works or we have the license to fight to win. In the meantime, we give our allies around the world every reason to respect us.
This is not an argument for Mr. Obama's candidacy, only for his idea. It is a good one because it allows America the advantage of its own great character.
DISCLOSURE: I am long 2008DEM.NOM.OBAMA
And I thought my kids fighting over a 25 cent tchotchke was petty.
The military relationship between China and the U.S. isn't always smooth sailing. But last week's stormy waters came as a surprise. On Wednesday evening, China's Ministry of Foreign Affairs denied permission for the USS Kitty Hawk and its carrier battle group to make a four-day port call to Hong Kong for the Thanksgiving holiday. The 8,000 servicemen aboard the ships -- and the 290 families of crew members who had flown to Hong Kong to meet them -- were left with their Thanksgiving plans in tatters.
The Kitty Hawk's visit had been well known for months, but Beijing didn't officially respond to the U.S. request for permission to dock until Wednesday evening -- at which point the ships had been waiting outside Chinese waters for a day. After getting the red light, the convoy began to head back to Japan. The ships were already more than 300 miles away when Beijing reversed its decision Thursday afternoon -- too far to make it back in time for Thanksgiving dinner.
Beijing's reasons for its rejection and reversal remain opaque, like most Chinese government decisions. The snub may have been retaliation for the Pentagon's recent approval of a $940 million upgrade to Taiwan's Patriot antimissile shield. Or for President Bush's meeting this month with the Dalai Lama, the exiled religious leader of Tibet. The Chinese have offered no explanation.
The only message that stands out loud and clear is that China is not a reliable military partner. Beijing's diplomacy is also not as sophisticated as it seems. Surely the Ministry of Foreign Affairs has better ways to send messages to the U.S. than by stealing Thanksgiving family dinners from American seamen.
Battered stock and bond markets are sending an increasingly ominous signal that a U.S. recession could be near.
The markets, however, haven't swayed Federal Reserve officials and most private economists from their view that the nation's economy can escape a downturn and get back on a steadier course.
The disparity between those two views of the economy -- one growing bleaker, the other remaining sanguine -- stood out starkly last week.
Though it rose during Friday's shortened trading day, the Dow Jones Industrial Average -- at 12980.88 -- is 8.4% below its all-time high, set in October. Safe-haven Treasurys, meanwhile, have rallied as investors have lost confidence in a quick resolution of the U.S. housing slump and mortgage crisis, which are behind many of today's economic worries in both the U.S. and Europe.
But in an economic outlook released by the Fed, the central bank's policy makers said they expected U.S. economic growth to pick up as housing hits bottom and financial markets gradually resume more-normal functioning. Fed officials see the U.S. economy growing between 1.8% and 2.5% next year, according to minutes from their most recent meeting.
Who's right? History isn't much help. The stock market is notorious for predicting downturns that never materialized, while economists have failed to acknowledge some recessions until after their arrival. "Economists are extremely bad at predicting turning points, and we don't pretend to be any better," Fed Chairman Ben Bernanke told Congress earlier this month.
This time around, much depends on how tight a rein financial institutions keep on their lending and consumers keep on their spending.
By itself, the housing slump seems unlikely to choke off U.S. economic growth. Home construction accounts for less than 5% of the nation's gross domestic product. But if banks curb their lending in response to billions of dollars of mortgage-related write-offs, or if consumers cut their spending as home values fall and gasoline prices rise, it could knock the economy out of its delicate balance.
"Even if you're a dyed-in-the-wool optimist you have to say it's a more challenging time than normal," says Michael Feroli, an economist at J.P. Morgan, which cut its U.S. economic forecast last week. It now expects GDP to grow at an anemic annual rate of 0.5% this quarter and 1.5% in the first three months of 2008 -- but no recession.
DISCLOSURE: I am short US.RECESSION.08
Friday, November 23, 2007
A commenter raises the issue of whether accounting losses exceed actual losses in the current subprime crisis. That is, suppose that only $3 million of default losses are likely to occur on a $50 million pool of subprime loans, but because of loss of confidence, the market price of the pool drops to $40 million. Using mark-to-market accounting, the holders of the pool take a loss of $10 million, not $3 million.
My view is that the holders in fact should record a $10 million loss, and then if they hold the pool they can record a gain in subsequent years. It's much better to take write-downs too much, too soon than too little, too late.
(1) The S&P 500 is up 53% since Thanksgiving 2002. The current bull market has been the third best since 1960.
(3) The core CPI inflation rate in the US has been remarkably steady around 2%, and down from 2.6% to 1.8% on average among the 30 members of the OECD, despite the soaring price of crude oil, which is up from $27 a barrel to $99 a barrel since Thanksgiving 2002, based on West Texas Intermediate price.
(4) Notwithstanding all the nonsense about outsourcing, the unemployment rate was down to 4.7% in October vs. 5.7% five years ago as payroll employment rose 8.1 million to a record high of 138.4 million.
(5) Real disposable personal income was at a record high in September, up 16.0% since September 2002. Real per capita income is also at a record high and up 2.1% per year, on average, over the past five years.
(6) Real GDP is up 15.3% over the past five years.
(7) In the US, since the end of 2002, household net worth is up nearly 50% to a record $57.9 trillion.
(9) Alan Greenspan’s book tour is over.
That last one got an "Amen!" from me.
Perhaps you think we'll probably muddle through OK, unless the sale of Freddie's assets would so depress the market as to hinder extensions of new loans to creditworthy borrowers, thereby reducing home sales further, thereby depressing house prices further, thereby inducing more borrowers to default, so that we go from the good equilibrium to the bad equilibrium. But figuring out exactly where we stand currently on that slippery slope between A and B is not an easy matter.
Here's my bottom line: if Freddie cuts its dividend, that's a good thing. All the rest is worrisome.
For all the Clinton protestations that they were the object of a conspiracy, the polls consistently show that even Democratic voters are queasy about her honesty. The most recent ABC News/Washington Post poll of likely Democratic caucus-goers in Iowa--which puts Mr. Obama ahead--shows him beating her by 2-1 as the most honest and trustworthy candidate. Every bump on the Clinton campaign road has also been linked to her reputation as insincere.
Mrs. Clinton has all but broadcast that her greatest fear is that her opponents will reopen this can of Clinton creepy crawlies. Her refusal, which is growing news, to expedite the release of her records from her time as first lady, is one big sign. Her campaign's aggressive reaction to the merest hint of a personal comment by an opponent is another. It isn't clear the Clinton campaign is sitting on dirt on Barack Obama; but they're happy to have him think they are.
Mr. Obama has come the closest to delving into Mrs. Clinton's past, though you need an Enigma machine to decode it. His campaign slogan is "Change We Can Believe In." (Translation: If you elect her, don't be surprised what she discovers in a box under a table.) He's mused about "character and judgment." (Translation: I don't trade in cattle futures.) Freudian psychology this is, Mortal Kombat it is not. Yet while the squeaky clean Mr. Obama may be best positioned to make a moral case against Mrs. Clinton, his own "politics of hope" has made it difficult to pull out the brass knuckles.
The rest of Mrs. Clinton's opponents fear an attack on her ethics would backfire, allowing her to paint herself as a female victim. You can bet they've studied the video of Rick Lazio, Mrs. Clinton's 2000 Senate opponent, invading her debate space, and Mrs. Clinton's ensuing performance as flinching, defenseless woman. (Mr. Lazio sank like a rock.) She has suggested she's not above a repeat act, dispatching Bill to warn that "the boys" were being awfully "tough" on his wife.
I don't think the other Democratic candidates will go for it. Too much of the party is wrapped up in the Clinton legacy; it jeopardizes the whole party for old issues to be rehashed and new allegations to get legs. It was tough enough for Kerry; and the Clinton's have much more fodder to supply.
I think Strassel is right, and we will see some character stress testing for Hillary. But only after she wins the nomination; the Republicans will bring it up at that point. As far as the "Rick Lazio Lesson", well, that would have never even come up so late in the campaign, had Giuliani not bowed out.
UPDATE: This is a barrage of cheap character attacks (via Don Surber), but Huma Abedin makes me like Hillary better, kinda like how Princess Leia casts Jabba the Hut in a better light. That said, I prefer being governed by Jabba to some of the other characters.
DISCLOSURE: I am long 2008DEM.NOM.CLINTON and short 2008.PRES.CLINTON
Wednesday, November 21, 2007
When the Pilgrims first settled the Plymouth Colony, they organized their farm economy along communal lines. The goal was to share everything equally, work and produce.by John Stossel (via Greg Mankiw). Anyone wanna bet me that my kids will never learn this lesson in their schools, from pre-school through college?
They nearly all starved.
Why? When people can get the same return with a small amount of effort as with a large amount, most people will make little effort. Plymouth settlers faked illness rather than working the common property. Some even stole, despite their Puritan convictions. Total production was too meager to support the population, and famine resulted. Some ate rats, dogs, horses and cats. This went on for two years.
"So as it well appeared that famine must still ensue the next year also, if not some way prevented," wrote Gov. William Bradford in his diary. The colonists, he said, "began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length after much debate of things, [I] (with the advice of the chiefest among them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves. ... And so assigned to every family a parcel of land."
The people of Plymouth moved from socialism to private farming. The results were dramatic.
Secure property rights are the key. When producers know that their future products are safe from confiscation, they will take risks and invest. But when they fear they will be deprived of the fruits of their labor, they will do as little as possible.
Didn't think so. And as much as I'm a libertarian, I'm all for big government when it comes to protecting lives and rights!
John Madden on Pats dominance:
“I think that New England, especially offensively, is as close to perfect as you can be. I think that they’re obviously the best team in the NFL and I think the gap is pretty big.”
John Madden on who's #2:
“For a long time everyone agreed that it was the Indianapolis Colts. Because of injuries and that they have now, it’s probably not. You would probably have to go to Dallas and Green Bay.”
But if the 2d Amendment refers solely to the rights of states of the union to have "state armies," as Glenn puts it, and if DC is not a state within the meaning of the Amendment, then how can the District constitutionally have a National Guard?--Donald SensingOther local DC genius posted upon earlier today.
They then brought in this fellow, truly evil man, James Freedman, who basically, simply put, his agenda was to turn Dartmouth into Harvard. Freedmanism basically had four planks.While the Spirit is the Friend of Truth, religion seems to be the enemy.
1. That Dartmouth should be a university rather than a college.
2. Political correctness in all forms -- speech codes, censorship, and the whole multicultural apparatus.
3. Comprehensive social engineering of student life and replacement of the Greek system for instance.
4. And a de-emphasis on Dartmouth's traditional values of educating well rounded leaders in favor of creative loners.If you read the interview with TJ Rodgers in the Wall Street Journal this fall you will see the kind of abuse that one has to deal with in a situation like this. And what we saw in September was that the Empire struck back. They rolled the tanks into Tiananmen Square. And basically they couldn't win at the ballot box and so they got rid of the ballot box. The entrenched powers are well, well entrenched and very powerful and they are formidable. And I think that the largest lesson I have drawn from this is that academic reformers have to decide whether or not they are serious or not about the project of reforming higher education. It's going to be a multigenerational battle; it's going to take a lot of resources, and a lot of struggle. And I think what you have to understand is that those who control the university today they don't believe in God and they don't believe in country. University is their cathedrals. Their entire being, both those who fund it and those who teach within it, are tied up in the universities. It is basically their religion and its supported by those who, the Medicis of the earlier age built academic buildings rather than cathedrals today and they call the shots.
My perception is, that those who bankroll these institutions basically use this to buy indulgences for being rich which is that they are fully embracing and happy to embrace all the multiculturalism and all the other stuff because this is their way of getting forgiveness. Of showing how virtuous they are despite the fact that they make a lot of money. So they have no quibble with the apparatus. Either they don't care about it because all they care about is the reputation of the institution or they're kind of happy with it because it allows them to deal with their conscience.
The new dogma is environmentalism and feminism and that is the dogma and they will enforce it viciously. We have the Spanish inquisition and you could ask Larry Summers whether or not the Spanish inquisition lives on academic campuses today. So that's why the first point is that we are either all in or we're not. It's going to be a long and vicious trench warfare, I think, if we are serious about taking the academy back.
When Trustees don't act, the void gets filled by the permanent constituencies on campus, which are the faculty and the administrators. The trustees are the only ones that can look out for the institutional mission.
Just as a point of clarification, it is actually considered a more egregious breach of etiquette to kick field goals when up 40-something points than it is to go for a first down. In the former case, you’re adding needless points. In the latter case, you’re at least giving the opposition a chance to stop you.Learning a lot this season, and having fun at the same time. More like the outside of the college classrooms than inside.
So in order to cover the 40,000 metric tons we would have to plant roughly 4,000,000 trees in the tropics.I'd laugh, if it weren't so pathetic (via Glenn Reynolds).
I think the only thing that Schumer has proven himself Kling's better is getting votes. Which might be overrated; Sanjaya Malakar comes to mind at this moment.
My hypothesis is that gender diversity works well in staff and committee groups, but poorly in operations, line jobs and time-sensitive teams. Musical theater is the only exception that comes to mind at this moment, although attractive saleswomen selling to meatheads is a corollary of sorts.
In looking at 2,260 management teams between 1996 to 2003, they found that mixed-gender groups underperformed all male groups by a little over 1 percent per year. On the other hand, they did find that differences in education and work history did seem to improve group performance (1.15 percent per year).
The reason? The researchers suggest that while diversity increases the total pool of information and experience the group can tap, in gender diverse groups that benefit can be sunk by the increased communication costs between men and women (especially if the gender makeup is lopsided, as it's likely to be in the male dominated mutual fund industry).
UPDATE: Our own Caitlin Liu reports on a related study showing an opposite gender effect: "Large corporations with the highest representation of women board members significantly outperformed those with the highest concentration of men."
Here's a quote from the Washington Post that may shed some light on the matter:
"There was a tendency toward alarmism, and that fit perhaps a certain fundraising agenda," said Helen Epstein, author of "The Invisible Cure: Africa, the West, and the Fight Against AIDS." "I hope these new numbers will help refocus the response in a more pragmatic way."
Could it be that we are watching the same phenomenon with the whole global-warmist hysteria? Our bet would be yes.
I was just thinking the same thing yesterday.
Tuesday, November 20, 2007
1. Ron Paul has opposed virtually all free trade agreementsI'm for critically massed government whenever it increases freedom to choose: protecting lives and rights, building infrastructure, opening new territories--anything that private institutions fall short of the democratic alternative. The fact that Paul wants to diminsh liberties related to trade, education, and people beyond our borders makes him something different from a libertarian. A charlatarian, perhaps?
2. Paul also has opposed school voucher programs
3. He not only favors a massive crackdown on illegal immigration but even seems to endorse the view that immigration should be "reduced, not expanded" whether legal or not
4. Paul refus(es) to repudiate the Stormfront neo-Nazis, racists, 9/11 "Truthers," and other assorted wackos who have endorsed him
DISCLOSURE: I am short 2008.GOP.NOM.PAUL
Tell me: Why should the courts spare the government from the harsh effects of laws that are written at a high level of generality? Private citizens and business get stuck with the application of general laws, which they don't write.--Ann Althouse (via Glenn Reynolds)This morning, I was explaining this point to my building superintendent, when he told me about his needing to work on Thanksgiving Day because NYC just changed the recycling policy this year.
In the last 20 years, the proportion of households with income below the poverty line with the following amenities has increased as follows:
Dishwasher 16% 37%Supposedly, over the last 20 years, all of the income gains have gone to the rich. Yet, somehow, the poorest households increased their access to appliances that make life more pleasant.
Washing Machine 56% 64%
Dryer 35% 57%
Worse yet, Congress is thinking about raiding your air travel taxes to pay for something completely unrelated.
Steve Conover explains why. Maybe this will get picked up by the media, since it affects anyone with a job or prospects for one. The "stagnant wages" meme is just a mythical trope.
UPDATE: I forgot to mention, federal employees earn almost double private sector workers, so they are even fatter.
The entire market in subprime debt is just 1.4% of the size of global equity markets. Or, to put it another way, a 1.4% downward fluctuation in stocks erases the same amount of value as if all subprime-backed bonds were collectively marked to $0.I think the U.S. accounts for almost half of those markets. And I said I wasn't that worried last year.
WHEN men meet fair-haired women they really do have a “blonde moment”. Scientists have found that their mental performance drops, apparently because they believe they are dealing with someone less intelligent.
Researchers discovered what might be called the “bimbo delusion” by studying men’s ability to complete general knowledge tests after exposure to different women. The academics found that men’s scores fell after they were shown pictures of blondes.
Further analysis convinced the team that, rather than simply being distracted by the flaxen hair, those who performed poorly had been unconsciously driven by social stereotypes to “think blonde”.
60% of my immediate family and 30% of my immediate business have earned their PhDs (I am among the unwashed who have not), and I have several other relations, friends, and colleagues who are doctored, too. But I have never heard anything remotely like this.
This stuff does matter. For example, if a million kids in Africa are dying every year of disease, it helps to know which diseases, and in what proportions. Otherwise, there is a big mismatch (and missed opportunity to save lives) between fundraising priorities v. the biggest threats.
I'm not that worried. The S&P500 alone is worth about $12 trillion, and a foreign buyer would need to pay a hefty 20-40% premium for most corporations. We can see from the Japanese buying frenzy in the Eighties, from Rockefeller Center in Manhattan to golf courses in Hawaii, that sometimes the U.S. wins twice, selling really high, and buying back much lower in the future.
China and the Gulf states are hungry, and they've just sat down for an American buffet. In the last few months alone, state-affiliated funds and companies have taken bites of American icons, picking up small stakes in Advanced Micro Devices, MGM Mirage, Nasdaq Stock Market, Blackstone Group and Bear Stearns.
The deals were designed to be small enough to avoid scrutiny from the U.S. government. This conveniently played into the hands of sellers, who were able to offload pricey positions while giving virtually nothing in return, such as board seats or veto rights.
But the mergers-and-acquisitions story of 2008 will be how these foreign sovereign funds -- sitting on an estimated $2 trillion to $3 trillion of reserves -- direct their appetites. Fattened by the U.S.'s own trade imbalances and encouraged by favorable currency rates, they aren't likely to stay so compliant for long. Further down the buffet line sit entire U.S. companies.
Foreign investments touch a nerve, especially when so much American economic power appears at the mercy of China, which holds U.S. Treasury bills, or the Gulf states, which have such a big say over U.S. energy costs. For 2007, foreign buyers have accounted for 20% of M&A in the U.S., according to Dealogic, the second-highest level since 1995.
Can the U.S. accept the foreign investments as an essential element for lubricating a dynamic economy? Tighter economic ties create less incentive for war and terrorism. And below the radar, a recent series of foreign investments have closed without incident. "No one raised serious objections when Sabic [a state-owned Saudi Arabian company] bought GE Plastics in a competitive auction. Are we culturally ready? We're a very welcoming and open society," adds Mr. Schlager.
Until it's not. Already the country has proven touchy, famously fretting when a Japanese businessman overpaid for the Pebble Beach golf resort back in 1990, or when a Dubai-backed company looked to take over a series of U.S. ports in 2006, setting off a talk-radio furor that squelched the deal.The irony is the U.S. is, in essence, funding its own potential takeover. In Wall Street parlance, they call it getting LBOed. "We're moving to a sharecropper economy," said Mr. Mulloy in an interview. "The other guys are going to be owning, and we're going to be working for them."
UPDATE: CNBC's Joe Kernen reporting possible dividend cuts.
Chuck Schumer is lucky Congress ignored him. We're referring to the New York Senator's idea, which he has loudly promoted for months, that Fannie Mae and Freddie Mac should ride to the rescue of the housing market by buying up unwanted mortgages and guaranteeing them. Now those two mortgage giants are themselves under scrutiny amid concerns that they'll report big losses.
Last week, Fortune magazine reported that Fannie had adjusted how it reports troubled mortgages in order to better meet its own projections. Fannie claims the accounting change was legitimate, but its explanations so far have done little to stem investor anxiety. (See chart below.) And whether you believe the new lower numbers or the old higher ones, delinquencies in Fannie's portfolio are rising fast.
This matters because Fannie and Freddie, owing to their special status as "government sponsored" mortgage securitizers, operate with a relatively small capital base. Fannie reported earnings for the first three quarters of this year on November 9, bringing its financial information up to date for the first time since it was hit with an accounting scandal in 2004.
According to those figures, Fannie has a capital base of $40 billion supporting a $2.8 trillion book of business, including more than $2 trillion in mortgage-backed securities it has guaranteed and sold to the public and over $700 billion more in mortgages it is holding on its balance sheet. That high degree of leverage means it would take only a small movement in the value of its assets to cause serious problems.
UPDATE: John Carney points to the SEC's accounting scandal, i.e. the agency charged with accounting oversight. Priceless.
Hey, Chuck, sometimes more government is not the best answer. More often than not. On the other hand, if the U.S. can buy Canada, that might be a good opportunity for more government. Temporarily, of course.
The following clip is Jeter in drag; maybe this garb can lower his profile a bit.
Who can blame him? Florida has no personal income tax, while New York's rate for the top bracket is 6.8%, rising to 12.15% in New York City (including temporary surtaxes that expired in 2005; the combined rate is now 10.5%). That makes for one of the worst tax burdens in America -- and politicians are proud of it. Mayor Michael Bloomberg boasts that his city is a "luxury good" for which everyone should happily pay higher taxes.
New York tax laws also take a notoriously wide view of "residency." Literally tens of thousands of people only work in-state Tuesday to Thursday each week to avoid spending the requisite 184 days per year that would subject their full income to the state tax regime. And Albany's taxmen try to catch them with things like travel records, credit-card usage and phone logs.
New York doesn't claim that Mr. Jeter has avoided taxes on the salary he's earned in-state -- i.e., his 10-year, $189 million Yankee contract. New York's complaint is in pursuit of the additional millions a megastar like Mr. Jeter makes from endorsement deals and the like, as well as from his investments.
According to court filings, state auditors don't dispute that his primary residence was in Florida before 2001 or after 2003, or even that he spent most of the year down south over the target period. Rather, they're employing the more subjective "domicilery test." They point to Mr. Jeter's Manhattan apartment, his "numerous public statements professing his love for New York," and allege he has "immersed himself in the New York community." Gosh.
Yankee owner George Steinbrenner is also a primary resident of Florida, no doubt for the same reasons as Mr. Jeter and who knows how many other professional athletes. Given the lengths New York is going to extract its pound of flesh, it's a wonder New Yorkers even have teams to root for.
DISCLOSURE: I am long 2008DEM.NOM.OBAMA and 2008DEM.NOM.CLINTON.
Sen. Barack Obama (Ill.) draws support from 30 percent of likely Democratic caucus-goers in Iowa, compared with 26 percent for Clinton and 22 percent for former senator John Edwards (N.C.). New Mexico Gov. Bill Richardson received 11 percent. The results are only marginally different from a Post-ABC poll in late July, but in a state likely to set the tone for the rest of the nominating process, there are significant signs of progress for Obama -- and harbingers of concern for Clinton.
The factors that have made Clinton the clear national front-runner -- including her overwhelming leads on the issues of the Iraq war and health care, a widespread sense that she is the Democrats' most electable candidate, and her strong support among women -- do not appear to be translating on the ground in Iowa, where campaigning is already fierce and television ads have been running for months.
At the heart of the Democratic race has been the dichotomy between strength and experience (qualities emphasized by Clinton, Richardson, and Sens. Joseph R. Biden Jr. of Delaware and Christopher J. Dodd of Connecticut in their appeals) and the ability to introduce a new approach to governing (as Obama and Edwards have promised to do).
Iowa Democrats are tilting toward change, and Obama appears to be benefiting from it.
Fifty-five percent of those surveyed reported that a "new direction and new ideas" are their top priority, compared with 33 percent who favored "strength and experience." That is a shift from July, when 49 percent sought change and 39 percent experience.
Monday, November 19, 2007
Kissinger: Well, his brains, are negligible. I--
President Nixon: He's really pretty shallow, Henry.
Kissinger: He's shallow. He’s got no...he's an actor. He--When he gets a line he does it very well. He said, "Hell, people are remembered not for what they do, but for what they say. Can't you find a few good lines?" [Chuckles.] That's really an actor's approach to foreign policy--to substantive....
President Nixon: I've said a lot of good things, too, you know damn well.
Kissinger: Well, that too.
President Nixon: Can you think though, Henry, can you think, though, that Reagan with certain forces running in the direction could be sitting right here?
President Nixon: Back to Reagan though. It shows you how a man of limited mental capacity simply doesn't know what the Christ is going on in the foreign area.
Nixon's move towards China really triangulated the Soviet Union. But it's funny how we fail to see some big things coming.
Friedrich Hayek's great legacy to economics was to show that the price system can aggregate vast amounts of information much more efficiently than a centralized bureaucracy can do. And intelligence agencies are centralized bureaucracies. The innumerable mistakes that the United States has made in Iraq suggest that our government does not have good means of obtaining and evaluating information concerning that country, possibly because of a combination of bureaucratic inefficiency and the vastness of the quantity of relevant data. The people who trade Iraq government bonds do so not because they are told to study Iraq or paid a salary to do so or have an academic or journalistic interest in the country, but because they hope to make money. Presumably therefore they are self-selected for knowing a lot about Iraq--and for thinking they know enough to put their money where their mouth is. They may be right.
Money, in other words, is like a drug; the more you have, the more you need to get a buzz. When a first-class plane ticket no longer satisfies, today’s wealthy board private jets. When that feels common, they buy a private jumbo jet. And so on.
We all like to think that wealth makes you happy. That belief is a core part of our culture. Yet the real impacts of great wealth are far more complicated.
For one thing, great wealth brings new problems. Maybe you don’t have to worry about cleaning the house (the maid will do it) or paying the bills (the private banker’s job). But now you have to worry about hundreds of friends and relatives asking for money. And your investments crashing. And your kid turning into a spoiled brat. And the question of whether your girlfriend or boyfriend loves you, or your money. According to one recent survey, more than 10 percent of millionaires say wealth creates more problems than it solves.
Consumption is a whole other treadmill. Like the article says, many of today’s wealthy are buying ever-larger boats, planes and homes in hopes that once they get that G550 or 250-foot Feadship, they will be content. But that’s not human nature — especially for the wealthy. There is, quite simply, never “enough.”
Now, most millionaires and billionaires I’ve met are happy, contented people. (At least on the outside.) But money isn’t the reason. To them, money is simply a tool for advancing their goals and aspirations. Those who look to money to fill a void or create meaning in their lives are almost always disappointed. Often, money is simply a magnifier — if you’re already a contented person, and see money as a means to an end, then it does make you happier. But if you’re already unhappy, money can make things worse.
Not that anyone should pity the wealthy for their troubles. Yet too often, the media tell us about all the predictable benefits of being wealthy, without mentioning the nasty side effects.
Sometimes smaller is better. Obesity does not become government.
Last month Paul Jacob, the former head of U.S. Term Limits and current head of Citizens in Charge, was led out of an Oklahoma City courtroom in handcuffs after pleading not guilty to charges that he conspired to defraud the state. Oklahoma Attorney General Drew Edmondson, who's overseeing this bizarre prosecution, has accused Mr. Jacob and two fellow petition organizers -- Rick Carpenter of Oklahomans in Action and Susan Johnson of National Voter Outreach -- of bringing out-of-state petition gatherers to Oklahoma to collect signatures.
In 2005 Mr. Carpenter, a Tulsan, launched a signature campaign to get a state-wide vote on a Taxpayer Bill of Rights. Tabor, as it is known, would cap the rate at which state government spending could increase. Mr. Jacob and Ms. Johnson were later brought on board to assist the effort. Not surprisingly, politicians and interest groups that favor big government have developed an intense dislike for Tabor spending limits, even though, like lawmaker term limits, they tend to be popular with voters.
This certainly proved to be the case in Oklahoma. Despite strong opposition from organized labor especially, Tabor petition advocates managed to gather some 300,000 signatures from registered voters, far more than the 219,000 needed to get the measure on the state ballot. Following a court challenge, however, the signatures were invalidated, not because the signers weren't legitimate but because the Oklahoma Supreme Court determined that nonresidents of the state had collected signatures.
Ironically, it is perfectly legal for opponents of a petition to solicit money and manpower from out-of-state. And sure enough, public sector unions opposed to the Tabor initiative recruited people from outfits like the Oregon-based Voter Education Project, an offshoot of the AFL-CIO that specializes in countering signature drives. They also set up Web sites that advertised the location of signature-gathers and urged their members to harass them.
After the Oklahoma Supreme Court ruled, Attorney General Edmondson could have let the matter die. Instead, he decided that the best use of scarce prosecutorial resources was to indict the petition campaigners. There's reason to believe his decision has less to do with enforcing the law and more to do with warning activists to think twice before challenging political elites.
Saturday, November 17, 2007
UPDATE: Doug Ross has more: all 6 "undecided" voters interviewed by CNN have strong ties to Clinton.
That left is not pleased CNN’s handling of the Democratic debate in Las Vegas. I expect people like Allahpundit at Hot Air to nose around and discover the “townspeople” asking questions at the debate were Hillary plants. It is a given that Hillary will cheat like hell.
But the left is pouncing. It is going for the throat: CNN, the least trusted name in news. Marc Ambinder broke the story about the coed who was told to ask Hillary only an innocuous girly question about jewelry instead of grownup question on nuclear waste. Even then Hillary blew it by saying “both.”
We are seeing a rerun of 1992, when “60 Minutes” and others threw their reputations in front of the train to protect Bill from disclosures of bimbo eruptions and the like.
The difference is now the left is giving the Clintons heat. Maybe the left now realizes that it was had in the 1990s. There was no Hillarycare, no Kyoto and no gay marriage on Bill Clinton’s watch. In fact, the left was handed DOMA and welfare reform.
The irony is the lefties demanded the Democratic candidates boycott a Fox News debate in Las Vegas. How did that work out having Wolf Blitzer instead of Brit Hume question Hillary? How is it better to have Carville instead of Hannity and Colmes analyze the debate?
Friday, November 16, 2007
Last hour's post here. Must be some big swingin' traders reading. Or a coincidence.
DISCLOSURE: I am long 2008.PRES.GIULIANI
[ungood] ones who don't.
I CALL THIS PROGRESS: "A U.N.-sponsored Internet conference ended Thursday with little to show in closing the issue of U.S. control over how people around the world access e-mail and Web sites."
International resentment about U.S. control of the domain name system is sure to grow, and I can understand that. But on the other hand, while my trust in the U.S. government is not extensive, it's infinitely greater than my trust of the Russians, the Chinese, or the United Nations. And the longer that the internet remains relatively open and uncensored, the harder it will be for them to put the genie back in the bottle later. Some related thoughts can be found here.
UPDATE: Fred Thompson agrees:
It's a bit sad that the U.N. makes the U.S. government--with all of its pandering, corruption, and unintended consequences of policy--look good by comparison.
But countries like China aren’t happy about U.S. control of “the tubes.” They’d rather have the U.N. run it. I wonder how the U.N. would’ve handled the situation in Burma recently when the government cut off all Internet access to all anti-government protesters, or how it would’ve handled the imprisonment in China of dissidents and reporters who emailed news out of the country.
My hunch is that we’d see the same level of management of the Internet from the U.N. that we’ve seen when it came to peacekeeping operations in Africa. Or its management of Saddam Hussein’s “Oil for Food” program. Or its monitoring of Iran’s nuclear program. In fact, I wouldn’t be surprised if when you look up “fool’s errand” in the dictionary, you find: “Role for United Nations’” as the definition.
We have a president with a near record-low job performance rating – 24 percent. (The record lows were Harry Truman after he fired Douglas MacArthur, and Richard Nixon the day before he resigned. Both were at 23 percent. )
Let's be clear, some of this is simple necessity. You might even say Mr. Giuliani didn't have a choice. Iowa's caucus system, dominated by social conservatives, was never going to blow kisses at the pro-choice, antigun New Yorker--Pat Robertson notwithstanding. Especially so if presented with a true-blue social conservative like Mike Huckabee, who in the latest polls is nipping Mr. Romney's shoes. South Carolina's southern conservatives present a similar challenge. Add to this that if Mr. Giuliani had vowed to conquer those citadels, and failed, his campaign would've taken a blow. You can't lose what you never said you'd win.
At the same time, this year's primary fight, and in particular the Republican race, are unique. The Giuliani wisdom, if that's what it proves to be, has been in recognizing those differences early on and toiling ever since to ply them to the mayor's advantage.
Changed circumstance No. 1 is this year's hypercompressed primary season. Whereas winners once got to bask in the glow of their early victories--and rake in the cash--for many weeks before Super Tuesday, this year they'll get to bask a few hours.Changed circumstance No. 2 is the unusual nature of the Republican field itself, in which there is no clear front-runner and voter confusion.
Finally, there's Mr. Giuliani, superstar.
The caveats? The New Yorker's ability to pull this off hinges on his ability to truly clean up in the mega-states. His campaign is already boasting that his leads in some of those places are "momentum-proof." But that's the sort of bold statement that borders on hubris. Even with a sped-up primary schedule, five hard-fought contests (the usual three, plus Nevada and Michigan) will still go down before the nation ever bats an eye at Florida. Allowing a campaign to go 0 for 5 in the run-up to that big day gives a new meaning to the word "risk."
DISCLOSURE: I am long 2008.GOP.NOM.GIULIANI