The Oracle calls the kettle black

Berkshire Hathaway collects $2.5 billion in derivatives premiums, via Dealbreaker.

Warren Buffett once called derivatives "financial weapons of mass destruction". Well, even my 2 year old is almost fully potty trained now.

UPDATE: More of the same, James Taranto on Buffett on taxes:

But does Buffett really want to pay more in taxes, or does he want the rest of us to pay more in taxes? If what troubles him really is his own meager contribution to the federal government, he could easily remedy that without being compelled to by law. Call it an act of civil obedience. Blogger Mark Perry leads us to this page on the U.S. Treasury Web site, which explains how to do it:

Citizens who wish to make a general donation to the U.S. government may send contributions to a specific account called "Gifts to the United States."

Buffett would be a far more effective advocate of higher taxes if he put his money where his mouth is. But in fact he has done just the opposite. Fortune reported last year on what he planned to do with his money:

"Brace yourself," Buffett warned with a grin. He then described a momentous change in his thinking. Within months, he said, he would begin to give away his Berkshire Hathaway fortune, then and now worth well over $40 billion.

This news was indeed stunning. Buffett, 75, has for decades said his wealth would go to philanthropy but has just as steadily indicated the handoff would be made at his death. Now he was revising the timetable. . . .

By giving his assets to charity, Buffett shields them from the death tax, which, under current law, his estate will have to pay unless he dies in 2010. As we noted in 2006, Buffett is also a supporter of the death tax. He just intends not to pay it.

Will the real Warren Buffett, please stand up?

Back in June 2007:

Speaking at a $4,600-a-seat fundraiser in New York for Senator Hillary Clinton, Mr Buffett, who is worth an estimated $52 billion (£26 billion), said: “The 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”

Today, November 2009:

Warren Buffett tells CNBC's Becky Quick that Berkshire Hathaway has talked to five big financial firms about buying their tax credits.

Buffett says he can't name any names due to confidentiality agreements, but notes that Berkshire has been buying tax credits since 1990 and will continue to do so in the future.

Can someone reconcile Buffett with Buffett for me?

UPDATE: Michael Corkery is just making the dissonance louder:

Isn’t it ironic that Buffett’s deal is sparking a lot of discussion about how railroads are an eco-friendly industry when much of Burlington Northern’s revenue comes from hauling coal? (The fossil fuel accounted for almost half the tonnage that the railroad hauled in the first nine months of the 2009).

Warren Buffett gets real about the government

Buffett is well known about his complaints that he pays less tax than his secretary. Well, Warren, when you are the richest man on earth, you might have more access to institutions--who will shelter your income and wealth from taxes--than the rest of us.

But in the case of Fannie & Freddie, Buffett is spot on:

Fannie Mae and Freddie Mac, the two largest mortgage finance companies, ``don't have any net worth,'' billionaire investor Warren Buffett said.

``The game is over,'' Buffett, the 77-year-old chairman of Berkshire Hathaway Inc., said in an interview on CNBC today. ``They were able to borrow without any of the normal restraints. They had a blank check from the federal government.''

Freddie Mac and Fannie Mae touched 20-year lows yesterday on the New York Stock Exchange on speculation a government bailout will leave the stocks worthless. U.S. Treasury Secretary Henry Paulson won approval from Congress last month to pump emergency capital into the companies, which account for more than half of the $12 trillion U.S. mortgage market.

Mr. Buffett, I hope you continue to follow the logic of your observations: a smaller government will yield smaller government disasters.

Here is some more history on the government's creation of the GSE mess.

Lehman was cooking its books

Great piece by Michael J. de la Merced and Andrew Ross Sorkin on "Repo 105":

... Lehman used what amounted to financial engineering to temporarily shuffle $50 billion of troubled assets off its books in the months before its collapse in September 2008 to conceal its dependence on leverage, or borrowed money.

This is also interesting:

Apparently unknown to Fuld, someone at Lehman had drafted a letter to employees "outlining a $3.5 billion investment from Buffett in Lehman's preferred stock at $54 per share conversion price."

That turned out to be a surprise for Buffett, "because he never got close to a deal with Lehman."

Based on a September 22, 2009 interview with Buffett, the report says, "Two items immediately concerned Buffett during his (March 28) conversation with Fuld."

First, "Buffett took it as a negative that Fuld suggested that Lehman executives were not willing to participate in a significant way" by investing in the firm under the same term.

Second, Buffett thought Fuld's complaints about short sellers indicated a "failure to admit one's own problems."

UPDATE: Yves Smith has a lot more, and it seems like Timothy Geithner is implicated.

UPDATE: Felix Salmon wonders if Arthur Andersen's fate awaits Ernst and Young.

Has Warren Buffett gotten too big or too old?

Insider Monkey runs an analysis, and finds:

Contrary to the general perception, Buffett has not had any alpha for the past 10 years. Let us repeat that: Buffett, no alpha, for the past decade. You would have been better off if you had invested your money with David Einhorn. Warren Buffett had a phenomenal annual alpha of 19% between 1956 and 1968. Our current analysis shows that his alpha was more than 30% between 1977 and 1981. During the 80′s and 90′s, his annual alpha declined but was still better than 12%. For the ten years leading to mid-2003, his annual alpha stayed around 12% per year. Since then, it started a steep decline; by the end of 2004 it was (still a respectable) 6% per year. Between 2005 and 2008 Buffett’s alpha averaged only 3% per year. Finally, in the ten years ending in 2009, it went virtually to zero.

Whether in sports or Nobel prizes in science, it seems a person's greatest achievements tend to occur in their twenties and thirties. But I think at least part of the decline here can be found in Berkshire's $200 billion market cap. It's a lot harder to move in and out of opportunities when you are piloting a supertanker versus a speedboat.

Quotes of the day

... Mr. Buffett didn’t build his $10 billion-plus stake in I.B.M. overnight. He started buying eight months ago, beginning in March. You wouldn’t have known that if you had been studiously reading Berkshire Hathaway’s filings — known as 13Fs — in which companies must disclose stock holdings. There was no mention of I.B.M. in Berkshire’s quarterly filing in April, nor in August. Instead, if you were looking carefully, you might have found an odd footnote that said: “Confidential information has been omitted from the form 13F and filed separately with the commission.”
...
Translation: Mr. Buffett received special permission from the S.E.C. to keep secret his investment in I.B.M. — and possibly keep secret stakes in other companies that he is building positions in that we have yet to learn about. Mr. Buffett’s special treatment from the S.E.C. is not new — he has long taken advantage of an obscure rule to avoid disclosing his bets to the public before he is good and ready. Mr. Buffett — and other billionaire investors like Carl Icahn, Bill Ackman and Nelson Peltz — essentially argue that the simple disclosure of an investment would cause the price to rise so much as to scuttle their strategy.
...
The rule says that the S.E.C. “may prevent or delay public disclosure of form 13F information for public interest reasons or the protection of investors.” In this case, the rule is clearly meant to protect the investor — Mr. Buffett — not the public.--ANDREW ROSS SORKIN

As a general rule, you can usually assume that someone is trying to screw someone else whenever you find these two elements working together:

Complexity
Money

Complexity is how evil schemes are hidden from the public. Complexity is what caused so many people to get mortgages they couldn't afford. Complexity is how hedge funds hide their treachery. Complexity is how the derivatives debacle was possible. Complexity is how your financial manager can get away with charging you for doing nothing. Complexity is why you don't know if you can get a better deal with another phone carrier.--Scott Adams

I’ve always been curious about successful men, leaders, and what they know that the rest of us don’t. This book was entertaining because Eisenhower was a character, nearly getting himself kicked out of West Point, causing a lot of trouble. But always there was in him a sense of confidence, a sense he would become somebody important. And more than this, he believed the world needed him — that if he didn’t exist, things would fall apart. He believed he was called to be a great man. I wondered, as I read, where he got this confidence.  I found the reason for Eisenhower’s confidence early on in [ At Ease: Stories I Tell to Friends.], in a chapter in which he discussed his childhood. Dwight Eisenhower said that from the beginning, his mother and father operated on an assumption that set the course for his life: that the world could be fixed of its problems if every child understood the necessity of their existence. Eisenhower’s parents assumed, and taught their children, that if their children weren’t alive, their family couldn’t function.--Don Miller

Plans are nothing. Planning is everything.--Dwight Eisenhower

... because Oscar campaigns are always based in part on the terrified certainty that the performance in itself cannot possibly be enough, all three men also come equipped with prepackaged narratives. DiCaprio’s, unveiled in a New York Times "Arts & Leisure" cover story simply headlined “Risk Taker,” is just that: I’m a hard worker who challenges myself with transformative roles for serious directors, and you’re never going to see me sell myself out for Pirates of the Caribbean 5: Shitload of Doubloons. Clooney’s narrative goes something like: I use my star power to get small and worthy movies greenlit, the clear implication being that the difference between The Descendants with Clooney and The Descendants with someone else is the difference between a movie you get to see and a movie you don’t. And Pitt’s, tailored to the tortuous history of Moneyball, is: I stick with projects I believe in for years until they get made. All three of these premises have enough truth in them to be legitimately deployed. But there’s a problem: They all fall into an awards-narrative category that Movieline’s Oscar guy, Stu Van Airsdale, astutely identified a couple of weeks ago “It’s a nice story. It’s just not … charming.”  Academy voters like to be seduced by a narrative, not simply persuaded by it, and a Clooney vs. Pitt vs. DiCaprio contest has a slight whiff of “Which of the three richest, handsomest, most popular boys in the school are we going to choose as class president?” They are, in short, the 1 percent — and this is not an ideal year to be in that category.--Mark Harris

The [Stereotype Threat] study investigated the applicability of previous experimental research on stereotype threat to operational Graduate Record Examinations® (GRE®) General Test testing centers. The goal was to document any relationships between features of the testing environment that might cue stereotype threat as well as any impact on GRE test scores among African American, Hispanic, Asian American, and female test-takers. Among such features were the gender and ethnicity of test proctors and more general factors, such as the size, activity level, and social atmosphere of test centers. Our analyses revealed several relationships among environmental factors and several variations in test performance for all groups. However, we found no direct support for stereotype threat and, in fact, found some effects for proctor ethnicity that ran counter to a stereotype-threat explanation.--Walters, Lee, and Trapani

These angry women have even less of a leg to stand on, now. Ding dong, the Sterotype Witch is dead, at least when it comes to race and gender in GRE performance (unless someone has another study with the same scientific credibility they can point me to).--Cav

Photo link here.

Warren vs. Whoopi and the rest of us

This story still seems to have some legs:

During a discussion of Republican Presidential candidates on ABC's "The View," which the comedian co-hosts, Ms. Goldberg said, "I'd like somebody to get rid of the death tax. That's what I want. I don't want to get taxed just because I died." The studio audience started applauding, but she wasn't done. "I just don't think it's right," she continued. "If I give something to my kid, I already paid the tax. Why should I have to pay it again because I died?"

When another co-host, Joy Behar, responded to Ms. Goldberg's remarks by asserting, "Only people with a lot of money say that," Ms. Goldberg shot back, "No, I don't think so . . . It doesn't matter if you have or don't have money. Once you paid your taxes, it should be a done deal. You shouldn't have to pay twice."

Ms. Goldberg has her political facts down. It's not just "people with a lot of money" who oppose confiscatory estate taxes. Billionaires like Warren Buffett have made a crusade of urging Congress to keep the death tax, even as he shelters much of his own wealth from that tax by giving to charity. However, according to polls, some 70% of voters favor a full repeal. And many, like Ms. Goldberg apparently, do so on moral grounds. Death as a taxable event and double taxation offend the average American's sense of fairness.

Today, CNBC's very own Buffett Beat Reporter, Becky Quick, softballs this back to Warren, who says that giving money to charity is not tax sheltering. I would agree with that, but still, we can't keep trying to compare Mr. Buffett to his receptionist (who pays a higher marginal tax rate) or to the rest of us who make between $40k-$400k per year and/or have $0-$4mil of net worth (i.e. most of us).

Even though Buffett is designating 85% or $37 billion of his estate to charitable foundations, that still leaves $6 billion in his estate, which could be allocated to trusts for each of his three children--essentially, dad could leave each of his kids as billionaires. Besides, about 10% or $3.5 billion of his charitable donations are placed in foundations headed by his kids.

I'm OK with the death tax (i.e. estate tax) if the first $6 billion is exempt. Warren, next time you testify before Congress (or that cutie Becky Quick), could you clarify these basic facts?

Quotes of the day

The real irony here is that a lot of [Chrysler's] secured creditors are institutional investors, including pension funds and mutual funds held by American workers, who are getting screwed on their retirement so that the UAW can save as much of the gold-plating on its contracts as possible.--Stephen Bainbridge

The [hedge fund] managers have a fiduciary obligation to look after their clients’ money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That’s how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could “share in the sacrifice”, you would not be happy.--Cliff Asness

I mean, the bondholders want a secure bond. If I have a first mortgage on my house here, and the first mortgage is for half of what the house is worth, and somebody says I want you to take a big haircut because I’ve got credit card debt someplace else, that’s got problems. It has problems in terms of future lending. I mean, if priorities don’t mean anything that’s going to disrupt lending practices in the future. On the other hand, to have a few people standing in the way of something that has, ah, so much importance to the whole country, I can see why people on the other side are very upset. But giving up priorities in lending, abandoning that principle, would have a whole lot of consequences. ... If we want to encourage lending in this country, we don’t want to say to somebody who lends and gets a secured position that that secured position doesn’t mean anything.--Warren Buffett

I think they’re just trying to make it past 2012.--Glenn Reynolds

Apparently the Obama administration's policy is to release photos only when doing so might pose a danger to national security.--James Taranto

Buffett is a towering figure, perhaps the greatest investor in American history. But he's not a god, and for all his good sense he's not omniscient. As Andrew Ross Sorkin mentioned in passing in Tuesday's New York Times, Buffett manages to play the kind of complex, risky, tax-advantaged, derivatives-laced game that he warns everyone else against. And the sense, conveyed by Sorkin who got to question the great man and his wisecracking sidekick Munger, that if we only pursued Buffett's "simple" verities we'd all be better off, is a snare and a delusion. ... If you want to keep it simple, index. If you want a homespun morality, find a church or synagogue.--Robert Teitelman

Quotes of the day

When it comes to business, everyone on Wall Street wants a piece of Warren E. Buffett. His presidential politics, however, appear to be another matter altogether. On Friday evening, Mr. Buffett was the host of a fund-raiser for President Obama at the Four Seasons restaurant in Manhattan, typically a magnet for the who’s who of finance. Democrats had bet that the star power of one of the world’s richest men would draw an overflow crowd of Wall Street’s elite for an affair that ran $10,000 a plate, or $35,800 for one-on-one time with Mr. Buffett.Yet organizers had trouble drawing the biggest guns of finance. The president’s campaign reserved space for 130 guests but only 116 (including Democratic staff members) attended, according to people with knowledge of the matter but not authorized to speak on the record. And there were few marquee names on the guest list.  ... One person who attended described the atmosphere as subdued and said the event seemed to attract more Buffett followers than Obama supporters.--SUSANNE CRAIG and BEN PROTESS

In the last election, people were tripping over themselves to get on the Obama bandwagon. Things have changed; Wall Street is not happy being under attack by the administration.--Michael J. Driscoll

In the meantime, we deserve to lose. We deserve our pain. The pain is the only hope that we'll ever learn to win again.--Stephen Marche

Silicon Valley entrepreneurs think the tech journalists are all stupid. The sports people think that about the sports journalists. They don’t say that to the sports journalists, because they want the sports journalists to be nice to them. But the level of contempt is very high. You need to kind of cut through that. You’ve got to be willing to not be a member of the tribe. Like, you can think what you think about journalists, but don’t put me in that category, because I’m not that.--Michael Lewis

It’s long been the source of domestic strife. Are women really worse at parking than men? Sorry ladies, official figures have revealed the truth: we are not very good at parking a car. Almost a third of all women who failed their driving test last year came unstuck due to parallel parking.--Emily Andrews

It's weird to write something that you really don't like.--Francis Chan

Uh, I’m pretty sure Jesus told us to have faith like a child. And kids can’t read. Soooo…--Jon Acuff

I'll never be in Joe [Montana]'s category.--Tom Brady

Lots of players are on pace to do ridiculous offensive things, and then there's Wes Welker, who has 40 catches in four games. Reggie Wayne, Hines Ward and Santonio Holmes have 40 too. Combined.--Peter King

... it is a waste of electrons to send me your resumé. ... I have seen dozens of top-ranked Ivy League graduates flame out (or worse, fizzle) over the years, mostly due to lack of energy, drive, or commitment to do what has to be done. Not because they weren’t smart enough; no, they were just too lazy or too entitled to get down in the mud and wrestle with the alligators, which is why we hire young cannon fodder like you in the first place. Survive the alligators, and you have a chance to rise into the haughty position of power, influence, and respect you feel you deserve. Don’t survive, and we’ll toss your mangled corpse out the back door onto a trash heap like a used Kleenex. Did I mention investment bankers are heartless bastards?--TED

When Mr. Obama was elected, some Americans believed he was serious about his campaign promises of immigration reform, an important issue for many voters. Those reforms were expected to include allowing more legal immigrants into the country for work, tourism, and study, and regularizing the status of many of the 11 million undocumented workers already in America. Three years later, immigration reform is more remote than ever. Once elected, the Obama administration has had other priorities, chiefly environmental and health policy. Our immigration policies remain a national embarrassment, confused and confusing and getting worse. Franz Kafka could never have imagined a more opaque, arbitrary, and unjust system than American immigration. It is a testament to the overwhelming attraction of America that people still seek to become Americans despite our immigration policies.--Diane Furchtgott-Roth

Photo link here.

Gates & Buffett: Conflicted Capitalists?

Don Boudreaux talks about about Bill Gates' Davos speech that dilutes capitalism:

I'm delighted that Bill Gates is reading the important work of the late Julian Simon ("Gates Calls for Kinder Capitalism," January 24). When he digests Mr. Simon's central idea - that human beings in market economies are "the ultimate resource" - Mr. Gates might then recognize that there is no need to change capitalism so that it becomes "creative." Capitalism has always been creative. It is inherently creative.

He also links to this John Tamny piece. I've posted several times in the past about Buffett's take, which is similar to Gates', and seems proven in his large charitable donation to the Gates Foundation.

Both Buffett and Gates were born to wealthy parents. On the other hand, Larry Ellison and Paul Allen (also americans on the Forbes top 20 billionaires list) grew up with parents of more modest, middle-class means. And while they are active in charitable works, I don't seem to hear them wanting to take more money from working families and distributing that money--through the inefficient intermediary of government--to families who are working less.

I think there's strong pathology of guilt that drives the children of the rich. Maybe that's a good thing, but please keep your hands off everybody else's money. Thanks.

Edmund Phelps on good economic rescue planning

He concludes:

A program of asset purchases, however needed, is limited in scope. It cannot be counted on to increase the equity capital of the banks -- to shore up their solvency. Underpaying for the toxic assets would actually inflict a further loss of capital. Overpaying the banks for their toxic assets could contribute capital, but that may not be politically feasible or attractive.

So it is clear that the main prong of any "rescue" plan must serve to advance the recapitalization of the banks. Cash transfusions in return for warrants are a good way to do it, as it lets taxpayers share in the upside. The rescue of Chrysler used warrants. This past Monday the FDIC got $12 billion in preferred stock and warrants in the deal that saw Citigroup buy Wachovia. The question is which banks are to be thrown a lifeline, which will have to sink or swim. This one-time dose of corporatism is unpleasant, though the banking industry is to blame for its necessity.

But these steps toward making the system operational again will leave it dysfunctional. We don't want to restore the system as it was. And the risk that the industry would cause another round of wreckage is not the only reason.

What has occurred is not just an old-fashioned banking crisis but also a banking scandal. Most of the big banks were shot through with short-termism, deceptive practices and self-dealing. We must institute basic changes in corporate governance and in management practice to restore responsibility and honesty for the sake of the economy and for the self-respect of the country.

We also need to return investment banking to its roots. There is more to the influence of the financial sector than merely its effects when it goes off the rails. The financial system is not a sort of circulatory system that passively carries fresh saving to the places in the economic body that demand the greatest investing -- as if guided by some "invisible hand." Judgment and vision -- of bankers, fund managers, angel investors and the rest -- matter hugely. So do the distortions, the limits and the license created by the regulatory system and the moral climate. To prosper and advance, the American business sector is going to need a financial system oriented toward business, not "home ownership."

I called for warrants as well last week, after seeing Warren Buffett scooping some from Goldman. I don't think Buffett is an expert on economics (re: Berkshire Hathaway's currency trades), but is there a better value investor?

UPDATE: Buffett does a capital infusion deal with General Electric, similar to the one he struck with Goldman Sachs. He also tells CNBC's Becky Quick that he would love to put $7 billion into the government's rescue plan, if they are buying assets at current market prices.

Some are more equal than others: Warren Buffett and derivatives regulation

Damian Paletta And Scott Patterson report:

Democrats took a step toward their goal of overhauling financial regulation, reaching a tentative deal to set restrictions on trading in exotic financial instruments known as derivatives. Among the considerations still in the balance: A big provision being sought by Warren Buffett in recent weeks. A key Senate committee had changed its proposed overhaul of derivatives regulation after lobbying by Mr. Buffett's Berkshire Hathaway Inc., potentially helping the famed investor avoid a financial hit, congressional aides say. ...

The provision, sought by Berkshire and pushed by Nebraska Sen. Ben Nelson in the Senate Agriculture Committee, would largely exempt existing derivatives contracts from the proposed rules. Previously, the legislation could have allowed regulators to require that companies such as Nebraska-based Berkshire put aside large sums to cover potential losses. The change thus would aid Berkshire, which has a $63 billion derivatives portfolio, according to Barclays Capital.

Who said this, again:

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.

Quotes of the day

It turns out that Bloomberg ran a headline on its terminals at 1:48 EST. The headline read: “Janus Says It Received Inquiry Calling For General Information.” That information wasn’t publicly available to anyone who does not have a Bloomberg terminal. It wasn’t posted on Janus’s website. In fact, it took several minutes before it appeared in any place the general public has access to. So is Bloomberg aiding insider trading? Of course not. It’s a journalistic enterprise whose right to report information is protected by the First Amendment. That’s true even if the information is ‘non-public’ and has obviously been leaked by an insider. And, although it’s less clearly spelled out in the constitution, the right to gate the information so that it is only available to subscribers is probably protected as well. The question is: what’s the difference between what Bloomberg did on Janus today and what the expert networks and consultants are doing?--John Carney

Here is what [Stevie Cohen] is not: he is not Warren Buffett, arguably the best investor in history. Buffett is a fundamental investor, a man who takes deep, long-term views on the prospects of one company or another, and then tries to pick his entry point when he's got a large "margin of safety" as protection. It's not difficult to understand why Buffett's early investments in the likes of Coca-Cola (KO), Wells Fargo (WFC), and American Express (AXP) have paid off over the long haul. Cohen is also not Marc Lasry of Avenue Capital, an investor who specializes in so-called distressed investments. When you're a distressed investor, you not only have to have a well-thought opinion on the prospects of a company, you also need to know your way around the capital structure. Size and experience go a long way in the distressed realm, and the big can get bigger by virtue of that edge. When Lasry tries to take control of Donald Trump's bankrupt Atlantic City casinos, we can understand where he's coming from: the assumption that a serious human being could run Trump's casinos better than the Donald himself. Finally, Cohen is not James Simons of Renaissance Technologies, the king of the quantitative investors. While SAC Capital may use some trading algorithms in its day-to-day, Cohen's is not a black-box operation, with software designed and constantly tweaked by a squadron of PhDs like those that work for Simons. We may never learn what Simons' algorithms actually are, but we do accept that computers can outperform humans at quantitative tasks. Cohen, in short, is a trader. According to one knowledgeable investor, Cohen has called what SAC does "information arbitrage." He and his staff are simply whipping stocks around on a day-to-day basis, trying to get an information edge over the guy on the other side of the trade. If that sounds fundamentally useless, that's because it is.--Duff MacDonald

While every decent person applauds fairness and condemns unfairness, “fairness” is far too fuzzy a concept to guide public policy. To see why, imagine what the state of First Amendment law would be like were only a few words of that amendment changed to make its guiding principle fairness rather than freedom: “Congress shall make no unfair law respecting an establishment of religion, or prohibiting the fair exercise thereof; or abridging the fairness of speech, or of the press; or the right of the people fairly to assemble, and to petition the Government fairly for a redress of grievances.” Is there any doubt that replacing “free” with “fair” in this context would remove all teeth from the First Amendment? In the same way, a policy of fair trade rather than free trade would, in practice, be a policy of unfree – and, by the way, unfair – monopoly privileges for politically influential domestic producers.--Don Boudreaux

Politicians lie all the time. They are expected to lie. The British government lied in 1931, 1967, and 1992, when it said it wasn’t going to devalue, before it did devalue. That’s expected. Everyone knows that if you say you will devalue in the future, it forces an immediate devaluation. And under a gold standard if there is uncertainty about whether a devaluation will occur then gold hoarding increases, which is deflationary. This happened on four occasions during the Great Depression, and on each occasion asset prices and industrial production declined sharply.--Scott Sumner

Every damn day, if you tune in to any of the 24-hour news outlets, the same pundits retread through the same stuff--they all say the same thing. I spend a great deal of time trying to figure out how the whole DC opinion apparatus remains employed. If there were any justice, their ranks would swell the unemployment rate beyond 10 percent. And still, some moron known as a news executive who hasn't registered a thought beyond mediocre in my lifetime approves of this, and Americans, educated to believe 2+2=5, will put up with anything. Into this horror walks Sarah Palin, who is kind of a sexy librarian, kind of a MILF, kind of just crazy, and altogether does what she wants to do. This, actually, is normal behavior. But we are so used to watching other female politicians compromise in so many ways that there is not enough Vaseline in all of CVS to make the situation comfortable--so Sarah Palin seems completely strange. Unfortunately, Sarah Palin is not very bright, not very thoughtful and not very qualified to run a country. Or a state. But really, are any of the other idiots who want the job so much better?--Elizabeth Wuertzel

You can either be an unhelpful and indecisive wimp, or you can be a frickin' idiot. There are no other options. I recommend the frickin' idiot path because it's more masculine.--Scott Adams

The enormous amount of coal required to run our great ocean steamships, our leviathans of the deep, and the innumerable factories of our cities is making such inroads upon the available store that nature cannot forever supply the demand. When all the coal of the earth is used, what then?--Lord Kelvin, in 1902

One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.--Al Gore

... Gore explains why he voted for ethanol subsidies despite believing that they are poor public policy. Note that Mr. Gore refers to his knowingly selling his principles for votes as a “mistake.” Unless he means that his effort didn’t pay off with the top job in the White House, his soul-selling was no “mistake”; he knew exactly what he was doing and why he was doing it. His soul-selling was an instance, pure and simply, of the hypocrisy and lying that is the stuff of too many political campaigns.--Don Boudreaux

Quotes of the day

Most people think facts are easy and theory is difficult. It is often the other way around.--Eric Falkenstein

Just because two variables have an expected difference of zero, you can’t conclude they have an expected ratio of one. That needs to be computed separately.--Steve Landsburg

... the fact that markets fail does not mean that government solutions work.--Arnold Kling

Consumers have benefited to the effect of $20 billion a year [from airline deregulation]. Where competition is feasible, the government should get the hell out of the way.--Alfred Kahn

I really don’t know one plane from the other. To me, they’re all marginal costs with wings.--Alfred Kahn

[Kahn] taught us a lesson that competition, even imperfect competition, is better than imperfect regulation; that facts make a difference, if only we have the humane procedures to uncover them and the brains to understand them; and that intellectual rigor, decked out in wit and flair, even in Washington, can be a winning combination.--former U.S. Assistant Attorney General John Shenefield

A 2008 study by the U.S. Securities and Exchange Commission found the average cost of Sarbox compliance is $2.3 million per year. A whopping 70 percent of all smaller public companies said compliance costs have prompted them to consider going private, and 77 percent of smaller foreign firms reported considering abandoning their American listings.--Eric Jackson

Warren Buffett wants the rich to pay a higher tax rate. Even Larry David (co-creator of Seinfeld) had a funny piece in the New York Times mocking the notion that the tax increase would be noticed by people in the hundred-million-dollar club, such as himself. The tax-the-rich argument feels fair if you allow yourself to see the world as only two categories: the rich and the non-rich. And it helps if you let the media install Bernie Madoff as the poster boy for the rich, while perhaps you imagine Tiny Tim as your symbol for the non-rich. But what about, let's say, a hard-working doctor? His taxes would increase when you tax the so-called rich. And unlike Warren Buffett and Larry David, a tax increase likely has real implications for the doctor's family. Before you break out the tiny violins for my hypothetical doctor, allow yourself to imagine that he's got a mountain of college loans, his mortgage is underwater, and he's supporting three grandparents (one on his wife's side) who all need some form of senior care, and the doctor's parents, and his wife's parents, have no spare cash. The doctor's parents might also need help in a few years. Oh, and the doctor has two kids of his own, one of whom needs some sort of special care. That's what the real world looks like for the so-called Sandwich Generation. For this imaginary doctor, any extra tax burden takes money from four generations of his family who needs it and distributes the cash to strangers. ... it is fair to say that the Majority left the bank door unlocked so the Rich could loot it. Nice work, Majority. Now the Majority's proposed solution is to take money from the Suckers income group to compensate for their own gross mismanagement of the country. You might argue that the rich are the ones who are really in charge, even in a democratic system. That makes the story even worse. In that case, the rich plundered both the Majority and the Suckers, and now Warren Buffett and Larry David are pointing fingers at the Suckers in the hope that the Majority doesn't decide to boil the rich for food. That's what I would do if I were a billionaire. Just sayin'. My own view, as a member of the Suckers group, is that if economists determine that the best way to make the country solvent is to increase my taxes, I'm willing to look at those numbers. I'm a practical guy. But I do resent being gang raped by the Rich and the Majority while they high-five each other and call it fairness. And I'd feel a little better about it if the Majority would do a better job managing things going forward.--Scott Adams

The answer to the inherent difficulty of judging performance is not to simply throw up one's hands and pay anyone who manages to show up for work more often than not. Yet this is that the teacher's unions seem to want. The unions, who seem to be the primary source for the New York Times piece, are (like many employees) very adept at picking out the problems in an evaluation system. Unfortunately, their solution is ... : Make no attempt to evaluate performance at all. ... Myself, I'd be happy with a more subjective, manager-intensive effort to evaluate teacher performance, weeding out the very bad teachers, and using pay to lure the very best ones into the places where they are most needed: schools that teach disadvantaged kids. But it's worth noting that such a system is pretty much totally incompatible with a unionized workplace--certainly one with a unionized workforce as adversarial as the teacher's union is in many cities. The whole union system is set up to deal with standardized processes.--Megan McArdle

Yes, Tom Brady is having an MVP-caliber season. Yes, rookies Devin McCourty, Aaron Hernandez, Rob Gronkowski, Brandon Spikes and Jermaine Cunningham have all played significant roles in the team’s success leading to a 13-2 record and the No. 1 seed in the upcoming AFC playoffs. But without the 21 undrafted free agents on the club’s roster, the Patriots would not have had the depth to deal with injury after injury to the rest of the roster. ... What is different is that few teams have managed a rash of injuries any better in recent memory than these 2010 Patriots. The 21 undrafted players are the most of any team in the NFL. Of the 21 players not drafted on the current Patriots roster, no fewer than 12 have found themselves not only playing but starting and playing significant roles, with significant defined by playing more than half of their potential snaps in a game.--Mike Petraglia

In theory, the 12,000 households with the highest incomes are producing more wealth each year than the 24 million households with the lowest incomes. I hate to have to say it, but I find that plausible. In theory, the average federal worker produces more than twice the wealth of the average private-sector worker. I hate to have to say it, but I find that doubtful.--Arnold Kling

... the American school system is actually better, if one makes ... a crude adjustment for demographics (with no adjustment for demographics, European scores are better). However, what might happen if you had a sophisticated way to adjust for the ability of children entering school? Would all of the differences between school systems become insignificant?--Arnold Kling

MBA training can give you insight into the workings of a firm and its components (marketing, operations, strategy, human resources, finance, etc.), but there is much of the investment world that is untouched in the standard MBA curriculum. However, should you want to change careers later on, an MBA is preferable to a CFA. Of course, as with math or any subject, what you get out of an MBA in terms of learning and the value of it as a currency depends greatly on the school you attend. If you think you want to stay in the investment world, a CFA is the better choice. I love the diversity of the subject matter. When I taught CFA classes, I could tell who in the class worked in equities and who in fixed income by their reactions — but everyone has to pass the same test, which includes those subjects, plus economics, quantitative methods, financial reporting and analysis, portfolio management, etc. And ethics, thankfully. You may think that you only need expertise in a couple of those areas, but the more of them you understand, the greater your value as an investment professional. The business will try to paint you into narrow lanes; those that know when to veer across them to seize an opportunity have a distinct advantage. ... If you choose to pursue an MBA or a CFA, remember that they are built upon orthodoxy, by and large, which you need to learn and attack at the same time. There are principles and standards and techniques for you to master, but the business is one that never stands still, no matter the credentials that you earn.--Tom Brakke

Consistent with the firm’s Compensation Principles and existing compensation programs, it is intended that any awards granted under the Plan will be designed to align compensation with long-term performance in a manner that does not encourage imprudent risk-taking.--Goldman Sachs

Since the dawn of the industrial revolution in the mid-18th century, available supplies of coal, petroleum, iron ore, and most other resources have increased significantly – and, as a result, their real prices have fallen. These rising resource supplies and falling prices occurred during a time when human population increased by a factor of ten – from 700 million to nearly 7 billion today, at least 4 billion of whom are now part of industrial economies. So the increase in the number of persons integrated into industrial economies over the past two-plus centuries – from near-zero persons 260 years ago to at least 4 billion persons today – is far larger than is the number of Chinese, Indians, and other peoples now being integrated into industrial economies.--Don Boudreaux

Most snow crystals—as [Wilson Bentley] knew, and kept quiet about—are nothing like our stellar flower: they’re irregular, bluntly geometric. They are as plain and as misshapen as, well, people. The Fifth Avenue snowflakes are the rare ones, long and lovely, the movie stars and supermodels, the Alessandra Ambrosios of snow crystals. The discarded snowflakes look more like Serras and Duchamps; they’re as asymmetrical as Adolph Gottliebs, and as jagged as Clyfford Stills. But are they all, as Starbucks insists, at least different? ... The sign in Starbucks should read, “Friends are like snowflakes: more different and more beautiful each time you cross their paths in our common descent.” For the final truth about snowflakes is that they become more individual as they fall—that, buffeted by wind and time, they are translated, as if by magic, into ever more strange and complex patterns, until, at last, like us, they touch earth. Then, like us, they melt.--Adam Gopnik

Is [the Christmas] story of any interest to non-Christians? Is it historically accurate? I don’t know, but I think it’s a great story. It’s a story of transformative power that comes not from the Palace up above, but from the Manger down below.--William Easterly

The Top Ten Billionaires in Finance

as rounded up by Matt Turner:

1. Warren Buffett, 78 years old, $37 billion.
Buffett, chairman and chief executive of financial conglomerate Berkshire Hathaway

2. Michael Bloomberg, 67, $16 billion
Bloomberg was the only man in the top 20 whose wealth increased last year, despite his only taking home $1 a year in compensation as mayor of New York City.

3. Prince Alwaleed Bin Talal Alsaul, 54, $13.3 billion
The “Buffett of Arabia” saw shares in his Saudi-listed investment vehicle Kingdom Holding fall 60% last year, as his ill-timed bet on Citigroup backfired, with shares in the U.S. financial conglomerate falling in 86% in a year.

4. David Thomson, 51, $13 billion.
Chairman of Thomson Corp, now Thomson Reuters, the media conglomerate in which has family own a 70% stake.

5. George Soros, 78, $11 billion.
Soros founded the Quantum Find in 1969, and is said to have made $1 billion in a day in his fight with the Bank of England over sterling.

6. Ronald Perelman, 66, $10 billion.
Renowned corporate raider Perelman famously bid for Salomon Brothers in the late 1980s, and sold Golden State Bancorp to Citigroup in 2002 for $6 billion.

7. Mikhail Prokhorov, 43, $9.5 billion.
Despite losing more than half of his wealth last year, Prokhorov is now the richest man in Russia, and owner of a 50% stake in Renaissance Capital, through his investment vehicle Onexim Group.

8. Carl Icahn, 73, $9 billion.
Activist investor Icahn, a former Wall Street trader at Dreyfus & Co, was hit by a 71% fall in the value of shares in his holding company Icahn Enterprises last year.

James Simons, 71, $8 billion
Founder of hedge fund Renaissance Technologies, Simons’ wealth actually increased last year. According to Forbes, his quant hedge fund has returned 80% net of fees last year.

John Paulson, 53, $6 billion
Hedge fund manager Paulson reaped handsome profits by betting against subprime-mortgage securities in 2008, personally pocketing $3.5bn. Paulson, who previously worked for Bear Stearns, has continued to benefit from the credit crunch by betting against U.K. bank shares.

Quotes of the day

Never trust a critic.
Especially this critic.--Mark Kermode

But the odds are that one of these years the world’s greatest nation will find itself ruled by a party that is aggressively anti-science, indeed anti-knowledge. And, in a time of severe challenges — environmental, economic, and more — that’s a terrifying prospect.--Paul Krugman

Yes, a terrifying prospect — and an excellent reason to limit the powers of ruling parties, though Paul never seems to notice this.--Steve Landsburg

I get the ball, I throw the ball, and I take a shower.--Mariano Rivera

... those who receive and act out the gift of athletic genius must, perforce, be blind and dumb about it -- and not because blindness and dumbness are the price of the gift, but because they are its essence.--David Foster Wallace

These tempests obscure a larger truth about [SC Justice Clarence] Thomas: that this year has also been, for him, a moment of triumph. In several of the most important areas of constitutional law, Thomas has emerged as an intellectual leader of the Supreme Court. ... In his jurisprudence, Thomas may be best known for his belief in a “color-blind Constitution”; that is, one that forbids any form of racial preference or affirmative action. But color blind, for Thomas, is not blind to race. Thomas finds a racial angle on a broad array of issues, including those which appear to be scarcely related to traditional civil rights, like campaign finance or gun control. In Thomas’s view, the Constitution imposes an ideal of racial self-sufficiency, an extreme version of the philosophy associated with Booker T. Washington, whose portrait hangs in his chambers. (This personal gallery also includes Frederick Douglass, Abraham Lincoln, Ronald Reagan, and Margaret Thatcher.)--Jeffrey Toobin

I don’t do Ivies. ... Yale meant one thing for white graduates and another for blacks, no matter how much anyone denied it. ... We talk about diversity. The real problem of our Court is that it’s all Ivy League. Correct me if I’m wrong, but I think there are other law schools out there. ... I grew up with maids, and janitors, and yard people. It gives you a perspective on society. You’re looking from the bottom up, and how people see it from that direction. . . . You understand why people are angry or upset. You understand why they become rich soil for class envy and class hatred, or class warfare. You see how they become easy pickings for people who have snake-oil merchants for solving all their problems. But you develop a respect for them without condescension. You develop an attitude that we are all inherently equal regardless of who went to school and who did not—that there can be smart people who did not have any book learning and never had a chance. ... There’s a difference between being poor and being stupid. And you’re stupid for thinking that they’re stupid. As my granddaddy would say, you’re just an educated fool. . . . I am passionate about preserving liberty so that people can rise from that to go to the Supreme Court. My wife does this, too. My wife is my best friend. I can rant with her. She doesn’t read opinions or anything. We believe that this is a good country and that people should have a chance. That’s why you see so many of my law clerks who don’t go to Ivy League schools. These are kids who tried hard and did well. Why don’t we reward them?--Clarence Thomas

I always ask people, ‘What would you do with Plessy v. Ferguson, which was sixty years old?’ If it’s wrong, the ultimate precedent is the Constitution. And it’s not what we say it is, it’s what it actually says, and I think we have to be humble enough to say we were wrong. ... When interpreting a constitutional provision, the goal is to discern the most likely public understanding of that provision at the time it was adopted.--Clarence Thomas

In other words, Thomas is humble before his own reading of the constitutional text—and dismissive of the attempts of others, including other Justices, to interpret it. ... To that end, he plumbs the words of the framers and the eighteenth-century (and earlier) thinkers who influenced Jefferson, Madison, and their contemporaries.--Jeffrey Toobin

One of the things the activists care about is that the so-called ‘living Constitution’ is a convenient political fiction. A living Constitution gives more power and authority to the state.--Dick Armey

I don’t agree with him, but Thomas has the most internally coherent view of any Justice.--Richard Hasen, a professor at the School of Law at the University of California at Irvine

Further, notwithstanding Thomas’s enduring certainties, it is difficult to know what the framers would have thought of any given situation. (Alito, a conservative but not a full-fledged originalist, captured this problem nicely, in the oral argument about the California law on violent video games. Following up on a series of questions by Scalia, Alito asked the lawyer, “I think what Justice Scalia wants to know is what James Madison thought about video games. Did he enjoy them?”) It is true, too, that the framers often disagreed profoundly with each other, making a single intent behind the Constitution even more difficult to discern, and the twenty-seven amendments (all with their own framers) created another overlay of complication. For all of Thomas’s conviction, originalism is just another kind of interpretation, revealing as much about Thomas as about the Constitution.--Jeffrey Toobin

Jeffrey Toobin’s gripping, must-read profile of Clarence and Virginia Thomas in the New Yorker gives readers new insight into what Sauron must have felt: Toobin argues that the only Black man in public life that liberals could safely mock and despise may be on the point of bringing the Blue Empire down.  In fact, Toobin suggests, Clarence Thomas may be the Frodo Baggins of the right; his lonely and obscure struggle has led him to the point from which he may be able to overthrow the entire edifice of the modern progressive state.--Walter Russell Mead

Alan Krueger to chair CEA. Congratulations, Alan. An excellent choice by President Obama.--Greg Mankiw

Dismissing the achievements of welfare reform because the poverty rate didn't decline towards zero makes no sense to me. While it would be nice if it had happened, no one really expected it to. The fact that a miracle failed to materialize is hardly a searing indictment of reform. You can argue that the decline in the poverty rate was assisted by other reforms like boosting the earned income tax credit, and I completely agree. But boosting the EITC does nothing to help people who aren't earning income. If we hadn't done welfare reform, "not earning income" would still describe the majority of poor families.--Megan McArdle

Look, Debbie, I understand that after I departed the House floor you directed your floor speech comments directly towards me. Let me make myself perfectly clear, you want a personal fight, I am happy to oblige. You are the most vile, unprofessional ,and despicable member of the US House of Representatives. If you have something to say to me, stop being a coward and say it to my face, otherwise, shut the heck up.--Rep. Allen West, to Rep. Deborah Wasserman Schultz

[Warren Buffet] suggests that the 12 member congressional panel set up to cut current and future federal deficits leave tax rates unchanged for 99.7 percent of taxpayers, and only raise rates on the approximately 250,000 households who make more than $1 million. Simple calculations show that a tax increase on such a small number of households, even a very large tax increase, would have a negligible effect on total tax revenue, and hence on closing the budget deficit. As we will see, there are more sensible ways to improve tax revenue. Warren Buffett has persuaded 68 other billionaires to follow his example and promise to give at least half their wealth to charities. But why hasn’t Buffett proposed also that the very rich make large gifts to the federal government to offset what he considers ridiculously low taxes on their incomes and wealth? My guess is that he and the others who pledged to give away their wealth to charity would have little confidence in how the government would spend such gifts. Buffett, for example, is giving most of his wealth to the Gates Foundation, not to the federal government, and is relying on how this foundation will spend his vast gift. Given this reluctance to make large gifts to the federal government, why should anyone have confidence that the federal government will spend additional tax revenue in a sensible way?--Gary Becker

Bol legends have piled up over the years, and in the e-book "The Defender" Jordan Conn probes as necessary, interviewing Bol's teammates, friends and family. As a child, he may have killed a lion; he quite possibly coined the phrase "my bad"; he certainly warned Congress about Osama bin Laden in 1993. Filtered through the American media, his later life—he died last year of kidney failure—was a sad mishmash of illness and publicity stunts, such as a 2002 bout with William "The Refrigerator" Perry on Fox's "Celebrity Boxing." (Bol won, wearing red shorts stitched with the nickname "Sudanese Freedom Fighter.") The stunts were ridiculous—Manute playing ice hockey, Manute in jockey's silks—but the proceeds went to the Southern Sudan rebels.  As Mr. Conn details what motivated Bol and the responsibilities he felt to his region, "The Defender" gives Bol back the dignity he seemed to have lost. If the image of Bol crouched in the brush, talking strategy with armed fighters, is an unexpected one, it's also revelatory. Even his financial woes were a result of giving too much to the cause, and Mr. Conn suggests that Bol more or less killed himself through his insistence on campaigning for pro-independence candidates. Suddenly the desperation that marked his later years makes a lot more sense.--Nathaniel Friedman

Photo links here and here.

Quote of the day

It's like Warren Buffett is driving up to a hospital on fire, and cherry picking out all the healthy people.--Unattributed, commenting on Buffett's monoline munibond plan

Quotes of the day

... sadness lowers the probability of earning A grades, and raises that of receiving grades of C or below, by over 15%.--NBER Working Paper No. 16239, Issued in July 2010

The more I think about it, the more convinced I am that the stories we are told govern what we believe possible.--Brooke Berman

I’ve preached too much and studied too little.--Billy Graham

Stubbornness is a virtue if you are right.--Tony Dungy

When Berkshire Hathaway earnings are released tomorrow they will report a further mark to market loss on their equity index put option portfolio. This could be up to $3bn. Collateralisation is being mooted, and talk of a Berkshire exit has long dated option markets rattled. ... Were Buffett inclined to close his positions because finreg and ratings downgrades forced unwelcome collateralisation I am fairly sure you can think that sort of level, at least, for an exit cost of almost $3bn. And that is before the impact on their position from the pressure on forwards (delta impact ought to be low as it would be a cross.) An unwind would be mass destruction, by anyone's reasoning. I find it unlikely, yet the mere thought of it as an unintended consequence of finreg is a sure fire reason for the striking upward moves in long dated volatility, particularly in the S&P 500 (if, in fact, Berkshire have not actually covertly started buying back vega). Buffett will resist collateralisation, but if it ends up a choice between cutting the position outright or posting collateral, major equity index option traders should be holding their breath for the latter.--Andrew Clavell

Like all presidents who win a big national election, Barack Obama wanted to whip as many measures through Congress as fast as possible But it’s not “obstructionism” for the Senate to decline to act like the British House of Commons, enacting whatever it pleases the chief executive to propose. There’s a big difference between the Senate of the 1950s refusing session after session to consider civil rights legislation backed by the overwhelming majority - and the Senate of the 2010s declining to try for the fourth time in 10 years to shove through an immigration amnesty that Americans do not want. ... If a president can mobilize the country behind an idea, it’s amazing how the filibusters will fade away. Look at how Republicans opted to step out of the way of the Sonia Sotomayor appointment or unemployment insurance extension. If the president cannot mobilize, he will fail. The Senate may be one of the more visible manifestations of that failure. But don’t mistake the manifestation for the cause.--David Frum

Elena Kagan’s confirmation represents a victory for big government and a view of the Constitution as a document whose meaning changes with the times. Based on what we learned the last few months, it is clear that Kagan holds an expansive view of federal power — refusing to identify, for example, any specific actions Congress cannot take under the Commerce Clause. She will rarely be a friend of liberty on the Court. It is thus telling that Kagan received the fewest votes of any Democratic nominee to the Supreme Court in history, beating the record set only last year by Sonia Sotomayor. Even several senators who had voted for Sotomayor voted against Kagan, including Democrat Ben Nelson — as did Scott Brown, the darling of these high-profile Senate votes.--Ilya Shapiro

In recent months Beijing has elevated its claims to territory in the South China Sea to the level of a "core national interest" on par with Tibet or Taiwan, and that has sparked considerable anger among the other countries in the region -- including Brunei, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam -- that claim ownership of pieces of the sea. A few days after Clinton's sally, China's minister of foreign affairs, Yang Jiechi, issued a harsh statement of his own in which he slapped down any effort to internationalize the dispute and called Clinton's statement "virtually an attack on China." Then, just in case the Americans and the Southeast Asians still didn't get the message, the Chinese navy staged large-scale maneuvers in the sea, deploying ships from all three of its fleets. Admirals watched as the ships fired off volleys of missiles at imaginary enemies -- all of it shown in loving detail by Chinese television. Experts agreed that the whole display was unprecedented. What's going on here? Aren't these the same Chinese who were being praised, a few years back, for their subtle diplomacy, shrewd PR, and clever exploitation of the strategic openings created by Washington's Middle Eastern adventures?--Christian Caryl

Quotes of the day

[HP] looks cheap, but the future of the PC is a very, very difficult business to handicap.--Bill Ackman

One of the interesting things that we’ve noticed is that companies correlate on decision making and speed of decision making. There are basically no companies that have good slow decisions. There are only companies that have good fast decisions. I think that’s also a natural thing as companies get bigger –they tend to slow down decision making. And that’s pretty tragic.--Larry Page

... even though a computer can execute millions of instructions in a microsecond, the furthest light can travel in that time - even in a vacuum - is just 300 meters.--Jeff Hecht

The world has experienced five major technical-economic cycles:
(1) 1771 - , The First Industrial Revolution in Britain, based on mechanization of the cotton industry.
(2) 1829 - , The Age of Steam and Railways
(3) 1875 - , The Age of Steel and Electricity
(4) 1908 - , The Age of Oil, the Automobile, and Mass Production
(5) 1971 - , The Age of Information and Telecommunications
--Leonard Wilson, on Carlota Perez's Technological Revolutions and Financial Capital

Proposed List Of Demands For Occupy Wall St Movement!--LloydJHart

I think we are between the last cycle and the next cycle, the latter of which will hopefully improve the intellectual capacity of people who make lists like the one above.--Cav

The midsection of a 67-year-old is not a pretty sight.--Bill Gross

For centuries, parents have given their kids the awkward “birds and the bees” sex conversation. But we are the first generation of parents in the history of mankind who must have a “digital footprint” conversation with our kids. We are the first generation that has to sit our kids down and say, “Let’s talk about Facebook and Twitter and Youtube.”--Jon Acuff

Koch Industries has spent more than $50 million to lobby in Washington since 2006." My reaction to reading this was, "$50 million? That's it?" That might sound like a lot, but let's compare that to, say, General Electric. Over the same period, GE has spent more than $136 million lobbying, according to the Center for Responsive Politics. ... I don't know the Koch brothers; I've never met them. I can't tell you if they're saints or sinners. But at least from this Bloomberg article, their company doesn't appear to be especially destructive or immoral. That much is crystal clear through some perspective. But maybe the reporters can prove me wrong about their bias by their next article detailing the many alleged misdeeds of a company with political ties to the left, like GE.--Daniel Indiviglio

Ms. [Betty] Liu deserves some credit for being a rare interviewer of Mr. Buffett who, rather than simply fawning, challenges him. Other journalists sought out by Mr. Buffett would do their profession and the country a favor by following suit. Some possible follow-ups for next time: “What’s your justification for making your tax apply only to “people who shuffle money around all day” but not to athletes or CEOs? Would it apply to CEOs of banks, insurance companies, or other publicly traded financial firms? Are there any other precedents for taxing income differentially by occupation rather than by source? Is that something we want to encourage in the tax code? Wouldn’t it just make things more complex?--Ira Stoll

Obama has basically confirmed the worst fears about regulators (and himself) which is that business shouldn't be regulated based on any predictable rules, but rather the whims of people who might in their gut just feel that something is wrong. In this instance, people who scream about "uncertainty" may have a point.--Joe Weisenthal

Gibor Basri, Berkeley’s vice chancellor for equity and diversity, could have served a valuable role here by pointing out that the [affirmative action] bake sale was obviously a parody of racial and gender preferences, not a criticism of students themselves. Whatever one thinks about the issue of preferences, he might have said, such political theater belongs to Berkeley’s once-revered tradition of free speech. Instead, Basri chose to stoke the melodramatic self-pity of today’s college students. “A lot of students, especially students of color, read [the bake sale] as placing a higher value on white students,” Basri told the New York Times. Basri, in other words, obeyed the ironclad script for all such minor perturbations in the otherwise unbroken reign of campus political correctness. That script requires that the massive campus-diversity bureaucracy treat the delusional claims of hyperventilating students with utter seriousness. Students in the ever-expanding roster of official campus victim groups flatter themselves that by attending what is in fact the most caring, protective, and opportunity-rich institution in the history of the world, they are braving unspeakable threats to their ego and even to their physical safety. (Indeed, so desirable is this alleged threatened status that a gender and women’s studies major held a sign during Tuesday’s protest of the bake sale decrying the exclusion of “queer people” from the Republicans’ pricing structure.) ... If he really is incapable of understanding such a simple satire, he does not belong in an institution of higher learning—or at least what used to pass for one. --Heather MacDonald

Eight new Dodge Grand Caravans, purchased 10 months ago with $186,192 in federal stimulus funds, are sitting unused in storage at a county park because Waukesha County has found no takers for its proposed workers' van pool program.--Laurel Walker

Photo link here.

Quotes of the day

Dave [Sokol]’s purchases were made before he had discussed Lubrizol with me...--Warren Buffett. WSJ has a timeline here.

At best, Buffett's quote can be translated into "Dave Sokol was talking his book to the max". To their credit, they got out right away to face the music. Sure beats hiding under a rock and facing the firing squad later.--Cav

Knowing today what I know, what I would do differently is I just would never have mentioned it to Warren, and just made my own investment and left it alone. I think that’s a disservice to Berkshire, but if that’s what people want to do in the future, that’s fine. You can’t — or at least I don’t think you can executives to not invest their own family’s capital in a company that Berkshire had no interest, or even knowledge of, and somehow police that. The only thing you can do is just say if you invest your own money, don’t ever mention it to anyone at Berkshire. That doesn’t make sense to me either, but that’s certainly what it sounds like.--David Sokol

I tried to put myself in his shoes and reconstruct his thinking, and I concluded that it was just this simple: What’s the most I can get? I think Bill [Gates] knew that I would balk at a two-to-one split, and that 64 percent was as far as he could go. He might have argued that the numbers reflected our contributions, but they also exposed the differences between the son of a librarian and the son of a lawyer. I’d been taught that a deal was a deal and your word was your bond. Bill was more flexible; he felt free to renegotiate agreements until they were signed and sealed. There’s a degree of elasticity in any business dealing, a range for what might seem fair, and Bill pushed within that range as hard and as far as he could.--Paul Allen

Is it me, or do the Gates/Allen, Jobs/Wozniak, and Zuckerberg/Saverin pairings of Microsoft, Apple, and Facebook rhyme with each other?--Cav

Surely I can’t call the TV, the “boobtube” and then act like the Internet is devoid of that issue?--Jon Acuff

Photo link here.