Tuesday, May 11, 2010

Quotes of the day

Why did the exchanges cancel trades if they insist there was no glitch?--Heidi Moore

... just because something was true for 100 years, doesn't mean it will be true forever. In fact, stock prices have the odd characteristic of many financial assets: if everyone thinks that something is true, then it's no longer true.--Megan McArdle

The day they get their own plane is the day I downgrade them.--Ronny Gal

Frugality doesn’t mean doing less. It means doing as much or more with less.--William Marth

No one or no one company has a monopoly on investment or ratings expertise. Second grade intelligence and a high [Common Sense Quotient] CQ are a rare combination for an individual rating agency or an investment management firm as well. Still, the rating agencies in recent years have displayed little of either. In addition, they have brazenly sold their reputations for unbiased judgment to the very companies they were standing in judgment upon. Don’t bury them however; like vampires in the dead of the night they will outlast us all. Those looking to profit at their expense, however, will dismiss them. They no longer serve a valid purpose for investment companies free of regulatory mandates that can think with a teaspoon of IQ and a tablespoon of CQ.--Bill Gross

In my view, that issuers pay for ratings may have been necessary for the rating agencies to have done as bad a job as they did rating subprime securities, but it was not sufficient. Many other factors contributed, including, importantly, that rating agencies “drank the Kool-Aid.” They convinced themselves that the transaction structures could do what they were touted as being able to do: with only a thin cushion of support, produce a great quantity of high-quality securities. Rating agencies could take comfort, too, or so they thought, in the past - the successful, albeit short, recent history of subprime securitizations, and the longer history of successful mortgage securitizations.--Claire Hill

I've been against bail-outs from the beginning. So should have all economists. It's reasonable to debate the merits of contracyclical monetary policy. It's not reasonable to debate the merits of rewarding failure on a grand scale. ... My point: One bailout seems to lead to another, but bailouts have to stop eventually. What begins as "too big to fail" eventually becomes "too big to save."--Bryan Caplan

Many market participants are keenly focused on the solvency issue here when in fact, this is a currency crisis. The solvency issue is a byproduct of the failures within the actual currency system. As I’ve said repeatedly, a move to QE would undermine the system’s existence and the dramatic about face by the ECB leaves it with zero credibility in my opinion. The ECB is no longer independent and no longer responsible for price stability. Even with rumors of sterilization, with their bond purchases I believe they have crossed a line. Without their knowing it, they have all but admitted that the Euro is a failed currency experiment and have resorted to “last ditch” efforts to save it.--The Pragmatic Capitalist

I vividly remember taking a class on terrorism in college, in which the professor memorably pointed out, as we were knee deep in debate over The Troubles, "None of you are asking the obvious question: Why the heck do the British want to stay in Northern Ireland? Guinness?" My family hails, a long time back, from bandit country in Northern Ireland, and the question was at first incomprehensible. At the time, Northern Ireland seemed like the most valuable piece of real estate on the planet--emotionally, at least. And yet, my professor was right. It wasn't really adding much to the economic and political life of Great Britain except a big headache. This is sort of the question I had this weekend, watching this gigantic new bailout effort unfold. I understand the tactical and even the strategic value of each individual move. But the goal of all of this eludes me. Is the euro really so marvelous that it must be saved at all costs? How much do France, Germany, etc really get out of Greek euro membership?--Megan McArdle

Weakness in the euro will make a US export adjustment much more difficult, and this will increase trade tensions between China and the US. More intriguingly, the trade imbalance within Europe that is at the heart of the euro crisis is replicated globally, and is just as much at the heart of the global crisis. Both are going to be equally difficult to resolve.--Michael Pettis

The typical pattern during most recessions is for measured labor productivity to fall as good employees are kept on even though they do not have much to do, and as fixed capital is underutilized. Yet productivity continued to grow during most of this past recession. A common explanation for this improvement in productivity is that businesses tried to squeeze more out of their employees and capital because times were bad. However, times are bad during all serious recessions, yet measured productivity usually falls. The EU has had a more serious recession in GDP than did the US, yet EU countries followed the typical patter with reductions in labor productivity during the recession. This growth in labor productivity during the recession of 2007-09 suggests that unemployment may fall more slowly than is typical after a severe recession because growth in GDP will be achieved in good part through further improvements in labor productivity. Why the recovery in employment and in unemployment has been relatively slow, given the severity of the recession, is not completely clear, but I believe one factor is the uncertainty about the policies that Congress and President Obama are impatient to implement.--Gary Becker

Michael Lynn, a Cornell University professor of marketing and tourism, surveyed 374 waitresses and asked them to assess their physical characteristics, including their breast size, and evaluate whether they perceived themselves as attractive. Those with bigger breasts, slender waists and blond hair reported receiving the best tips. High-quality service, Lynn's analysis concluded, had less than a 2 percent effect on tip.--Katie Drummond

I am disappointed but not surprised to learn that female servers with larger breasts receive more generous tips.--Cornell law professor Sherry F. Colb

A law that is too burdensome to pass if it affects the majority probably shouldn't be passed if it's only targeted towards a smaller group . . . precisely because the majority apparently believes that the burden is too large in relation to the problem it solves. Conservatives weren't buying it. Which is weird, because conservatives make this argument all the time, except that it's about taxes.--Megan McArdle

Immigrant kids begin school with surprisingly good social skills, eager to engage teachers and classroom tasks, even though many are raised in poor households. This stems from tight families and tough-headed parenting. Our findings shatter the myth that immigrant or low-income parents necessarily produce troubled children.--Bruce Fuller

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