Tuesday, May 31, 2011

Quotes of the day

The U.S. spent $10,498.66 on each public school student in 2009, according to the U.S. Census. The figure is a high as $18,126 in New York and as low as $6,356 in Utah. Surprisingly, Utah’s high school graduation rate is higher than New York’s.--Michael B. Sauter, Charles B. Stockdale, Douglas A. McIntyre

Not surprising to a parent in New York. Have you ever taken a close look at schools here?--Cav

Because big-time college football and basketball are so entertaining, most people prefer to ignore the cesspool that recruiting has become, and could care less about the academic abilities of the players who represent what we like to refer to as institutions of higher learning. It's the hypocrisy of it all that is nauseating.--Jim Donaldson

Unfortunately, Medicare illustrated an immutable law of economics: Cut the marginal price and demand will skyrocket. With Medicare services seemingly free, the elderly used far more services. Costs raced upwards. In 1967 Medicare debuted with a cost of $2.5 billion. The same year the House Ways and Means Committee predicted that Medicare would cost $12 billion in 1990. Alas, that turned out to be an $86 billion underestimate. Medicare first exceeded $12 billion in 1975.--Doug Bandow

If the minimum wage is a good idea, shouldn't unpaid internships be illegal as well? If not, why not? Name the main arguments in favor of the legality of unpaid internships. Aren't all of them equally good arguments for allowing people to work for wages greater than zero and less than the minimum wage?--Bryan Caplan

If ticket scalping laws that make it illegal to sell a ticket to a concert or sporting event above face value are a good idea, shouldn't selling a coin, bond, car, or house above face value, sticker price or list price also be illegal as well? If not, why not? Name the main arguments in favor of selling a coin, bond, car or house above face value/list price. Aren't all of them equally good arguments for allowing people to sell tickets above face value?--Mark Perry

[Steve] Jobs is inflicting his own version of personal revenge by causing major nightmares for traditional PC vendors with the new products and services that he has brought to market since he returned to Apple in 1997. While his moves are all business, his intentions are clearly to make sure that this time he wins the battle for producing the next big thing in personal computers.  ... he realized that just creating a hardware device and a great OS is not enough. In his long-range planning way of thinking, he spent the last decade building out a rich service component that includes iTunes, the App Store, and the soon to be announced cloud service. These services combined with the new personal computing device give users a richer experience. To Jobs, perhaps the more important aspect of this is that the whole package is hard to replicate.--Tim Bajarin

There's one problem with this global-warming chicken little-ism. It has little to do with reality. National Weather Service data on weather-related fatalities since 1940 show that the risks of Americans being killed by violent weather have fallen significantly over the past 70 years. The annual number of deaths caused by tornadoes, floods and hurricanes, of course, varies. For example, the number of persons killed by these weather events in 1972 was 703 while the number killed in 1988 was 72. But amid this variance is a clear trend: The number of weather-related fatalities, especially since 1980, has dropped dramatically.--Don Boudreaux

Harold Camping — what an idiot! He predicted the end of the world on May 21. Last week, the Christian radio station owner said he was kind of right, though no one else noticed, and anyway the judgin’ will continue until (new date!) Oct. 21 of this year, when the world really and truly will be destroyed, probably. What you didn’t know is that after his loony prediction, Camping was promoted to full professor at Stanford and rewarded with adoring mainstream press coverage, more than a dozen appearances on “The Tonight Show,” prestigious awards and praise from the Obama administration’s chief science advisor. Sorry, I got one detail wrong. It wasn’t Camping who reaped those earthly rewards for his cosmic wackiness. It was Paul Ehrlich. In his psychedelically doomy 1968 catastrophe tract, “The Population Bomb,” Ehrlich argued that birthrates were out of control and would cause worldwide crisis. ... Ehrlich has groused that he was kinda sorta right, and the worst you can say is that, like preacherman Camping, he was a little early. President Obama’s point man on science, John Holdren, is an Ehrlich man. A text version of a speech Holdren gave in 2006 was accompanied by a footnote in which he praised Ehrlich’s call to end population growth “a key insight . . . the elementary but discomfiting truth of it may account for the vast amount of ink, paper and angry energy that has been expended trying in vain to refute it.” There are Ehrlich-men everywhere, and that ehrlich is German for honest just makes it so much richer, doesn’t it? ... All Harold Camping has to do to be treated as a genuine visionary is to change the words at the beginning of his doom sermons from “the Bible says” to “science says.”--Kyle Smith

I was shocked by Ms. Warren’s blatant sense of entitlement. She was apparently under the assumption that she could dictate a one-hour time limit for her testimony to Congress, and that we were there at her behest instead of the other way around. This is just further example of her disregard for Congressional oversight.--Patrick McHenry

... telecoms are capturing most of the wealth being generated from the Internet. For all the new world hype, the old world has a major role to play. And sometimes focusing on what is not changing help us figure out how to best master changes. We still need to find, delight, and excite customers. We need business models that pay people fairly for their work. Businesses must make a credible case to government that they act in the public interest. And the best asset for mastering change is still that old classic: leadership.--Rosabeth Moss Kanter

Email is a task list created for you by someone else.--Chris Sacca

... the other day I decided to try a game called Angry Birds just to see why it's so popular. I wasn't expecting to like it. I was wrong. The game is instantly addictive. But why? Or more generally, what makes one game a hit and another a dud? My hypothesis is that we humans have a dozen or so natural impulses that evolution has provided. When we exercise any of those impulses, we feel most alive. For example, a first person shooter game primarily appeals to males, probably because it taps into a man's most primitive urge to eliminate other males as reproductive competition. And more generally, we males have a natural impulse to fight. A well-designed shooter game allows males to spend hours per day unleashing the urges that are socially inappropriate. You can see in almost any successful game the elements needed for hunting, gathering, self-defense or reproduction. Puzzles probably use the part of our brain designed to figure out where the food is. Lots of games require us to gather up resources. And any game that requires you to quickly spot abnormality is the same skill you need to identify healthy mates. I would argue that Tetris and Mahjong are good examples of games where you have to quickly spot abnormality. And it is no surprise that both games have attracted female gamers.--Scott Adams

The Mets came up with a buyout plan: Beginning on July 1, 2011, they would pay Bonilla $1,193,248.20 per year for 25 years, or $29.8 million. The payment was based on the return Bonilla would've received had he invested the $5.9 million at an interest rate of 8% (which was just below the 8.5% prime rate at the time). Why would the Mets make such a deal? The Bonilla money would be invested with Madoff, from whom the Mets expected the usual 10 to 12% return, or two to four percentage points above the rate they guaranteed Bonilla. "We were going to make money on Bobby Bo's $30 million," says one official who was at the meeting. "I remember the chuckling in the room." By deferring the money to Bonilla, the Mets freed cash to fortify their roster for the 2000 season. On Dec. 23, 1999, they traded for pitcher Mike Hampton and outfielder Derek Bell in a deal that added $8.1 million to the payroll. Eleven days later they officially released Bonilla. The 2000 Mets would win the NL pennant. The Madoff fund made the roster moves possible.--Tom Verducci
Photo links here, here, and here.

Monday, May 30, 2011

In Flanders fields the poppies blow

Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

by John McRae

Photo link here.

UPDATE: From Eric Falkenstein:
... who is more courageous: a professional warrior, raised from birth in a tradition of service and self-abnegation, facing a known opponent at arms length, or an 18-year old Specialist, fresh off the boat from America, driving a Humvee through the IED-riddled streets of Ramadi.

Then, please, do me a favor: Say a prayer of thanks, and protection, for all our young men and women in harm's way. They deserve it.

Friday, May 27, 2011

Cartoon of the day: What goes for sports commentary, can also go for political discourse, media reporting, and a lot of 'science'

Source here.

Hurricane Katrina's silver lining

The public school system was destroyed along with much else, and the new charter school system is educating kids much better.


This is why we cannot trust government any more than the markets

Barney Frank. 

Truth be told, I trust the markets more than I trust many people in Washington, D.C.  Gretchen Morgenson's interview with Dave Davies:
One of the really big beneficiaries (of Fannie Mae lobbying and political favors), albeit indirectly, was Congressman Barney Frank of Massachusetts. Back in 1991, when Congress was writing the legislation that would, you know, enhance or improve the oversight of Fannie Mae, or so they thought, Frank actually called up the company and asked them to hire his companion, who had just gotten an MBA from the Amos Tuck School of Business.

Of course the company was happy to provide a job for his companion and rolled out the red carpet in a series of interviews with a variety of executives, and it ultimately did hire the man. And he stayed there for I believe seven years.

So that was an example of the kind of thing that Fannie Mae would do. Now, when I asked Mr. Frank about this, I asked him, did it have any impact on his approach to the company. You know, was it a conflict? Did he feel that it had been a conflicted, put him in a conflicted spot? And he said absolutely not, that he didn't really remember being interested or having much to do with the 1992 legislation.

But the record shows that he was very aggressive and really tough on those who were testifying in Congress about reining in Fannie Mae and Freddie Mac. He was very aggressive to, for instance, the head of the Congressional Budget Office at that time, who was trying to call for increased capital requirements and to call for a focus on safety and soundness at Fannie Mae, that Frank really took him apart in testimony.
Via Greg Mankiw. Photo link here.

Quotes of the day

Professional athletes have taken the "Dancing" title six times in the past 12 seasons. Since the show premiered stateside in 2005, three Olympians, two football stars and one race-car driver have been named "Dancing" champs. Three other NFL stars and an Olympic skater finished the popular show in second place.--Mark Divver

Do you not know that in a race all the runners run, but only one gets the prize? Run in such a way as to get the prize. Everyone who competes in the games goes into strict training. They do it to get a crown that will not last, but we do it to get a crown that will last forever. Therefore I do not run like someone running aimlessly; I do not fight like a boxer beating the air. No, I strike a blow to my body and make it my slave so that after I have preached to others, I myself will not be disqualified for the prize.--Paul

Analogies are like spices: a judicious application can enhance and bring out the flavor of a dish; too much can overwhelm it and even change its character entirely.  ...Football teams and quarterbacks can put up better statistics than anyone else in the league, but if they don't win games, it just doesn't matter. Football is simple: over the course of a season each team in the league competes against all the others, and the playoffs and championship determine—by definition—the "best" football team of the season. There is no equivalent in the world of business. The metrics of success in business are far more multiform, variable, and relative: revenue growth, income growth, operating margins, free cash flow, market share, etc. You cannot point to a company's results at the end of a fiscal year and definitively declare that it "won" or "lost." Even if it outperformed its entire history in terms of growth, margins, and profitability, that does not mean it outperformed its competitors.--Epicurean Dealmaker

The problem (of deflationary food prices) began with the invention of the spear.--Don Boudreaux

Married couples have dropped below half of all American households for the first time, the Census Bureau says, a milestone in the evolution of the American family toward less traditional forms. Married couples represented just 48 percent of American households in 2010, according to data being made public Thursday and analyzed by the Brookings Institution. This was slightly less than in 2000, but far below the 78 percent of households occupied by married couples in 1950. What is more, just a fifth of households were traditional families — married couples with children — down from about a quarter a decade ago, and from 43 percent in 1950, as the iconic image of the American family continues to break apart.--SABRINA TAVERNISE

We find that both women and men equally value physical attributes, such as age and weight, and that there is positive sorting along age, height, and education. The role of individual preferences, however, is outplayed by that of opportunities. Along some attributes (such as occupation, height and smoking) opportunities explain almost all the estimated variation in demand. Along other attributes (such as age), the role of preferences is more substantial, but never dominant.--IZA Discussion Papers, number 2377

So yes, we're pickier about marriage partners but we're drawing them from the same pool that we rather indiscriminately assembled in the first place.--Eric Barker

The USPS has 571,566 full-time workers, making it the country's second-largest civilian employer after Wal-Mart Stores (WMT). It has 31,871 post offices, more than the combined domestic retail outlets of Wal-Mart, Starbucks (SBUX), and McDonald's (MCD). Last year its revenues were $67 billion, and its expenses were even greater. Postal service executives proudly note that if it were a private company, it would be No. 29 on the Fortune 500. The problems of the USPS are just as big. It relies on first-class mail to fund most of its operations, but first-class mail volume is steadily declining—in 2005 it fell below junk mail for the first time. This was a significant milestone. The USPS needs three pieces of junk mail to replace the profit of a vanished stamp-bearing letter. ... Since 2007 the USPS has been unable to cover its annual budget, 80 percent of which goes to salaries and benefits. In contrast, 43 percent of FedEx's (FDX) budget and 61 percent of United Parcel Service's (UPS) pay go to employee-related expenses. Perhaps it's not surprising that the postal service's two primary rivals are more nimble. According to SJ Consulting Group, the USPS has more than a 15 percent share of the American express and ground-shipping market. FedEx has 32 percent, UPS 53 percent. The USPS has stayed afloat by borrowing $12 billion from the U.S. Treasury. This year it will reach its statutory debt limit. After that, insolvency looms. --Devin Leonard

The core structure of medicine—how health care is organized and practiced—emerged in an era when doctors could hold all the key information patients needed in their heads and manage everything required themselves. One needed only an ethic of hard work, a prescription pad, a secretary, and a hospital willing to serve as one’s workshop, loaning a bed and nurses for a patient’s convalescence, maybe an operating room with a few basic tools. We were craftsmen. We could set the fracture, spin the blood, plate the cultures, administer the antiserum. The nature of the knowledge lent itself to prizing autonomy, independence, and self-sufficiency among our highest values, and to designing medicine accordingly. But you can’t hold all the information in your head any longer, and you can’t master all the skills. No one person can work up a patient’s back pain, run the immunoassay, do the physical therapy, protocol the MRI, and direct the treatment of the unexpected cancer found growing in the spine. I don’t even know what it means to “protocol” the MRI.  Before Elias Zerhouni became director of the National Institutes of Health, he was a senior hospital leader at Johns Hopkins, and he calculated how many clinical staff were involved in the care of their typical hospital patient—how many doctors, nurses, and so on. In 1970, he found, it was 2.5 full-time equivalents. By the end of the nineteen-nineties, it was more than fifteen. The number must be even larger today. Everyone has just a piece of patient care. We’re all specialists now—even primary-care doctors. A structure that prioritizes the independence of all those specialists will have enormous difficulty achieving great care.  We don’t have to look far for evidence. Two million patients pick up infections in American hospitals, most because someone didn’t follow basic antiseptic precautions. Forty per cent of coronary-disease patients and sixty per cent of asthma patients receive incomplete or inappropriate care. And half of major surgical complications are avoidable with existing knowledge. It’s like no one’s in charge—because no one is. The public’s experience is that we have amazing clinicians and technologies but little consistent sense that they come together to provide an actual system of care, from start to finish, for people. We train, hire, and pay doctors to be cowboys. But it’s pit crews people need.--Atul Gawande

If a pension fund has a shortfall of $X, and amortizes its shortfall over a 30-year period, that does not make annual amortization payment $X/30. Because of the need to pay interest, the actual figure is closer to $X/11. This means that funding shortfalls (which arise because pension funds make risky investments) impose meaningful short-term fiscal costs. Given the performance of the stock market over the past five years, it is likely that a typical pension fund that was fully funded in mid-2006 is now only 75 percent funded; as a result, doublings of annually required pension contributions should be considered typical, not unusual. Some funds, such as New York's, which use shorter amortization schedules are seeing even more rapid rises in current-year costs. So while pension costs have historically consumed about 4 percent of state and local budgets, that figure is likely to be far higher in the next several years, making pensions a major driver of state and local fiscal crises.--Josh Barro

An increase in the debt limit that contains no reforms for Fannie and Freddie is effectively a blank check for continuing the policy of massively subsidizing housing finance, one that has already cost taxpayers more than $153 billion. The longer Fannie and Freddie stay in business as subsidized federal policy instruments, the more unlikely any private-sector alternative will develop. Although most of the taxpayer losses came from bad mortgage loans made from 2005-2007, each new loan purchased by Fannie and Freddie involves the implicit issuance of more Treasury debt.--CHRISTOPHER PAPAGIANIS
Photo links here, here, here and here.

T. Boone Pickens wants the U.S. Government to give him 8 million 18-wheelers

on CNBC right now.

Do you know 8 million people who can be drivers?  Do you 8?

At $200,000 per truck plus natural gas trailer with a 4 year depreciation schedule, and $100,000 per driver ($80,000 per year in wages and benefits, plus 25% in administrative overhead), this is a $1 trillion program, before infrastructure and other operational costs.

This plan will start making sense once the average household consumption of gasoline hits about $2,000 per month.

I don't know who is more out of their mind, T. Boone Pickens, or the post-Haines CNBC for giving him the airtime.

Photo link here.

Einhorn speaks; the market agrees

Shares of Microsoft rose more than 2 percent on Thursday after David Einhorn urged that Steven A. Ballmer be removed as chief executive of the company.
$4 billion in market capitalization. Just like that.

Photo links here and here.

Thursday, May 26, 2011

Treason: I love Mariano Rivera, and I am a Red Sox fan

I thought about this yet again reading Joe Posnanski:
Has any athlete in the history of New York (or the history of anywhere) given fans a more assured feeling than Mariano Rivera? I would suggest: No. When Rivera warms up, the Yankees almost always win. It's that simple. Mickey Mantle ... Joe Namath ... Mark Messier ... Clyde Frazier ... Babe Ruth even ... none of these players, despite their obvious greatness, could grant the peace of mind that comes with the familiar pitching motion of Mariano Rivera. If he's up, the Yankees are probably winning, maybe tied, at the very least in position to tie. And if he enters the game, the Yankees will almost certainly win. I think this helps explain why Rivera is so beloved. Certainly it mostly has to do with his own greatness -- his 572 saves, his 205 ERA+, his 0.71 ERA in the postseason and so on. But it also has to do with his role, his particular circumstances, with being the best closer who ever lived. Yankees fans have come to connect the very sight of Mariano Rivera and victory. No pitcher in the history of baseball, not even Cy Young, has been on the mound at the end of so many victories. And I would argue that no player in the history of American sports, not even Bill Russell, has been more synonymous with that blast of joy that comes when your favorite team wins.
But don't worry fans, my oldest is the only known Red Sox fan in her school in NYC, and when asked why, she responds "because they win!" I'm worried about the youngest though, and I might have jinxed it, breaking down and buying him a Laser Show jersey.

Photo links here and here.

Chart of the day: Professor grading by party affiliation

Source here.

We haven't cracked growth; we haven't cracked the business cycle

The Story of Economics, via Tyler Cowen.

The Story of Economics from Kate Burn on Vimeo.

Quotes of the day

The high-frequency traders are like the beautiful women. If their biggest “threat” is to stay home, we are not worse off for their existence. If we fear their flaky departures enough, we may prefer to trade in other markets or at other time horizons, namely very long.--Tyler Cowen

Said a Harvard professor of econ,
"That Google's got something unique on:
They have cash by the score,
Yet still borrow more;
This is something I've puzzled all week on."

Said an expert in cross-border taxes,
"I should hope the professor relaxes;
As Google keeps cash
In an overseas stash,
'Til taxation here wanes and not waxes."--Dr. Goose

The three largest U.S. metropolitan areas, New York, Los Angeles, and Chicago, contain 13 percent of the population and generate 18 percent of GDP. This (crudely) suggests that densification could increase GDP considerably.--Reihan Salam

If normal growth theory is right, it takes a lot of work just to keep a rich economy rich. Just replacing the old, depreciating physical capital is an enormous task that only a highly productive economy can accomplish. The more capital you have, the more capital you have to replace every year. If you fall behind in replacing the fast-decaying capital, you quickly become less productive. The fact that the US has been able to keep its relative ranking is evidence that it has stayed highly productive over the decades. Solow’s growth model captures this fact—and it’s why a one-time massive gift of capital can’t make a poor country rich. It’s a gift that keeps on wearing out.--Garrett Jones

I just pre-ordered Ezra F. Vogel, Deng Xiaoping and the Transformation of  China, which looks to be an important book.--Tyler Cowen

Our exchange rate is just a price — the price of the dollar in terms of other currencies. It is not controlled by anyone. And a high price for the dollar, which is what we mean by a strong dollar, is not always desirable. Some countries, like China, essentially fix the price of their currency. But since the early 1970s, the United States has let the dollar’s value move in response to changes in the supply and demand of dollars in the foreign exchange market. The Treasury no more determines the price of the dollar than the Department of Energy determines the price of gasoline. Both departments have a small reserve that they can use to combat market instability, but neither has the resources or the mandate to hold the relevant price away from its market equilibrium value for very long.  In practice, all that “the exchange rate is the purview of the Treasury” means is that no official other the Treasury secretary is supposed to talk about it (and even he isn’t supposed to say very much). That strikes me as a shame. Perhaps if government officials could talk about the exchange rate forthrightly, there would be more understanding of the issues and more rational policy discussions.--Christina Romer

In addition to his wide-ranging influence within the academic and policy spheres of economics, Harvard Economics Professor Martin S. Feldstein ’61 has perhaps had his greatest impact in the classroom. While sitting in a meeting about Social Security reform in the West Wing of the White House in 1999, Harvard Kennedy School Professor Jeffrey B. Liebman—once a Ph.D. student of Feldstein’s—realized he shared something with the others at the meeting. “[I noticed] that three of the four economists in the room—Larry Summers, Doug Elmendorf, and myself—had been Marty’s students,” he said. “The fourth economist had studied at MIT under someone who himself had been a student of Marty’s.” Feldstein, a professor at Harvard since 1967, has taught every level of economics, from introductory to upper-level graduate courses—training some of the world’s foremost economists in the process and spurring the Wall Street Journal to term him perhaps the “most influential economist of his generation.”--Benjamin M. Scuderi

Washington relies too much on off-the-cuff comments and tweets to drive policy debates. Serious policy addresses like these three provide depth that is essential to the national dialogue. I also wish we had more frequent serious policy speeches on the House and Senate floors. Today I will begin to respond to the Geithner speech, which is the most effective presentation of the Administration’s fiscal policy argument I have seen. It’s a long speech with a lot that deserves analysis and response. Since the partisan policy battle is already fairly heated, and since I haven’t written in a while, I’ll start today with a reach-across-the-aisle post. ... Secretary Geithner is reflecting the conclusions of the Social Security and Medicare Trustees, issued last Friday, and he is saying something different from the Washington Consensus, which focuses only on health care cost growth. In fact demographics is a bigger deficit driver over the next 10-20 years than health care. Kudos to the Secretary for emphasizing both. He also correctly identifies the two subcomponents of an aging population: more Baby Boomers becoming retirees and longer lifespans. The first of these is big but temporary (one generation), the second is gradual and permanent. ... Secretary Geithner is right that the ultimate forcing action will be when investors lose confidence in American fiscal policy and take their funds elsewhere. He is right that, if this happens, it can happen suddenly and without warning. He is right that this would be extremely painful and costly to stop. And he is right that it is unpredictable. We may not know the market-imposed deadline until it has already passed.--Keith Hennessey

So much for rational ideas in public debate.--Peter Suderman

The fact that I would want to be able to involve the police if my daughter became a streetwalker, but not if she became a Hari Krishna, tells me something important about what kind of legal regime I should support.--Ross Douthat

(A map of slave ownership by county)
You have now shown under the most adverse circumstances that the great mass of the people of Western Virginia are true and loyal to that benificent [sic] government under which we and our fathers have lived so long. ... The General Government cannot close its ears to the demand you have made for assistance. I have ordered troops to cross the Ohio river. They come as your friends and brothers, as enemies only to the armed rebels who are preying upon you. Your homes, your families, and your property are safe under our protection. All your rights shall be religiously respected, notwithstanding all that has been said by the traitors to induce you to believe that our advent among you will be signalized by interference with your slaves. ... I call upon you to fly to arms and support the general government, sever the connection that binds you to traitors, proclaim to the world that the faith and loyalty so long boasted by the Old Dominion are still preserved in Western Virginia, and that you remain true to the stars and stripes.--General George McClellan, May 26, 1861

In terms of basketball talent, I’ve been covering pro basketball for more than 40 years, and I’ve never seen a guy Rodman’s size play like he did and shut down opponents who were half a foot taller and 100 pounds heavier. When he played for the Bulls from 1996 to 1998, I remember 7-1, 335-pound Shaquille O’Neal trying to back Rodman into the paint to posterize him with a dunk. But Rodman would body up, using his leverage and pelvis to impede Shaq’s progress.--Lacy Banks

He has six of the 17 best seasons in history for offensive-rebounding percentage, and six of the 12 best for defensive-rebounding percentage. And unlike most top rebounders, one skill didn’t impede the other. Most players who are great on the defensive glass aren’t as good at corralling offensive rebounds, perhaps because they are behind their teammates in getting down the floor.--Carl Bialik

Wait, what? Dennis Rodman is a Christian? Not yet, but wait for it. This one is going to happen and when it does, we’re going to lock in a phenomenally colorful rebounder.--Jon Acuff
Photo link here.

A great economist challenges a great journalist

David Leonhardt posits:
The United States no longer leads the world in educational attainment, partly because so few low-income students — and surprisingly few middle-income students — graduate from four-year colleges. Getting more of these students into the best colleges would make a difference. Many higher-income students would still graduate from college, even if they went to a less elite one. A more educated population, in turn, would probably lift economic growth.
Greg Mankiw responds:
The finding [that students from higher income backgrounds have significantly higher grades throughout college conditional on college entrance exam (ACT) scores] is the opposite of what the Leonhardt story suggests. What this means is that if you are a college admissions officer trying to identify the students who will do best in college, as measured by grades, you would give positive rather than negative weight on family income. I am not proposing that they should do this, as colleges have many goals when putting together a class. But it does seem that the hypothesis implicit in Leonhardt's article is not supported by the data.
There's a lot to think about here. For one, Peter Thiel's program to incent kids not to go to college, because we have too many college graduates. But the biggest thought is, what are we trying to normalize here: intelligence, income, or status? Bryan Caplan and Arnold Kling have interesting thoughts.

As much as I am a fan of great journalism, I still think that my engineering curriculum was a lot more challenging than any journalism program anywhere.  I concede I'm not a great writer, storyteller, or entertainer.  That's why I talk to my computer more than people for a living.

I think Mankiw is more evidence-based than Leonhardt, and I weight my truth sourcing portfolio accordingly.  I don't believe I can improve things until I know where things are first.

I don't know how abysmal Mark Zandi's Sharpe Ratio is

but it sure ain't positive. Neither are Peter Schiff's or Nassim Taleb's. Jumping into the markets isn't easy; most of the guys on TV and in the newspapers either couldn't or didn't hack it, at least in terms of buying and selling financial assets, generating revenues, and managing risk.  Here is my first entry into evidence.

Via Eric Falkenstein.

Wednesday, May 25, 2011

Quotes of the day

Potential teachers out there- beware! You are blamed for everything and children and parents and administrators get away with murder. Prepare yourself to not be respected or appreciated ever. Teachers are under so much pressure to perform that there is a huge emphasis on test prep. You are lucky if you get to do projects.--former Teach for America teacher

I suppose [congressional representatives yielding significant positive abnormal trading returns] are good at stock investing for the same reason Hillary Clinton was a savvy commodities trader, and Obama was good at playing poker with Illinois lobbyists.  If the guys who set my property taxes want to bet on something, anything, I'm willing to post great odds. Just be sure to remember me, you know, later--Eric Falkenstein

U.S. Transportation Secretary Ray LaHood unveiled new fuel-economy window stickers for cars and trucks, saying "we're not just sitting around waiting for high gasoline prices to come down." His ride of choice to the unveiling: This 12-mpg Chevy Suburban SUV.--Justin Hyde

For months now top economic officials in Washington have been arguing that the Congress should vote to increase the debt limit without any reductions in the growth of spending—in other words a “clean debt limit hike.” Just last Thursday Ben Bernanke compared linking the debt limit and spending reductions to playing a game of chicken with U.S. credit worthiness, adding “I think using the debt limit as a bargaining chip is quite risky.” CEA Chairman Austan Goolsbee and Treasury Secretary Timothy Geithner have been saying much the same thing. But these arguments do not take account of important economic advantages of linking the debt limit to spending reductions. Such a link is good economics in theory and in practice. It is essential to a credible return to sound fiscal policy and an end to the ongoing debt explosion. Here’s why. In the current political and economic environment—where more people than ever in the United States and around the world are aware of, and paying attention to, the country’s debt problem—the decision about the debt limit will be precedent-setting. They also know that government spending has increased rapidly in recent years, rising from 18.2 percent of GDP in 2000 to over 24 percent now. If Washington does not change the budget game now, people will sensibly reason, it will never change the game. If politicians just increase the debt limit now when spending has been growing so rapidly compared to revenues without correcting that rapid growth of spending, then they will be expected to do so in the future. In contrast if they tie any increase in the debt limit to a halt in the explosion of spending, then people will be more likely to expect them to control spending in the future. Linking the debt limit vote with spending establishes a precedent and valuable credibility.--John Taylor

Economies of scale in fonts, as often in the corporate world, do not seem to stand in the way of diversity for long. There have never been so many alternatives to Helvetica, and new fonts are created at an unprecedented rate. There is always demand for the next forward-looking font. Barack Obama used a 21st century font, Gotham, for his 2008 election campaign. Evidently some people think it helped his fortunes: Gotham has now been adopted by Sarah Palin.--Tim Harford 

Asian-American success is typically taken to ratify the American Dream and to prove that minorities can make it in this country without handouts. Still, an undercurrent of racial panic always accompanies the consideration of Asians, and all the more so as China becomes the destination for our industrial base and the banker controlling our burgeoning debt. But if the armies of Chinese factory workers who make our fast fashion and iPads terrify us, and if the collective mass of high-­achieving Asian-American students arouse an anxiety about the laxity of American parenting, what of the Asian-American who obeyed everything his parents told him? Does this person really scare anyone?--Wesley Yang
Photo links here and here.

Cartoon of the day: My apparent IQ drops by 30 points

when Wikipedia has a server outage.

Sad news: Mark Haines, CNBC anchor, has passed away

My condolences to his family.  I liked his style, wit, intelligence and honesty.  He seemed to love his family and to work really well with colleagues.

His and Erin Burnett's 9-11am Squawk On The Street was my favorite CNBC timeslot over the past many years.

Photo link here.

UPDATE:  Jim Cramer making sense, saying about Haines:
He was our Sevareid, our Cronkite, our David Brinkley.
I'm thinking, yeah, that's about right.

UPDATE:  Dick Grasso, former NYSE president, compares Haines' breaking 9/11 coverage to Cronkite's reporting of the Kennedy assassination.

UPDATE:  By corroborated accounts, Haines called the Nasdaq 100 top in 2000 and the Great Recession bottom in 2009.  I think its fitting that Alan Greenspan called CNBC this afternoon to send in his sympathies.  Before today, I had not realized that Haines invented the Greenspan Briefcase Indicator.  The best anecdote, that I've heard repeated, is how an editorial manager (Bruno Cohen?) chewed Mark out for wearing a helmet on the air, and then Jack Welch (then CEO of GE, which is the parent company of CNBC) said it was the greatest thing he'd ever seen on air.  That was the license Haines needed, and he never looked back.  Sometimes, the genius of corporate executives lies in the genius that works for them.

UPDATE:  Ron Insana pays another high compliment:
He was our Chris Berman.

I think Mark Haines did ... go ... all ... the ... way!

Tuesday, May 24, 2011

Sad news: Intrade/Tradesports founder John Delaney has died

John Delaney, 41, from Ireland, has collapsed less than 50m from the top. He left for the expedition on April 9 and was due back in Ireland at the end of this month. His body will remain where he died.--Chris Masse

He was 42, climbing Mount Everest (more here), and he was best known for his role in running InTrade.com.  He was also an MR reader and sometimes he wrote to me.  He will be missed.  His wife is pregnant with another child but did not have the chance to tell him before he died.--Tyler Cowen
I would not have even started this blog (this is the 4,854th post) had I not opened a Tradesports account, learned about prediction markets, and enjoyed great chats in the trading pit with other traders. John wrote the kings of blogosphere like Tyler, but also he corresponded with small fry like me. My sympathies go out to his family, and I hope that I can carry the torch--for discovering greater truth through prediction markets--for another mile or two until my time comes.

DNA pattern matching for faith?

I guess this is how scientists conclude that humans are a lot like nematodes and sea urchins.

Still, it hurts to know I am less (Catholic, Judaic or Non-theist) than Mormon, Jehovah's Witness, or Baha'i.  Call me Roundworm. 

I think they mimized the false positives, but let the false negatives run amok.  Quiz here.  Image link here.

Your Results

The top score on the list below represents the faith that Belief-O-Matic, in its less than infinite wisdom, thinks most closely matches your beliefs. However, even a score of 100% does not mean that your views are all shared by this faith, or vice versa.
Belief-O-Matic then lists another 26 faiths in order of how much they have in common with your professed beliefs. The higher a faith appears on this list, the more closely it aligns with your thinking.
How did the Belief-O-Matic do? Discuss your results on our message boards.

1. Mainline to Conservative Christian/Protestant (100%)
2. Mainline to Liberal Christian Protestants (95%)
3. Church of Jesus Christ of Latter-Day Saints (Mormons) (87%)
4. Orthodox Quaker (81%)
5. Jehovah's Witness (80%)
6. Baha'i Faith (77%)
7. Liberal Quakers (72%)
8. Seventh Day Adventist (67%)
9. Unitarian Universalism (61%)
10. Eastern Orthodox (61%)
11. Roman Catholic (61%)
12. Christian Science (Church of Christ, Scientist) (57%)
13. Orthodox Judaism (54%)
14. Jainism (53%)
15. Islam (53%)
16. Mahayana Buddhism (49%)
17. Reform Judaism (49%)
18. Theravada Buddhism (48%)
19. Neo-Pagan (42%)
20. New Age (41%)
21. New Thought (38%)
22. Hinduism (37%)
23. Secular Humanism (36%)
24. Sikhism (34%)
25. Scientology (30%)
26. Taoism (28%)
27. Nontheist (27%)

Monday, May 23, 2011

Quotes of the day

Politicians—you may have noticed—tend to adopt a flexible point of view aimed more at getting votes than rigidly sticking to a preconceived view of the world.--John Carney

President Obama, I voted for an idea. What I didn’t realize what I was getting was an idealist. If you’ve never been to the moon, you can’t issue policy about the moon. You have no ... idea what it’s like on the moon. For a president to be sitting in Washington, D.C., and saying, “Go back to your 67 borders in Israel,” how about you live there and try to defend an indefensible border nine miles wide? On one side you’ve got hundreds of millions of people who hate your guts, on the other side you’ve got the Mediterranean. Unless you control, in Israel, unless you control those Golan Heights, it’s an indefensible position. It’s a nice idea, when you grow up you find out that life isn’t the way you imagined it, and President Obama means well. I think he’s actually a good guy. He has no ... idea what the world is like because he doesn’t have to live there.--Gene Simmons

President Obama's re-election campaign is trying to dig up dirt in the Garden State. ... The Obama campaign is trying to keep its efforts from public view, concerned they would only elevate Christie's already impressive standing within the Republican Party, sources said.--JOSH MARGOLIN

... as we have all seen throughout his campaign and his presidency, President Obama talks the talk, but he has yet to walk the walk. We have heard him talk a great deal about the importance of small business and his intention to help small business and it all sounds great; but we have yet to see any action. In fact, if anything, most of the policy he has put forth over the last two years has actually hurt small businesses. Businesses haven’t been sitting on revenues because they want to, it’s because they are nervous about the uncertainty that this Administration has created. This is the most anti-business Administration ever--House Small Business Committee Chairman Sam Graves

When George W. Bush was President, the Patriot Act became part of the liberal conspiracy theory that Republicans were engaged in a lawless crusade to turn the U.S. into a police state. But the Patriot Act can now join Guantanamo, military commissions, unlimited detention, drone strikes, the state secrets doctrine and Middle Eastern democracy as Bush policies that Mr. Obama has embraced one way or another.--Wall Street Journal Editorial Board

... Liberty paid just $12,500 for preferred stock in Sirius XM. At the end of the March quarter, those preferred shares had a market value of nearly $4.3 billion. It’s hard to think of an investment made anywhere, anytime that turned out better.--Shira Ovide

We don't know a lot about 2013. We know that Donald Trump will not be President of the U.S. -- Arnold Schwarzenegger won't either. We know that Apple will release a new iPad that will look cool and cost a lot of money but only be available in theory. We know that the loud guy sitting behind me at the airport who is on the phone begging for a first class upgrade will still be talking. And we know that the New York Yankees have about $150 million in payroll obligations to eight players ... all of those players on the wrong side of 30, and at an average age of 34.--Joe Posnanski

The biggest threat to natural monopolies comes, not from a competitor, but from innovation. As a result, these standards can be far more vulnerable than we realize. That’s why I’m so suspicious of the elevated price for LinkedIn.--Eddy Elfenbein

I listened to [Robert] Kraft, and I don't agree with the Patriots on a lot of things, but I agree with him that we're on the verge of really irritating our fan base and damaging the fabric of the game.--Bart Scott, New Jersey Jets linebacker

Being players and growing up and not having much and the fact that we're squabbling about money is kind of ridiculous to me," he said. "I came into this league ... I probably made more money than I thought I ever would in a lifetime. Everything from here is just icing on the cake. Hopefully, we get something fair done and we get to a point where we can play football.--Wes Welker
Photo links here and here.

Good insights for traders

from Gerald Loeb. I've lost the most money (or opportunities) not remembering:
  • Stocks are always way overvalued in a bull market and way undervalued in a bear market
  • The best stocks will always seem overpriced to the majority of investors
I've made the most money by remembering:
  • What everyone else knows is not worth knowing
  • Traders must always resist the urge and temptation to change their strategies for each and every different market cycle
  • To succeed in trading you must 1) aim high, 2) control the risks, 3) be unafraid to keep uninvested reserves and 4) be patient
  • You must always trade with the actions of the market and not simply by how you might think the market should trade
  • Knowledge through experience is one trait that separates successful stock market speculators from everyone else
  • The stock market is more an art than a science and far more complex than most people understand
I've got a bone to pick with (i.e. it depends):
  • Three basis elements should be considered when evaluating a stock – 1) quality (fundamentals, liquidity, management), 2) price, and 3) trend (the most important)
  •  Pyramid your buys – start with an initial position and then add to it only if the trade moves in your favor
  • The more experienced and successful you become, the less you should diversify
  • Always sell when you start patting yourself on the back for being smarter than the market

Quote of the half-century

In the spirit of inherently “reasonable” historical precedent, and given the current situation is “unsustainable”, we propose rolling back the giant ever-growing socialistic regulatory liberty-crushing nanny state to its pre-1967 borders.--Cliff Asness

Who shot Osama?

A profile emerges here.  Predicted elements include:
  • male, definitely
  • probably of european descent
  • probably between 26 and 33 years old (bounded by time to pass extra qualifications and physical condition)
  • probably a high school, if not college, athlete
  • probably "bearded, rough-looking, like a street urchin"
  • experienced "he’s got frag in him somewhere"
Photo link here.

Quotes of the day: LinkedIn Sanity installment

... here is another way to think about the LinkedIn I.P.O: the offering price was generous — and maybe even too high--Andrew Ross Sorkin

This is a really bad miss for the investment bankers. But I'm not sure if a few outliers like this means that there is systemic cheating going on. Bankers have a reputation to uphold, which includes stocks that do not crash below their IPO levels, because that would stave off future deals. The owners want to get paid, but then so does the secondary market.  Alan Greenspan missed just as badly on a couple of key things during his tenure at the Fed, and things turned out much worse for many more people. I don't think people who are wrong some of the time are necessarily guilty all of those times.--Cav

More to the point, do you really care? You got your money, you still own 95% of the equity in your house. ... They did it to go public, which means, in this case, that current shareholders will be able to sell their shares in future offerings. They are priming the pump for bigger paydays in the future. Believe you me, I can guarantee the underwriters were begging company executives and big shareholders to increase the size of the offering, especially after they began to see the strength of demand. After all, the investment banks get paid 7% of the offering proceeds; the bigger the offering, the more money they make. Viewed this way, the approximately 50% haircut the company and its current shareholders took on the offering was the price they paid to establish a public trading market for their shares. It was indeed a steep price—several hundred million dollars—but I doubt many of the newly minted billionaires and multimillionaires are too bent out of shape about it. ... Giving new investors in an IPO some value for free is the price of being able to do successful follow-on offers in the future. Now, you can see that this exercise is an art, not a science. Investment bank IPO pricing is the epitome of (very) highly educated guessing. We often get it wrong, but, on average, IPO pricing is normally pretty accurate. Let me make this perfectly clear: Investment banks do not set the ultimate price for IPOs; the market does. And sometimes, as in the case at hand, you get what we call in the trade a "hot IPO." Investors work themselves into a buying frenzy, the offering becomes massively oversubscribed (e.g., orders for 10 or more shares for every one being offered), and the valuation gets out of control. Underwriters have a limited ability to respond to these conditions, which typically emerge during the pre-IPO marketing or "bookbuilding" process, including revising estimated pricing up, like LinkedIn's banks did (+30%), and increasing the number of shares offered. But eventually you just have to release the issue into the marketplace and let the market decide what the company is really worth.--Epicurean Dealmaker

The twofold objective is to build a book of indicative orders that exceeds the anticipated size of the offering—to create conditions for a sustained level of demand support after the stock opens for trading—and to build this book with investors who do not have hard limits on the price they are willing to pay. Now, every underwriter worth its fees will do its damnedest to build what we call a high quality book of orders. In other words, we want to weight the initial buyers in the deal toward investors who intend to not only hold the stock after it frees to trade but also add to their positions in the aftermarket. These are the type of investors virtually all of our issuer clients want: investors, not traders; buy-and-hold accounts, not fast money hedge funds. Of course, the stronger the demand for the deal, the more selective underwriters can be in our allocations. The stronger the overall demand, the more likely it is that we can exclude buy side accounts who traditionally flip on the offering from the deal entirely. And believe you me, we know exactly who the fast money accounts and IPO flippers are. We track every deal, and we keep records. The other material point to relate is that virtually every investment bank makes this process as transparent as possible to its issuer clients. ... Most companies are so delighted with a strong IPO performance that they don't mind having a few more hedge funds and fast money accounts in their shareholder base for a while. After all, those guys' money is just as green as Warren Buffett's. ... investment banks by their very nature straddle both the buy- and the sell-side of markets. We have corporate clients and their inside shareholders who sell stock and institutional investor clients who buy it. Yes, we serve two client bases with potentially competing interests, but that is the very reason we are able to underwrite securities in the first place. We are middlemen, and it is the essence of what we do all day to balance the competing interests of our clients for the benefit of all. All our clients are fully aware of this. ... Of course investment banks horse trade with certain buy-side investors; of course we give certain accounts bigger than normal allocations in IPOs; of course we give a hedge fund we owe a favor to access to a hot IPO. By the same token, we earn a lot of favor ourselves for giving accounts access to such hot IPOs. The horse trading goes both ways. And because we owe an obligation to underwrite a successful offering for our issuing clients, all the competing pressures from the institutional securities side of our house are generally and pretty successfully kept in check. This—for those among you who might be unfamiliar with it—is commonly known as business.--Epicurean Dealmaker

Good money after bad?

How these soothsayers keep getting traction, I have no clue. Harold Camping inspired his followers to liquidate everything, maybe more than $1 million in transferred property. Of course, John Meriwether's destruction of wealth is more in the $10-100 billion range.  Maybe Camping has another apocalyptic fallacy yet to foist, if only he studies Meriwether carefully ...

Photo links here and here.

Friday, May 20, 2011

Quotes of the day: LinkedInsanity installment

Today 150 years ago North Carolina seceded from the Union. North Carolina was the last to go. In February they had voted against secession, but after Lincoln's call for troops they reconsidered.--Joshua Horn

Don't get me wrong: economies of scale are great stuff. But the corporate relationship with economies of scale is too often like a fourteen year old boy's relationship with cologne, or a hipster's relationship with hot sauce: if a dash is delightful, five dashes must be utter heaven. They end up trying to put the damn stuff on everything.--Megan McArdle

... a 100 percent rise is evidence that LinkedIn’s shares were wildly, almost fraudulently, underpriced. The bankers either had no clue about the price people are willing to pay for the shares—or they decided to grant their best institutional investment clients a bonanza at the expense of LinkedIn. In either case, LinkedIn gave up $350 million for this mispricing. Let’s use a simply analogy adapted from my old boss, Henry Blodget. This is as if the trusted real-estate agent you hired to sell your house persuaded you to sell it to her best client for $1,000,000. This is the best price she can get you, the agent says. But the very next morning, the person who bought your house immediately turns around and sold it for $2,000,000. And, of course, the very same agent helps her sell the house. Would you suspect that the agent was really working for the guy who flipped your house for a 100 percent gain? Of course you would.--John Carney

With sales of $243 million last year, LinkedIn has a price-to-sales ratio of about 40x (find data in SEC docs here). Facebook is estimated to have had sales of $2 billion last year. So a similar 40x ratio would suggest a market capitalization of just over $80 billion. A slightly less elevated way to get at a market capitalization is to look at a per-user comparison. LinkedIn has more than 100 million users, and therefore a value-per-user of about $98. Apply this metric to Facebook, with more than 500 million users, and the company’s value comes to $49 billion. Obviously these estimates are guesstimates. When Facebook begins to trade, anything could happen.--Mark Boslet

I don't think LinkedIn is worth $10 billion. But then again, I thought Google was a good short at $300.--Cav

If Apple were trading at the same multiple, it would have a market value of $2.7 trillion.--Shira Ovide
Photo link here.