Quotes of the day

I can’t believe I’ve turned into a typical old man. I can’t believe it. I was young just minutes ago.--Maurice Sendak

Much cyclical unemployment involves a waste of time and productivity, but the social cost is especially severe for the long-term unemployed. Unfortunately, the past several years has seen a dramatic rise in this group, not only in absolute numbers, but also as a fraction of all unemployed workers. This social cost of long-term unemployment has received insufficient attention from the media and during this presidential campaign.--Gary Becker

Yes, Obama had a big handicap in the lackluster economy.  Luckily for him, Mitt Romney had made a stupendous pile of money in the very industry that people blame for that lackluster economy.  On that stupendous pile, he paid a tax rate which struck people as absurdly low.  He pushed every button for folks who feel broke and terrified while the very rich sail along just fine. Obama could hardly have had a better opponent if he had ordered him from central casting.  My mother, aka The Swing Voter, delivered an extensive rant on the subject of Mitt Romney's taxes this morning.  I suspect that a more modestly wealthy Republican governor would have taken her vote.--Megan McArdle

In a political system such as China’s, those below imitate those above, and political struggles at the higher levels are replicated at the lower levels in an expanded and even more ruthless form.--Yang Jisheng

Quote of the day

On the campaign trail, President Obama talks about Mitt Romney’s tax proposals, Mitt Romney’s investments, Mitt Romney’s binders, Mitt Romney’s dog. But when it comes to his own thinking, he is curiously laconic, and confines himself to slogans and platitudes. Occasionally, however, the mask slips, and the president tells us what he actually believes. 
...
Imprisoned in medieval notions of profit and competition, President Obama is unable to share [Adam] Smith’s optimism about the future. Instead he channels the pessimism of the English clergyman-turned-economist Thomas Malthus.
...
Modern liberalism is not the first political philosophy to rest its case on doom and gloom, and it is unlikely to be the last. But until liberals offer more compelling evidence that the era of heroic growth is indeed at an end (and has not been merely artificially depressed by excessive government interference), the reasonable observer will hold with Francis Bacon: we know too little about future possibility to be justified in the adoption of a dogmatic glumness. Bacon, when pressed for “forecasts of the works that are to be,” replied “that the knowledge which we now possess will not teach a man even what to wish.”

Francis Bacon was an American-style optimist ahead of his time. Barack Obama is a Malthusian pessimist trying to be president of the wrong country. After four years of his melancholy leadership, Americans are ready for some sunshine. 

That's Michael Knox Beran.

Obama & Romney

I've taken some heat from friends and co-workers for not watching any of the presidential debates (although I watched the VP debate with great interest).

I did watch President Obama's and Governor Romney's remarks at last night's Alfred E. Smith dinner, and I got a lot more utility out of it than any of their debates.  I'd have to give the Most Gracious nod to Obama, although both of them found grace for each other and some self-deprecation for themselves.



Ohio tightens a bit, on 3 days of higher-than-usual trading volume.

Here's a nice summary map of Intrade state-by-state predictions, currently giving the win with 281 electoral votes to Obama, vs. 257 for Romney.

Intrade futures after the first 2012 presidential debate

I will not be watching any of the debates, save the VP debate next week.  However, I read up a bit, and this one was my favorite, although it did bring to mind:  who fact checks the fact checkers?

Overall, President Obama's odds moved back closer to parity.  Here is the 60-day chart of how he's traded at Intrade:

and here is the less liquid, but well correlated Ohio prediction futures contract:

I guess that polling data surfacing over the next week will impact prices further, viewership for the second debate will be higher, and Obama, having digested some much needed humble pie, will perform better.

Romney is still trailing far behind.  Should he overtake in not only Ohio, but also Florida and Virginia and one other state where Obama is polling better, he can win the thing.  My gut tells me that Virginia will be the toughest--lots of wealthy government elites live in the northern part of the state, and they will be voting for the incumbent for sure.

South Carolina GOP primary

Both Intrade and Rasmussen have Newt Gingrich to win the SC primary.

I am still waiting for the prediction market and the pollster to differ.

New Hampshire GOP primary

Both Intrade and Rasmussen have predicted a Romney victory.

Hoping for a tighter race soon.

Intrade vs. Rasmussen

Four years ago, I tracked the head-to-head predictiveness of the Intrade futures market as compared to the Zogby pollster.

This election year, I will compare Intrade to Rasmussen.  Both have Romney taking Iowa tomorrow.

Obama's relection odds stablizing

Source here.

I'm still mourning the Gingrich fade, the lost entertainment value of the debates.  If Obama can stomp Hillary, I predict he will liquify Romney.

Last 6 months of Romney GOP nomination trading from Intrade

Source here.

Not surprising, but I was really hoping for the entertainment value of Obama-Gingrich debates.

I've stopped hoping for much leadership from the White House.

Quotes of the day

The great value investor Benjamin Graham suggested that investors should never have less than 25% or more than 75% of their money in stocks.--Jason Zweig

I realized technical analysis didn’t work when I turned the charts upside down and didn’t get a different answer.--Warren Buffett

I’m already highly irritated. What makes this canuck think that “the simplest model you can imagine” has any bearing on whether NGDP targeting is a wise policy for our highly complex economy? Theoretical macroeconomists love to play with their little toy models, but unfortunately these models don’t actually describe the world we live in. In their models the IS curve slopes downward. Output depends on real interest rates. Inflation depends on output gaps. I don’t know about you, but that’s not the world I inhabit.--Scott Sumner

Well, you're gonna be dead a long time. Might as well have fun when you're alive.--Rex Ryan

In terms of guardrails in the financial system, I think automatic saving for me is the best example for this. You know the rational thing to do is to look at the end of each month and see how much money we had, how much expenses we had and then at the end of each month decide how much to send for our long-term savings. But I think we all intuitively realize that if this was the case we would not save as much. American savings rates are nothing to be proud of, but they will probably be even lower. And it clearly doesn’t make rational sense because we have different levels of expenses in the winter and in the summer. There are fluctuations. There are things that come as emergencies. Saving should not be the same every possible month. But we know that if we relied on our mediocre cognitive ability and thinking and demanded that every month we make this decision, the odds are we will never make this decision. Or at least we’ll make it very infrequently. So by creating a system that takes this decision out of our hands we actually do much better.--Dan Ariely

[At Goldman, Jon Corzine] was called ‘Fuzzy’ because he’s a sloppy thinker.  You can never really figure out what he’s doing because he doesn’t know. He just kind of wings it.--Goldman Sachs executive

I suggest that a rich person can consistently favor taxes on the rich without volunteering to pay such taxes him or herself. The argument is simply that the world in which every rich person pays is preferable to me to the world in which no rich person pays which is preferable to me to the world in which only I pay.--Karl Smith

... I learned far more from 3 months with the Assimil self-study course than from 5 years of school French. The absurdity of that comparison only grows upon comparing the hours spent. The Assimil method took 0.5 hours per day for about 90 days: That’s 45 hours. The 5 years of school French happened every school day for roughly 50 minutes. A school year has roughly 180 days, for a total of 750 hours over the 5 years. Including homework, the total is probably 900 hours. That’s a time-invested ratio of 20 to 1. Thus, despite spending 5 percent of the hours that I spent in school, with the self-study method I became far more competent in the language.--Sanjoy Mahajan

The history of English’s global diffusion is littered with important dates: the planting of the Jamestown colony in 1607; Robert Clive’s victory at the Battle of Plassey in 1757, which ushered in the dominion of the British East India Company; the creation of the first penal colony in Australia in 1788; the British settlement at Singapore in 1819 and establishment of a Crown Colony in Hong Kong in 1842; the formal beginning of British administration in Nigeria in 1861; the foundation of the BBC in 1922 and the United Nations in 1945; the launch by AT&T of the first commercial communications satellite in 1962. This list is condensed. It takes no account, for instance, of the various waves of Anglomania that swept much of Europe in the eighteenth century. But it will be apparent that the diffusion of English has had a lot to do with material reward, the media, and its use as a language of instruction. A fuller list might intensify the impression of a whiff of bloodshed. Wherever English has been used, it has lasted. Cultural might outlives military rule.--Henry Hitchings

Retractions of research papers have soared in recent years, which demonstrates how unethical scientists, like financial criminals, cut corners to tell people what they want to hear.--Edward Tenner

Together with a string of other recent cases, the Bronx case suggests that a culture of corruption and entitlement has spread through the ranks of the thin blue line. Worse, it is clear that police union officials are the mainstay of the illegal ticket fixing enterprise, so much so that prosecutors considered indicting the union as a corrupt organization under racketeering laws. The police demonstration in the Bronx was apparently orchestrated by the union, which sent text messages to officers urging that they show up to support colleagues involved in ticket fixing. “It’s a courtesy, not a crime,” was the slogan.
...
This of course is what everybody thinks of special privileges. That’s what doctors and lawyers think when they cover up professional wrongdoings by their guild brethren. It’s what investment bankers think when they pass on inside information to favored clients — a courtesy not a crime. It’s what politicians think when they do favors in exchange for money and it’s what Don Corleone and Tony Soprano think when they do favors for their friends. The essence of privilege (private law, etymologically speaking) is exactly that: exemption from the laws that govern other people. The police union in New York believes that based on longtime practice it possesses certain unique rights to circumvent the written law.
...
What that Bronx courtyard shows us is a political culture in decline and a development model on the brink. New York’s dependence on Wall Street and the federal government is becoming more acute by the year. Post bubble and post stimulus, neither source of revenue can be expected to grow at an adequate rate, and it is not unlikely that both will be shrinking for years. The pieces of the coalition are venting their rage and hostility, and new supplies of money are nowhere in view.--Walter Russell Mead

But if we are headed toward collapse, what would an American “Oh sh*t!” moment look like? An upsurge in civil unrest and crime, as happened in the 1970s? A loss of faith on the part of investors and a sudden Greek-style leap in government borrowing costs? How about a spike of violence in the Middle East, from Iraq to Afghanistan, as insurgents capitalize on our troop withdrawals? Or a paralyzing cyberattack from the rising Asian superpower we complacently underrate? Is there anything we can do to prevent such disasters? Social scientist Charles Murray calls for a “civic great awakening”—a return to the original values of the American republic. He’s got a point. Far more than in Europe, most Americans remain instinctively loyal to the killer applications of Western ascendancy, from competition all the way through to the work ethic. They know the country has the right software. They just can’t understand why it’s running so damn slowly.
...
What we need to do is to delete the viruses that have crept into our system: the anticompetitive quasi monopolies that blight everything from banking to public education; the politically correct pseudosciences and soft subjects that deflect good students away from hard science; the lobbyists who subvert the rule of law for the sake of the special interests they represent—to say nothing of our crazily dysfunctional system of health care, our overleveraged personal finances, and our newfound unemployment ethic. Then we need to download the updates that are running more successfully in other countries, from Finland to New Zealand, from Denmark to Hong Kong, from Singapore to Sweden.
...
And finally we need to reboot our whole system. I refuse to accept that Western civilization is like some hopeless old version of Microsoft DOS, doomed to freeze, then crash. I still cling to the hope that the United States is the Mac to Europe’s PC, and that if one part of the West can successfully update and reboot itself, it’s America.
...
But the lesson of history is clear. Voters and politicians alike dare not postpone the big reboot. Decline is not so gradual that our biggest problems can simply be left to the next administration, or the one after that. If what we are risking is not decline but downright collapse, then the time frame may be even tighter than one election cycle.--Niall Ferguson

The one thing that we absolutely know for sure is that if we don’t work even harder than we did in 2008, then we’re going to have a government that tells the American people, ‘you are on your own. If you get sick, you’re on your own. If you can’t afford college, you’re on your own.--President Obama

Roosevelt transformed millions of Americans from citizens into clients. The direct effect of this was evil, and the indirect effect was even worse, for all these people were robbed of their self-respect.--H.L. Mencken

A president’s approval rating at the beginning of his third year in office has historically had very little correlation to his eventual fate. In January 1983, Reagan had an approval rating of just 37 percent, but he won in a landslide. George H. W. Bush had a 79 percent approval rating in January 1991 and was soundly defeated. But voters start to think differently about a president over the course of his third year; they view him more on the basis of his performance and less on the hopes they had for him. These perceptions are sharpened by the beginning of the opposition party’s primary campaign, which, of course, accentuates the negatives.  A president’s approval rating toward the end of his third year, therefore, has been a decent (although imperfect) predictor of his chances of victory. Reagan saw his approval rating shoot up to 51 percent in November 1983 amid the V-shaped recovery from the recession of the previous year — the first sign that he was headed for a big win. Obama’s approval rating may have rebounded by a point or two from its lows after the debt-ceiling debacle — but not by much more than that. In late October, it ranged between 40 and 46 percent in different polls and averaged about 43 percent.  There have been two presidents stuck with similarly low approval ratings a year in advance of the next election. Gerald Ford had a 44 percent approval rating a year before his loss to Carter. Johnson had a 41 percent approval rating in November 1967, and although he was eligible for another term, he opted not to run. His vice president, Hubert H. Humphrey, did, and he lost.--Nate Silver

Quotes of the day

Corporate executives and managers, as well as some economists, like to think that the increasing pay of senior employees has to do with increasing returns for their specialized skills. Over email, [Emmanuel] Saez offered me a much less flattering explanation: it’s not that managers have become more valuable. It’s that, as he puts it, there’s no good way to measure objectively the productivity of an executive. That lends itself to what Saez calls “bubble phenomena” in their perceived value—to put things bluntly, they benefit from being seen as more important than they are.  If that’s the case and managers do not have some special growing value, then the same forces that have put pressure on wages lower down the ladder—labor mobility, ease of hiring and firing—will eventually apply to them, too. We may already be seeing the beginnings of that with CEO salaries. Whether in a slow seep or a big bang, every bubble will deflate.--Mark Gimein

Corporate governance experts should consider whether there should be real mechanisms to throw out and replace bad boards. Perhaps we need term limits for board members? At a minimum, there should be accountability and some metric to determine what constitutes a good board. We are seeing a search for accountability in the criticisms of the Hewlett-Packard and News Corporation boards for poor oversight. Again, though, we have no real systematic way to measure or monitor this conduct. Boards are also not a panacea and have serious institutional failings. Boards appear to be poor at taking decisive action. In the face of crisis, boards tend to resign or be taken captive by their advisers. Think of Dynegy, where the board resigned en masse after two failed sale attempts. And does anyone really think a board can substantively monitor systemic risk at a $2 trillion institution like Bank of America? Not only do boards need to be held accountable, there is the scary question of whether all of this power being provided to them is a good thing. If not, should this power flow back to the chief executive? This is not to say that corporate governance does not have value. It does, and I believe it has increased shareholder wealth. But this is a learning process. There is still a lot of work to do.--Steven Davidoff

I majored in communism and graduated magna cum laude. SO WHAT?--Jim Cramer, on CNBC today, who did this at Harvard

I’m not planning on going home.--Stacy Hessler, Wall Street Occupier, who has 4 children at home

[Herman Cain] is rising as more and more Republicans come to the conclusion that the Republican Party has found its Michael Dukakis, a technocratic Massachusetts governor running on competence, not ideology.--George Will

... when you’re a speaker, in the sense of public speaking, you can pick your topics. When you’re a would-be president, every topic picks you. Whatever happens this morning is the new topic. So, you have to have the ability to get briefed, very fast. Ideally, you should know a fair amount going in. And I think one of the Republican weaknesses has been that we rely too much on consultants and too much on talking points. And we don’t rely enough on actually knowing things. If you’re going to lead the country and change history, you had better know a heck of a lot before you start, because there’s not much time for learning on the job. And as Obama’s proven, youth and inexperience are interesting, but they can also be a disaster.--Newt Gingrich

[New York City Comptroller John] Liu also claims that public-pension funds are a better deal because they can take much more risk in pursuit of higher profits. But he all but ignores the fact that when pension returns fall short, it’s the taxpayer who must make up the difference. Skyrocketing pension costs have wreaked havoc with the city’s budget; they’re the driving force behind budget cuts, including fewer police officers to deal with more protests and gunplay alike. Yet Liu’s report merely says that concerns about higher taxpayer costs are “legitimate” -- and that’s it. Indeed, the report raises a question that the comptroller surely didn’t intend: If big pension plans offer better returns at lower costs, why not let city workers participate in such plans if they like -- but with only a small portion (maybe 20 percent of salary, instead of 50 percent) guaranteed by the taxpayers? Workers who want more money could contribute more and still benefit from scale. But the extra contributions wouldn’t carry a taxpayer guarantee. Anyway, New York City doesn’t have to guarantee such generous pensions to “work” its size. It could still use the leverage to fight for lower fees on 401(k)-style plans for its workforce. Liu’s report doesn’t advance the cause of fixing pensions. But it does remind New Yorkers of the stakes of the next mayoral race. It should remind them, too, that the current mayor is running out of time. If Mayor Bloomberg doesn’t get something done on pensions -- and soon -- he’ll leave behind a legacy of having left untouched a status quo whose costs are eating the city from the inside out. Sadly, plenty of his would-be successors think that’s just fine.--Nicole Gelinas

All models are analogies, and being analogies, they are limited in their scope. In physics you can describe ice, water and steam, and the phase transitions between them, with one unified theory, amazingly, and hence you can handle the extremes of freezing and boiling. In finance or economics we have nothing like that. Even beautiful Black-Scholes-Merton ignores volatility variations, illiquidity, panic, government regulations on shorting, to name just a few things that lie outside it. Therefore, when the world changes dramatically, every single model you can think of is likely to fail. I would like the following principle to be engraved on the foreheads of all financial and economic model users: All models are short volatility. When volatility changes a lot, the model is going to fail.--Emanuel Derman

Chart of the day: Herman Cain's Intrade pricing history

Source here.

UPDATE:  Megan has a nice brief on Cain's 9-9-9 tax plan.

Quotes of the day

The nation's state and local public employee retirement systems had $2.5 trillion in total cash and investment holdings in 2009, a $726.1 billion or 22.7 percent decrease from $3.2 trillion in 2008, according to new statistics from the U.S. Census Bureau. This follows a $176.7 billion loss the previous year.--U.S. Census Bureau

... IS-LM provides absolutely no framework for policy analysis because it makes no assumptions, and draws no conclusions, about what people are trying to accomplish. If you don’t know what people are trying to do, you can’t possibly know how best to help them.  ... Greg Mankiw and Matt Weinzierl have recently provided ... a [useful] model. Like IS-LM, their model is fundamentally Keynesian. Unlike IS-LM, it is capable of evaluating the relative desirability of various policies. Would we be better off in a world where everyone floats in a vat of money until we all starve to death? The Mankiw/Weinzierl model, reassuringly, says “no”. The IS-LM model, unhelpfully, says “that’s not my department”.--Steve Landsburg

You know, Jamie Dimon is one of the greatest bankers, he’s brought more business to this city than maybe any other banker.  To go and pick on him, I don’t know what that achieves. Jamie Dimon is honorable and works very hard and pays his taxes.  ... The majority of people who work in the financial services sector make something like $72,000 a year. They’re hard-working people and just bashing them doesn’t make a lot of sense.--Mayor Bloomberg

... deviations from Benford's law are compellingly correlated with known financial crises, bubbles, and fraud waves. And overall, the picture looks grim. Accounting data seem to be less and less related to the natural data-generating process that governs everything from rivers to molecules to cities. Since these data form the basis of most of our research in finance, Benford's law casts serious doubt on the reliability of our results. And it's just one more reason for investors to beware.--Jialan Wang

... analysis of the Senate returns over the six-year period, published in the Journal of Financial and Quantitative Analysis in 2004, showed that the Senate portfolio outperformed the market by approximately 12 percent a year. In April of this year, the team published a follow-up analysis of the House in Business and Politics, which showed that House members on average outperformed the market by a smaller but still impressive figure—roughly 6 percent a year. ... Certainly, the guardians of our laws don’t seem eager to pursue the question. No member of Congress has ever been investigated for insider trading. Four times since 2006, Congresswoman Louise Slaughter (D–New York) has sponsored the STOCK Act, which would explicitly make congressional insider trading illegal, and require members of Congress to disclose significant trades within 90 days. It’s never even come to a vote.--Megan McArdle

Why should our legislators be above the law? I have yet to hear an even vaguely plausible reason that our legislators shouldn't be watched at least as closely as we watch CEOs. In fact, I've yet to hear any reason. No one in government wanted to talk about it. The best I can infer is that well, it's a pain in the ass, and they don't wanna. That's absurd. What's even more absurd, however, is that we permit it.--Megan McArdle

If the Republicans want a nominee who will pander to the left, right and middle with no coherent philosophy and no coherent policy proposals, why not just drag out Bob Dole [instead of Mitt Romney]? At this rare historical moment when the country just might be willing to take a flyer on some truly radical changes, it saddens me deeply that warmed-over Dole might be the best the Republicans can manage to dish up.--Steve Landsburg

I find myself liking Herman Cain this year. It reminds me of how I liked Sarah Palin in 2008. And Barack Obama in 2004.--Cav

For an economist, the most fascinating aspect of Pan Am is the highly attractive flight attendants -- or rather, stewardesses, since the show is set in the early 1960s. If you’re young enough, you might think that’s just TV. But I’m just old enough to remember flying in the 1970s, and I recall stewardesses who really were, in fact, hot. Okay, I was too young to understand the concept of “hot” -- but I was definitely aware that I was being attended by some very pretty young women  Not so anymore. Flight attendants aren’t necessarily unattractive now, but they’re no more fetching than people in any other service profession that doesn’t get tips. And what’s changed? In a word, deregulation.--Glen Whitman

Chart of the day: Large cap, large lobbying

Source here, via Abnormal Returns.

Chart of the day: Only $200 million per year to buy America's politicians

Source here.

I think I share at least 2 major disappointments with Occupy Wall Street protestors

First is massive lobbying, and how paid for our government is.

Second is CEO and executive pay, and how ineffectual corporate governance is for certain principal-agent problems.

Unfortunately, our legislative and executive branches are addicted to the first and even more ineffectual on the second.

Romney, Perry, and Christie trading at Intrade

Source here.

Some interesting takes on Romney. David Brooks thinks:

It’s exciting to have charismatic leaders. But often the best leaders in business, in government and in life are not glittering saviors. They are professionals you hire to get a job done.

The strongest case for Romney is that he’s nobody’s idea of a savior.

while Christopher Benfrey says:

When I ask locals about their impressions of Mitt, I get a recurring response: Nixonian. “The overriding passion of his life seems to be to become president,” a conservative economics professor tells me. “I can’t think of a single issue over which Romney would risk reelection in order to stick to a principle.”

Quotes of the day

Apple couldn’t have killed Flash if HTML 5 hadn’t recently been adopted by major browsers. HTML 5 offers alternatives to most of the key features of Flash. And no one controls it the way Adobe controls Flash. Since no software company wants to build its products on a standard it doesn’t control, every company other than Adobe has a natural incentive to adopt HTML 5 over Flash.  This brings to mind Jonathan Zittrain’s book The Future of the Internet and How to Stop It. Zittrain warned that the success of the proprietary iPhone threatened to undermine the decentralized, bottom-up structure of the Internet. The Flash story is a useful counterexample to Zittrain’s thesis. On the one hand, iOS is a proprietary standard controlled by Apple, so its ascendancy looks like a threat to open standards. Yet the rise of the iPad was a major factor in the decline of another proprietary standard, Flash.  ... for at least two decades, it has looked like proprietary technologies were on the verge of taking over the software industry. Yet open standards have grown more and more dominant. This hasn’t been a lucky fluke, it’s a matter of basic economics. Proprietary software is central planning. And in the long run, central planning doesn’t work as well as bottom-up organization.--Timothy B. Lee

Trading is about being self-aware to obtain profits in excess of losses. Gambling is about the emotional payoff. ... When a trader lacks emotional intelligence and has no inner voice to listen to, he is more of a philanthropist than a trader. He’s giving money away, so it doesn’t matter who is on the other side of the trade ... [rogue traders] didn’t deliberately trade a Martingale system, but this is what their emotions led them to do, whether they knew it or not. That’s how vicious a cycle it is if you don’t learn to take small losses and flush your ego. Traders don’t think it can happen to them, and then all of a sudden they’re emotionally invested in the outcome of a trade. A trader must detach emotionally from the outcome of any particular trade.--Joshua Brown

You [men] don’t have to take the pill, wear a patch, insert messy rings or go through the hassle of making an appointment with your doctor to change and refill your prescription for said pills, patches, rings and paraphernalia. As for the potential short and long-term health consequences such as nausea, decreased libido, blood clotting, cancer, and infertility? On us. Cervix with a smile. If I didn’t know better, I would say that it’s like men invented birth control. But, of course, that’s just the woman in me talking crazy.--Clare Halpine

... if your blogger was good at forecasting market movements, he would be running a hedge fund, not enduring the daily sardine-like commute on the Piccadilly line. It is that the nature of financial journalism is in assembling evidence from published sources, analysts, fund managers that other people know as well. By the time the evidence of a trend is convincing enough for an article, the trend may well be over.--Buttonwood

[Jamie] Dimon, a lifelong Democrat who was rumored to be on Obama’s short list for treasury secretary before he settled on Tim Geithner, met privately with Romney on Tuesday morning before a fund-raiser at Brasserie 8¹/2 hosted by Highbridge Capital, a JPMorgan-owned hedge fund. Dimon, who was spotted “in a discreet one-on-one” discussion with Romney, cannot publicly endorse a candidate because he sits on the board of the Federal Reserve Bank of New York. But he donated to Democratic candidates in 2008 and privately supported Obama. ... Political insiders are buzzing that a defection would signal further Wall Street hostility toward Obama, who famously called them “fat cat” bankers in 2009. Dimon responded, “I don’t think the president of the United States should paint everyone with the same brush.” One insider said, “There is not a person on Wall Street, with the exception of the genetic Democrats, who would get anywhere near supporting Obama. The hostility to the administration is huge. Dimon will continue to look bipartisan, then work behind the scenes to get a Republican elected.” There were few big Wall Street names openly linked to Obama’s fund-raisers in New York. And we’re told ticket sales for Obama’s Friday event with Warren Buffett have been slower than expected, with staffers calling and e-mailing supporters to shift tickets at up to $35,800.--Page 6

High-frequency traders—often seen as the destabilizing villains of the currency markets—may in fact be helping it to run smoothly, a study by the Bank for International Settlements suggested Tuesday. Many traditional market players blame secretive high-speed traders for "predatory" or "unfair" practices, bemoaning the superfast computers they use to pick out trade signals and exploit banks' often slower machines. Some banks have even toyed with the idea of setting up closed trading systems, where they can trade with one another and avoid these accounts. But in a report based on research by officials at 14 central banks, the BIS said high-frequency traders help to make trading cheaper for everyone by squashing so-called spreads—the gap between where banks buy and sell currencies. High-frequency traders also support liquidity, and don't tend to flee the market in tough times any more often than banks.--EVA SZALAY And JACOB BUNGE

A good corporate board should be characterized by constant tension, with non-executive directors respectfully questioning the decisions of management. This can make board meetings very uncomfortable, especially for young people. Chelsea’s background makes her very well suited to dealing with this situation. So stop your hating, kids.--John Carney

Sometimes, frankly, it seems the Jets organization is afraid of Namath.--Mike Freeman

Photo links here and here.

Quotes of the day

What was driving unemployment was clearly deficient aggregate demand. [Larry Summers and I] wondered where [President Obama's misplaced belief that high unemployment was caused by productivity gains] could be coming from. We both tried to convince him otherwise. He wouldn’t budge.--Christina Romer

[McCain] didn't have a clue about the economy. I just assumed the guy [Obama] could do it. I thought he was going to be more Clinton-like in his economics and politics. I was caught by surprise by how far left the guy is and how much he's hung onto it and, I would say, at considerable cost to his own standing. ... The president keeps focusing on transitory things. He grudgingly says, 'OK, we'll keep the Bush tax cuts on for a couple years.' That's just the wrong thing to say. What I care about is what's the tax rate going to be when my project begins to bear fruit?--Robert Lucas

Scale matters--you can't take billion-dollar fliers on too many ideas. Appropriateness matters--retirees shouldn't put their living expenses in tech stocks. And the potential payoff matters--we should not invest billions to develop a slightly better form of white-out, or into experiments that have a 1-in-a-trillion chance of developing a low-cost way to turn lead into gold. I think Solyndra flunks on all three counts.--Megan McArdle

As of this moment, which do you think is more likely — that neutrinos can travel faster than light, or that the South won the Civil War?--Steve Landsburg

Our existence today requires that the North won the Civil War, therefore it’s unthinkable they actually lost. Likewise, our atomic existence today requires that neutrinos do not surpass the speed of light, therefore it’s unthinkable they somehow went faster. It’s just that most people comprehend the former and not the latter, and thus don’t see how absurd the latter is.--Sean

Many people, when the pressure is on as hard as it's been, decide that the first thing they have to do is try to hang on to their job. Anything interesting and risky can wait until after the mortgage payment has cleared and the tuition checks have been written. The behaviors most associated with "Don't get laid off" are not the ones that are best associated with "Keep the company going", much less "Discover something new". That last set of behaviors, in fact, might be one of the first to go, along with the people who exemplify them.--Derek Lowe

Here's what the 1936 government pamphlet on Social Security said: "After the first 3 years -- that is to say, beginning in 1940 -- you will pay, and your employer will pay, 1.5 cents for each dollar you earn, up to $3,000 a year. ... Beginning in 1943, you will pay 2 cents, and so will your employer, for every dollar you earn for the next 3 years. ... And finally, beginning in 1949, twelve years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year." Here's Congress' lying promise: "That is the most you will ever pay."--Walter Williams

Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Timothy F. Geithner may be working at cross purposes as one buys Treasury bonds and the other sells them.  The Fed plans to purchase $400 billion of longer-dated Treasuries in a bid to reduce yields. At the same time, the Treasury Department is selling more long-term securities to decrease its reliance on short-term borrowing. That strategy puts upward pressure on interest rates by adding to market supply.--Rich Miller

... it is clear that the Palestinian Authority now governing the West Bank cannot “deliver” a united Palestine: it cannot sign a treaty that Hamas will pledge to honor. Hamas won the last Palestinian elections; does Israel have any guarantee whatever that, after the Israelis have dismantled settlements and turned over strategic territory to the Palestinians, the Palestinian government will continue to abide by a treaty that Hamas doesn’t accept? The answer is no. Until the answer is yes it is very unlikely that Israel will make large sacrifices for what is likely to be a bogus, temporary peace. The core problem with the land for peace concept at the basis of both the Oslo Accords and every effort since to revive the moribund peace process is, simply, this: the process doesn’t offer enough land to the Palestinians or enough peace to the Israelis to be satisfactory to either side. ... It’s doubtful at this point if the President can get much done before the 2012 election. Palestinians don’t much like negotiating during US election years as they believe that Israel’s political popularity in the US makes itself felt most strongly then. (One reason President Clinton’s peace blitz was ill-timed in 2000: his wife was running for the Senate in New York and Palestinians believed he would not force Israel to make difficult concessions while his wife was running in a state where the Jewish vote is so important and while his vice president Al Gore was in a tough race against George W. Bush. After the election, Clinton was a lame duck and the Palestinians had little confidence that he could deliver on any promises he made.)--Walter Russell Mead

I think that the best way to get rid of the worst teachers(short of full-on vouchers with no government-run schools) would be to de-consolidate school districts, which would shift the balance of power toward parents and away from school administrators and teachers' unions. In my opinion, the large school district is one of the most anti-libertarian institutions in the United States today.--Arnold Kling

In general, despite extensive government subsidies, hyperprocessed food remains more expensive than food cooked at home. You can serve a roasted chicken with vegetables along with a simple salad and milk for about $14, and feed four or even six people. If that’s too much money, substitute a meal of rice and canned beans with bacon, green peppers and onions; it’s easily enough for four people and costs about $9. (Omitting the bacon, using dried beans, which are also lower in sodium, or substituting carrots for the peppers reduces the price further, of course.) Another argument runs that junk food is cheaper when measured by the calorie, and that this makes fast food essential for the poor because they need cheap calories. But given that half of the people in this country (and a higher percentage of poor people) consume too many calories rather than too few, measuring food’s value by the calorie makes as much sense as measuring a drink’s value by its alcohol content. (Why not drink 95 percent neutral grain spirit, the cheapest way to get drunk?)--Mark Bittman

Forget the Crimson Tide. It's the Crimson who's rolling.--Chris Berman

Bill Belichick went to Wesleyan. Safety school.--Cav

Quotes of the day

If you don’t hate your trainer or workout partner sometimes, then they’re not helping you really get in shape--Jon Acuff

For a man wearing the standard uniform of the office suit, it’s hard to go wrong. For a woman, the office style is always trickier. Never be flamboyant; be modest. Always cover your shoulders.  Short skirts and open cleavage are strictly forbidden. High heels and colours are a go.--XENIA TCHOUMITCHEVA

Unfortunately for Yahoo’s shareholders, the board is simply weak, unable to assert itself in important areas. This feebleness is about to leave Yahoo to the wolves. The Yahoo directors appear to have no vision or patience. This self-created vacuum has left the board and Yahoo directionless, allowing outside players to push these directors in inopportune directions. The problems of the Yahoo board are endemic in corporate America. Shareholders put their faith in and entrust their money to directors to manage the company and counter a chief executive if need be. But when things get tough, boards become captive of executives or bankers or they simply leave. The recent case of Dynegy illustrates this. Rather than stay to fix the mess the directors created, the entire Dynegy board resigned when shareholders rejected its efforts to sell the company. The reasons are interrelated. Too often directors don’t have enough skin in the game to push the company in a strong direction. Directors’ pay averages less than a $100,000 a year, typically far less than what they earn in their full-time jobs. They do not own substantial stock in their companies and face no risk if things go wrong. Even if directors are given incentives to take strong action, the corporate board is not set up for this type of decision-making. Directors work part time to manage the company. It’s tough getting any group to agree on anything, let alone to challenge chief executives. Boards thus naturally tend to rely on the top executives and advisers. Board collegiality and friendships among directors and with the chief executive often also mean that no director takes a disruptive stance. All these factors work to prevent directors from taking charge of a company or forging their own vision, a sobering thought for those who advocate greater board power.--Steven Davidoff

... for all his brave rhetoric about shared sacrifice and grand bargains and hard choices, when it comes to make actual, specific, detailed policy proposals, President Obama has always shied away from putting his name on anything that 1) acknowledges the actual scale of our deficit problem and 2) takes on his party’s interest groups in any meaningful way. So why should we expect his election-year proposals to be any different? In either case, it looks like we have our campaign theme for Obama 2012: “Tax the rich, and Medicare forever.” Which means that if Rick Perry wins the Republican nomination, we’ll be set up for the starkest ideological collision in a presidential election since 1964. No doubt cable news executives are salivating at the prospect.--Ross Douthat

The focus on jobs irrespective of whether they pass a cost-benefit test, highlights the worldview of Keynesians, where spending on anything when unemployment is high, is a good thing via the magic of the multiplier. Further, spending $100k per job is good because it's a million jobs. One wonders if there's a price at which it would not be attractive.--Eric Falkenstein

The [Fed's] dual mandate language [for maximizing employment AND price stability] is based on an outmoded concept of a tradeoff between inflation and unemployment. Moreover, too many goals blur responsibility and accountability. The dual goal enables politicians to lean on the Fed, and people often cite it as an excuse for unconventional policies. Indeed, one of the reasons for the growing interest in removing the dual mandate is the extraordinary discretionary actions the Fed has taken in the past few years -- including large-scale purchases of mortgage-backed securities and longer-term Treasuries, a strategy commonly called "quantitative easing." The Fed has explicitly used the dual mandate to justify these unusual interventions.--John Taylor

... what the Harvard Crimson dubs the “freshman kindness pledge” remains in place. The vast majority of freshmen, and the college itself, have formally declared that “the exercise of kindness” is “on par with intellectual attainment.” Both parts of that equation are odd, and they are odd in ways that suggest something has gone awry at Harvard.--Virginia Postrel

The pursuit of niceness and the worship of success can complement one another as easily as they can contradict. But the kind of culture that’s created when they combine — friendly and deferential on the surface, boiling with resume-driven competitiveness underneath — isn’t one that a great university should aspire to cultivate.--Ross Douthat