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!

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%)

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.

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.

Nothing a Harvard ethics oath--aka MBA Oath--won't solve

Felix Salmon on the corrupt culture of Raj Gupta and McKinsey.

Some people think that profits are sinful, immoral, obscene and exploitative

Dummkopfs. The video is well worth the 5 minutes of your time.



Via Don Boudreaux.

Chart of the day: Religious affluence

Source here, via William Easterly and Laura Freschi

Quotes of the day

If you've been following the latest research on diet in the scientific journals, you would understand why the regulators appeared so defensive. Increasingly, some of the basic assumptions about nutrition that have formed the core of the government's recommendations on what Americans should eat are being questioned by studies which suggest the advice is not merely ineffective but may be counterproductive, contributing among other things to the rise in obesity which the White House decries. Rather than be humbled and made cautious by such research, however, government regulators are simply plowing ahead with a conviction that their ideas about nutrition are correct.--Steven Malanga

[William] Byers argues that there is an inherent uncertainty about science and our knowledge that is frequently ignored. Byers contrasts a science of wonder with a science of certainty. He suggests that our knowledge of the physical world will always be incomplete because of the imperfection of models and human modes of thought relative to the complexity of the physical world.--Russ Roberts

... I argue that more competition in K-12 education would make the schooling available to people in poor neighborhoods better than it is now. However relatively lacking is the selection of groceries in poor neighborhoods, grocers there still must compete for customers’ dollars – a requirement that obliges those grocers to be more responsive to their customers than are those neighborhoods’ public schools which receive their revenue, not from voluntarily paying customers, but from taxpayers forced to pay regardless of how well or poorly their schools perform. Consider, for example, that 47 percent of adults in Detroit are functionally illiterate while approximately 0 percent are starving or wanting for the likes of toothpaste, paper towels, and laundry detergent.--Don Boudreaux

... is Romney really telling people who care about freedom that the federal government should not take away their liberties, but it's okay when state governments do it?--Michael Cannon

[President Obama is] a black mascot of Wall Street oligarchs and a black puppet of corporate plutocrats. And now he has become head of the American killing machine and is proud of it.--Cornel West

There is one thriving constitutional democracy in the Middle East. It is Israel. Arabs can vote in Israel. There are Arab members of the Israeli parliament. Why does the President of the United States put any pressure on Israel to make concessions to the other side–the side that does not recognize Israel’s right to exist, the side where people danced in the streets on 9/11, the side that mourned the death of Osama Bin Laden. This is a political mystery I do not understand.--Russ Roberts

I admire hockey fighters, and I don’t care for it when people refer to them as goons. It is an uninformed point of view and disrespectful.--Alec Wilkinson

The mechanism by which DCA works in mice is remarkably simple: It killed most types of cancer cells by disrupting the way they metabolize sugar, causing them to self-destruct without adversely affecting normal tissues. Following the animal trials, Michelakis and his colleagues did tests of DCA on human cancer cells in a Petri dish, then conducted human clinical trials using $1.5 million in privately raised funds. His encouraging results — DCA treatment appeared to extend the lives of four of the five study participants — were published last year in Science Translational Medicine. The preliminary work in rodents, cell cultures, and small trials on humans points to DCA as being a powerful cancer treatment. That doesn't mean it's the long-awaited cure — many other compounds have seemed similarly promising in the early stages of research without later living up to that promise — but nonetheless, Michelakis believes larger human trials on DCA are warranted. Like Jonas Salk, Michelakis hasn't patented his discovery. It's not because he doesn't want to, but because he can't. When it comes to patents, DCA really is like the sun: It's a cheap, widely used chemical that no one can own. In today's world, such drugs don't readily attract funding. Pharmaceutical companies are not exactly ignoring DCA, and they definitely aren't suppressing DCA research — it's just that they're not helping it. Why? Drug development is ultimately a business, and investing in the drug simply isn't a good business move. "Big Pharma has no interest whatsoever in investing [in DCA research] because there will be no profit."--Natalie Wolchover

I graduated from college exactly 20 years ago. And as I am reminded every single day where I work, that makes me really old. Mark Zuckerberg, our founder and my boss, said to me the other day, “Sheryl, when do midlife crises happen? When you’re 30?” Not a good day at the office.--Sheryl Sandberg

Almost 47 percent of women from 25 to 29 had never been married in 2009, almost double the 26 percent reported in 1986, according to a Census Bureau report released today.--Frank Bass

Every now and then go away, have a little relaxation, for when you come back to your work your judgment will be surer. Go some distance away because then the work appears smaller and more of it can be taken in at a glance and a lack of harmony and proportion is more readily seen.--Leonardo Da Vinci

Photo link here.

Less in Japan

Note this fact: The U.S. ten-year Treasury bond pays 3.18 percent, whereas a ten-year Japanese government bond pays 1.16 percent.

No, I am not predicting the United States is about to become just like Japan. But it is not inconceivable. That is why buying long-term bonds now is not a crazy investment strategy, and selling them (as many companies are now doing) is not at all a sure thing.

That's Greg Mankiw. Photo link here.

UPDATE: China, too. Jim Chanos thinks:

A lot of people are willing to say China will slow down. The really scary thing is if you do the numbers and they cut back on construction it's not a slowdown, and they go negative real fast. ... The fact of the matter is if they hit the breaks really hard, the economy goes into reverse. It doesn't slow. Nobody will say that publicly because it's unbelievable. But it happens to be the way the numbers work.

Quotes of the day: Tim Harford on innovation and complex systems

You cannot understand why the U.S. military was able to execute this extraordinary operation deep in the heart of Pakistan without first understanding the failures of Iran in 1980.--Andrew Exum

... the message ... isn’t really “practice makes perfect,” or even “learn from your mistakes,” at least not as a straightforward self-help cliché. It’s about building systems – whether markets, businesses, governments or armies – that solve complex problems. And it turns out that complex problem-solving usually means experimenting, quickly discovering what works and what doesn’t, and somehow letting what’s working replace what isn’t.--Tim Harford

What was the return on Henry Cave-Browne-Cave's investment of 10,000 pounds [in developing the Spitfire]? Four hundred and thirty thousand people saved from the gas chambers, and denying Adolf Hitler the atomic bomb. The most calculating economist would hesitate to put a price on that.--Tim Harford

Never in the field of human conflict has so much been owed by so many to so few.--Winston Churchill, speaking about Spitfire and Hurricane fighter pilots

My blood boiled in indignation, for I know that every true Briton would rather sell his last shirt than admit that England could not afford to defend herself against all-comers.--Dame Fanny Houston, who covered the entire development costs of the Spitfire's predecessor, the S6

After Deng Xiaoping took power in the late 1970s, local experiments were tolerated, and if they worked, they were allowed to spread. The “household responsibility system”, which gave rural farmers the right to profit if they were able to generate extra crops, was used in 1 per cent of collectives in 1979 and was almost universal by 1983, largely as a result of benign neglect from Beijing. Nor did Deng’s industrial reforms demolish the planned economy. If corporate managers could produce more than the central plan required, and if they could find a market for the surplus, they were allowed to do so. The brilliance of this idea was that it provided all the traditional free-market incentives for efficient producers to grow and find new markets – and yet the parallel market did not undermine the central plan. This itself was “frozen” in 1985, and slowly became irrelevant as the economy around it grew. Another experiment was the establishment of special economic zones. These areas were designed to encourage foreign investment and industrial development, without requiring the entire economy to be thrown open to market forces. The contrast with China’s earlier Maoist system could scarcely be greater.--Tim Harford

Photo link here.

Quotes of the day

Anybody who loses his job because of a free trade agreement was overpaid to begin with. The $20-an-hour American who loses his job to a $5-an-hour Colombian is an American who has spent the past few years charging his countrymen twenty dollars for something they ought to have been able to buy for five. ... The Obama administration said on Monday that it would not seek Congressional approval of free trade agreements with Colombia, Panama and South Korea until Republicans agree to extort additional money from American consumer/taxpayers who might stop being overcharged as a result.--Steve Landsburg

Our demand for housing and transportation, two of the biggest commodity hogs, will be lower. McMansions will be totally passe. It should already be dawning on people that most all of our non-sleeping hours at home are spent in the kitchen and its adjacent family room. Living rooms and dining rooms are relics. When people internalize the fact that they spend most of their non-sleeping, non-bathroom, non-eating time in a ten by twelve foot space with their various experience machine prototypes, large homes will, by and large, go the way of cars with fins and chrome. We obviously will not need to drive around as much, given that so much of what we want is delivered to us electromagnetically. And, getting back to real goods and technological advances, if we take the web-based distribution a few steps further, rather than having thousands of cars running from one store to the next, a couple of delivery trucks will ply the streets. So per-capita consumption of energy and resource-intensive infrastructure will decrease. Given our evolved interests a few decades hence, most of us will be spending a fraction of our income on consumption. There just won't be a lot that we will demand that requires nonrenewable resources. What we will demand will be in the way of electronic products, which will only consume a few ounces of such commodities. We will basically eat, sleep, work and then veg out. Give us food, plumbing, heat and our two-hundred dollar experience machine games, and we will be happy as a clam.--Rick Brookstaber

Why let a little thing like blatant unconstitutionality get in the way of scoring political points?--Steve Bainbridge

I suppose “humility” is one way to describe getting buffaloed into war by Bernard Henri-Levy …--Ross Douthat

Photo link here.

Quotes of the day

The United States government hit its $14 trillion borrowing limit Monday, forcing the Treasury Department to begin taking a series of extreme steps to stave off default, including suspending payments into public employee pension plans. Treasury Secretary Timothy Geithner sent letters to congressional leaders Monday to explain that his money shuffle will buy them until August 2 to reach a deal on the debt limit. After that, the government will default on its debts.--MEREDITH SHINER

...isn't that thing about history? You rarely see it coming. Who saw the Smoot-Hawley Tariff act coming?--Joe Posnanski

... the ARRA [Obama stimulus bill] created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.--Tim Conley and Bill Dupor

The federal government will take in $2.173 trillion in 2011. That’s their income, and it sounds pretty good. Until, that is, you factor in that the federal government will spend $3.818 trillion during the year. So, just like many families, the government’s outgo exceeds their income—to the tune of $1.645 trillion in overspending. That’s called the deficit. Altogether, the government has $14.2 trillion in debt. What would happen if John Q. Public and his wife called my show with these kinds of numbers? Here’s how their financial situation would stack up: If their household income was $55,000 per year, they’d actually be spending $96,500—$41,500 more than they made! That means they’re spending 175% of their annual income! So, in 2011 they’d add $41,500 of debt to their current credit card debt of $366,000! What’s the first step to get out of debt? Stop overspending! But that means a family that is used to spending $96,500 a year has to learn how to live on $55,000. That’s a tough pill to swallow. Those kinds of spending cuts seriously hurt, but it’s the only way out of debt for John Q. Public.--Dave Ramsey

Our output gap is not a measure of economic underperformance or “lost output.” We might not be underperforming at all. We’re very likely performing at exactly the capacity appropriate for a people with the combination of assets, liabilities and skills we actually have. What the Output Gappers miss is that a lot of the productive capacity built during a boom —whether that’s machinery, skills, business relationships, or financial products — might not be very useful when the bust comes around. Having the government spend more or pump out more dollars won’t somehow reverse this process. Stimulus spending and monetary easing won’t overcome an output gap if it is caused by an actual reduction in the productive capacity of the country. And a shift in demand away from what we’re equipped and skilled at making is the equivalent of a reduction in productive capacity. We have relatively less capacity to make what’s actually in demand because so much of our capacity is dedicated to making what’s fallen out of favor.--John Carney

... the admirers of Greg Mankiw are most liberal, and the admirers of Paul Krugman are the least liberal (and remarkably preponderantly Democratic).--DAVIS, FIGGINS, HEDENGREN, AND KLEIN

Do we take market prices seriously? Since Treasury rates are still low, low, low, arguably we can infer that the market does not think the Republican stance is so catastrophic. Paul Krugman does not take a consistent position on the relevance of low rates. They are allowed to indicate that the U.S. government should spend more, but not allowed to indicate that we should diminish the blame to be leveled at Republicans. One cannot have it both ways.--Tyler Cowen

Has there ever been a socialist government in which the people at the top didn't live at least as well as the coupon-clipping plutocrats of capitalism?--Steve Bainbridge

The [NIH Chemical Genomics Center] folks realize that they have some problems, and are willing to put in the work to help clean things up. The problem is, they'd already published on this list, calling it "definitive, complete, and nonredundant", which now seems to be a bit premature ...--Derek Lowe

You’re an eagle, so why do you want to be with these chickens who can’t fly? You’ll get the chicken flu.--Bala Balachandran, warning Raj Gupta of his business partners

Photo link here.

Dummkopfs

First DSK, now Ahnuld. What's going on?

I think a Darwinist would have to conclude everything is as it should be; nothing new or surprising to see here.

Gloria Steinem would probably complain about whoever she did not have influence over, and give guys who owed her (e.g. Bill Clinton) a pass.

Maybe its time to bring Jesus back into the conversation. He'd say adultery is not cool.  I'm thinking a lot of kids caught in the middle of their parents' conflict would agree.

Photo links here and here.

UPDATE: France has their situational feminists, too. Apparently, they stop advocating for women when the perp is a Socialist party star:

... the real national embarrassment for France is the response of its elites.

First came the two-faced appeals to the sacred "presumption of innocence" by French politicians on both sides of the aisle. DSK rival and self-proclaimed women's advocate Ségolène Royal extended her thoughts to DSK and his family for going through a very hard time, but did not have a word for the maid, for whom one suspects the past few days haven't been all roses.

The "presumption of innocence" was turned into a presumption of culpability of the accuser. Much ink was poured over how awful it is for DSK. And since DSK must be presumed innocent, not a word was spared to worry about the maid and her family, who are going through a hard time.

To the rescue came repeated fraudster and Roman Polanski defender Bernard-Henri Lévy (with friends like these, who needs enemies, Dominique?) who was shocked, shocked that in America "anyone can come along and accuse another fellow of any crime" (mon Dieu!), and suggests that DSK shouldn't be treated that way because, well, he's a very important man.

Dear GM Danny Ainge

Please read this.

Why does dubious social science keep showing up in medical journals?

ask William Easterly and Laura Freschi.  They go on to wonder:

Medical journals would presumably not tolerate shaky medical science in the name of advocacy; why in social science? We also care about rape, and stillbirths, and dying in childbirth. That’s why we also care about the quality of social science applied to these tragic problems.

Upper Middle Class Guilt, I theorize, with a splash of Higher Ed Elitism. And of course, Bikini Statistics.

Statistics are like a bikini. What they present is suggestive, but what they conceal is vital.--Aaron Levenstein

Memorizing anatomy and understanding statistics are not necessarily correlative. Previous BS installment here.

Quotes of the day

When I watched the party and celebration in the streets of London [for the royal wedding], my very first thought was “David would be in his underwear.” That’s admittedly a weird thought, but that’s where I went. I immediately imagined David stripping down to his under armor and doing the robot in the streets after his victory. Just standing there saying, “Hands go up, and they stay there! All I do is win!”--Jon Acuff

In 1997, Julie Preuitt sounded the alarms that the Texas financier R. Allen Stanford was operating a huge Ponzi scheme. The Securities and Exchange Commission official hammered away at the case for years, until the agency finally brought action against Mr. Stanford in 2009. ... Ms. Preuitt brought the concerns to her bosses and later complained to officials in the agency’s Washington headquarters. In turn, Ms. Preuitt received a letter of reprimand. The agency later transferred her to a nonsupervisory position, which in essence was a demotion.--BEN PROTESS

When President Barack Obama took office, in 2009, he championed the cause of government transparency, and spoke admiringly of whistle-blowers, whom he described as “often the best source of information about waste, fraud, and abuse in government.” But the Obama Administration has pursued leak prosecutions with a surprising relentlessness.--Jane Mayer

... power is incredibly destructive. It’s a weird, pathological thing. I also think the intelligence community coöpted Obama, because he’s rather naïve about national security. He’s accepted the fear and secrecy. We’re in a scary space in this country.--Thomas Drake

We are witnessing the bipartisan normalization and legitimization of a national-surveillance state.--Jack Balkin, a liberal law professor at Yale

The program he talked to the Baltimore Sun about was a failure and wasted billions of dollars. It’s embarrassing to the N.S.A., but it’s not giving aid and comfort to the enemy.--Thomas Tamm, a Justice Department lawyer, revealed that he was one of the people who leaked to the Times

I think it’s outrageous. The Bush people have been let off. The telecom companies got immunity. The only people Obama has prosecuted are the whistle-blowers.--Mark Klein, the former A.T. & T. employee who exposed the telecom-company wiretaps

Democracy is the recurrent suspicion that more than half of the people are right more than half the time.--E.B. White

Suffrage coincided with immediate increases in state government
expenditures and revenue and more liberal voting patterns
for federal representatives, and these effects continued growing
over time as more women took advantage of the franchise. Contrary
to many recent suggestions, the gender gap is not something
that has arisen since the 1970s, and it helps explain why American
government started growing when it did.--John Lott and Lawrence Kenny

Kesselschlact means ‘caldron battle’ in German. That’s what the Nazis called battles of total annihilation, and that’s how I felt. Like a survivor of Kesselschlact.--Jim Cramer

Taken from the top, these sentiments [of "Why isn't Wall Street in jail?"] imply that the financial crisis was caused by fraud; that people who take big risks should be subject to a criminal investigation; that executives of large financial firms should be criminal suspects after a crash; that public revulsion indicates likely culpability; that it is inconceivable (to Madoff, anyway) that people could lose so much money absent a conspiracy; and that Wall Street bears collective guilt for which a large part of it should be incarcerated. These assumptions do violence to our system of justice and hinder our understanding of the crisis. The claim that it was "caused by financial fraud" is debatable, but the weight of the evidence is strongly against it. The financial crisis was accompanied by fraud, on the part of mortgage applicants as well as banks. It was caused, more nearly, by a speculative bubble in mortgages, in which bankers, applicants, investors, and regulators were all blind to risk. More broadly, the crash was the result of a tendency in our financial culture, especially after a period of buoyancy, to push leverage and risk-taking to the extreme. ... The mortgage crisis was a societal breakdown—a massive failure of the private market, Wall Street in particular. It wasn't, fundamentally, rooted in fraud. Enron was fraud. The bankers convicted in the savings and loan scandal who dealt sweetheart loans to friends were fraudulent. These people had their hands, willfully, in the till—and knew it. ... I wasn't a fan of Goldman's slickness in letting a short-seller design a collateralized debt obligation that Goldman marketed to clients, for which it was sanctioned by the Securities and Exchange Commission. However, its unsavory dealmaking should not obscure that in betting, correctly, against the housing market, it helped mitigate the crash. Had more firms done as Goldman and shorted mortgages, fewer unsound loans would have been issued. ... imprisonment is a punishment for criminality—not a sociological remedy for unfairness, incompetence, or outsize losses.--Roger Lowenstein

But we didn’t know what [our dad, Warren Buffett] did. In fact, when my sister filled out a form, I think in fourth or fifth grade, about what our parents did, she put “security analysis,” and it was assumed that what he did was check alarm systems. So to a kid it was like “what do all the numbers on the page mean? And what exactly is the New York Stock Exchange and buying and selling and all that?” So we really didn’t know.--Peter Buffett

The U.S. achieved 9% annual growth between 1800 and 1900, with 15 recessions, 4 depressions, and a civil war at halftime.--Bill Smead, contrasting the growth of China on CNBC.  More here.

... maybe there remains one last shiny, fat apple hanging right in front of our faces, one last endeavor that would bring us fast, costless, and easy growth. It is immigration reform. The United States can grow faster by stealing the rest of the world's smart people.--Annie Lowrey

Photo link here.

Plastic of the day

The east side of Manhattan was horrible today.

Via Abraham Piper.

Chart of the day: Tornado deaths in the U.S.

Via Steve McIntyre.

Quotes of the day

Now who would have been more astonished? Aristotle confronted with Martin Gardner’s calculator, or the Martin Gardner of 1975 confronted with my iPhone? I’m going to say it’s a close call.--Steve Landsburg

In a dynamic setting, …financial innovation always reduces the average variance in the long run because traders learn from past asset payoffs. A question emerges as to how new assets should be introduced to minimize their short run impact on the speculative variance. I show that staggering (or delaying) the introduction of new assets is not effective because it reduces traders’ learning simultaneously with their speculation. A viable alternative is to set temporary position limits (or taxes) on new assets.--Alp Simsek

Not many people want to vote for a candidate who says, “I really am not sure how to improve schools in our area, so I plan to pilot half a dozen ideas, and we’ll keep the one or two that we can prove to have worked.” But the other guy – the one who claims he does know – isn’t telling us the truth about uncertainty and failure. He’s just telling us what we want to hear.--Tim Harford

The woman who was apparently selectively hard to get, i.e. easy for you but hard for everyone else was the runaway winner for the men. Not only that but men thought the selectively hard to get woman would have all the advantages of the easy to get woman with none of the drawbacks of the hard to get woman. They thought she would be popular, warm and easygoing, but not demanding and difficult.--Jeremy Dean

You have to consult. Bad women's comedies are made by men who didn't consult enough women.--Paul Feig

Despite various limitations in data and tools, it should be noted that applying a scientific process is essential if one is to overcome the lack of rigor inherent in attribution claims that are all too often based on mere coincidental associations.--National Oceanic and Atmospheric Administration

Memo to suburban voucher opponents who 'support public education': you're already sending your kid to private school. You're just confused because your tuition fees came bundled with granite countertops and hardwood floors.--Megan McArdle

Circa 2080, imagine a world with two classes, the very rich and the fairly poor. The very rich pay thirty percent of their $1 million a year incomes on health care. The fairly poor earn $100,000 a year. How are we supposed to roughly equalize health care consumption? Does it make sense to give the fairly poor 3/4 of their real income ($300,000 out of a total of $100,000 cash plus $300,000 health care benefits) in the form of health care benefits? And could we enforce that with a mandate + subsidy? Probably not. Of course both health care costs and income inequality have been rising in this country. It is a critical question — and one which remains unanswered — at which margins these problems kick in decisively. Under “Medicaid for everybody plus private cash top-offs,” this same problem does not arise, but there is also less egalitarian redistribution. I would favor that blend over a mandate.--Tyler Cowen

Photo link here.

Raj Rajaratnam guilty on all accounts

CNBC is reporting right now.

Getting the cheaters out of the game is good for humble folks like me, who are seeking returns honestly. Sort of like getting the juicers and dopers out of sports.

Photo link here.

UPDATE: Joe Posnanski thinks steroids are out of baseball. Hmph, rats fly. (In my neighborhood, we call 'em pigeons).

Quotes of the day

Blessed are the poor in spirit,
for theirs is the kingdom of heaven.--Jesus Christ

I’d like to thank all the rich people for donating tonight. And when I say rich, I mean rich in spirit.--Lady Gaga

People in New York are nice too -- many of the nicest people I know are New Yorkers -- but in New York there isn't often TIME to be nice. If you're nice and let people in at the Holland Tunnel you will NEVER get where you're going. In Kansas City, people have the time t0 be nice.--Joe Posnanski

While entrepreneurs are grasping for venture capital, the nation's leading firms seem puzzled about how to spend their money. Their lack of imagination stunts economic growth. A big problem is that these companies tend to treat nascent opportunities the same way that they approach established businesses. They want data, even though data on non-existent markets is inherently fictional.--Stephen Wunker

... the number of young women (ages 20-24) joining the financial industry every year is about 22%. However, this number is actually much lower than it was a decade ago. Approximately 141,000 women or 2.6% have left Wall Street in the last ten years. To give you some context, 9.6% or 389,000 men have started working in finance in the same period. What is the reason for this exodus?--Meredith Lepore

As my colleague David Leonhardt pointed out recently, in 1954, about 96 percent of American men between the ages of 25 and 54 worked. Today that number is around 80 percent. One-fifth of all men in their prime working ages are not getting up and going to work. ... We’re locking in the nation’s wealth into the Medicare program and closing off any possibility that we might do something significant to reinvigorate the missing fifth. Next time you see a politician demagoguing Medicare, ask this: Should we be using our resources in the manner of a nation in decline or one still committed to stoking the energy of its people and continuing its rise?--David Brooks

Palin entered the national consciousness more suddenly than most high-level politicians do, and she did it in the intense final stretch of a presidential campaign, which had a kiln-like effect of hardening the initial impression—depending on your point of view, of the provincial half-wit portrayed by Tina Fey or the plain-sense Mama Grizzly proudly leading her army of culture warriors. In modern politics, your “brand,” once established, is almost impossible to change. Only a handful of politicians have changed theirs (Hillary Clinton is one), and then only through tireless perseverance. Palin has shown little inclination to revise or deepen these impressions—she didn’t respond to my requests to discuss her record—and she hasn’t designated anyone else to do it for her. (Mama Grizzlies claw; they don’t contextualize.) ... As governor, Palin demonstrated many of the qualities we expect in our best leaders. She set aside private concerns for the greater good, forgoing a focus on social issues to confront the great problem plaguing Alaska, its corrupt oil-and-gas politics. She did this in a way that seems wildly out of character today—by cooperating with Democrats and moderate Republicans to raise taxes on Big Business. And she succeeded to a remarkable extent in settling, at least for a time, what had seemed insoluble problems, in the process putting Alaska on a trajectory to financial well-being. Since 2008, Sarah Palin has influenced her party, and the tenor of its politics, perhaps more than any other Republican, but in a way that is almost the antithesis of what she did in Alaska. Had she stayed true to her record, she might have pointed her party in a very different direction.--Joshua Green

A lot of people on the East Coast, when they think of Sarah Palin now, some five-letter words come to mind: Scary. Crazy. Angry. Maybe some others. But the five-letter word that people in Alaska associated with her name was clean.--Cliff Groh

One of the ways in which government is able to operate unaccountably—that is, outside of democratic checks and balances—is by facilitating public ignorance about its activities. The debt ceiling vote helps raise public awareness about the costs of government, keeping government accountable and increasing democratic participation. Lawmakers must go on record as approving an increase in the debt limit. They must confront, in a very public manner, the costs of the programs they have enacted. This is inconvenient for lawmakers and a great many of them would probably like to escape this burden. Which is all the more reason to keep the debt ceiling process around.--John Carney

There’s nothing like a little dust-up between millionaires and billionaires to start us thousandaires yawning. And when the upcoming pro football season is in danger of being cancelled because of it, we’re likely to say: a plague on both your mansions. Too bad, because the current struggle between labor and management in the National Football League not only reflects the current attacks on unions across the country but conjures up, even if in cartoon fashion, some crucial American issues: racism, classism, sexism, recreational violence, and the health-care gap. No wonder football seems to have replaced baseball as the national pastime.--Robert Lipsyte

The U.S. Postal Service continues to hemorrhage money, with a loss of $2.2 billion in the most recent quarter.--Ben Rooney

Photo links here and here.

Quotes of the day

Without significant spending cuts and reforms to reduce our debt, there will be no debt limit increase. And the cuts should be greater than the accompanying increase in debt authority the president is given. We should be talking about cuts of trillions, not just billions.--John Boehner

Much of the attraction between the sexes is chemistry. New studies suggest that when women use hormonal contraceptives, such as birth-control pills, it disrupts some of these chemical signals, affecting their attractiveness to men and women's own preferences for romantic partners. The type of man a woman is drawn to is known to change during her monthly cycle—when a woman is fertile, for instance, she might look for a man with more masculine features. Taking the pill or another type of hormonal contraceptive upends this natural dynamic, making less-masculine men seem more attractive, according to a small but growing body of evidence. The findings have led researchers to wonder about the implications for partner choice, relationship quality and even the health of the children produced by these partnerships.--SHIRLEY S. WANG

I was just wondering if you would consider a deployment of outside military troops to be less of an interference than using the descriptive word “democracy”?--Bill Easterly, to the World Bank

Initially, [former governor and General Sterling] Price was against secession for the state of Missouri. But that changed after May 10, 1861 and the Camp Jackson Affair. Missouri Governor Claiborne Fox Jackson, a southern sympathizer, had called out the state militia for training. They established "Camp Jackson" about 4 to 5 miles from the St. Louis Federal Arsenal. Federal Captain Nathaniel Lyon, an ardent abolitionist, saw this as a threat to the federal arsenal and forced the militiamen to surrender to his Missouri Home Guard. In marching the prisoners through St. Louis a riot broke out and many of the prisoners were killed or wounded. Price was outraged at the Camp Jackson Affair.--The Civil War Muse

... the textbook money multiplier doesn't exist anymore. This means that Fed attempts to juice the economy by raising the quantity of reserves—the basic effect of quantitative easing—are bound to fail. But it also means that predictions of massive inflation resulting from the rising reserves are also likely to be wrong.--John Carney

... Democrats wrestling with the legacy of Ronald Reagan’s deficits resented the influence of what the analyst Ed Yardeni had dubbed “the bond vigilantes”: the investors who enforce fiscal and monetary discipline when governments won’t. If your political system inflates its currency, or fails to align its spending with its tax revenues, the bond vigilantes will raise your interest rates until you either get it together … or catapult into a crisis. In the 1990s, we chose to get it together; thanks to tax hikes under both Bush I and Clinton, and a massive influx of capital-gains-tax revenue from the stock-market bubble, we even enjoyed a brief surplus. The bond vigilantes retreated over the horizon. But now deficits are back—and bigger than ever. In 2010, the United States spent $1.3 trillion more than it took in. ... not bearish on America. “We own U.S. corporates, Fannie and Freddie mortgages—we haven’t left the country, we’ve just left Treasuries.” It would be one thing, he told me, if this were 1943 and we were in World War II; but we’re not, and he has a fiduciary duty to his investors that he can’t violate just because his country doesn’t want to make hard choices about taxes and spending. And would he have bought the Victory Bonds that the government sold to fund the war effort? For the first time in the interview, Gross obviously tried to hedge. “Well, I’d like to think that the government wouldn’t have picked the pockets of its savers.” But it did then, just like it is doing now, I pointed out; the government inflated away the value of the bonds so that they yielded negative real returns. Gross smiled. “Maybe if they framed it as a ‘Victory in Afghanistan’ thing, I might be more favorably disposed.” So the people worried about the bond vigilantes have at least one ray of hope after all. The leader of the gang may be tough—but at heart, he’s still a bit of a patriot. That may not be enough to save us. But perhaps it will buy us some time to clean up our act.--Megan McArdle

In case you missed it ailing mortgage giant Fannie Mae announced its first quarter earnings loss numbers on Friday. About $11 billion in credit losses on the firm's giant mortgage portfolio led to a fresh $6.5 billion loss in the quarter. Ultimately, it needs another $8.5 billion from taxpayers to stay afloat.--Daniel Indiviglio

Donald Trump’s support among Republicans has collapsed in the wake of President Obama’s release of his long form birth certificate, according to a new survey by the Public Policy Polling. PPP, which in April gave Trump sole possession of first place among Republican voters, now has him back in the pack with the support of just just eight percent, tied with Ron Paul.--Keith Koffler

All good things must come to an end, and after more than two and a half years of producing an Economix post every week, it is time for me to move on. ... At its best, normative economics draws heavily on positive economics: scores of studies have shown the ways in which rent control can screw up a housing market, with too little supply and misallocation of housing units, and that helps formulate policy prescriptions. Yet the economic approach to public policy is distinguished by attributes beyond an attention to evidence. There is a strong predisposition within economics to emphasize individual freedom. Our theories start with the assumption that giving individuals more choices is a good thing — and that assumption leads to the view that people benefit from having more money or lower prices for the goods that they buy. That assumption doesn’t mean that all regulation is bad or even that, in some cases, people are better off facing fewer soups on a supermarket shelf. Even though people value more choices, they also value information, and an overload of choices can make it hard to figure out which soup is really best. But our assumptions do put freedom first, and that’s an important perspective. Economics marries a predilection for personal freedom with a longstanding tendency to view the interests of the government as being distinct from the welfare of the people.--Ed Glaeser

Children that we are, even you and I, who have given up so little, know in our hearts not only that it is more blessed to give than to receive, but that it is also more fun—the kind of holy fun that wells up like tears in the eyes of saints, the kind of blessed fun in which we lose ourselves and at the same time begin to find ourselves, to grow up into the selves we were created to become.--Frederick Buechner

Photo link here.

Top 10 CEO pay packages, for the year ending Apr 30 2011

Courtesy of the WSJ, which has an app for that (in millions):

$84  Viacom, Philippe Daumann
$69  Oracle, Larry Ellison
$54  CBS, Leslie Moonves
$45  Jarden, Martin Franklin
$33  DIRECTV, Michael White

$32  Stanley Black & Decker, John Lundgren
$31  Freeport McMoran, Richard Adkerson
$27  Disney, Robert Iger
$27  Visteon, Donald Stebbins
$26  Time Warner, Jeffrey Bewkes

What, no Wall Street or Big Oil or Big Pharma CEOs up here?  I guess life-saving drugs, energy and banking are not as important as MTV and Comedy Central.

Photo link here.

Tatoo of the day: The gaussian copula

Photo link here, via Sam Ro.