"History is a wonderful thing, if only it was true"

Monday, November 30, 2009

Problems with Gold

Good summary
And gold is rather sterile : no yield, cost to own (store, insure)

Buttonwood: Paper promises, golden hordes | The Economist:

"A gold standard clearly protects the interest of creditors since it ties the value of money to a scarce resource. A government cannot create new gold. But the law of volatility applies. If you fix one part of the economic system, trouble has to show up elsewhere. When countries on the gold standard suffered a shock they had to let the real economy, rather than their currencies, take the strain.

The Depression showed the problem with this approach. In theory businesses and workers should quickly adjust to a deflationary shock, by slashing their prices and wages. In practice they were slow to adjust and the results were bankruptcies and mass unemployment. Democratically elected governments proved reluctant to stand by and let this happen. By going off the gold standard and allowing their currencies to fluctuate, they protected the interests of the bulk of their populations at the expense of creditors.

Dropping gold did work. A recent paper* by Barry Eichengreen of the University of California, Berkeley, and Douglas Irwin of Dartmouth College found that countries that abandoned gold not only had shorter recessions but were also less inclined to raise tariffs than those countries that retained the link."

Sunday, November 29, 2009


Fareed Zakaria's GPS
The thesis is spot on - don't teach specific skills, but how to to acquire skills

CNN.com - Transcripts:

"ZAKARIA: And we are back with Eric Schmidt, the CEO of Google.

You know, I wonder about how we educate kids. I watch, you know, my kids go to school. And one of the things they have to do with great -- what takes a lot of time is to learn to spell properly.

Is it worth teaching people how to spell properly in a world in which every -- there's spell checks everywhere?

SCHMIDT: You can imagine education changing a lot. After all, when I was growing up, they forced me to memorize everything. But now, why do I need to remember that? I just need to learn how to search for it."

Saturday, November 28, 2009


Hacked E-Mail Data Prompts Calls for Changes in Climate Research - NYTimes.com:

"Some prominent climate scientists are calling for changes in the way research on global warming is conducted after a British university said thousands of private e-mail messages and documents had been stolen from its climate center.

The scientists say that the e-mail messages, which have circulated on the Internet and which disclose the inner workings of a small network of climatologists who chart the planet’s temperature, have damaged the public’s trust in the evidence that humans are dangerously warming the planet, just as many countries are poised to start reining in greenhouse gas emissions.

“This whole concept of, ‘We’re the experts, trust us,’ has clearly gone by the wayside with these e-mails,” said Judith Curry, a climate scientist at Georgia Institute of Technology."

Politics posts

Several links dealing with state of the Obama Administration

Is the electorate getting disillusioned?

Note that source is Rupert Murdock's Wall St. Journal, so take with requisite dose of salt

Strains in Party Threaten Democrats' Plans - WSJ.com (note : Democrats often seem strained to acted together - see Will Rogers "I'm not a member of any organized political party, I'm a Democrat!")

More damning:

Fred Barnes: Why Obama Isn't Changing Washington - WSJ.com:

"First, Mr. Obama misread the meaning of the 2008 election. It wasn't a mandate for a liberal revolution. His victory was a personal one, not an ideological triumph of liberalism. Yet Mr. Obama, his aides and Democratic leaders in Congress have treated it as a mandate to radically change policy directions in this country. They are pushing forward one liberal initiative after another. As a result, Mr. Obama's approval rating has dropped along with the popularity of his agenda."

"Second, Mr. Obama misread his own ability to sway the public. He is a glib, cool, likeable speaker whose sentences have subjects and verbs. During the campaign, he gave dazzling speeches about hope and change that excited voters."

"Third, Mr. Obama misread Republicans. They felt weak and vulnerable after losing two straight congressional elections and watching John McCain's presidential bid fall flat. They were afraid to criticize the newly elected president. If he had offered them minimal concessions, many of them would have jumped aboard his policies. If that had happened, the president could have boasted of achieving bipartisan compromise on the stimulus and other policies. He let the chance slip away."

On the lead domestic program, health care:

David S. Broder - David Broder: Fears of health-reform cost are justifiable:

"By David S. Broder
Sunday, November 22, 2009

It's simply not true that America is ambivalent about everything when it comes to the Obama health plan.

The day after the Congressional Budget Office (CBO) gave its qualified blessing to the version of health reform produced by Senate Majority Leader Harry Reid, a Quinnipiac University poll of a national cross section of voters reported its latest results.

This poll may not be as famous as some others, but I know the care and professionalism of the people who run it, and one question was particularly interesting to me.

It read: 'President Obama has pledged that health insurance reform will not add to our federal budget deficit over the next decade. Do you think that President Obama will be able to keep his promise or do you think that any health care plan that Congress passes and President Obama signs will add to the federal budget deficit?'

The answer: Less than one-fifth of the voters -- 19 percent of the sample -- think he will keep his word. Nine of 10 Republicans and eight of 10 independents said that whatever passes will add to the torrent of red ink. By a margin of four to three, even Democrats agreed this is likely."

The executive branch is not all that strong, and congress was allowed to take over the agenda. Furthermore, I wonder if "campaign style" really works oversees, or do you have to put the foreign service to work laying the groundwork.

Peggy Noonan: He Can't Take Another Bow - WSJ.com:

"An icon of a White House that is coming to seem amateurish."

"From journalist Elizabeth Drew, a veteran and often sympathetic chronicler of Democratic figures, a fiery denunciation of—and warning for—the White House. In a piece in Politico on the firing of White House counsel Greg Craig, Ms. Drew reports that while the president was in Asia last week, "a critical mass of influential people who once held big hopes for his presidency began to wonder whether they had misjudged the man." They once held "an unromantically high opinion of Obama," and were key to his rise, but now they are concluding that the president isn't "the person of integrity and even classiness they had thought.

She scored "the Chicago crowd," which she characterized as "a distressingly insular and small-minded West Wing team." The White House, Ms. Drew says, needs adult supervision—"an older, wiser head, someone with a bit more detachment."


"Just as stinging as Elizabeth Drew on domestic matters was Leslie Gelb on Mr. Obama and foreign policy in the Daily Beast. Mr. Gelb, president emeritus of the Council on Foreign Relations and fully plugged into the Democratic foreign-policy establishment, wrote this week that the president's Asia trip suggested "a disturbing amateurishness in managing America's power." The president's Afghanistan review has been "inexcusably clumsy," Mideast negotiations have been "fumbling." So unsuccessful was the trip that Mr. Gelb suggested Mr. Obama take responsibility for it "as President Kennedy did after the Bay of Pigs

He added that rather than bowing to emperors—Mr. Obama "seems to do this stuff spontaneously and inexplicably"—he should begin to bow to "the voices of experience" in Washington.

When longtime political observers start calling for wise men, a president is in trouble."

Then the more "liberal" NYTimes chimes in:
Editorial - Diplomacy 101 - NYTimes.com:
"Mr. Obama’s own credibility is so diminished (his approval rating in Israel is 4 percent) that serious negotiations may be farther off than ever.

Peacemaking takes strategic skill. But we see no sign that President Obama and Mr. Mitchell were thinking more than one move down the board. The president went public with his demand for a full freeze on settlements before securing Israel’s commitment. And he and his aides apparently had no plan for what they would do if Prime Minister Benjamin Netanyahu said no.

Most important, they allowed the controversy to obscure the real goal: nudging Israel and the Palestinians into peace talks. (We don’t know exactly what happened but we are told that Mr. Obama relied more on the judgment of his political advisers — specifically his chief of staff, Rahm Emanuel — than of his Mideast specialists.)"

Monday, November 23, 2009


Took some time off and posted recollections from "racing daze"

1977 I'd put together a race team, went to Ohio and with combination of planning and a bit of luck started on our way to a National Championship, and Endurance racing at that.
With endurance racing, if it breaks, you fix it, if rider crashes, you fix it.
You keep racing.
Most pavement racing runs from 30 to 60 min, we'd run 3-6-12 hours, even a pair of the ultimates - 24hrs, once around the clock.

Transcriptions and notes: Racing Recollections - Google Docs

1978 we moved into the new AMA Superbike class, modest results, then worked with other riders and teams for a few years, but now had a family and would not spend as much time on the road.

Besides, it's damn hard to top a National Championship.

Later, I was a guest at a SAE (Society of Automotive Engineers) dinner, where the keynote speaker was the head of Porsche and he spoke of the importance of racing in teaching values to young engineers.

With winning the only object, you could :
build the best car, but if you couldn't make it to the starting line - NFG
build the fastest car, but if you couldn't make it to the finish line - NFG
Simply - no excuses, no gray, it's black and white - win or loose

You apply yourself, try to anticipate as many contingencies as possible and plan for alternative actions, if something breaks, can you fix it ... quickly?

Wednesday, November 18, 2009


He all but admits that he's all about BS and Hype
I just wonder if he really does drink his own kool-aid

Trump on Trump: Testimony Offers Glimpse of How He Values His Empire - WSJ.com:

"'My net worth fluctuates, and it goes up and down with markets and with attitudes and with feelings, even my own feeling,' he told lawyers in the December 2007 deposition."


"Mr. Trump was asked whether he has ever exaggerated in statements about his properties. "I think everybody does," he said in the deposition. "Who wouldn't?"

A follow-up question: Does that mean he inflates the value of his properties in general, nonfinancial public statements? "Not beyond reason," he said in the testimony.

The deposition reveals he told his bankers and New Jersey casino authorities in 2004 and 2005 that he was worth approximately $3.6 billion. In 2005, Deutsche Bank evaluated his net worth as part of underwriting a $640 million construction loan it made to Mr. Trump's Chicago condo and hotel project. The bank said his worth was $788 million, according to information presented by the author's lawyers present during Mr. Trump's deposition."

Thursday, November 12, 2009

More on the Housing Bubble

From an insider

Edward Pinto: Acorn and the Housing Bubble - WSJ.com

Lays out Congressional influence on Fannie and Freddie to lend at all costs (and what costs we've had)

"Fannie and Freddie acquired $1.2 trillion of loans from banks and other lenders from 1993 to 2007. This amounted to 62% of all such conventional home purchase loans with a down payment of 5% or less that were originated nationwide over the same period.

Fannie and Freddie also acquired $2.2 trillion in subprime loans and private securities backed by subprime loans from 1997 to 2007. Acorn and the other advocacy groups succeeded at getting Congress to mandate "innovative and flexible" lending practices such as higher debt ratios and creative definitions of income. And the serious delinquency rate on Fannie and Freddie's $1.5 trillion in high-risk loans was 10.3% as of Sept. 30, 2009."

Mr. Pinto was the chief credit officer at Fannie Mae from 1987 to 1989. He is currently a consultant to the mortgage-finance industry.

Monday, November 09, 2009

Who Killed the Electric Car?

Maybe, just maybe they just don't work

"The electric car is like a 4,000 pound Chevette with a single cylinder engine and a one gallon gas tank... that takes all night to fill."

Fiat pulls the plug on Chrysler's electric car program -- DailyFinance

"The Fiat decision to scuttle its American subsidiary's electric cars could signal the industry shakeout is already underway. One major problem is the inability of battery makers to bring down prices or increase performance quickly enough to allow the electric roadster to compete on equal footing with the gas slurping status quo. To be fair, Marchionne does plan on making some electric and hybrid cars. But he expects those types of vehicles to total less than three percent of Fiat's total production runs by 2014, a paltry 60,000 or so vehicles. In a nutshell, 440,000 electric cars just died and the toll will likely continue to rise."

Sunday, November 08, 2009

Reflections on the Tues Vote

Both parties should be careful, the public may well be pissed at all politicians.

Peggy Noonan: The Rose Garden Path

"The White House has gotten bad at listening, and now it’s paying the price."

The voters are more concerned about jobs than the health care debate.

"The path the president and the Democrats of Congress chose has been called the big-bang strategy. In January 2009 they had the big mo and could claim a mandate. The strategy was to give their first year to 2008 domestic policy pledges: health-care reform, climate change, empowering unions, etc.But reality came in and stole the mandate, stopped the mo.

The reality is that over the past 10 months the great recession settled in, broadened its presence, and became part of the national landscape. It became the big bad thing for normal people."

and Frank Rich from the other side:

Op-Ed Columnist - The Night They Drove the Tea Partiers Down - NYTimes.com: "Unemployment ranked ahead of the deficit and health care as the No. 1 pocketbook issue in the survey, with 81 percent saying the Obama administration must take more action.

The tea party Republicans vanquished on Tuesday have no jobs plan. They just want to eliminate all Washington spending — a prescription that didn’t go down too well in New York’s 23rd, where the federal government has the largest payroll. The G.O.P. establishment’s one-size-fits-all panacea is tax cuts — thin gruel for those with little or no taxable income. The administration’s answer is the stimulus, whose iffy results so far, it argues, can’t be judged this early on.

Fair enough. But a year from now the public will register its verdict in any event. Meanwhile, both parties have their own delusions, not the least of which is the Republicans’ conviction that Tuesday was a referendum on what Obama has done so far. If anything, it was a judgment on just how much he has not."


American elections: The shine coming off | The Economist:

"Two broad points have emerged from this election night. The first is that the Democrats are now considered to own the economy—trying to blame George Bush for the country's economic ills, as Mr Obama tried to do in New Jersey, will not wash with swing voters. In Virginia, moderates and independents warmed to Mr McDonnell's themes of reduced taxes. The economy will doubtlessly improve before next year's mid-term elections, but Mr Obama's ambitions for government spending trouble many centrists.

The other point is that Sarah Palin’s broadside against the Republican candidate in upstate New York has established her beyond doubt as the leading player in Republican politics, much to the chagrin of party grandees. There is nothing new about conservative insurrection in the party. The contest in New York is somewhat reminiscent of Pat Buchanan's rebellion against the party establishment in the New Hampshire primary in 1992, except that conservatives have ditched their pitchforks for iPhones. But the danger for the Republicans remains the same now as then; the pursuit of an ideologically pure conservatism will turn away moderates and independents. The Republicans lost the 1992 presidential election, and they lost the 23rd congressional district in upstate New York on Tuesday."

It's Complicated

Good analysis of strategic patience
We may be in Iraq and Afghanistan for a very long time

U.S. Amb. Ryan Crocker on Iraq and Afghanistan Newsweek.com

Saturday, November 07, 2009


An "older" world needs some policy changes
In short, the idea of retirement needs to be "retired"
As long as people are productive, they should contribute to society

Demographics: Greying globe | The Economist:
The Age of Aging: How Demographics are Changing the Global Economy and Our World,
by George Magnus

"This book falls firmly into the last category. It provides a clear, sober and well-written analysis of the problem, both in developed and developing countries, and runs through the options for heading off the worst effects. The biggest part of the solution lies in expanding the shrinking band of workers, mainly by getting people to retire later and persuading even more women to take up paid employment. At the same time more productivity will have to be squeezed out of the labour force that remains. And people will have to be persuaded to save a lot more for their old age."

A report on aging populations :
A survey of ageing populations: : A slow-burning fuse | The Economist:

But there is a bright side, population growth slows
Fertility and living standards: Go forth and multiply a lot less | The Economist:

"Lower fertility is changing the world for the better"

Maybe I AM a Conservative

If the following defines a conservative ...

Looking for a True Conservative - Forbes.com:

A true conservative today should stress construction, encouragement, moderation and understanding instead of destruction, prohibition, extremism and slogans. A conservative thinks in terms of countless minor corrections and improvements based on experience and experiment rather than in terms of a universal, uniform solution based on theory and enforced by inflexible law.

"A conservative, in the best sense, sees the world and its inhabitants as an interdependent organism, comprising innumerable local communities and territories, each adapting to particular conditions. A conservative is someone who goes with the grain of humanity and the nature of the physical world, rather than trying to regiment and fashion a utopia through force of law. And, needless to say, an acceptable conservative is not one who thinks all the answers are obvious but is a modest person who admits that problems are not easily solved, that perfection is unattainable in this world and that it is often necessary to admit mistakes, change one's mind and start again."

Links on Financial Fiascos

A series of links from the last week or so

Charleis Gasparino's work on the crash
Book Review: "The Sellout" - WSJ.com

This goes way back:

"So what made 2008 so much worse? For one thing, the market was in the throes of a housing mania so intense that a leading lender, New Century Financial, touted its ability to generate a mortgage offer in as little as 12 seconds. For another, the government had made a series of horrendous policy decisions that, as Mr. Gasparino shows, encouraged financial firms to go long on housing in ways that would have once been unimaginable.

In 1995, Henry Cisneros, the secretary of housing and urban development, directed Fannie Mae and Freddie Mac—two "government-sponsored enterprises" in housing finance—to buy and guarantee mortgages of low- and moderate-income borrowers amounting to 42% of their annual business volume. His successor, Andrew Cuomo, moved the number up to 50% and directed Fannie and Freddie to buy the mortgages of borrowers with "very low income." The effect was a flood of government-subsidized lending."

Can't afford a mortgage - That's OK, you have a "right" to a home

Note that I applaud the goal of home ownership, as owners tend to be more responsible citizens, but there have to be sensible guidelines.

More from Charlie:
RealClearMarkets - An Interview with Charlie Gasparino:
"But what you will also find in my book, which I guarantee is absent from most of the others, is the root cause of the risk taking, which I believe begins and ends with the policy makers. The various heads of HUD, like Henry Cisneros, Andrew Cuomo and those in the Bush Administration who believed owning a home was a right, rather than something that should be earned, led to the disaster at Fannie Mae and Freddie Mac, which spread its guarantees to subprime loans, a place it traditionally stayed away from.

You also can't excuse Alan Greenspan for handing out free money to Wall Street every time the big firms screwed up over the past thirty years. It gave them incentive to double down on their risky bets until of course they double-downed so much the system blew up

More on GSE's:
Barney Frank, Predatory Lender - WSJ.com

"Since the early 1990s, the government has been attempting to expand home ownership in full disregard of the prudent lending principles that had previously governed the U.S. mortgage market. Now the motives of the GSEs fall into place. Fannie and Freddie were subject to "affordable housing" regulations, issued by the Department of Housing and Urban Development (HUD), which required them to buy mortgages made to home buyers who were at or below the median income. This quota began at 30% of all purchases in the early 1990s, and was gradually ratcheted up until it called for 55% of all mortgage purchases to be "affordable" in 2007, including 25% that had to be made to low-income home buyers.

It was not easy to find candidates for traditional mortgages—loans to people with good credit records or the resources for a substantial downpayment—among home buyers who qualified under HUD's guidelines. To meet their affordable housing requirements, therefore, Fannie and Freddie reduced their lending standards and reached into the FHA's turf. The FHA, although it lost market share, continued to guarantee what it could, adding to the demand that the unregulated mortgage brokers filled. If they were engaged in predatory lending, it was ultimately driven by the government's own requirements. The mortgages that resulted are now problem loans for the GSEs, the FHA and the big banks that were required to make them in order to burnish their CRA credentials."

Then Charlie wrote an OpEd piece:
Charles Gasparino: Three Decades of Subsidized Risk - WSJ.com:

"The greed merchants needed a co-conspirator, Mr. Forstmann argues, and that co-conspirator is and was the United States government.

'They're always there waiting to hand out free money,' he said. 'They just throw money at the problem every time Wall Street gets in trouble. It starts out when they have a cold and it builds until the risk-taking leads to cancer.'

Mr. Forstmann's point shouldn't be taken lightly. Not by the press, nor by policy makers in Washington. But so far it has been, and the easy money is flowing like never before. Interest rates are close to zero; in effect the Federal Reserve is subsidizing the risk-taking and bond trading that has allowed Goldman Sachs to produce billions in profits and that infamous $16 billion bonus pool (analysts say it could grow to as high as $20 billion). The Treasury has lent banks money, guaranteed Wall Street's debt and declared every firm to be a commercial bank, from Citigroup with close to $1 trillion in U.S. deposits, to Morgan Stanley with close to zero. They are all 'too big to fail' and so free to trade as they please—on the taxpayer dime."

From across the pond - similar need for re-regulation in the Anglo world of finance
Banks are too big, and the model needs to change

Of note - the policy to allow mega-banks was to allow American and British banks to compete with the perceived mega-banks of Europe and Japan.
In both systems, banks are a much large portion of the finance system, as opposed to the equity and debt markets in New York and London.

The Agenda for a Finance Revamp - WSJ.com:

"The repair of the global financial-regulatory system is too important to future prosperity to be left to technocrats and bankers. But the substance is so arcane and complicated that few politicians or informed citizens can grasp the issues, let alone choose solutions."

But there not all is well between London and the US
Andrew Sorkin's Too Big to Fail

Wall Street's crisis: Book of revelations | The Economist:

"...as Lehman Brothers tottered, there was briefly hope that Barclays Bank would ride in with an 11th-hour bid. But the British government, fearful of contracting the American cancer, took fright and blocked it, helping to seal the investment bank’s fate. As American officials absorbed the news, an exhausted and exasperated Hank Paulson, the then treasury secretary, muttered that the British had “grin-fucked us.”

Andrew Ross Sorkin’s fly-on-the-wall account of the great panic of 2008 is littered with such colourful anecdotes. It is meticulously researched, drawing on interviews with more than 200 of those who participated directly in the events it covers, including their handwritten notes and tape-recordings of critical meetings. The result is a compelling reconstruction of the drama surrounding the government seizure of Fannie Mae and Freddie Mac, Lehman’s collapse, the rescue of American International Group (AIG), the subsequent market pandemonium and the shoring-up of big banks’ capital with public funds."

I happen to agree with past Fed Chair, Paul Volker:
Volcker: Bernanke Didn't Go Far Enough | Newsweek Politics | Newsweek.com:

"But Bernanke didn't go nearly as far as Volcker says we should. Volcker wants to keep major commercial banks that enjoy federal-deposit guarantees away from big-time speculative trading. 'They shouldn't be doing risky capital-market stuff,' Volcker told NEWSWEEK before the Fed announcement. But, he adds, the president 'obviously decided not to accept'"

Which leads to the following - on bank's capital structure(s):

"The peculiarity of the banks is not some arcane matter. Regulators are furiously trying to find ways to prevent taxpayers picking up the tab for banking crises. The latest bill passing through Congress aims to hit the industry for the cost of bail-outs, for example. Their main weapon, however, is forcing banks to have bigger equity buffers. Bankers complain that equity is too expensive and will have a knock-on effect on the price of credit, damaging the economy. But this contradicts a cornerstone of corporate finance, set out by Franco Modigliani and Merton Miller in 1958, that a firm’s value is unaffected by its capital structure (at least in a perfectly efficient, tax-free world)."

Much more here:
Economics focus: Buffer warren | The Economist

Wednesday, November 04, 2009

Good Read !

John Steele Gordon: Obama and the Liberal Paradigm - WSJ.com:

"Valerie Jarrett, senior adviser to President Barack Obama, recently explained the White House war on Fox News as an example of 'speaking truth to power.' Much of the American political world collapsed in laughter, pointing out that her boss was president of the United States, the most powerful man on earth. His every word is news around the world. Fox News is a cable channel rarely watched by more than a few million people at a time. How could she have so blithely said something completely out-of-sync with reality?

Simple: She's a liberal."

Tuesday, November 03, 2009

Who woulda thunk?

no comment

U.S. Unlikely to Recoup Auto Bailouts, G.A.O. Says - DealBook Blog - NYTimes.com:

"A government report released Monday concludes that taxpayers will probably never recoup all — or even close to all — of the $67 billion that the Treasury Department lent to General Motors and Chrysler in the last year to prevent their collapse, Nick Bunkley of The New York Times reports from Detroit.

The report, by the Government Accountability Office, estimates that G.M. and Chrysler would need to be worth a combined $121.7 billion, or roughly 30 percent more than their values about a decade ago, for the Treasury to break even on its investments. The report said it already was assuming that $6.4 billion of the money lent to the carmakers before their bankruptcies would not be repaid.

“Treasury is unlikely to recover the entirety of its investment in Chrysler or G.M., given that the companies’ values would have to grow substantially above what they have been in the past,” the report said."

Monday, November 02, 2009

Dealing with Information

Interview with Esther, who seems to be in the eye of the info-hurricane.

When did you first recognize the power of information?
My brother and I were always trying to one-up each other, and the most devastating thing I could say was that I already knew something he told me.

You were in on the ground floor of the information explosion. Will information continue to grow so rapidly in importance?
That's like asking if energy will continue to grow in importance. It's so true that it's not a very useful statement.

Life in Information, According to Esther Dyson - Leadership and Innovation - EMC:

"How do you manage information?
I have my PC and my cellphone, which now gets e-mail. I don't have a phone at home. I threw out my landline 20 years ago, not because I was replacing it with a cellphone but because I didn't want to be called at home. The message here is: Don't let these things run you. You can always unplug your phone.

But we hate to feel we're missing something. And now there's so much more to miss.

People are trying to make you feel you're missing something. That's called marketing."