Not a whole heck of a lot to report but wanted to get one more post in before we roll the calendar over.
Spent Christmas in Houston and looks like we missed out on some truly nasty weather up here in Chicago. I have no doubt that we'll have plenty of more chances to experience horrible weather over the next 2-3 months. Our nice and relaxing time in Houston was brought to a grinding halt when we were informed on Saturday that a pipe had burst in our building and the garage was being flooded. Fortunately (for us, not the developer) it was the rear half of the building that was affected and our car was parked at Midway, so from a damage perspective we were fine. It did mean, however, that we had the distinct pleasure of returning home to no running water. After some headaches dealing with our not-at-all efficient developer we finally got water restored last night ~7:00. Good times.
Weather was decent in Houston. Got up into the 70s most days but rained a lot. I was excited to have a chance to get outside and run again for the first time in over 6 weeks. I was real good and ran the first 5 days I was there but then took Christmas day off and somehow never made it back out again. Nothing too much else exciting to report from the trip. Worked at the pizza place a bit, finished a couple books, and saw a couple movies: The Curious Case of Benjamin Button and Bedtime Stories. Benjamin Button I would classify as a good movie that I just didn't like very much. Everything about it is well done (acting, writing, directing) but it just can't escape the fact that the story is inherently depressing and in the end that makes it not a lot of fun to watch. Bedtime Stories was about what you'd expect it to be (i.e. pretty stupid but moderately entertaining); only saw it because we took our nieces and nephews to see it and when you can get 4 kids (from ages 4 to 13) to all agree on the same movie that is the movie you are seeing.
Since we got back I also went out and saw The Wrestler, which I thought was excellent. Ironic that it was just about as depressing as Benjamin Button but somehow I liked it a lot more. Maybe it's because it was an hour shorter or maybe it's just because I am quite familiar with what happens to has-been (or never were) wrestlers and thus I knew more what to expect. Mickey Rourke does indeed turn in an Oscar-worthy performance and you can't help but think that he put a lot of himself into the role. Evan Rachel Wood is also very good in a small role. I've only seen her in this and Across the Universe but I've been impressed by her and wouldn't be surprised to see her really take off in the next couple years.
The Bears? Blah . . . Only silver lining is that tickets to the game were going for so much money that I avoided having the displeasure of witnessing the season-ending loss in person. I am however, excited about Illini basketball and the Big Ten conference season opening today, as well as the Blackhawks Winter Classic and all the bowl games on New Year's Day.
Well, I think that does it for me for 2008. I'm working on a couple of more weighty posts that hopefully will be enjoyable and stimulate some good discussion. Hope everyone had a Merry Christmas, has a Happy New Year, and I will see you in '09!
Tuesday, December 30, 2008
Wednesday, December 17, 2008
Double Feature
OK, one more thought on Bernie Madoff and then I'll let it go (for now). Is it just me or does he look like he could be Harry Shearer's brother?
Bernie Madoff 
Harry ShearerIn other news, I got out last night and saw a double-feature of two really good films: Frost/Nixon and Slumdog Millionaire.
For the benefit of those unfamiliar with these films, Frost/Nixon is a fictionalized recount of the interview of Richard Nixon by David Frost 3 years after Nixon resigned from office and the circumstances leading up to it. It is famous because it was in these interviews that Nixon finally admitted to being part of a coverup and that he let the American people down. Here the story is largely told from Frost's perspective, and I think that is the correct choice. Frost was viewed as basically the Jerry Springer of his day (or, at best, the David Letterman). Someone who could be entertaining but was not given serious credibility for having the journalistic chops to pin down someone like Nixon and force him to answer the tough questions. In fact, that's pretty much the reason he was granted the interview. He offered Nixon $600,000 (much from his own personal accounts) and was seen as someone who would toss softballs all night and allow Nixon to start to repair his image. Frost, on the other hand, sees this as an opportunity to prove that he has what it takes to be taken seriously and (he hopes) will springboard his career back to success in America. This type of approach makes us realize that there is a lot on the line for Frost here too. Had the film focused on Nixon's point of view, why would we care about some hack journalist asking him questions? Whatever your opinion on Nixon, you have to admit that he's a fascinating, enduring figure whose legend just seems to grow with time. One of the great ironies of the film is that many of the characters talk about how one of the worst outcomes of the interview would be if Nixon was somehow able to exonerate himself. The interviews did not do that, and I wouldn't argue that the film does either, but it's certainly succesful at turning Nixon into a sympathetic (if never really likable) figure. In the end, it doesn't argue that people should forgive Richard Nixon for his crimes, but that they should understand that he definitely did not "get away with them." One of the lines in the film (which, incidentally, Nixon never actually said) is "no one can know what it's like to resign the Presidency of the United States." And that's the key. I can't think of another person in history that has fallen so far, and had to live with that fact for 20 more years. To have been the most powerful man in the world and then been reduced to the point where you will never just be "former President Richard Nixon"; always "disgraced former President Richard Nixon."
A quick word on Frank Langella's performance. He doesn't really look like Nixon, and he only passably sounds like him. Nevertheless, he IS him. From his mannerisms, to his walk, to his style of speech, to the way he fills up a room and just exudes power, he really is the embodiment of the man. If you have never understood why Nixon was so hard to pin down during interviews and investigations, I can guarantee that you will understand after you see this film.
Don't want to sleight Slumdog Millionaire, which I also thought was very good, but I don't have a whole lot to say about it. It's really a conventional rags-to-riches/love story set in a very unconventional setting (Mumbai, India) and told in a fairly unique way. It's about a "slumdog" (i.e. poor boy from the ghettos) that is one question away from becoming a millionaire on the Indian version of "Who Wants to Be a Millionaire". He is suspected of cheating because how could someone from such a background know all these answers? The remainder of the story is told in a series of flashbacks as he takes us through his life and we learn how he acquired his knowledge. Ultimately, it's a skillfully made if rather conventional story. Definitely worth seeing though, if only to see some great shots of a foreign country that haven't really been seen before by US audiences. Be warned that much of the movie is subtitled.
Monday, December 15, 2008
May(doff)day
First of all, it is Monday afternoon and as of right now we still have good old Blago as our governor so, sadly, it looks like I was wrong about that one. I'm still hoping for a quick resolution, but am preparing myself for this thing to drag out for weeks and possibly months.
I also awoke today to see that some dude named Bernie Madoff is perhaps the greatest magician of our time: he apparently made $50 billion disappear overnight. Before we get to the specifics, there is something that irks me. The four articles about this that I saw today had the following headlines: "Stocks Edge Lower as Madoff Victim List Grows", "Alleged Madoff Fraud Victims Include Big Banks, Super Rich", "List of Madoff's Victims Keep Growing, Likely to Extend Beyond Clients", and "How to Get Money Back from Bernie Madoff." So, basically, a lot of information about who has been affected and to what extent, but next to nothing about what actually happened. I think it's yet another example of our ADD media. Apparently they broke the story of what Madoff did on Saturday and so if you missed it - too bad; they're moving on. In that respect, maybe Blagoyevich is on to something here. He's gambling that we don't care enough to continually keep following this story and will eventually just forget about it. And he might be right. But I digress. . .
Fortunately, I got a good summary from the Economist:
"Details are still emerging, but Mr. Madoff has himself described it as a giant Ponzi scheme. For years, it seems, the returns paid to investors came, in part at least, not from real investment gains but from inflows from new clients. It might still have been going on, were it not for the global financial crisis. Redemption requests for $7 billion, by investors looking to pull back from turbulent stockmarkets, forced Mr. Madoff to admit that his coffers were empty - bearing out Warren Buffett's adage that only when the tide goes out is it clear who was swimming naked."
Some other details that I found interesting:
"The affair has - like the subprime-mortgage debacle - exposed a stunning lack of due dilligence. Droves of investors who should have known better tossed in billions, preferring to keep their fingers crossed rather than ask awkward questions of a firm whose investment strategy was vague and opaque. Even within his own group, Mr. Madoff's money-management business was a black box; no one but he had full access to the accounts. As a broker-dealer, it was able to clear its own trades, a privilege that should give pause for thought. Worse, questions had been hanging over the operation since the mid-1990s. Some institutional investors have long steered clear of Mr. Madoff, unable to understand how he spun his gold, or uneasy that his books were audited by a tiny, three-person accounting firm."
I bolded the parts I found most interesting. Being able to clear your own trades is just a complete lack of a fundamental control. You can get away with that if your operation is heavily audited, but I think it's pretty obvious that a $50 billion portfolio is way too big for a 3-person accounting firm to handle. Even so, if they had performed their job adequately they would have uncovered this scheme long ago. One of the most basic steps in auditing investments is to pick a sample of securities and observe that they are physically present onsite or in a safety deposit box offsite. I'm sure that this accounting firm will soon be out of business if they are not already. I am quite curious if they have professional liability insurance (as most audit firms do) and if so how much they had and who is on the hook for that.
Two months ago, Christy and I went to see a play called The Voysey Inheritance. Here's a quick summary of the plot:
"Misappropriation of client funds...fraudulent speculation on the Stock Market...deceit...lies ...and an intricate cover up. When young Edward Voysey discovers that the family's wealth has been built on three generations of deceit and theft he must choose between confessing all and ruining the clients that have unwittingly trusted the firm, or continuing the deceit in the hope of righting the wrongs that the firm's clients have unwittingly been subjected to. So the scene is set for an intriguing examination of ethics - and their absence - in the world of high finance."
Hmm, sounds a bit familiar no? The best part is that this play was written in 1905. Technology has grown by leaps and bounds since then, but it seems that financial swindels are often still barely above the sophistication level of 3 Card Monty.
It's also a vivid reminder of the fact that the "con" in "con man" is short for confidence. A good con man doesn't take your money; you give it to him because he's somehow managed to convince you that he's got your best interests in mind, or at least that you both share a common interest. And no matter what the final dollar amount ends up being here, the real damage will be consumers enduring yet another blow to their confidence in the finance industry. As they say about roaches in your house, "by the time you see one, it means you've got 1000." People are likely to start pulling more and more money out of their accounts out of fear and that's going to 1) cause the markets to fall further and 2) expose more criminals who are currently perpetrating similar schemes. The combination is likely to have a postive feedback loop effect, and that can be a very dangerous thing. Whatever the underlying reasons for a financial crisis, nothing gets better until trust is restored. People have to trust that they will still have a job next week before they will make major purchases. Banks have to trust a company's or consumer's income statements before they will lend them money. Right now nobody trusts anybody, and this is actually where greed is the enemy of capitalism. In the capitalist model, a nation of greedy pigs with an unquenchable need for consumption is good for society as a whole, but a nation of greedy misers who horde all they have is not.
It's hard to see the silver lining in all this, but I still believe it's there. There are still a whole lot of well run firms with profitbale, enduring business models and they will end up coming through this fine. I am also hopeful that the exposure of all these systemic problems will let us make some badly needed reforms in a way that is just not possible during the good times. Sometimes you just need to demolish the house and start over again instead of patching up every leak. Of course, that doesn't make it any more pleasant for the owners of the house (i.e. us), particularly when we are still inside the house as it's being demolished around us!
I also awoke today to see that some dude named Bernie Madoff is perhaps the greatest magician of our time: he apparently made $50 billion disappear overnight. Before we get to the specifics, there is something that irks me. The four articles about this that I saw today had the following headlines: "Stocks Edge Lower as Madoff Victim List Grows", "Alleged Madoff Fraud Victims Include Big Banks, Super Rich", "List of Madoff's Victims Keep Growing, Likely to Extend Beyond Clients", and "How to Get Money Back from Bernie Madoff." So, basically, a lot of information about who has been affected and to what extent, but next to nothing about what actually happened. I think it's yet another example of our ADD media. Apparently they broke the story of what Madoff did on Saturday and so if you missed it - too bad; they're moving on. In that respect, maybe Blagoyevich is on to something here. He's gambling that we don't care enough to continually keep following this story and will eventually just forget about it. And he might be right. But I digress. . .
Fortunately, I got a good summary from the Economist:
"Details are still emerging, but Mr. Madoff has himself described it as a giant Ponzi scheme. For years, it seems, the returns paid to investors came, in part at least, not from real investment gains but from inflows from new clients. It might still have been going on, were it not for the global financial crisis. Redemption requests for $7 billion, by investors looking to pull back from turbulent stockmarkets, forced Mr. Madoff to admit that his coffers were empty - bearing out Warren Buffett's adage that only when the tide goes out is it clear who was swimming naked."
Some other details that I found interesting:
"The affair has - like the subprime-mortgage debacle - exposed a stunning lack of due dilligence. Droves of investors who should have known better tossed in billions, preferring to keep their fingers crossed rather than ask awkward questions of a firm whose investment strategy was vague and opaque. Even within his own group, Mr. Madoff's money-management business was a black box; no one but he had full access to the accounts. As a broker-dealer, it was able to clear its own trades, a privilege that should give pause for thought. Worse, questions had been hanging over the operation since the mid-1990s. Some institutional investors have long steered clear of Mr. Madoff, unable to understand how he spun his gold, or uneasy that his books were audited by a tiny, three-person accounting firm."
I bolded the parts I found most interesting. Being able to clear your own trades is just a complete lack of a fundamental control. You can get away with that if your operation is heavily audited, but I think it's pretty obvious that a $50 billion portfolio is way too big for a 3-person accounting firm to handle. Even so, if they had performed their job adequately they would have uncovered this scheme long ago. One of the most basic steps in auditing investments is to pick a sample of securities and observe that they are physically present onsite or in a safety deposit box offsite. I'm sure that this accounting firm will soon be out of business if they are not already. I am quite curious if they have professional liability insurance (as most audit firms do) and if so how much they had and who is on the hook for that.
Two months ago, Christy and I went to see a play called The Voysey Inheritance. Here's a quick summary of the plot:
"Misappropriation of client funds...fraudulent speculation on the Stock Market...deceit...lies ...and an intricate cover up. When young Edward Voysey discovers that the family's wealth has been built on three generations of deceit and theft he must choose between confessing all and ruining the clients that have unwittingly trusted the firm, or continuing the deceit in the hope of righting the wrongs that the firm's clients have unwittingly been subjected to. So the scene is set for an intriguing examination of ethics - and their absence - in the world of high finance."
Hmm, sounds a bit familiar no? The best part is that this play was written in 1905. Technology has grown by leaps and bounds since then, but it seems that financial swindels are often still barely above the sophistication level of 3 Card Monty.
It's also a vivid reminder of the fact that the "con" in "con man" is short for confidence. A good con man doesn't take your money; you give it to him because he's somehow managed to convince you that he's got your best interests in mind, or at least that you both share a common interest. And no matter what the final dollar amount ends up being here, the real damage will be consumers enduring yet another blow to their confidence in the finance industry. As they say about roaches in your house, "by the time you see one, it means you've got 1000." People are likely to start pulling more and more money out of their accounts out of fear and that's going to 1) cause the markets to fall further and 2) expose more criminals who are currently perpetrating similar schemes. The combination is likely to have a postive feedback loop effect, and that can be a very dangerous thing. Whatever the underlying reasons for a financial crisis, nothing gets better until trust is restored. People have to trust that they will still have a job next week before they will make major purchases. Banks have to trust a company's or consumer's income statements before they will lend them money. Right now nobody trusts anybody, and this is actually where greed is the enemy of capitalism. In the capitalist model, a nation of greedy pigs with an unquenchable need for consumption is good for society as a whole, but a nation of greedy misers who horde all they have is not.
It's hard to see the silver lining in all this, but I still believe it's there. There are still a whole lot of well run firms with profitbale, enduring business models and they will end up coming through this fine. I am also hopeful that the exposure of all these systemic problems will let us make some badly needed reforms in a way that is just not possible during the good times. Sometimes you just need to demolish the house and start over again instead of patching up every leak. Of course, that doesn't make it any more pleasant for the owners of the house (i.e. us), particularly when we are still inside the house as it's being demolished around us!
Thursday, December 11, 2008
Blag-OY-VEH-evich (sorry, all the good puns are already taken)
So the masses (ok, 2 people) have been clamoring (ok, wondering) if I was going to do a post about our esteemed public servant Mr. Blagoje(bleep). Initially, I didn't have a whole lot to say about it. Most of the time when a public official gets caught (as in the cases of Sen. Craig and Sen. Stevens) there's at least some form of semi-plausible story where they might, just maybe, be innocent. That's when it's a good time to get together and try and separate the known facts from the speculation and figure out where the "truth" lies. That certainly does not appear to be the case here. As Nixon can tell you (or could of until 1994) it's real hard to weasel out of your own voice on tape. Speaking of Nixon, Hot Roddy might have a chance to surpass him in the category of "highest concentration of expletives in a career and life ruining recording." Something he can hang his hat on as he (hopefully) rots in his cell next to his predecessor.
For those who may not have read a ton about it, let's take a look at the "highlights":
"I’m going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain. You hear what I’m saying. And if I don’t get what I want and I’m not satisfied with it, then I’ll just take the Senate seat myself."
[The Senate seat is] "a (bleeping) valuable thing, you just don’t give it away for nothing."
"I’ve got this thing and it’s (bleeping) golden, and, uh, uh, I’m just not giving it up for (bleeping) nothing. I’m not gonna do it. And, and I can always use it. I can parachute me there."
On Obama's preferred candidate: "they’re not willing to give me anything except appreciation. (bleep) them."
There's also a lot of good stuff with him trying to shake down the CFO of a children's hospital for a $50k contribution and him threatening to hold up the Cubs sale if the Trib board didn't fire some editors that were critical of him.
So, anyway, all that's out there and I think it's pretty cut and dry. And while I am disgusted and saddened by it I am also not naive and I can't be completely stunned by the revelation that we have a very crooked politician on our hands.
But what I am absolutely astonished by is the news that he apparently has no plans of resigning. I am assuming that he will be planning to use the R Kelly "that's not me on the tape" defense. That will prove to be exceedingly more difficult for him though, as he's up against a court-approved wiretap by federal agents and not a grainy video on the web.
Perhaps I shouldn't be that astonished, though. As I mentioned in the comments to my last post, we're talking about a guy trying to auction off probably the highest-profile appointment in the country right now, knowing that he's already under investigation for his Rezko affiliation, in a job where his predecessor left in disgrace and is currently rotting in jail. In that context, this latest act of arrogance or stupidity (I'm still not sure which it is) represents the model of consistency.
Actually, more than anything else I think it's delusion. This is obviously a guy who basically must feel like he's Bear Stearns (i.e. too big to fail). The level of self-denial that allows this man to actually believe that he has a chance of conducting "business as usual" for the remainder of his term is such that I honestly believe he may now have a good case to plead innocence by reason of insanity when he's eventually put on trial.
Ultimately, though, it won't really matter. There is an ever-increasing crowd of people lining up at the guillotine to have a whack. It's a race between the IL attorney general, Lisa Madigan, getting to the IL supreme court to declare him unfit for office, and the state legislature getting down to impeach him. I'm sure that somewhere on the internet there has been a betting line established.
My guess is that by end of day tomorrow he will "do the right thing" and resign. It's just taking some more time for those around him to pierce the fog of invincibility he thinks he has. One way or the other, I think we'll be welcoming in Gov. Quinn by early next week. Once Blago goes to jail that will make 4 of our last 8 governors who have followed that route. Here's hoping that Gov. Quinn can take us back under the 50% line!
Surprise loser in all of this: George Ryan. If he ever had a chance of having the rest of his sentence commuted, it is gone now.
Surprise winner in all of this: Elliot Spitzer. Congratulations Elliot! You are now just the 2nd most disgraced governor of 2008!
For those who may not have read a ton about it, let's take a look at the "highlights":
"I’m going to keep this Senate option for me a real possibility, you know, and therefore I can drive a hard bargain. You hear what I’m saying. And if I don’t get what I want and I’m not satisfied with it, then I’ll just take the Senate seat myself."
[The Senate seat is] "a (bleeping) valuable thing, you just don’t give it away for nothing."
"I’ve got this thing and it’s (bleeping) golden, and, uh, uh, I’m just not giving it up for (bleeping) nothing. I’m not gonna do it. And, and I can always use it. I can parachute me there."
On Obama's preferred candidate: "they’re not willing to give me anything except appreciation. (bleep) them."
There's also a lot of good stuff with him trying to shake down the CFO of a children's hospital for a $50k contribution and him threatening to hold up the Cubs sale if the Trib board didn't fire some editors that were critical of him.
So, anyway, all that's out there and I think it's pretty cut and dry. And while I am disgusted and saddened by it I am also not naive and I can't be completely stunned by the revelation that we have a very crooked politician on our hands.
But what I am absolutely astonished by is the news that he apparently has no plans of resigning. I am assuming that he will be planning to use the R Kelly "that's not me on the tape" defense. That will prove to be exceedingly more difficult for him though, as he's up against a court-approved wiretap by federal agents and not a grainy video on the web.
Perhaps I shouldn't be that astonished, though. As I mentioned in the comments to my last post, we're talking about a guy trying to auction off probably the highest-profile appointment in the country right now, knowing that he's already under investigation for his Rezko affiliation, in a job where his predecessor left in disgrace and is currently rotting in jail. In that context, this latest act of arrogance or stupidity (I'm still not sure which it is) represents the model of consistency.
Actually, more than anything else I think it's delusion. This is obviously a guy who basically must feel like he's Bear Stearns (i.e. too big to fail). The level of self-denial that allows this man to actually believe that he has a chance of conducting "business as usual" for the remainder of his term is such that I honestly believe he may now have a good case to plead innocence by reason of insanity when he's eventually put on trial.
Ultimately, though, it won't really matter. There is an ever-increasing crowd of people lining up at the guillotine to have a whack. It's a race between the IL attorney general, Lisa Madigan, getting to the IL supreme court to declare him unfit for office, and the state legislature getting down to impeach him. I'm sure that somewhere on the internet there has been a betting line established.
My guess is that by end of day tomorrow he will "do the right thing" and resign. It's just taking some more time for those around him to pierce the fog of invincibility he thinks he has. One way or the other, I think we'll be welcoming in Gov. Quinn by early next week. Once Blago goes to jail that will make 4 of our last 8 governors who have followed that route. Here's hoping that Gov. Quinn can take us back under the 50% line!
Surprise loser in all of this: George Ryan. If he ever had a chance of having the rest of his sentence commuted, it is gone now.
Surprise winner in all of this: Elliot Spitzer. Congratulations Elliot! You are now just the 2nd most disgraced governor of 2008!
Thursday, December 04, 2008
So, uh, yeah . . .
Wow, 3 weeks since my last update. I knew it had been a while but I didn't realize that I'd slacked quite this bad. It certainly hasn't been due to me being busy - I had all of last week off. More along the lines of I haven't had a whole lot to say.
I talked about doing a long post on the auto bailout, but after having a couple hour-long conversations with various people about it I got a little burned out on the topic and don't really want to go too much in depth on it. The long-short of it is that on principle I am against it. The auto industry is not merely going through a liquidity crisis like a lot of other businesses are. They have been struggling and burning through cash at an almost unimaginable rate for the better part of 2 decades now. They simply were able to get away with it as long as credit was so easy. However, as I have oft repeated, I am a pragmatist and I recognize the extremely detrimental effect (both economically and psychologically) that letting the Big 3 go under would have on the labor market and the country as a whole right now, so I won't be that upset if some form of bailout ends up being authorised. The main problem is that I don't want this to open the floodgates for all struggling industries to parade through Washington with their hands out. For that reason, I will only be really upset if money is given without any form of punitive stipulation, such as the removal of the current management. One of the arguments I've heard from the auto company reps is "why was it a good idea to bail out Wall Street but now it's a bad idea to bail out the auto industry?" That's just a terrible argument. If you are asking for money, you have to make the case why it's a good idea to give it to you, and not basically say "well you made this mistake once, so how about you just keep on making it?" Regardless of what happens, the Big 3 are going to need to do some major restructuring if they want to survive. They are simply carrying way too much debt to ever be profitable with their business model. Even with the dramatic reduction of benefits set to take effect in 2010, they will need to find a way to turn some of their creditors into equity holders or all they will be doing is delaying the inevitable. As they say, when you jump off the top of the 80th floor for 79 stories you can feel like you're flying.
And, as a final point, having all of the CEOs flying up to Capitol Hill on private jets was just idiocy. I know that it's a relatively minor thing, but it just shows complete lack of foresight on their part. It's like a guy going out to beg while he's wearing an Armani suit. And really I blame their respective PR departments. Each company has teams of people that are dedicated only to upholding the company's image. How can it be that not one of them stood up and said "Um, think about how this is going to look."? If truly no one did, that doesn't speak very highly of the level of talent in the organization. And if someone did and was shot down, that doesn't speak very highly of the decision making process. But then again what do you expect from a company who said in the mid-90s that hybrid cars would never be economically viable?
Finally finished Warren Buffett's book, and I still can't recommend it enough for anyone with even a passing interest in business. As my next "educational read" I've started to read Contours of the World Economy, which is a series of essays that analyzes the economies of the major empires and civilizations from the Romans on. So far it's pretty good, although quite dry. But I've read that it's used as a textbook in some college macro-economics classes, so I guess that's to be expected.
Hope that everyone had a good Thanksgiving! I'll try not to make it another 3 weeks before my next update.
I talked about doing a long post on the auto bailout, but after having a couple hour-long conversations with various people about it I got a little burned out on the topic and don't really want to go too much in depth on it. The long-short of it is that on principle I am against it. The auto industry is not merely going through a liquidity crisis like a lot of other businesses are. They have been struggling and burning through cash at an almost unimaginable rate for the better part of 2 decades now. They simply were able to get away with it as long as credit was so easy. However, as I have oft repeated, I am a pragmatist and I recognize the extremely detrimental effect (both economically and psychologically) that letting the Big 3 go under would have on the labor market and the country as a whole right now, so I won't be that upset if some form of bailout ends up being authorised. The main problem is that I don't want this to open the floodgates for all struggling industries to parade through Washington with their hands out. For that reason, I will only be really upset if money is given without any form of punitive stipulation, such as the removal of the current management. One of the arguments I've heard from the auto company reps is "why was it a good idea to bail out Wall Street but now it's a bad idea to bail out the auto industry?" That's just a terrible argument. If you are asking for money, you have to make the case why it's a good idea to give it to you, and not basically say "well you made this mistake once, so how about you just keep on making it?" Regardless of what happens, the Big 3 are going to need to do some major restructuring if they want to survive. They are simply carrying way too much debt to ever be profitable with their business model. Even with the dramatic reduction of benefits set to take effect in 2010, they will need to find a way to turn some of their creditors into equity holders or all they will be doing is delaying the inevitable. As they say, when you jump off the top of the 80th floor for 79 stories you can feel like you're flying.
And, as a final point, having all of the CEOs flying up to Capitol Hill on private jets was just idiocy. I know that it's a relatively minor thing, but it just shows complete lack of foresight on their part. It's like a guy going out to beg while he's wearing an Armani suit. And really I blame their respective PR departments. Each company has teams of people that are dedicated only to upholding the company's image. How can it be that not one of them stood up and said "Um, think about how this is going to look."? If truly no one did, that doesn't speak very highly of the level of talent in the organization. And if someone did and was shot down, that doesn't speak very highly of the decision making process. But then again what do you expect from a company who said in the mid-90s that hybrid cars would never be economically viable?
Finally finished Warren Buffett's book, and I still can't recommend it enough for anyone with even a passing interest in business. As my next "educational read" I've started to read Contours of the World Economy, which is a series of essays that analyzes the economies of the major empires and civilizations from the Romans on. So far it's pretty good, although quite dry. But I've read that it's used as a textbook in some college macro-economics classes, so I guess that's to be expected.
Hope that everyone had a good Thanksgiving! I'll try not to make it another 3 weeks before my next update.
Thursday, November 13, 2008
Republican Schizophrenia
"Senator Obama and I have had and argued our differences, and he has prevailed. No doubt many of those differences remain. These are difficult times for our country. And I pledge to him tonight to do all in my power to help him lead us through the many challenges we face. I urge all Americans who supported me to join me in not just congratulating him, but offering our next president our good will and earnest effort to find ways to come together to find the necessary compromises to bridge our differences and help restore our prosperity, defend our security in a dangerous world, and leave our children and grandchildren a stronger, better country than we inherited. Whatever our differences, we are fellow Americans. And please believe me when I say no association has ever meant more to me than that."
- John McCain, from his concession speech last Tuesday
"There are three seats in the House and two in the Senate that still hang in the balance. Winning these races and strengthening our Republican numbers in both chambers of Congress is critical to blocking Barack Obama’s left-wing agenda . . .The Obama-Biden Democrats and their liberal special interest allies are trying to steal these election victories from Republicans. . .Harry Reid and Nancy Pelosi are hoping to add more seats to the Democrats’ Senate and House majorities so they can steamroll our opposition to their extreme, ultraliberal schemes. . . Every Republican vote we can add now will help our Party stop the Obama Democrats’ leftist policies in the U.S. Congress. "
- Mike Duncan (RNC Chairman), from an email I got from him yesterday soliciting me for donations to the RNC.
You can really feel the goodwill and bipartisanship, can't you?
First of all, let me just say that the reason I get emails from the RNC is because I gave $25 to John McCain during the primaries. And it turned out to be some of the best $25 I ever spent, just for the information and insight into the campaign that it provided. It was quite humorous over the last 6 months to get back to back emails; one from the Obama campaign and one from the McCain campaign, with subjects like "Help us defeat Obama and the Democrats" next to "Help us defeat John McCain and the Repiblicans."
In any case, back to the quotes. I certainly don't expect the GOP to suddenly start agreeing with everything the Democrats say. I just think that it shouldn't be too much to ask to, you know, wait until there actually is legislation out there to oppose. Otherwise you're basically just defining your party as "we're against whatever the Democrats are for". In addition to being really petty, that doesn't sound like a very good way to govern or reconnect with the American public. And I like the use of the word "schemes" in describing Reid and Pelosi. Makes them sound like some silent picture-era villains sitting in Congress twirling their handlebar moustaches. And finally, I really like how they say that Democrats are "trying to steal these elections." Yes, their cunning plan to get more votes than their opponent is diabolical indeed.
I understand that politics is a contact sport, but there's a lot of other paths to take here. Why not just play up the checks and balances angle, as in "our government functions best when voices from both sides of the aisle are heard. We need these elections to keep our voices from being drowned out."? Or, considering the beating they endured last Tuesday, the GOP could approach it from the angle of "you have spoken, and we have heard you. With your help we will renew this party and this country." Overall, this is just another illustration of the fact that the Republicans simply don't know how to appeal to centrists and independents anymore. They can't get it through their thick skulls that there are a lot of people (as of today a majority, in fact) that don't automatically equate the Democrats with a force that needs to be stopped at all costs. As with the Sarah Palin pick, this kind of communication does very well at energizing your base but that base by itself is simply not sufficient to win federal elections anymore (north of the Mason-Dixon line anyway). Until they realize that, there will continue to be dark days ahead for the GOP.
- John McCain, from his concession speech last Tuesday
"There are three seats in the House and two in the Senate that still hang in the balance. Winning these races and strengthening our Republican numbers in both chambers of Congress is critical to blocking Barack Obama’s left-wing agenda . . .The Obama-Biden Democrats and their liberal special interest allies are trying to steal these election victories from Republicans. . .Harry Reid and Nancy Pelosi are hoping to add more seats to the Democrats’ Senate and House majorities so they can steamroll our opposition to their extreme, ultraliberal schemes. . . Every Republican vote we can add now will help our Party stop the Obama Democrats’ leftist policies in the U.S. Congress. "
- Mike Duncan (RNC Chairman), from an email I got from him yesterday soliciting me for donations to the RNC.
You can really feel the goodwill and bipartisanship, can't you?
First of all, let me just say that the reason I get emails from the RNC is because I gave $25 to John McCain during the primaries. And it turned out to be some of the best $25 I ever spent, just for the information and insight into the campaign that it provided. It was quite humorous over the last 6 months to get back to back emails; one from the Obama campaign and one from the McCain campaign, with subjects like "Help us defeat Obama and the Democrats" next to "Help us defeat John McCain and the Repiblicans."
In any case, back to the quotes. I certainly don't expect the GOP to suddenly start agreeing with everything the Democrats say. I just think that it shouldn't be too much to ask to, you know, wait until there actually is legislation out there to oppose. Otherwise you're basically just defining your party as "we're against whatever the Democrats are for". In addition to being really petty, that doesn't sound like a very good way to govern or reconnect with the American public. And I like the use of the word "schemes" in describing Reid and Pelosi. Makes them sound like some silent picture-era villains sitting in Congress twirling their handlebar moustaches. And finally, I really like how they say that Democrats are "trying to steal these elections." Yes, their cunning plan to get more votes than their opponent is diabolical indeed.
I understand that politics is a contact sport, but there's a lot of other paths to take here. Why not just play up the checks and balances angle, as in "our government functions best when voices from both sides of the aisle are heard. We need these elections to keep our voices from being drowned out."? Or, considering the beating they endured last Tuesday, the GOP could approach it from the angle of "you have spoken, and we have heard you. With your help we will renew this party and this country." Overall, this is just another illustration of the fact that the Republicans simply don't know how to appeal to centrists and independents anymore. They can't get it through their thick skulls that there are a lot of people (as of today a majority, in fact) that don't automatically equate the Democrats with a force that needs to be stopped at all costs. As with the Sarah Palin pick, this kind of communication does very well at energizing your base but that base by itself is simply not sufficient to win federal elections anymore (north of the Mason-Dixon line anyway). Until they realize that, there will continue to be dark days ahead for the GOP.
Friday, November 07, 2008
Idiots on Both Sides of the Aisle
So, if we have truly entered a new age of bipartisanship in American politics let me get in the spirit by complaining equally about a member of each party.
First up, and hopefully the last time I ever feel compelled to talk about her, is the easiest Republican target since Dan Quayle, Sarah Palin. With the election over it now appears that as harsh as the media and pundits were on her it turns out she deserved all that and then some. The stories starting to surface about her now are truly cringe-worthy considering how close she came to being one heartbeat away from the presidency. And the best part about it is that these stories have been broken by Fox news . Among the most damning (hopefully; though who knows what other stories will emerge) are reports that "she was unaware that Africa was not a country but a whole continent" and that she was "unable to name the countries that belong to the North American Free Trade Agreement: the US, Mexico, and Canada." I could go on a long diatribe about this being a reflection of McCain's bad judgment and so on and so forth, but you know what? More than anything I just want to be done with her. Ms. Palin, I wish you all the best in your future endeavors, but please slink back to Wasilla now and become irrelevant to my life once again.
This story though, bothers me a bit more. Harry Reid is apparently leaning towards removing Joe Lieberman as Chairman of the Senate Homeland Security and Governmental Affairs Committee. In a statement, Reid said "While I understand that Sen. Lieberman has voted with Democrats a majority of the time, his comments and actions have raised serious concerns among many in our caucus." However he wishes to phrase it, the bottom line is that this is punishment for Lieberman supporting John McCain. Look, I am not a big Lieberman fan. I thought he was a poor choice for VP in 2000 and I often found myself getting very angry at him throughout this campaign. But this is 100% the wrong thing to do. Democrats won on Tuesday based largely on a campaign of ushering in a new era of bipartisanship. That means extending an olive branch across the aisle to people who may have done you wrong in the past and whom you may not even like very much for the betterment of the country. Well, Joe Lieberman isn't even across the aisle. If Congressional Democrats can't even make peace with someone who has been one of their own for the vast majority of his career, I have absolutely no faith in their ability to heal the rift with Republicans. It also sends the message that breaking with the party to stand up for what you believe is right for the country will not be tolerated. I can't think of a single worse message to send right now.
On the far, far lighter side of things I am on my way to the Cheech and Chong show at the Rosemont Theatre tomorrow night. I honestly haven't watched a single Cheech and Chong film or listened to a recording of them in about 10 years, so it will be interesting to see how the humor has held up. In any case, Cheech Marin has aged a lot better than Tommy Chong has, so I had a feeling this would be my only chance to see them and I'm looking forward to it.
Have a good weekend everyone!
First up, and hopefully the last time I ever feel compelled to talk about her, is the easiest Republican target since Dan Quayle, Sarah Palin. With the election over it now appears that as harsh as the media and pundits were on her it turns out she deserved all that and then some. The stories starting to surface about her now are truly cringe-worthy considering how close she came to being one heartbeat away from the presidency. And the best part about it is that these stories have been broken by Fox news . Among the most damning (hopefully; though who knows what other stories will emerge) are reports that "she was unaware that Africa was not a country but a whole continent" and that she was "unable to name the countries that belong to the North American Free Trade Agreement: the US, Mexico, and Canada." I could go on a long diatribe about this being a reflection of McCain's bad judgment and so on and so forth, but you know what? More than anything I just want to be done with her. Ms. Palin, I wish you all the best in your future endeavors, but please slink back to Wasilla now and become irrelevant to my life once again.
This story though, bothers me a bit more. Harry Reid is apparently leaning towards removing Joe Lieberman as Chairman of the Senate Homeland Security and Governmental Affairs Committee. In a statement, Reid said "While I understand that Sen. Lieberman has voted with Democrats a majority of the time, his comments and actions have raised serious concerns among many in our caucus." However he wishes to phrase it, the bottom line is that this is punishment for Lieberman supporting John McCain. Look, I am not a big Lieberman fan. I thought he was a poor choice for VP in 2000 and I often found myself getting very angry at him throughout this campaign. But this is 100% the wrong thing to do. Democrats won on Tuesday based largely on a campaign of ushering in a new era of bipartisanship. That means extending an olive branch across the aisle to people who may have done you wrong in the past and whom you may not even like very much for the betterment of the country. Well, Joe Lieberman isn't even across the aisle. If Congressional Democrats can't even make peace with someone who has been one of their own for the vast majority of his career, I have absolutely no faith in their ability to heal the rift with Republicans. It also sends the message that breaking with the party to stand up for what you believe is right for the country will not be tolerated. I can't think of a single worse message to send right now.
On the far, far lighter side of things I am on my way to the Cheech and Chong show at the Rosemont Theatre tomorrow night. I honestly haven't watched a single Cheech and Chong film or listened to a recording of them in about 10 years, so it will be interesting to see how the humor has held up. In any case, Cheech Marin has aged a lot better than Tommy Chong has, so I had a feeling this would be my only chance to see them and I'm looking forward to it.
Have a good weekend everyone!
Thursday, November 06, 2008
Musings on the Rally
Well, probably the best and easiest way to describe the rally is to say that if you saw it on TV it was exactly what it looked like it was: a lot of people that were all very happy and just excited to be a part of the moment.
The picture above was taken by Joe right when Obama came out to speak. Obviously we were not very close, but that wasn't really the point. We spent the early part of the evening at Joe's friend's Ed's place (that's a lot of possesives in a row!) with my brother and his girlfriend Kari (who also went to the rally with us). He lives about 5 blocks from the rally location and we thought it would be a good place to eat dinner, watch the early returns, and relax before we got amped up to be amidst the throngs of people. As a result, we didn't leave for the rally till about 8:45. Since people had started lining up to get in first thing in the morning, it didn't seem to make much sense to get there 2 hours early just to end up about 200 feet closer and still not be able to see anything. While there were lines to get in, it wasn't nearly as bad as I was expecting. There were 2 separate security checkpoints, but it was only the first one that had a decent size line. That was where they were making sure that only people with tickets were getting past so once you got through that it really opened up. At the second one they scanned your ticket and checked your ID to make sure it was legit. Strangely enough, there were actually no metal detectors. I am thinking that they used them for the early crowd but then once it got jammed up they figured it wasn't as big of a security risk since everyone else would be pretty far back. That's just speculation on my part, though.
We got inside the actual rally at about 9:15 and just stood around and conversed with fellow supporters for about half an hour. At that point, since they'd already called Ohio and Pennsylvania for Obama it was just a question of when, not if, the victory would be official. They had CNN on the jumbotron and the sound system was more than adequate to keep everyone informed. Finally, at 9:58 they called Virginia for Obama and there was a huge cheer that went up from the crowd. Less than 2 minutes later, just as the California polls closed they made it official: Sen. Barack Obama was now President-elect Obama. For about 5 minutes you couldn't hear CNN anymore or, indeed, anything else other than 200,000 people screaming and yelling. When some semblance of calm was restored, the next thing I remember hearing was that McCain was about to speak and officially concede. I give John McCain all the credit in the world, because he gave one of the best concession speeches I've ever heard. While there were a smattering of boos, by and large most people cheered and applauded him (with the notable exception of when he talked about Palin). We weren't there to dance on the grave of our opponent, we were there to celebrate our victory.
After that the fervor died down for a little while, but you could feel the anticipation and the energy never left the crowd. Finally, after about another 30-45 minutes of waiting the moment arrived. As you would expect, the place erupted when he walked out but it actually died down fairly quickly. As excited as everyone still was, they were more interested in hearing him talk than they were in cheering at the moment. There was the feeling that this was going to be a speech that would still be played 30, 50, maybe 100 years from now. And he didn't disappoint. For any that missed it, I would encourage you to go to youtube or any of 1000 other places on the web to view or read a transcript of it. It was a synthesis of everything he has been saying for the past 2 years. I made a point to look around while he was talking, to try to freeze the image in my mind forever. The thing that struck me the most as I listened was being aware of how silent it was. There were 200,000 people all standing in the center of one the largest, busiest cities in the world and the only sound that could be heard was the voice of one man, speaking for millions and saying everything that we wanted to say. By the end, I don't think there was anyone there whose eyes didn't at least well up. Truly as unforgettable a moment as there can be.
Reflecting on it later, I was most impressed with how he was able to weave in the sense of celebration and rejoicing with a continuing call for action. As I said in my last post, this isn't really the end at all; it's just the beginning. And rather than summarize and expound upon what he said, in the end I really can't say it any better than he did himself:
The road ahead will be long. Our climb will be steep. We may not get there in one year or even one term, but America - I have never been more hopeful than I am tonight that we will get there. I promise you - we as a people will get there.
There will be setbacks and false starts. There are many who wont agree with every decision or policy I make as President, and we know that government can't solve every problem. But I will always be honest with you about the challenges we face. I will listen to you, especially when we disagree. And above all, I will ask you to join in the work of remaking this nation the only way its been done in America for two-hundred and twenty-one years - block by block, brick by brick, calloused hand by calloused hand.
What began twenty-one months ago in the depths of winter must not end on this autumn night. This victory alone is not the change we seek - it is only the chance for us to make that change. And that cannot happen if we go back to the way things were. It cannot happen without you.
Tuesday, November 04, 2008
Election Day!
So, at last it has all come down to this. We have finally reached THE day that marks the end of one of the longest and arguably most exciting presidential elections in our lifetimes. While there have been a lot of surprises, twists, and turns over the last year, obviously it is my earnest desire for it to be over early and that we are spared anymore late night drama. I will be amidst the craziness at the Obama rally tonight in Grant Park, so I am hoping that my only concern will be how best to celebrate with my fellow Obamaniacs. But, as with all things, you never really know until you know. And on that note, let me be probably the umpteenth person today to urge everyone who has not already done so to get out and vote!
Speaking of the Obama rally, just for fun I decided to look on craigslist to see how strong the "entrepreneurial spirit" was. While I expected to see some pretty high prices (highest I saw was $850), what intrigued me more was the number of interesting trades and offers I saw. On the more "normal" side of the spectrum were people offering Cubs tickets, Rock Band for the PS3, various other concert tickets, and an electric guitar (Guild). And, of course, since Obama has a lot of strong support among 20-somethings there are lots of hormonally related offers. Mostly this runs along the lines of young guys looking for "a cute date" (equal opportunity though, as there are both straight and gay posts) to bring but there are also a few cases of women offering themselves up in trade. Then there are the humorous posts. One guy offered to trade "fishing lures for a ticket" (at least I *think* that's a joke) and another guy was offering to take John McCain as his guest for free. On the more commendable side, there were people offering up the guest spot to the highest bidder with the stipulation that the money go to charity (yeah, there were a lot less of these than any of the other ones). Then, there are the ones that can only be described as odd. One guy wants someone to try and pass as his ex-wife, and then others are requesting essay submissions (typically either pro or anti religious). All in all, I think this shows a couple things. First, that the spirit of capitalism is alive and well in the American people. Second, there is still a place for a barter economy (particularly among the young and horny). And lastly, if you get a large enough group together (even if they all appear to be somewhat like-minded) you will see a broad spectrum of ideologies, some ingenious thinking, and all manners of personality traits and quirks.
For the record, I am taking my friend Joe and I will be getting nothing from him save the pleasure of his company (the value of which is debatable).
On a semi-serious note, I just want to point out that although this is the "end" of this presidential campaign, in another way it really is only the beginning. No matter the outcome tonight, the greatest value this campaign has had is that it has engaged the American people in a way that has not been seen in a long time. A democracy functions best when all of its members are thus engaged and it is my earnest hope that this marks a rebirth of perpetual political enthusiasm in this country. It would be a real shame if 6 months from now the populous collectively shrugged its shoulders and returned to the complacency towards government that has marked a lot of our last hundred years. As a people we have been very adept at overcoming adversity, but we need to get better at not letting up once we have broken through. As Mr. Haake, my old cross-country coach, used to say "everyone is taught to run hard up the hill, but if you run hard for 100-yards past the hill that's when you can really pass people." So, to all Americans, I say this: if you haven't been running hard, start now; and if you have, keep going!
Speaking of the Obama rally, just for fun I decided to look on craigslist to see how strong the "entrepreneurial spirit" was. While I expected to see some pretty high prices (highest I saw was $850), what intrigued me more was the number of interesting trades and offers I saw. On the more "normal" side of the spectrum were people offering Cubs tickets, Rock Band for the PS3, various other concert tickets, and an electric guitar (Guild). And, of course, since Obama has a lot of strong support among 20-somethings there are lots of hormonally related offers. Mostly this runs along the lines of young guys looking for "a cute date" (equal opportunity though, as there are both straight and gay posts) to bring but there are also a few cases of women offering themselves up in trade. Then there are the humorous posts. One guy offered to trade "fishing lures for a ticket" (at least I *think* that's a joke) and another guy was offering to take John McCain as his guest for free. On the more commendable side, there were people offering up the guest spot to the highest bidder with the stipulation that the money go to charity (yeah, there were a lot less of these than any of the other ones). Then, there are the ones that can only be described as odd. One guy wants someone to try and pass as his ex-wife, and then others are requesting essay submissions (typically either pro or anti religious). All in all, I think this shows a couple things. First, that the spirit of capitalism is alive and well in the American people. Second, there is still a place for a barter economy (particularly among the young and horny). And lastly, if you get a large enough group together (even if they all appear to be somewhat like-minded) you will see a broad spectrum of ideologies, some ingenious thinking, and all manners of personality traits and quirks.
For the record, I am taking my friend Joe and I will be getting nothing from him save the pleasure of his company (the value of which is debatable).
On a semi-serious note, I just want to point out that although this is the "end" of this presidential campaign, in another way it really is only the beginning. No matter the outcome tonight, the greatest value this campaign has had is that it has engaged the American people in a way that has not been seen in a long time. A democracy functions best when all of its members are thus engaged and it is my earnest hope that this marks a rebirth of perpetual political enthusiasm in this country. It would be a real shame if 6 months from now the populous collectively shrugged its shoulders and returned to the complacency towards government that has marked a lot of our last hundred years. As a people we have been very adept at overcoming adversity, but we need to get better at not letting up once we have broken through. As Mr. Haake, my old cross-country coach, used to say "everyone is taught to run hard up the hill, but if you run hard for 100-yards past the hill that's when you can really pass people." So, to all Americans, I say this: if you haven't been running hard, start now; and if you have, keep going!
Friday, October 31, 2008
Ronald Reagan Was A Socialist
Believe me, I was as shocked as you probably are to discover this. And I'd like to thank John McCain and Sarah Palin for finally pointing this out to me. I always thought he was a conservative-minded, supply-side, free-market idealist but apparently I was mistaken.
I stumbled upon this startling realization by listening to the recent attacks McCain and Palin have levied against Obama's tax plan. His plan calls for raising taxes on the highest bracket (currently at 35%) back to the levels they were at under Clinton (39.6%). McCain and Palin have been quick to decry this as "socialism" and "spreading the wealth around." Obviously it goes without saying that during the Clinton years we were all living under a socialist regime. Fair enough. However, while researching here I was shocked *shocked* to discover that under Reagan (from 82-86) not only did the highest tax bracket have a far higher tax rate (50%), but there were actually 3 brackets that all had higher tax rates than Obama's proposal (44%, 49%, and 50%). And while we're at it we can't let perhaps the biggest socialist of all time, Richard Nixon, off the hook either. Under his tax plans, there were a whopping 14 brackets with higher rates (ranging from 42% to 70%) than under Obama's plan.
OK, so obviously the tongue is planted firmly in cheek here, but I think it illustrates the ridiculousness of this "socialism" accusation. Ever since we have had an income tax (1913) we have had a progressive tax system. By definition, a progressive tax system is a redistribution of wealth mechanism. If you believe that redistribution of wealth is a socialist idea, then it's all socialist and we have in fact been a socialist country for the last 95 years. Personally, I think that's a pretty narrow view to take on it. At it's core, socialism is about collective ownership at the expense of individual property rights and government setting the market price for goods and services. Tax policy has absolutely no effect on the former and only a minor, indirect effect on the latter.
In any case, I have absolutely no beef with someone who supports a flat tax levying the claim of "socialism" at our tax code. What I have a real problem with is the hypocrisy of someone who still supports a progressive tax code (as McCain does) calling another progressive tax code "socialist". If he wants to say "my plan is socialist, but his is more socialist" I could accept that too.
As you might be able to tell, with it being 5 days before the election my hackles are a bit up. It really saddens me that this campaign featured two of the most honest and respectable candidates in our recent history and we still had a campaign that was this nasty. While the Democrats are certainly not blameless, it is mainly the Republicans' fault (but don't take my word for it). Fortunately, while it's never over till it's over, it looks to be shaping up to not be particularly close. Every day more and more Republican insiders are coming out with negative feelings on Palin and her actions, and Republican Congressional candidates are starting to throw McCain under the bus by running ads playing up the angle that you don't want Democrats to control both houses of Congress as well as the Presidency. My sincerest hope is that the Republicans get the thorough ass kicking they deserve on Tuesday so that they are forced to reinvent themselves, throw out the right-wing extremists, and get back to their Reagan-esque roots. When that happens, I will be proud to once again pick up the Republican banner and wave it. Until that day though, I hope they never win another election.
I stumbled upon this startling realization by listening to the recent attacks McCain and Palin have levied against Obama's tax plan. His plan calls for raising taxes on the highest bracket (currently at 35%) back to the levels they were at under Clinton (39.6%). McCain and Palin have been quick to decry this as "socialism" and "spreading the wealth around." Obviously it goes without saying that during the Clinton years we were all living under a socialist regime. Fair enough. However, while researching here I was shocked *shocked* to discover that under Reagan (from 82-86) not only did the highest tax bracket have a far higher tax rate (50%), but there were actually 3 brackets that all had higher tax rates than Obama's proposal (44%, 49%, and 50%). And while we're at it we can't let perhaps the biggest socialist of all time, Richard Nixon, off the hook either. Under his tax plans, there were a whopping 14 brackets with higher rates (ranging from 42% to 70%) than under Obama's plan.
OK, so obviously the tongue is planted firmly in cheek here, but I think it illustrates the ridiculousness of this "socialism" accusation. Ever since we have had an income tax (1913) we have had a progressive tax system. By definition, a progressive tax system is a redistribution of wealth mechanism. If you believe that redistribution of wealth is a socialist idea, then it's all socialist and we have in fact been a socialist country for the last 95 years. Personally, I think that's a pretty narrow view to take on it. At it's core, socialism is about collective ownership at the expense of individual property rights and government setting the market price for goods and services. Tax policy has absolutely no effect on the former and only a minor, indirect effect on the latter.
In any case, I have absolutely no beef with someone who supports a flat tax levying the claim of "socialism" at our tax code. What I have a real problem with is the hypocrisy of someone who still supports a progressive tax code (as McCain does) calling another progressive tax code "socialist". If he wants to say "my plan is socialist, but his is more socialist" I could accept that too.
As you might be able to tell, with it being 5 days before the election my hackles are a bit up. It really saddens me that this campaign featured two of the most honest and respectable candidates in our recent history and we still had a campaign that was this nasty. While the Democrats are certainly not blameless, it is mainly the Republicans' fault (but don't take my word for it). Fortunately, while it's never over till it's over, it looks to be shaping up to not be particularly close. Every day more and more Republican insiders are coming out with negative feelings on Palin and her actions, and Republican Congressional candidates are starting to throw McCain under the bus by running ads playing up the angle that you don't want Democrats to control both houses of Congress as well as the Presidency. My sincerest hope is that the Republicans get the thorough ass kicking they deserve on Tuesday so that they are forced to reinvent themselves, throw out the right-wing extremists, and get back to their Reagan-esque roots. When that happens, I will be proud to once again pick up the Republican banner and wave it. Until that day though, I hope they never win another election.
Tuesday, October 21, 2008
Is This Thing On?
Update (10/22): Winner! In an unannounced and unexpected move, Kevin Smith WAS at the screening last night, and stuck around for over an hour after the movie to do a Q&A with the audience. We really lucked out because we were a little late in getting to the theatre and ended up getting seats near the front. While that wasn't ideal for the movie, it meant that we were about 10 feet from Kevin the entire time he was there. If you've seen any of his "An Evening With Kevin Smith" dvds it was exactly like that. I'm not sure if he'd take it as a compliment or an insult, but I think I laugh harder just hearing him talk for an hour than I do watching any of his movies (and I really like his movies). In any case, the movie was solidly good but not great. Definitely a must for anyone who enjoys either Kevin Smith or Seth Rogen movies.
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10/21
So, apparently I’m talking to myself now (or, more accurately, talking to Becky and Dan). My 4 posts in a 7-day span (which I think is a record for me) resulted in a whopping 6 comments (and 2 of those were mine). Yeesh, was my call for civility really that insulting?
So, last weekend my friend Joe and I went to the burgeoning metropolis that is La Porte, IN to campaign for Obama. I had been hoping that all we’d have to do was hang some literature on peoples doorknobs but we were out there knocking on people’s doors and talking to them. While I’m glad I did it, it just really isn’t my thing. I have a real problem with offering up unsolicited opinions to people (and FYI, I believe that by visiting this site you are implicitly asking for my opinion). I don’t like to be bothered by random campaign people and I assume no one else does either, so it just made the whole experience uncomfortable. What can I say, I’m just not a salesman. I’m also not exactly sure if we did any good. We met some strong Obama supporters that were happy to see us, and also some strong McCain supporters who were . . .less happy to see us, but I don’t really think we changed anybody’s mind. I guess in the end you have to believe in the power of numbers; if 10,000 people all knock on 50 doors somehow minds do get changed even if it can’t be directly traced to any one canvasser. Or maybe that’s just what I’m telling myself so I don’t feel like I wasted 4 gallons of gas and an entire Saturday.
In case the market hasn’t made you nauseous lately maybe this will do the trick . Some 21-year old ate a 15lb. burger in less than 5 hours. And the 15lbs was just the beef itself (pre-cooked). The bun and trimmings brought the total weight to 20.2 lbs. His prize for this feat? $400, 3 t-shirts, and a certificate. No matter how he invests that $400, I’m doubting it will come close to covering the costs of the inevitable angioplasty 20 years down the road. Don’t get me wrong, eating 20lbs of food in 5 hours is impressive, but so is maintaining consciousness while relentlessly beating yourself in the head with a hammer for a half hour. Doesn’t make either idea any less stupid. Of course, this is coming from someone who once drank 14 beers in 85 minutes and (on a separate occasion) decided to walk onto a semi-frozen lake in mid-March, so I think I know a thing or two about stupid ideas.
Going to see the new Kevin Smith movie tonight (Zack and Miri Make a Porno) as part of the Chicago International Film Festival. Sometimes as part of these they have special guests introduce the film and I had been hoping that maybe Kevin Smith would be here but it looks like no such luck. Still, it’s always fun to see a movie in a crowded theatre 10 days before its release.
I’m also really looking forward to seeing Saw V this weekend. I have no idea why, but I am.
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10/21
So, apparently I’m talking to myself now (or, more accurately, talking to Becky and Dan). My 4 posts in a 7-day span (which I think is a record for me) resulted in a whopping 6 comments (and 2 of those were mine). Yeesh, was my call for civility really that insulting?
So, last weekend my friend Joe and I went to the burgeoning metropolis that is La Porte, IN to campaign for Obama. I had been hoping that all we’d have to do was hang some literature on peoples doorknobs but we were out there knocking on people’s doors and talking to them. While I’m glad I did it, it just really isn’t my thing. I have a real problem with offering up unsolicited opinions to people (and FYI, I believe that by visiting this site you are implicitly asking for my opinion). I don’t like to be bothered by random campaign people and I assume no one else does either, so it just made the whole experience uncomfortable. What can I say, I’m just not a salesman. I’m also not exactly sure if we did any good. We met some strong Obama supporters that were happy to see us, and also some strong McCain supporters who were . . .less happy to see us, but I don’t really think we changed anybody’s mind. I guess in the end you have to believe in the power of numbers; if 10,000 people all knock on 50 doors somehow minds do get changed even if it can’t be directly traced to any one canvasser. Or maybe that’s just what I’m telling myself so I don’t feel like I wasted 4 gallons of gas and an entire Saturday.
In case the market hasn’t made you nauseous lately maybe this will do the trick . Some 21-year old ate a 15lb. burger in less than 5 hours. And the 15lbs was just the beef itself (pre-cooked). The bun and trimmings brought the total weight to 20.2 lbs. His prize for this feat? $400, 3 t-shirts, and a certificate. No matter how he invests that $400, I’m doubting it will come close to covering the costs of the inevitable angioplasty 20 years down the road. Don’t get me wrong, eating 20lbs of food in 5 hours is impressive, but so is maintaining consciousness while relentlessly beating yourself in the head with a hammer for a half hour. Doesn’t make either idea any less stupid. Of course, this is coming from someone who once drank 14 beers in 85 minutes and (on a separate occasion) decided to walk onto a semi-frozen lake in mid-March, so I think I know a thing or two about stupid ideas.
Going to see the new Kevin Smith movie tonight (Zack and Miri Make a Porno) as part of the Chicago International Film Festival. Sometimes as part of these they have special guests introduce the film and I had been hoping that maybe Kevin Smith would be here but it looks like no such luck. Still, it’s always fun to see a movie in a crowded theatre 10 days before its release.
I’m also really looking forward to seeing Saw V this weekend. I have no idea why, but I am.
Friday, October 17, 2008
W.
So I snuck away during lunch today to see W. Overall, I'd say it was pretty good. I have to admit, though, that I'm not really sure who the movie is intended for. It actually pulls too many punches to please the throngs of Bush-haters (which, judging by the latest approval ratings, is round about everybody nowadays). You won't find any scenes of him snorting coke, getting DUIs, smearing John McCain in 2000, or any mention of My Pet Goat. Sure, there are plenty of scenes of him drinking in his early life, but it's not exactly controversial to say that Bush drank a lot during his youth. So, it's pretty safe to say that anyone going into the movie expecting to see a non-stop pummeling of Bush the younger is going to be disappointed. On the other hand, it's unlikely that Republicans will like it either. After all, it's certainly not a coincidence that this is being released 18 days prior to the election and while I said that it doesn't pummel him it certainly doesn't paint him in a glowing light either. Largely, the movie reinforced the opinion I've had of him for the last 3-4 years. It paints the picture of a man who's been struggling his entire life to step out of the shadow of his father and his family's legacy. In a number of ways, he is a very tragic figure. Contrary to what a lot of the far left vilifies him to be he is not some evil, greedy, Machiavellian figure. He is a guy who genuinely believed (and still does) that what he is doing is right for the country and for the world and whose biggest mistake was surrounding himself with people that did not provide him with the crucial information he needed at the correct time. I am not trying to be a Bush apologist. The man made a lot of very, very bad decisions and we will be paying the price for them for a long time. Those bad decisions were a product of misinformation, stubbornness, and too much reliance on "gut feelings" instead of reevaluation of each situation as the facts changed. But I don't believe they were mainly the product of greed or malice. In the end, I still despise George W. Bush the President, but I really do feel empathy for George W. Bush the human being.
One of the people that comes off pretty well in the film is George H.W. Bush. Most of the film centers on him as an exasperated father dealing with a child who shows no real desire or ambition for anything for his first 40 years. He is proud of his son's accomplishments but can't connect with him, and he seems almost bewildered when the life and legacy that seemed destined to go to Jeb almost falls in George's lap instead. What little we see of Bush the elder as a politician centers on his side-stepping a number of the perils that W fell into headlong. Ironically, while W's numerous mistakes may have tainted the Bush name, it actually seems to have enhanced the legacy of H.W. Maybe it's just because enough time has passed that we can now look on his presidency with a less biased lens. Maybe not. But if that is indeed the case, then who knows? Maybe 15 years from now W will be right and history will vindicate him. I sincerely doubt it, but I have to leave open the possibility. I never thought my opinion of H.W. would have risen with time, and I never thought my opinion of Clinton would have risen with time either, but both happened.
Powell comes off very well too. Actually, I think he comes across a little too well. I am definitely a fan of Powell, and in all the books I've read concerning the Iraq war he was in fact one of the only people in the administration pushing for a conservative and diplomatic approach. But he is presented here as something of a crusader (in one scene in particular) whereas the story I've come to believe is one where he spoke out a few times early on but then gradually grew silent as he realized that his opinion was not valued and not often requested. I believe his decision to resign in 2004 is pretty concrete proof that he chose to remove himself rather than stay and try to fight, well, pretty much everyone. Mind you, I'm not criticizing him for that decisio, but I just don't think that's the perception that comes across in the film.
I have read a lot of praise about Thandie Newton's portrayal of Condoleeza Rice, and I just don't really see it. It is by no means a bad performance but apart from her looking spot on like her, there is very little meat to the role and she's largely a background character. Biggest props go to Richard Dreyfuss as Cheney (who, in the words of Ebert, "is not so much a double as an embodiment" of him) and of course Josh Brolin as W. It's hard to imagine one or both not garnering an Oscar nomination.
So in the end you have a well-made, well-acted film that is far more even handed than I would have thought Oliver Stone capable of. I'm still not exactly sure who it was made for, and I'm also not sure if the film will age well after the public has forgotten about the specifics of the Bush years. I guess, as W. himself would say, "we'll let history decide that".
One of the people that comes off pretty well in the film is George H.W. Bush. Most of the film centers on him as an exasperated father dealing with a child who shows no real desire or ambition for anything for his first 40 years. He is proud of his son's accomplishments but can't connect with him, and he seems almost bewildered when the life and legacy that seemed destined to go to Jeb almost falls in George's lap instead. What little we see of Bush the elder as a politician centers on his side-stepping a number of the perils that W fell into headlong. Ironically, while W's numerous mistakes may have tainted the Bush name, it actually seems to have enhanced the legacy of H.W. Maybe it's just because enough time has passed that we can now look on his presidency with a less biased lens. Maybe not. But if that is indeed the case, then who knows? Maybe 15 years from now W will be right and history will vindicate him. I sincerely doubt it, but I have to leave open the possibility. I never thought my opinion of H.W. would have risen with time, and I never thought my opinion of Clinton would have risen with time either, but both happened.
Powell comes off very well too. Actually, I think he comes across a little too well. I am definitely a fan of Powell, and in all the books I've read concerning the Iraq war he was in fact one of the only people in the administration pushing for a conservative and diplomatic approach. But he is presented here as something of a crusader (in one scene in particular) whereas the story I've come to believe is one where he spoke out a few times early on but then gradually grew silent as he realized that his opinion was not valued and not often requested. I believe his decision to resign in 2004 is pretty concrete proof that he chose to remove himself rather than stay and try to fight, well, pretty much everyone. Mind you, I'm not criticizing him for that decisio, but I just don't think that's the perception that comes across in the film.
I have read a lot of praise about Thandie Newton's portrayal of Condoleeza Rice, and I just don't really see it. It is by no means a bad performance but apart from her looking spot on like her, there is very little meat to the role and she's largely a background character. Biggest props go to Richard Dreyfuss as Cheney (who, in the words of Ebert, "is not so much a double as an embodiment" of him) and of course Josh Brolin as W. It's hard to imagine one or both not garnering an Oscar nomination.
So in the end you have a well-made, well-acted film that is far more even handed than I would have thought Oliver Stone capable of. I'm still not exactly sure who it was made for, and I'm also not sure if the film will age well after the public has forgotten about the specifics of the Bush years. I guess, as W. himself would say, "we'll let history decide that".
Friday, October 10, 2008
A Eulogy For the Cubs Season
Well, I have by meaning to do this since the season ended but found that it is only now that I can even stomach it without either feeling nauseous or depressed (or both). I guess the good news is that the Cubs did fulfill my pre-season prediction of back-to-back division championships and actually exceeded my win prediction (I predicted 91 and they ended up with 97). And of course I will always remember seeing the no-hitter up in Miller Park.
But that’s where the good news ends, as I had the extreme displeasure of watching my beloved team act like a bunch of clowns for 27 innings and get bounced. No gut-wrenching losses, no false hope, just 3 games of bad baseball from a team that looked cooked from the moment James Loney hit the grand slam in the 5th inning of game 1.
Minutes after the Cubs were officially eliminated, I came to the realization that this season officially marks my transformation from young, optimistic Cubs fan to old, jaded one. My entire life as a Cubs fan has been spent waiting for the one season where they’d be so good that they’d just steamroll everyone. Even when they have made the playoffs in the past, they were always the underdog and even though you hoped against hope that they’d pull it out, you certainly weren’t shocked when they didn’t. For the better part of 6 months this year, they finally were that team that seemed unstoppable. And guess what? It didn’t matter. I’ve been forced to realize that the worst part about this is that now I don’t even know how I go about getting excited about them next year (or any other season). Even if they started out 40-0, I’ll be left going “So what? That still doesn’t mean they’ll perform when it counts in the playoffs.” Now, of course the logical part of my brain tells me that 8 good teams made it through the 6-month grind, and already half of them have gone home. Even the Angels, with the best record in baseball, lasted only a game longer than the Cubs. And, of course, ultimately there will only be 1 out of 32 teams whose fans will be happy with the end of the season. Yes, my rational mind gets all of that. But then again, if I was truly rational, I wouldn’t be a Cubs fan to begin with.
That’s as far as I can explain it in words. So I’d like to further express how I feel in pictures:
This first one's my favorite. It's pretty much the exact expression on my face while watching the Cubs commit 3 errors in the 2nd inning of game 2 en route to falling behind 5-0.
But that’s where the good news ends, as I had the extreme displeasure of watching my beloved team act like a bunch of clowns for 27 innings and get bounced. No gut-wrenching losses, no false hope, just 3 games of bad baseball from a team that looked cooked from the moment James Loney hit the grand slam in the 5th inning of game 1.
Minutes after the Cubs were officially eliminated, I came to the realization that this season officially marks my transformation from young, optimistic Cubs fan to old, jaded one. My entire life as a Cubs fan has been spent waiting for the one season where they’d be so good that they’d just steamroll everyone. Even when they have made the playoffs in the past, they were always the underdog and even though you hoped against hope that they’d pull it out, you certainly weren’t shocked when they didn’t. For the better part of 6 months this year, they finally were that team that seemed unstoppable. And guess what? It didn’t matter. I’ve been forced to realize that the worst part about this is that now I don’t even know how I go about getting excited about them next year (or any other season). Even if they started out 40-0, I’ll be left going “So what? That still doesn’t mean they’ll perform when it counts in the playoffs.” Now, of course the logical part of my brain tells me that 8 good teams made it through the 6-month grind, and already half of them have gone home. Even the Angels, with the best record in baseball, lasted only a game longer than the Cubs. And, of course, ultimately there will only be 1 out of 32 teams whose fans will be happy with the end of the season. Yes, my rational mind gets all of that. But then again, if I was truly rational, I wouldn’t be a Cubs fan to begin with.
That’s as far as I can explain it in words. So I’d like to further express how I feel in pictures:
This first one's my favorite. It's pretty much the exact expression on my face while watching the Cubs commit 3 errors in the 2nd inning of game 2 en route to falling behind 5-0.
More Ambivalence
If you currently do not have any money in the stock market, now is the time to get in. Contrary to what you may be expecting, there is no joke forthcoming. I am completely serious.
As I mentioned before, I am currently reading an investment book called A Random Walk Down Wall Street. There could not be a more relevant time to be reading it, as you can see the principles that he lays out operating in action in the market on a daily basis.
Contrary to what sterile economic theory has taught for decades, one thing that has been consistently borne out by empirical data over the years is that investors do not behave in a completely rational manner. Alan Greenspan called the internet boom of the late 90s a product of “irrational exuberance” but that principle also works in reverse as well. When the market goes up, investors have a tendency to believe that happy days are here to stay, and when it goes down there is a tendency to believe that it will never go up again. Both are obviously wrong, and both trains of thought will hurt you if you fall prey to them.
Let me ask a question. Taking crowds out of the equation, would you rather do your Christmas shopping on Black Friday when everything’s on sale or a week before Christmas on ebay where you may end up paying two to three times the retail price to get your kid the last whatever-the-hell that season’s must have trinket is? Most people would opt for the former, because all things being equal people prefer to pay less for something when they can. Seems to make sense, right? Well, shockingly enough the market tends to work in almost the exact opposite manner. Then again, considering the amount of business done on ebay at exorbitant prices in the days leading up to Christmas, perhaps it’s not so surprising after all.
Take a look at the following graph (apologies that it's slightly askew; I had to copy and scan it from the book), and please take a few minutes to fully absorb what it is saying, because it tells a fascinating story.
As I mentioned before, I am currently reading an investment book called A Random Walk Down Wall Street. There could not be a more relevant time to be reading it, as you can see the principles that he lays out operating in action in the market on a daily basis.
Contrary to what sterile economic theory has taught for decades, one thing that has been consistently borne out by empirical data over the years is that investors do not behave in a completely rational manner. Alan Greenspan called the internet boom of the late 90s a product of “irrational exuberance” but that principle also works in reverse as well. When the market goes up, investors have a tendency to believe that happy days are here to stay, and when it goes down there is a tendency to believe that it will never go up again. Both are obviously wrong, and both trains of thought will hurt you if you fall prey to them.
Let me ask a question. Taking crowds out of the equation, would you rather do your Christmas shopping on Black Friday when everything’s on sale or a week before Christmas on ebay where you may end up paying two to three times the retail price to get your kid the last whatever-the-hell that season’s must have trinket is? Most people would opt for the former, because all things being equal people prefer to pay less for something when they can. Seems to make sense, right? Well, shockingly enough the market tends to work in almost the exact opposite manner. Then again, considering the amount of business done on ebay at exorbitant prices in the days leading up to Christmas, perhaps it’s not so surprising after all.
Take a look at the following graph (apologies that it's slightly askew; I had to copy and scan it from the book), and please take a few minutes to fully absorb what it is saying, because it tells a fascinating story.
It is a measure of cash flow into and out of equity funds (i.e. mutual funds) in relation to the S&P 500 (which, even better than the Dow, is a good proxy of the market as a whole). What it shows is that when the S&P is riding high, investors are lining up to get onboard. They can’t wait to throw their money into the market. Then when it takes a dive, investors make a mad dash for the exits like rats on a sinking ship. The thing is, the ship is not sinking. Markets are cyclical and thus peaks and troughs are as unavoidable as they are unpredicatable. I am certainly not advocating that you try and jump ship when the market is high and get in when it’s low. I am saying that the best course of action is to not try to time the market at all. You have a far greater chance of hurting yourself rather than helping, as evidenced by this:
“Professor H. Negat Seybun of the University of Michigan found that 95 percent of the significant market gains over the thirty-year period from the mid-1960s to the mid-1990s came on 90 of the roughly 7,500 trading days.”
Now, I’m sure that there are at least somewhat similar numbers for market downturns, but keep in mind that over the last century the market has consistently trended up (from a Dow of virtually nothing in the 1930s to over 8000 today). The question then becomes, do you really want to play the market and risk missing out on the ~1.5% of the days where most of the gains occur?
So, to be clear on what I’m advocating, if you’re already invested in the market: do nothing! Resist the urge to jump ship along with the other rats. If you currently have nothing in the market this is one of the best opportunities to get involved, and I would strongly advise doing so by buying a broad-based index fund (like the S&P 500) rather than try to pick out your own portfolio.
Some caveats, though (and aren’t there always?). First, I am advising holding on to your investments absent the specific knowledge that any one particular company in your portfolio is a dog (AIG, for example, although I’m actually not ready to throw in the towel on them yet). Second, if you are contemplating retirement soon you may very well want to consider moving into a more stable investment. The market will recover, but your financial needs may not allow you to wait long enough to reap all the benefits when it does. Lastly, when I say that “now is the time to get in” I am not talking about maxing out your credit card on cash advances. I am talking about if you happen to have money (in savings, CDs, etc.) that you don’t plan to touch in the near future and can live without. Neither I or anyone else can tell you exactly when the market is going to turn around, and there’s certainly no guarantee that it won’t drop another 1000 points or more. But what I am confident about is that over the long term it will recover. If I had to put numbers to it, I’d say assuming you invested today in the S&P 500 (currently trading at 899) I am 60% confident that you will see a significant positive return (i.e. greater than that which you’d find in a “safe” investment like an FDIC-insured savings account) in a year, 75% certain you will see one in 2, and 99% (because nothing is absolute) that you will see one in 5.
Now, if you’d like to press me to recommend a specific company, I would have to go with GE (currently trading at $21.50/share). There are a lot of reasons I like them, but probably the biggest is the fact that Warren Buffett just invested $3 billion in them and by and large the man only invests in solid companies. They also are a bargain right now because GE credit is struggling (along with every other lender) but I believe that will eventually recover, and there is still a large amount of demand for their turbines and jet engines. But, again, I am talking about long-term investing here. One of Warren Buffett’s most famous statements is that “the correct holding period of a stock is forever.”
Of course, I would be remiss if I didn’t also point out another piece of advice I gleaned from A Random Walk Down Wall Street:
Stay Cool to Hot Tips
Tips come at you from all fronts – friends, relatives, the telephone, even the internet. Don’t go there. Steer clear of any hot tips. They are overwhelmingly likely to be the poorest investments of your life. And remember: Never buy anything from someone who is out of breath.
So I guess what I’m saying is that if you listen to what I’m saying, you definitely shouldn’t be listening to what I’m saying.
How’s that for ambivalence?
“Professor H. Negat Seybun of the University of Michigan found that 95 percent of the significant market gains over the thirty-year period from the mid-1960s to the mid-1990s came on 90 of the roughly 7,500 trading days.”
Now, I’m sure that there are at least somewhat similar numbers for market downturns, but keep in mind that over the last century the market has consistently trended up (from a Dow of virtually nothing in the 1930s to over 8000 today). The question then becomes, do you really want to play the market and risk missing out on the ~1.5% of the days where most of the gains occur?
So, to be clear on what I’m advocating, if you’re already invested in the market: do nothing! Resist the urge to jump ship along with the other rats. If you currently have nothing in the market this is one of the best opportunities to get involved, and I would strongly advise doing so by buying a broad-based index fund (like the S&P 500) rather than try to pick out your own portfolio.
Some caveats, though (and aren’t there always?). First, I am advising holding on to your investments absent the specific knowledge that any one particular company in your portfolio is a dog (AIG, for example, although I’m actually not ready to throw in the towel on them yet). Second, if you are contemplating retirement soon you may very well want to consider moving into a more stable investment. The market will recover, but your financial needs may not allow you to wait long enough to reap all the benefits when it does. Lastly, when I say that “now is the time to get in” I am not talking about maxing out your credit card on cash advances. I am talking about if you happen to have money (in savings, CDs, etc.) that you don’t plan to touch in the near future and can live without. Neither I or anyone else can tell you exactly when the market is going to turn around, and there’s certainly no guarantee that it won’t drop another 1000 points or more. But what I am confident about is that over the long term it will recover. If I had to put numbers to it, I’d say assuming you invested today in the S&P 500 (currently trading at 899) I am 60% confident that you will see a significant positive return (i.e. greater than that which you’d find in a “safe” investment like an FDIC-insured savings account) in a year, 75% certain you will see one in 2, and 99% (because nothing is absolute) that you will see one in 5.
Now, if you’d like to press me to recommend a specific company, I would have to go with GE (currently trading at $21.50/share). There are a lot of reasons I like them, but probably the biggest is the fact that Warren Buffett just invested $3 billion in them and by and large the man only invests in solid companies. They also are a bargain right now because GE credit is struggling (along with every other lender) but I believe that will eventually recover, and there is still a large amount of demand for their turbines and jet engines. But, again, I am talking about long-term investing here. One of Warren Buffett’s most famous statements is that “the correct holding period of a stock is forever.”
Of course, I would be remiss if I didn’t also point out another piece of advice I gleaned from A Random Walk Down Wall Street:
Stay Cool to Hot Tips
Tips come at you from all fronts – friends, relatives, the telephone, even the internet. Don’t go there. Steer clear of any hot tips. They are overwhelmingly likely to be the poorest investments of your life. And remember: Never buy anything from someone who is out of breath.
So I guess what I’m saying is that if you listen to what I’m saying, you definitely shouldn’t be listening to what I’m saying.
How’s that for ambivalence?
Tuesday, October 07, 2008
Hot, Flat, and Crowded
So as promised, here are some of my thoughts on Thomas Friedman's new book Hot, Flat, and Crowded which, contrary to what the title may insinuate, is not a biography on Paris Hilton. It is a detailed guide on why we need a green revolution in this country, how it can completely renew and revitalize us, and how it can once again restore our image to the rest of the world while simultaneously cementing us as an economic power throughout the next century.
Some of what is below I heard almost verbatim recited by one or both Presidential candidates on Tuesday night, and that makes me happy (if I make the colossal assumption that it was more than just lip service on their part). Most of what follows are paraphrasings of some of the main ideas in the book, with a few of my own musings thrown in. I put quotes where applicable, but for a lot of the rest I just didn't want to write "Friedman says" 100 times. Just wanted to make it clear that I'm not trying to plagiarize. In addition, I'd like to add that what I'm going to talk about is only a very, very small part of all that Friedman discusses. Some of it is controversial and some of it is just common sense; all of it is fascinating. As much as I enjoyed The World is Flat, this is better and it's not even particularly close.
Obviously, when one hears the words "green revolution" it instantly brings to mind the idea that, "oh, this is a book about global warming." Well, that's certainly a big part of it. Here Friedman presents in 27-pages probably the best synopsis on the science as far as what we know and don't know yet. He also puts forth this analogy about skeptics, which I got a big kick out of:
"Climate change deniers are like the person who goes to the doctor for a diagnosis, and when the doctor tells him 'If you don't stop smoking, there is a 90% chance you will die of lung cancer' the patient replies, 'Oh, doctor, you mean you are not 100% sure? Then I will keep smoking.'"
He also makes a very compelling case that climate change is not going to be as bad as some of the estimates out there. It's actually far more likely that it will be a lot worse.
But I don't want to harp on climate change (again) because for one my feelings on the subject have been well documented here and two that's actually not even the biggest reason Friedman convincingly gives for the US leading the charge in the green revolution.
Obviously if you are a staunch believer in man-made, carbon emmision-based climate change it's elementary to see why we would need to switch to renewables. But let's take climate change completely off the table. There's still overwhelming evidence that a switch to green technology is in our best interest. First, let's look at it from a national security standpoint. Right now we give a lot of money every day to oil barons and regimes operating in countries whose people don't like us very much. What's more, in a lot of cases the money received by these regimes is used to deny their citizens a lot of the freedoms of the Western world. If the motto of the Revolutionary War was "no taxation without representation" then the motto for a lot of these countries is "no taxation, so no representation either." Because these countries are so heavily dependent on oil revenue, they have very little motivation to invest in other industries. As a result, the people are often at the mercy of the government to support them and don't have the leverage to demand change. Taking these countries off of this type of "welfare" system would force them to change and attempt to build infrastructure and industry that competes as part of the global market. Then, and only then, will true democracy flourish in the Middle East. Some would say that the answer to that is drilling in the U.S. They are wrong. I'm not going to do the vast amounts of research to come up with completely hard numbers (because people would just argue with them anyway), but I went here for some rough estimates. Using the upper estimates of the potential oil, I come up with a grand total of 180 billion barrels of potential domestic oil (727 million barrels in the strategic reserve, 115.1 billion barrels in the OCS, 48.5 billion barrels onshore, and 16 billion in ANWR). Our consumption is over 20 million barrels per day. Some quick math reveals that even in the best case scenario we could be self sufficient for less than 2 and a half years using just our own oil. Even if our estimates are wildly off the mark and the real figure is 4 times that, we're still talking less than a decade. So, obviously if the goal is to be self-sufficient with our energy needs, renewables are a must. The stone age didn't end because we ran out of stones. It ended because we found a better way.
In addition, the energy needs of the world are escalating almost exponentially everyday thanks to the emerging markets (China and India are the headliners, but they are hardly the only ones). You also hear a lot (though probably still not enough) about the need to stifle the immense poverty in Africa but if you stop and think about what it would actually mean from an energy perspective to bring that entire continent up to first-world living standards the problem is truly daunting. So much so that a lot of people (including me for a time) have the attitude that "China and India are so big and growing so fast, it doesn't matter what efforts we undertake to curb our consumption and switch to renewables; all of our gains will easily be outweighed by their excess." I particularly like Friedman's response to this, which he gave in a speech to the Chinese at their "Green Car Congress" in 2007:
"Every year I come to China and young Chinese tell me, 'Mr. Friedman, you Americans got to grow dirty for 150 years - you got to have your Industrial Revolution based on coal and oil - now it is our turn.' Well, on behalf of all Americans, I am here today to tell you that you're right. It's your turn. Please, take your time, grow as dirty as you like for as long as you like. Take your time! Because I think my country needs only 5 years to invent all the clean power and energy efficiency tools that you, China, will need to avoid choking on pollution, and then we are going to come over and sell them all to you. We will get at least a five-year jump on you in the next great global industry: clean power and energy efficiency. We will totally dominate you in those industries. "
I realy like that because it turns everything around and turns a stick into a carrot. Instead of us acting like some world police force at a time when most of the rest of the world has had quite enough of us in that role, it transforms us yet again into a world leader on the cutting edge that challenges other countries by saying "This is the future, and we are moving towards it full speed ahead. If you want to join us now: great! We welcome the competition. But if you want to carry on like you have been and risk falling behind again right at the moment when you were just starting to catch up, that's fine with us too." The problem, of course, is that at the moment we are not going "full speed ahead."
In the early 1960s, President Kennedy made a bold declaration that we would put a man on the moon by the end of the decade. It was obvious that this was at least in part driven by the Cold War. Even though the moon clearly offered no strategic military position, the humbling and helpless feeling the American people felt by having to look up at the sky and see Sputnik circling the Earth was enough to spur us into collective action. It spurred us to invest heavily in science, technology, and education in an effort to win the space race. Succesfully landing on the moon may have been the public face of the success that type of investment bred, but it certainly wasn't limited to just that.
Similar to the space race, we now need a green race. We need leadership that sets a lofty goal that the U.S. can rally behind. Collectively, I believe that we are still the most industrious people on the planet when it comes to working towards, fighting for, and sacrificing in the name of a cause we believe in. I believe that this is that cause.
And there will be sacrifices that need to be made; at least at first. Change is never comfortable, and there will be at least as many bad ideas that get implemented as there will be good ones. Great novels and great programs don't get written in one draft. But by investing in the next great global industry, we will not only be putting ourselves in position to dominate the global economy for the 21st century, we have the opportunity to once again bring manufacturing jobs back home. Maybe GM and Ford will never again enjoy the market share they once did, but instead of cars their assembly line workers can certainly put together solar panels or parts for wind turbines. The idea of bringing outsourced industries back onshore is folly; building infrastructure towards the next industry is vision.
This is a pivotal point in the history of mankind, and I shudder to think of what will happen if we fail to take advantage of this opportunity. To that point, Friedman quotes Jeffrey Immelt (CEO of GE): "I have always believed that every generation looks back at the generation before it and has one big question about something they did or did not do. For our generation, the big question to the generation before us was 'How could good people be so prejudiced against blacks and women?' I am convinced that when our kids are fifty, and they look back at us, they are going to ask: 'What were you thinking?' You were the richest country in the world. You had the technology to really make a difference on things like global warming. Why were you so slow to do the right things?'"
So, is it already too late? I don't think so. I can't; because really at that point all there is to do is despair. I prefer to think along the lines of Amory Lovins (Chief Scientist at the Rocky Mountain Institute):
"We have exactly enough time - starting now."
Some of what is below I heard almost verbatim recited by one or both Presidential candidates on Tuesday night, and that makes me happy (if I make the colossal assumption that it was more than just lip service on their part). Most of what follows are paraphrasings of some of the main ideas in the book, with a few of my own musings thrown in. I put quotes where applicable, but for a lot of the rest I just didn't want to write "Friedman says" 100 times. Just wanted to make it clear that I'm not trying to plagiarize. In addition, I'd like to add that what I'm going to talk about is only a very, very small part of all that Friedman discusses. Some of it is controversial and some of it is just common sense; all of it is fascinating. As much as I enjoyed The World is Flat, this is better and it's not even particularly close.
Obviously, when one hears the words "green revolution" it instantly brings to mind the idea that, "oh, this is a book about global warming." Well, that's certainly a big part of it. Here Friedman presents in 27-pages probably the best synopsis on the science as far as what we know and don't know yet. He also puts forth this analogy about skeptics, which I got a big kick out of:
"Climate change deniers are like the person who goes to the doctor for a diagnosis, and when the doctor tells him 'If you don't stop smoking, there is a 90% chance you will die of lung cancer' the patient replies, 'Oh, doctor, you mean you are not 100% sure? Then I will keep smoking.'"
He also makes a very compelling case that climate change is not going to be as bad as some of the estimates out there. It's actually far more likely that it will be a lot worse.
But I don't want to harp on climate change (again) because for one my feelings on the subject have been well documented here and two that's actually not even the biggest reason Friedman convincingly gives for the US leading the charge in the green revolution.
Obviously if you are a staunch believer in man-made, carbon emmision-based climate change it's elementary to see why we would need to switch to renewables. But let's take climate change completely off the table. There's still overwhelming evidence that a switch to green technology is in our best interest. First, let's look at it from a national security standpoint. Right now we give a lot of money every day to oil barons and regimes operating in countries whose people don't like us very much. What's more, in a lot of cases the money received by these regimes is used to deny their citizens a lot of the freedoms of the Western world. If the motto of the Revolutionary War was "no taxation without representation" then the motto for a lot of these countries is "no taxation, so no representation either." Because these countries are so heavily dependent on oil revenue, they have very little motivation to invest in other industries. As a result, the people are often at the mercy of the government to support them and don't have the leverage to demand change. Taking these countries off of this type of "welfare" system would force them to change and attempt to build infrastructure and industry that competes as part of the global market. Then, and only then, will true democracy flourish in the Middle East. Some would say that the answer to that is drilling in the U.S. They are wrong. I'm not going to do the vast amounts of research to come up with completely hard numbers (because people would just argue with them anyway), but I went here for some rough estimates. Using the upper estimates of the potential oil, I come up with a grand total of 180 billion barrels of potential domestic oil (727 million barrels in the strategic reserve, 115.1 billion barrels in the OCS, 48.5 billion barrels onshore, and 16 billion in ANWR). Our consumption is over 20 million barrels per day. Some quick math reveals that even in the best case scenario we could be self sufficient for less than 2 and a half years using just our own oil. Even if our estimates are wildly off the mark and the real figure is 4 times that, we're still talking less than a decade. So, obviously if the goal is to be self-sufficient with our energy needs, renewables are a must. The stone age didn't end because we ran out of stones. It ended because we found a better way.
In addition, the energy needs of the world are escalating almost exponentially everyday thanks to the emerging markets (China and India are the headliners, but they are hardly the only ones). You also hear a lot (though probably still not enough) about the need to stifle the immense poverty in Africa but if you stop and think about what it would actually mean from an energy perspective to bring that entire continent up to first-world living standards the problem is truly daunting. So much so that a lot of people (including me for a time) have the attitude that "China and India are so big and growing so fast, it doesn't matter what efforts we undertake to curb our consumption and switch to renewables; all of our gains will easily be outweighed by their excess." I particularly like Friedman's response to this, which he gave in a speech to the Chinese at their "Green Car Congress" in 2007:
"Every year I come to China and young Chinese tell me, 'Mr. Friedman, you Americans got to grow dirty for 150 years - you got to have your Industrial Revolution based on coal and oil - now it is our turn.' Well, on behalf of all Americans, I am here today to tell you that you're right. It's your turn. Please, take your time, grow as dirty as you like for as long as you like. Take your time! Because I think my country needs only 5 years to invent all the clean power and energy efficiency tools that you, China, will need to avoid choking on pollution, and then we are going to come over and sell them all to you. We will get at least a five-year jump on you in the next great global industry: clean power and energy efficiency. We will totally dominate you in those industries. "
I realy like that because it turns everything around and turns a stick into a carrot. Instead of us acting like some world police force at a time when most of the rest of the world has had quite enough of us in that role, it transforms us yet again into a world leader on the cutting edge that challenges other countries by saying "This is the future, and we are moving towards it full speed ahead. If you want to join us now: great! We welcome the competition. But if you want to carry on like you have been and risk falling behind again right at the moment when you were just starting to catch up, that's fine with us too." The problem, of course, is that at the moment we are not going "full speed ahead."
In the early 1960s, President Kennedy made a bold declaration that we would put a man on the moon by the end of the decade. It was obvious that this was at least in part driven by the Cold War. Even though the moon clearly offered no strategic military position, the humbling and helpless feeling the American people felt by having to look up at the sky and see Sputnik circling the Earth was enough to spur us into collective action. It spurred us to invest heavily in science, technology, and education in an effort to win the space race. Succesfully landing on the moon may have been the public face of the success that type of investment bred, but it certainly wasn't limited to just that.
Similar to the space race, we now need a green race. We need leadership that sets a lofty goal that the U.S. can rally behind. Collectively, I believe that we are still the most industrious people on the planet when it comes to working towards, fighting for, and sacrificing in the name of a cause we believe in. I believe that this is that cause.
And there will be sacrifices that need to be made; at least at first. Change is never comfortable, and there will be at least as many bad ideas that get implemented as there will be good ones. Great novels and great programs don't get written in one draft. But by investing in the next great global industry, we will not only be putting ourselves in position to dominate the global economy for the 21st century, we have the opportunity to once again bring manufacturing jobs back home. Maybe GM and Ford will never again enjoy the market share they once did, but instead of cars their assembly line workers can certainly put together solar panels or parts for wind turbines. The idea of bringing outsourced industries back onshore is folly; building infrastructure towards the next industry is vision.
This is a pivotal point in the history of mankind, and I shudder to think of what will happen if we fail to take advantage of this opportunity. To that point, Friedman quotes Jeffrey Immelt (CEO of GE): "I have always believed that every generation looks back at the generation before it and has one big question about something they did or did not do. For our generation, the big question to the generation before us was 'How could good people be so prejudiced against blacks and women?' I am convinced that when our kids are fifty, and they look back at us, they are going to ask: 'What were you thinking?' You were the richest country in the world. You had the technology to really make a difference on things like global warming. Why were you so slow to do the right things?'"
So, is it already too late? I don't think so. I can't; because really at that point all there is to do is despair. I prefer to think along the lines of Amory Lovins (Chief Scientist at the Rocky Mountain Institute):
"We have exactly enough time - starting now."
Wednesday, October 01, 2008
Energy Crisis Solved: We Will Be Powered by Spite
So if anyone saw The Daily Show last night I have very little to add. Apparently the reason given by several prominent Republicans (notably House Republican leader John Boehner) for the bailout failing to pass the House was Nancy Pelosi's highly partisan speech given before the vote was taken. What the hell kind of kindergarten crap is this? No, I don't like Nancy Pelosi and yes, I agree that the speech was highly partisan and not really necessary at the time, but I fail to see how that is relevant to voting for or against anything. I don't care if she was up at the podium dressed as a nazi, burning a bible in one hand and an American flag in the other, if you think the bill is in the best interests of the country you vote for it and if you don't you vote against it. Period. End of discussion. I still don't know exactly how I feel about the bailout and there were a lot of Reps who cast votes against it and voiced very legitimate concerns about it. That's fine. I'm not arguing that they should have voted for it. I'm saying that if you were all set to vote for it and then you changed your mind because Nancy Pelosi was a big meany you are a spiteful moron and you deserve to be voted out of office immediately.
Of course, as usual the truth of the matter (as I see it anyway) is somewhat more complicated. The bill wasn't going to pass anyway. Nancy Pelosi didn't have the votes and she knew it. She figured there was no chance she was going to sway any more Republicans at the last minute so instead she tried to appeal to Democrats to fall in line by stoking up anti-Republican and anti-Bush sentiment. It didn't work, so then it left a convenient opening for Republicans to blame it all on her. So I actually don't think that Republicans changed their mind based on her speech. I have more respect for their intelligence than that. What I have no respect for and hate with a fiery passion is the earnest desire to take every opportunity to take a partisan shot instead of providing an actual reason why you voted the way you did.
I still haven't had a chance to read through all the details of the bailout but one of the things that has been bothering me is the question of "how did we get to this point this quickly?" How did we go from "yeah, times are tough but we'll pull through it" to "OH MY GOD we need $700 billion immediately or everything's going to collapse!"? That would be like me sitting down at a blackjack table and Christy coming by every hour to check up on me. The first 5 times she asks how I'm doing I say "well, I'm down a little but I'm doing ok" and then she comes back the 6th time and I say "I need $798,000 or they're going to break my legs." Does this mean that everybody's balance sheets have just been lying this whole time, or was everyone (including the auditors) really just this clueless till 2 weeks ago about how bad things were?
On a somewhat related note, I just started reading A Random Walk Down Wall Street which is a fairly famous investing guide that argues in favor of investing in large index funds instead of speculating in individual stocks or managed mutual funds. It was first published in 1973 and has been updated and revised 9 times since (most recently in 2007) and it's amazing how relevant it still is. It's also amazing how in over 80 years Wall Street still has never managed to learn from its mistakes and continually gets caught up in manias and overvaluation where everytime they are convinced that there is no bubble and growth will continue indefinitely. I found this passage, found on page 1, particularly relevant: "many of the pros lost their shirts in the 90s using derivative strategies they failed to understand." That was only 8-15 years ago; there's probably a lot of the same people still at these big investment firms. How did they not see this coming?
With every year I find the Who's Won't Get Fooled Again to be more and more wise. . .
Of course, as usual the truth of the matter (as I see it anyway) is somewhat more complicated. The bill wasn't going to pass anyway. Nancy Pelosi didn't have the votes and she knew it. She figured there was no chance she was going to sway any more Republicans at the last minute so instead she tried to appeal to Democrats to fall in line by stoking up anti-Republican and anti-Bush sentiment. It didn't work, so then it left a convenient opening for Republicans to blame it all on her. So I actually don't think that Republicans changed their mind based on her speech. I have more respect for their intelligence than that. What I have no respect for and hate with a fiery passion is the earnest desire to take every opportunity to take a partisan shot instead of providing an actual reason why you voted the way you did.
I still haven't had a chance to read through all the details of the bailout but one of the things that has been bothering me is the question of "how did we get to this point this quickly?" How did we go from "yeah, times are tough but we'll pull through it" to "OH MY GOD we need $700 billion immediately or everything's going to collapse!"? That would be like me sitting down at a blackjack table and Christy coming by every hour to check up on me. The first 5 times she asks how I'm doing I say "well, I'm down a little but I'm doing ok" and then she comes back the 6th time and I say "I need $798,000 or they're going to break my legs." Does this mean that everybody's balance sheets have just been lying this whole time, or was everyone (including the auditors) really just this clueless till 2 weeks ago about how bad things were?
On a somewhat related note, I just started reading A Random Walk Down Wall Street which is a fairly famous investing guide that argues in favor of investing in large index funds instead of speculating in individual stocks or managed mutual funds. It was first published in 1973 and has been updated and revised 9 times since (most recently in 2007) and it's amazing how relevant it still is. It's also amazing how in over 80 years Wall Street still has never managed to learn from its mistakes and continually gets caught up in manias and overvaluation where everytime they are convinced that there is no bubble and growth will continue indefinitely. I found this passage, found on page 1, particularly relevant: "many of the pros lost their shirts in the 90s using derivative strategies they failed to understand." That was only 8-15 years ago; there's probably a lot of the same people still at these big investment firms. How did they not see this coming?
With every year I find the Who's Won't Get Fooled Again to be more and more wise. . .
Wednesday, September 24, 2008
I Didn't Mean For It To Be THAT Interesting
When I titled my last blog "an interesting week" I was referring to my personal experiences, but you could certainly say it was an apt, if understated, description of what happened on Wall Street last week.
I said a few months ago that I thought we'd bottom out around late September/early October. This is not quite what I meant. I did at least put in the caveat that "another financial or international crisis between now and then and all bets are off." I'm pretty sure this qualifies.
I have been meaning to blog about my thoughts on it since late last week, but I keep finding that I don't quite know enough to put together a coherent overall opinion together. And it's one of those where everytime I find out a new piece of information it just leads me to 2 new questions.
One issue I can speak to a little bit is the specific bailout of AIG. A lot of people have wondered why the government seems to be picking and choosing who it is going to let fail. Why was Lehman brothers allowed to go bust but not AIG? Well, to put things simply, you flat out cannot allow an insurance company to just "fail". I got some up close and personal experience in this while working for Kemper Insurance until they went bankrupt in 2002. When people invest money in a particular company or investment bank, it is with the understanding that the reason you are going to expect higher returns than you can get from a CD or T-Bill is that there is some element of risk involved. So, in a sense, by getting into the market you've signed up for that (even if you didn't know that you did when you got in). Insurance is exactly the opposite. You are not ever expecting to profit from an insurance deal. Instead, you are paying someone so that you can project your future more accurately and not have to contemplate all the "what ifs" of potential catastrophes that could befall you. If you just let an insurance company fail you remove that safety net and now you have thousands of companies (many of whom paid tens of millions in premiums) left completely uncovered. So not only would they need to immediately dump additional untold amounts of cash into new insurance during a time when they can least afford to, but in the interim they are left completely exposed and subject to unlimited liability. It's not hard to see how this could lead to a domino effect of potentially hundreds of companies (from the biggest to the smallest) becoming insolvent in short order. That is why when an insurance company goes bankrupt what you usually see is the state or federal regulators come in and "wind up" the business (meaning they don't write any new policies but honor all the existing ones by paying claims using whatever is left in the coffers, then selling assets, and then finally having the taxpayers foot the bill). Now, that didn't exactly happen with AIG, largely because it is unprecedented for an insurance company this large to go under. So what happened instead was a loan at a high interest rate, which is backed by ~80% ownership of the company. In theory, this means that AIG is not finished, IF they can pay back the loan. Former AIG CEO Hank Greenberg doesn't think it's going to happen though. He believes that the only feasible way AIG is going to be able to make their loan payments is to begin selling off their assets. If this continues, eventually you reach a point where you have sold off too many of the vital parts of the company and you will no longer be able to continue profitably even if you manage to pay off the loan. So he believes the government is in effect basically making AIG wind themselves down instead of having the government do it. Personally, I think that since the only real alternative is that the regulators would already be in shutting it down he should feel lucky they got the deal they did. If AIG can prove to potential investors that its troubles are now behind them, they should be able to attract new loans that will allow them to trade the high government loans for more favorable terms and that should allow them to continue. What is perhaps most extraordinary about the AIG situation is that even though its financial products division accounted for only a fraction of its overall revenues, it was able to write enough of these complicated derivatives to destroy the firm. That is some extremely poor risk management. Nevertheless, the remainder of the company has been well-run and profitable and thus I still give them a 50-50 shot of pulling out of this.
As for where the other $600 billion plus are going, I really don't have any specific thoughts yet. So instead I'll just post a couple of general thoughts and questions that have occurred to me:
I said a few months ago that I thought we'd bottom out around late September/early October. This is not quite what I meant. I did at least put in the caveat that "another financial or international crisis between now and then and all bets are off." I'm pretty sure this qualifies.
I have been meaning to blog about my thoughts on it since late last week, but I keep finding that I don't quite know enough to put together a coherent overall opinion together. And it's one of those where everytime I find out a new piece of information it just leads me to 2 new questions.
One issue I can speak to a little bit is the specific bailout of AIG. A lot of people have wondered why the government seems to be picking and choosing who it is going to let fail. Why was Lehman brothers allowed to go bust but not AIG? Well, to put things simply, you flat out cannot allow an insurance company to just "fail". I got some up close and personal experience in this while working for Kemper Insurance until they went bankrupt in 2002. When people invest money in a particular company or investment bank, it is with the understanding that the reason you are going to expect higher returns than you can get from a CD or T-Bill is that there is some element of risk involved. So, in a sense, by getting into the market you've signed up for that (even if you didn't know that you did when you got in). Insurance is exactly the opposite. You are not ever expecting to profit from an insurance deal. Instead, you are paying someone so that you can project your future more accurately and not have to contemplate all the "what ifs" of potential catastrophes that could befall you. If you just let an insurance company fail you remove that safety net and now you have thousands of companies (many of whom paid tens of millions in premiums) left completely uncovered. So not only would they need to immediately dump additional untold amounts of cash into new insurance during a time when they can least afford to, but in the interim they are left completely exposed and subject to unlimited liability. It's not hard to see how this could lead to a domino effect of potentially hundreds of companies (from the biggest to the smallest) becoming insolvent in short order. That is why when an insurance company goes bankrupt what you usually see is the state or federal regulators come in and "wind up" the business (meaning they don't write any new policies but honor all the existing ones by paying claims using whatever is left in the coffers, then selling assets, and then finally having the taxpayers foot the bill). Now, that didn't exactly happen with AIG, largely because it is unprecedented for an insurance company this large to go under. So what happened instead was a loan at a high interest rate, which is backed by ~80% ownership of the company. In theory, this means that AIG is not finished, IF they can pay back the loan. Former AIG CEO Hank Greenberg doesn't think it's going to happen though. He believes that the only feasible way AIG is going to be able to make their loan payments is to begin selling off their assets. If this continues, eventually you reach a point where you have sold off too many of the vital parts of the company and you will no longer be able to continue profitably even if you manage to pay off the loan. So he believes the government is in effect basically making AIG wind themselves down instead of having the government do it. Personally, I think that since the only real alternative is that the regulators would already be in shutting it down he should feel lucky they got the deal they did. If AIG can prove to potential investors that its troubles are now behind them, they should be able to attract new loans that will allow them to trade the high government loans for more favorable terms and that should allow them to continue. What is perhaps most extraordinary about the AIG situation is that even though its financial products division accounted for only a fraction of its overall revenues, it was able to write enough of these complicated derivatives to destroy the firm. That is some extremely poor risk management. Nevertheless, the remainder of the company has been well-run and profitable and thus I still give them a 50-50 shot of pulling out of this.
As for where the other $600 billion plus are going, I really don't have any specific thoughts yet. So instead I'll just post a couple of general thoughts and questions that have occurred to me:
- I think that by and large, Treasure Secretary Paulson has done a good job in explaining why this type of drastic action is required while still not panicking people. However, he's a bit naive in his request for the Congree to pass this as quickly as possible and to have absolutely no committee oversight to answer to. In an election year where just about nobody trusts the current administration anymore, going to the "trust me" well one more time seems a tad . . . optimistic. I understand that time is of the essence, but we have 3 branches of government for a reason. If we didn't want checks and balances, we'd just have a monarchy. Writing a $700 billion check seems exactly the right time to kick the tires and take a test drive instead of simply buying straight off of craigslist.
- When you start talking in terms of the hundreds of billions of dollars, what are the rules for rounding? If you decide that a particular company needs "~$50 million", do you just round up to $100 million?
- It's funny how 6 months ago everyone was watching the presidential race and no one was paying attention to Bush, and now no one is paying attention to the candidates. People are basically saying "I'm not nearly as concerned with what you would do if you were in there as I am with what the guy that's currently in there is doing." That's appropriate, I think.
- McCain can't have it both ways. You can't paint yourself as someone who is "anti government regulation" and then say that the reason this crisis happened is because we need better regulation. And I don't care how you paint it, saying "the fundamentals of our economy are strong" was a political gaffe no matter how you try to change the meaning of the word "fundamentals".
- Anyone who is in favor of this bailout must give up this whole "the Democrats are socialists" line forever. If you don't like a particular social program, say "I don't want the government involved in that" and not "the government should not be involved in that because it shouldn't be involved in anything because that's for socialists." If, however, you are against the bailout then by all means you can continue the "socialist" slander, but I'm going to call you an "anarchist" from now on..
Leaving for Vegas in a few hours, so wish me luck. I don't expect to win; I am just hoping to navigate around the isolated pockets of massive cash hemhorraging that I usually run into on at least 2-3 occasions per trip. With luck, I will also finish Hot, Flat, and Crowded, which is the phenomenal new book by Thomas Friedman (author of The World is Flat) on the plane ride over. I will have an extensive write-up on that (hopefully) next week sometime, but I'd highly advise anyone looking for a good non-fiction book to pick it up immediately.
And yes, it will involve me being preachy on climate change again. You have been warned.
Wednesday, September 17, 2008
An Interesting Week
For starters, I had a more personal interest in Hurricane Ike than most of the people up here considering I've got parents, an uncle, a brother, nephews and nieces in Houston. While it will still be quite a while before any true "normalcy" returns to the area fortunately everyone is safe with little to no damage to their homes. And also fortunately, there were two silver linings that came out of all this. There was a huge worry that the storm would devastate the pizza biz. Overall, the place has been doing decent but "decent" in the sense of a new business in its first year; meaning that they have been making enough to clear expenses and haven't had to dump any more money into it but they have yet to really turn a profit. The worry was that a potential couple weeks of being shut down could really turn the screws on them. They even stayed open late on Friday night before the storm hit to make some extra cash since everyone else closed early. Well, they finally got a stroke of luck. For some unexplainable reason they got power back on at the restaurant on Saturday night (even though everyone's house and most of the 3 million people in the Houston area still don't have it). So once again they are pretty much the business open and people have been flocking. As a consequence, they have pretty much sold out all of their food every day since then. This is good news for them not only because it means they will be able to make it through the storm relatively unscathed, but now there are a whole lot of people that have tried them that probably never would have and hopefully that will lead to more repeat business. That was one silver lining . . .
The second one has to do with the Cubs! When the hurricane hit, it forced the postponement of the Cubs-Astros series that was scheduled for that weekend in Houston. Imagine my surprise when I got on the net Saturday night to find out that they would be playing one of the make-up games on Sunday night in Milwaukee. Even though we already had people coming over for the Bears game on Sunday, I couldn't resist going. After all, the Cubs game that was supposed to be my last of the year was the one in Cincy that they blew in the 9th, and who wants to go out like that? Well, I'm certainly going out on a much, much better note as I got to witness Carlos Zambrano throw a no-hitter (the 257th ever thrown and the first in 36 years for the Cubs). The word for the entire night was surreal. Surreal to be in someone else's ballpark with nothing but Cubs fans. Surreal to hear the crowd cheering when it was announced that the normal "home" team (the Brewers) had lost. Surreal to see Cubs fans who, starting with about the 6th inning, just wanted to see the Cubs batting half of each inning get over as quickly as possible. And surreal to see such a dominating pitching performance that featured a grand total of 2 hard hit balls the entire game. I said a few years ago after witnessing Illinois come back from 13 points down to Arizona in the last 2 minutes to win that you watch sports your entire life in the hope that you get maybe 10 "moments" that are truly special and take your breath away. Where it seems perfectly natural to see people around you crying and strangers hugging each other and "perfect" is the only way to describe it. That was one such moment, and this was another. Not to be greedy, but I'm hoping to get another one around the end of October this year.
On another note, last Tuesday I finally finished War and Peace and a part of me wants to now list that accomplishment on my resume. My reaction? Well, it's one of those where I could easily spend about 3 hours talking to someone about it but I am almost at a loss to try to give a 2-minute version. Nevertheless, here are some of of the most frequent questions I've been asked about it:
Q: How long was it?
A: 1358 glorious pages
Q: How long did it take you to finish?
A: A little over 2 months
Q: Why would anyone read a book that long? What the hell is wrong with you?
A: I don't know. I like to think of it as reading 13 100-page books, then it doesn't seem so bad. Or you can view it like watching a season of Lost or Heroes (or whatever tv show you like). It would be pretty intimidating if someone said "here watch this, it's 16 hours long" but when it's spread out over 9 months it doesn't seem that long at all.
Q: So, uh, what's it about?
A: Well, it's about war and peace [rimshot]. Plot wise, it's about the Napoleonic wars in Europe from 1805 - 1813 as viewed (mainly) from the perspective of the Russian aristocracy. I haven't fact-checked him, but I believe most of the historical references to battles and such to be historically accurate. I believe this mainly due to the footnotes in the back which corroborate his accounts and just the fact that it was published in 1869 and Tolstoy was a former general in the Russian army. That would be like today someone publishing a historical fiction about WWII. You certainly could take liberties with the characters but it's doubtful you'd get critical acclaim if you completely changed the facts of the war. But, again, I haven't confirmed this (nor do I plan to).
Q: So what else is it about?
A: On the philosophical side of things, it's an exploration of what it means to have free will. Tolstoy says that the closer we are (time wise) to an event which has happened, the more we attribute it to the decisions and actions of a specific person or people. But the farther away we get, the more we are able to get the "big picture" and the more it looks like those actions were inevitable and can't be specifically attributed. For instance, look at the American Revolution. I'm sure at the time the cause of the war was attributed to the "shot heard round the world" at Lexington and Concord. But through the prism of history, we are now able to see that event as a culmination of tensions which had been rising for years and which surely would have boiled over somewhere else if they didn't happen there. I don't think anyone would argue that if that showdown hadn't occurred, there never would have been a war.
So, he takes this as his base and argues that we can never determine the true "cause" of anything, because every cause itself has another proximate cause and another and another until we are irretrievably far away from the event we are attempting to explain. This leads him to conclude, basically, that things "happen because they happen" (which is actually quite similar to the Buddhist expression "everything is as it should be.") This passage explains it pretty succinctly:
"It may seem to be a matter of indifference whether we understand the meaning of historical events this way or that; yet there is the same difference between a man who says that the people of the West moved on the East because Napoleon wished it, and a man who says that this happened because it had to happen, as there is between those who declared that the earth was stationary and that the planets moved round it, and those who admitted that they did not know what upheld the earth, but knew there were laws directing its movement and that of other planets. There is, and can be, no cause of an historical event except the one cause of all causes. But there are laws directing events, and some of these laws are known to us while we are conscious of others we cannot comprehend. The discovery of these laws is only possible when we have quite abandoned the attempt to find the cause in the will of some one man, just as the discovery of the laws of the motion of the planets was possible only when men abandoned the conception of the fixity of the earth."
So, basically it is his position that absolutely everything is subject to and governed by physical laws; nothing is random. This is a concept that became more popular about 75 years later with Einstein's famous statement "God does not play dice with the universe." And since everything is subject to law and nothing is random, there is no room for free will. I may think that I am making a conscious decision to write these words, and you may think that you are making a conscious decision to read them, but in reality the "decision" is a product of all the neurons in your brain acting in a rigid, predictable way to determine what action you will take. You are not in control; you're just along for the ride. That's his theory anyway. Kind of a bummer huh? As a final note, I'd like to add that I actually do largely agree with him. Neverthless, I will continue to blame Bush for the Iraq War.
Q: So, was it worth reading?
A: Absolutely! For a book that's 140 years old, it is surprisingly easy to read (no doubt a good translation helps immensely). It has some beautifully fleshed out, 3 dimensional characters that you come to care about. It will also force you to think and puts old historical (and even more recent) events in a new context, even if you don't completely agree with his philosophical take. Ultimately though, probably the best thing I can say about it was that when I got to the end I wanted it to keep going. Of course, the bottom line is that you're either someone who is horrified at the thought of a 1000+ page book (in which case you will never, ever pick this thing up) or you are intrigued. If you are in the latter category, then I absolutely would recommend picking this up and can guarantee that you won't be sorry.
Q: So is it the best novel ever written?
A: I really don't know how to answer that question, mainly because my reading of "classic" literature is extremely limited. I can say this, though. I've never read any novel that I would definitively say is better, although I'd probably put Atlas Shrugged right up there with it.
That's all I'm gonna say for now, but rest assured that I do like talking about it so if you want to know anything more about it feel free to ask some questions in the comment section or the next time we get together for a beer!
The second one has to do with the Cubs! When the hurricane hit, it forced the postponement of the Cubs-Astros series that was scheduled for that weekend in Houston. Imagine my surprise when I got on the net Saturday night to find out that they would be playing one of the make-up games on Sunday night in Milwaukee. Even though we already had people coming over for the Bears game on Sunday, I couldn't resist going. After all, the Cubs game that was supposed to be my last of the year was the one in Cincy that they blew in the 9th, and who wants to go out like that? Well, I'm certainly going out on a much, much better note as I got to witness Carlos Zambrano throw a no-hitter (the 257th ever thrown and the first in 36 years for the Cubs). The word for the entire night was surreal. Surreal to be in someone else's ballpark with nothing but Cubs fans. Surreal to hear the crowd cheering when it was announced that the normal "home" team (the Brewers) had lost. Surreal to see Cubs fans who, starting with about the 6th inning, just wanted to see the Cubs batting half of each inning get over as quickly as possible. And surreal to see such a dominating pitching performance that featured a grand total of 2 hard hit balls the entire game. I said a few years ago after witnessing Illinois come back from 13 points down to Arizona in the last 2 minutes to win that you watch sports your entire life in the hope that you get maybe 10 "moments" that are truly special and take your breath away. Where it seems perfectly natural to see people around you crying and strangers hugging each other and "perfect" is the only way to describe it. That was one such moment, and this was another. Not to be greedy, but I'm hoping to get another one around the end of October this year.
On another note, last Tuesday I finally finished War and Peace and a part of me wants to now list that accomplishment on my resume. My reaction? Well, it's one of those where I could easily spend about 3 hours talking to someone about it but I am almost at a loss to try to give a 2-minute version. Nevertheless, here are some of of the most frequent questions I've been asked about it:
Q: How long was it?
A: 1358 glorious pages
Q: How long did it take you to finish?
A: A little over 2 months
Q: Why would anyone read a book that long? What the hell is wrong with you?
A: I don't know. I like to think of it as reading 13 100-page books, then it doesn't seem so bad. Or you can view it like watching a season of Lost or Heroes (or whatever tv show you like). It would be pretty intimidating if someone said "here watch this, it's 16 hours long" but when it's spread out over 9 months it doesn't seem that long at all.
Q: So, uh, what's it about?
A: Well, it's about war and peace [rimshot]
Q: So what else is it about?
A: On the philosophical side of things, it's an exploration of what it means to have free will. Tolstoy says that the closer we are (time wise) to an event which has happened, the more we attribute it to the decisions and actions of a specific person or people. But the farther away we get, the more we are able to get the "big picture" and the more it looks like those actions were inevitable and can't be specifically attributed. For instance, look at the American Revolution. I'm sure at the time the cause of the war was attributed to the "shot heard round the world" at Lexington and Concord. But through the prism of history, we are now able to see that event as a culmination of tensions which had been rising for years and which surely would have boiled over somewhere else if they didn't happen there. I don't think anyone would argue that if that showdown hadn't occurred, there never would have been a war.
So, he takes this as his base and argues that we can never determine the true "cause" of anything, because every cause itself has another proximate cause and another and another until we are irretrievably far away from the event we are attempting to explain. This leads him to conclude, basically, that things "happen because they happen" (which is actually quite similar to the Buddhist expression "everything is as it should be.") This passage explains it pretty succinctly:
"It may seem to be a matter of indifference whether we understand the meaning of historical events this way or that; yet there is the same difference between a man who says that the people of the West moved on the East because Napoleon wished it, and a man who says that this happened because it had to happen, as there is between those who declared that the earth was stationary and that the planets moved round it, and those who admitted that they did not know what upheld the earth, but knew there were laws directing its movement and that of other planets. There is, and can be, no cause of an historical event except the one cause of all causes. But there are laws directing events, and some of these laws are known to us while we are conscious of others we cannot comprehend. The discovery of these laws is only possible when we have quite abandoned the attempt to find the cause in the will of some one man, just as the discovery of the laws of the motion of the planets was possible only when men abandoned the conception of the fixity of the earth."
So, basically it is his position that absolutely everything is subject to and governed by physical laws; nothing is random. This is a concept that became more popular about 75 years later with Einstein's famous statement "God does not play dice with the universe." And since everything is subject to law and nothing is random, there is no room for free will. I may think that I am making a conscious decision to write these words, and you may think that you are making a conscious decision to read them, but in reality the "decision" is a product of all the neurons in your brain acting in a rigid, predictable way to determine what action you will take. You are not in control; you're just along for the ride. That's his theory anyway. Kind of a bummer huh? As a final note, I'd like to add that I actually do largely agree with him. Neverthless, I will continue to blame Bush for the Iraq War.
Q: So, was it worth reading?
A: Absolutely! For a book that's 140 years old, it is surprisingly easy to read (no doubt a good translation helps immensely). It has some beautifully fleshed out, 3 dimensional characters that you come to care about. It will also force you to think and puts old historical (and even more recent) events in a new context, even if you don't completely agree with his philosophical take. Ultimately though, probably the best thing I can say about it was that when I got to the end I wanted it to keep going. Of course, the bottom line is that you're either someone who is horrified at the thought of a 1000+ page book (in which case you will never, ever pick this thing up) or you are intrigued. If you are in the latter category, then I absolutely would recommend picking this up and can guarantee that you won't be sorry.
Q: So is it the best novel ever written?
A: I really don't know how to answer that question, mainly because my reading of "classic" literature is extremely limited. I can say this, though. I've never read any novel that I would definitively say is better, although I'd probably put Atlas Shrugged right up there with it.
That's all I'm gonna say for now, but rest assured that I do like talking about it so if you want to know anything more about it feel free to ask some questions in the comment section or the next time we get together for a beer!
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