Wednesday, December 23, 2009

health care and education

Will the government's increased role in health care cause it to more closely resemble the education system?  The U.S. public school system used to be world class.  It clearly no longer is as a whole.  But, some private schools and higher education institutions continue to be very good (for a price).  And teaching is generally a second-choice career.  Will medicine follow?  Where, because we start with today's quality, it will be hard to perceive its decline for many years?  And we will find ourselves in a two-tier system where many of the participants receive the lower-tier quality?  And, perhaps far into the future, agitation for vouchers or similar market based incentives (needing the years in the desert to internalize that the highest quality medicine cannot be available for all for free)?

Thursday, December 17, 2009

Intel antitrust

I don't know the relative merits of the case but I would note that Intel doesn't seem to have sat on its heels despite its dominant position.  I would say some other companies with antitrust issues have not made as many significant improvements in their products as Intel has in microprocessor speed.  But who knows, maybe Moore's Law could have been surpassed with a freer market.

Thursday, November 19, 2009


He seems like a nice enough guy but he is being disingenuous when he says the government lacked the powers it needed to handle the collapse of a company like AIG and that, "Coming into AIG we had, basically, duct tape and string."  Setting aside the method (meaning tools), it was the PRICE that was wrong.  The tools at hand (using AIG as a conduit to cover banks exposed to CDS losses) were used poorly.  The Fed could have poured less cash into AIG rather than paying out on CDSs at 100 cents on the dollar.  Also, the subtext seems to be that the CDS counterparties used economic collapse as a playing card ("we will bring the financial system down by demanding that AIG make good on its CDS obligations") and that the Fed caved in.  Crazy both in the recklessness of the counterparties and if the Fed bought the argument.  Put simply, the Fed should simply have said: "we can pay you some amount on the CDSs or you can take your chances in bankruptcy court with AIG."  As bankruptcy court for AIG would have meant bankruptcy for the counterparties (as the financial system collapsed), they would have accepted the "some amount".  Separately, why is Goldman's hedged position with AIG relevant?  Either they were hedged (in which case there was no need to bail GS out because there was no system risk from failure to satisfy the CDS obligations to GS) or they weren't (in which case they weren't in a position to demand 100 cents on the dollar).

The Fed should ask for its money back.

Friday, November 6, 2009


There's a lot to be said for wetlands.  Filtering waterCapturing greenhouse gassesRefuges for wildlife.  Easing the effect of floods.  I'm considering making wetlands protection a pet cause.  Second to education reform, of course.

Thursday, October 29, 2009

AIG CDS Collateral

We are starting to get some clearer coverage on the collateral calls that sunk AIG and, more importantly, made its CDS counterparties whole.  Unfortunately, that coverage is buried inches below the lead.  From today's Wall Street Journal:

"That [Maiden Lane] was a boon to the banks, which were effectively made whole. The banks pocketed $35 billion in collateral AIG already had paid them, and collected another $26.8 billion in cash for selling the investments at roughly their lowered values. Goldman Sachs got to keep billions in collateral and got paid $5.6 billion for the investments.

Whether that was the best strategy for AIG remains a subject of debate.

At the time, the move eliminated the risk that AIG would have to post still more collateral on the canceled swaps if the investments continued to decline. Last November, AIG's then-chief executive, Edward Liddy, told investors that the company was hemorrhaging cash because it had to post collateral on the swaps and problems with other deals. "We need to stop that and that's what this is designed to do," Mr. Liddy said.
The advantage of that approach was illustrated in the first quarter. Markets continued to fall but AIG didn't have to keep handing over more cash on closed-out deals. But AIG also surrendered any chance of getting some of the collateral back on the canceled swaps.

AIG's former longtime CEO, Maurice R. "Hank" Greenberg, argued publicly at the time that the government should have guaranteed the swap contracts, eliminating the need for AIG to post more collateral. Others have contended that AIG's trading partners should have been forced to accept less money for tearing up the contracts."

Tuesday, October 27, 2009

fan with a thermostat

I've been looking but can't find a simple small fan with a thermostat to cool down my media cabinet.  This should be a $20 product but it doesn't seem to exist.  I've found over-priced components to cobble one together but that would be nearly $100.  My cable box keeps shutting off because it overheats.

Monday, October 26, 2009

Verizon and iPhone

I'd bet that this Businessweek article (claiming that Verizon is still serious about selling the iPhone) is 100% wrong.  My guess is that there are a lot of potential iPhone customers who are unwilling to switch to AT&T (and would prefer Verizon's service).  And that Verizon is dangling the idea of the iPhone on Verizon to keep them in limbo and waiting until the iPhone's allure wears off (or technology shifts such that Verizon can sell the iPhone because we are all on 4G).  A statement to the press is nearly free (and a lot cheaper than advertising).

I'm pretty sure I've heard this story

Gold, stocks, etc. have been rising recently.  Isn't most of this simply a function of a declining dollar?  In other words, inflation?  An asset bubble?  Much of the government's stimulus efforts seem to have been translated into increased holdings of financial assets rather than increased spending.  Which isn't great for TIPS (CPI flat, asset prices way up).

Oh well.

reserve currency

To a large extent, isn't a reserve currency simply a function of minimizing transaction costs?  Especially transaction costs relating to acquisition of supply for businesses.  The dollar is useful as the basis of trade because a fair portion of global expenditures are in dollars.  If more is produced in China, at a certain point, people should be comfortable holding Chinese Yuan because they know they will be able to spend it.  I wonder how much of the status of the U.S. is based on its years of being the core manufacturer and agricultural producer of the world.


I don't get it.  What is the basis for an agreement where an investor agrees to limit future share purchases in exchange for representation on the board of directors?  Is it a bad thing for someone to acquire a large block?  Even if it is, isn't there a conflict of interest in the group making the deal (the current board, I assume).  In fact, can a board even strike a binding agreement on who will be on the board of directors?  Perhaps votes are such a fiction that nomination (perhaps this can be agreed) are sufficient?  I'm really very confused by the conflicts and the message.

Wednesday, October 21, 2009

Galleon and relative value

The New York Times writes: "One bad trade, in the shares of the chip maker Advanced Micro Devices, cost his hedge fund, the Galleon Group, $30 million. That loss more than wiped out the profits that prosecutors claim Mr. Rajaratnam and his accomplices reaped with their scheme."  I wonder if this is true.  The loss was mostly due to a decline in shares overall (in the late 2008 meltdown).  If AMD lost less than the market decline and if the fund had puts or similar to hedge out broader market moves, then couldn't they still have made money off the relative value difference?  I don't know whether those trades can work but I thought there were ways to be macro market neutral and still take advantage of price moves.

Thursday, October 15, 2009

Wall Street problems

This is generally right, especially adding in my pet theory of sales guys rising a little further than they ought to.

Friday, October 9, 2009

Not quite sure what had been done by March

From this, it looks like President Obama was shortlisted by March - perhaps less than two months into the presidency.  Wow.  The committee's chair wasn't kidding when he said: "We would hope this will enhance what he is trying to do."  Notwithstanding claims that this was for actions over the past year, I think it clear that this is meant to help direct the foreign policy of the United States.  Wow.

Tuesday, October 6, 2009

New York Times has difficulty with private equity

I don't get it.  The article says that private equity portfolios are being sold at between 29.3 cents on the dollar and 51.58 cents on the dollar, measured at net asset value.  I believe some discount so I would accept these numbers and trust the article. 

Except for the baffling sentence two paragraphs later:  "But what happens if Stanford is able to sell its stake at only 50 cents on the dollar, for example, when K.K.R. is listing it at 80 cents? If other endowments hold similar stakes, what happens to their value?"

Huh?  Isn't KKR's listed stake the net asset value?  Perhaps the article means 29.3 cents on the invested capital?  But who in their right mind is applying a discount off of entry price rather than their judgment of current value?  What is this "dollar" referring to?  In the KKR context, I think it is of invested capital.  In Stanford's case, I think off of KKR's reported value (which is lower than entry value).  But, of course, I have no idea because the article is sloppy.

Notwithstanding private equity's larger mindshare and increased column inches, the press still has a long way to go before it understands even the basics, I think.

Monday, October 5, 2009

1959 Bel Air

Seems a little sad that they totaled the Bel Air for this.

PE in the crosshairs

Clearly, the NYT has decided that driving while texting and private equity are ripe targets.

Although I found the reporting a little one-sided on the private equity story, they did manage to find one of the more awkward series of deals (mattresses).  Of course, the story does not present the basic underlying principle of whom the funds work for and why (their investors and to maximize their returns, respectively) to balance the story and its presentation of the workers and bondholders' situations.  It's not clear that the results would have been different in the hands of any other owners (i.e., regardless of the identity of the owner (except, perhaps for an ESOP or the government), the same thing could very well have happened).

I think the more interesting story (especially if the NYT really wanted to undercut the basic principle part I note above) is that there were a series of fund-to-fund sales with overlapping investor bases.  It would make the story far more forceful (if complicated) and allow the finger to be pointed solely at the sponsors (if unfairly).

Monday, September 28, 2009

City = Green

I'm pretty sure this article says basically the same thing as the New York Times Magazine piece a few years ago (which I can't find at all).  But that's fine with me as the message is more relevant than ever.

Wednesday, September 23, 2009

high quality, high paying jobs

I've been thinking that the goal of "high quality, high paying jobs" is a bit of a catch-22. Of course, all things being equal, we prefer them. But they also assume a static world and, if endowment effects and similar are significant, there are real downsides. I'm thinking that those are the same jobs which involve significant personal investment and have high specificity of skills (i.e., they are high paying because the employees are not easily replaced). While the industry is healthy, this is great. If the industry shrinks (whether because of something specific to the industry or macro), the displaced worker almost certainly cannot replicate his or her prior income in the near term. Which is painful. Especially if he or she took on liabilities on the assumption that the income would be there. We can't stop people seeking these jobs (and I don't think we want to) but it does suggest that economies with lots of lower skilled jobs will have (assuming away regulations that limit labor flexibility) a leg up on those that depend more on high skilled jobs. Of course, this is probably part of the natural order of things.


Whether one thinks he is serious or joking, Col. Muammar el-Qaddafi's proposal to create a single Israeli/Palestinian state is actually the kind of out-of-the-box thinking that can square a circle.

Among the most intractable problems in that conflict have been the crazy-quilt arrangement of settlements and control of holy sites. By having a single country, if there were actually general support (and, interestingly, Israel and Palestine are two of the rare middle-east examples of a meaningful popular vote that can actually gauge popular support), everyone could declare victory. I know this won't happen but it opened my eyes to a path I hadn't really considered.

I am generally against combining separate peoples into a single political group but, in thinking about it, that may be more because historic examples have been forced (see: nearly all of sub-saharan africa) and lack popular support than because of some inherent problem. Legitimacy counts for a lot (but, here, is unlikely to overcome longstanding enmity).

Tuesday, September 15, 2009

campaign finance

Hadn't realized that there were meaningful challenges to campaign finance rules coming up. Thank goodness. I still don't understand: (i) why is a politician permitted to sell an advertisement (i.e., a book published in connection with a campaign) but not to buy an advertisement; (ii) how can it possibly be legal to penalize a candidate for private efforts on their behalf; and (iii) how can we possibly distinguish between spending money and giving time when it comes to campaign finance limits?

Monday, August 31, 2009

Graphs confuse?

I wonder if stock charting inherently misleads (or at least confuses) the reader because we reflexively treat lines as representing physical motion (and thus see momentum (and its corollary, inertia) where there is none). It might be more useful to identify useful graphical representations of similar motion (using physical metaphors is probably a bad place to start but helps to highlight the problem) to avoid seeing patterns (another reflexive trait) where there are none.

Tuesday, August 18, 2009

awesome awesome

Just an awesome awesome article about health care. Unfortunately, unlikely to have any results but just so correct (and, I can't resist saying, consistent with much of what I've believed and said over the past years).

Thursday, July 23, 2009

Summers wrong?

I don't want to doubt Larry Summers but this statement seems wrong: “The rebuilt American economy must be more export-oriented and less consumption-oriented.” I would think that it is more important to have productive (whether services or manufacturing, but, in either case, with true efficiency improvements or creation of lasting value) industries and fewer rent-seeking or "skimming" (brokerage fees and similar) activities. Maybe export-oriented is a byproduct of moving to more productive industries (can't find foreign buyers for rent-seeking activities, for example), but why not state the true goal rather than the symptom or upshot. Separately, to get to this more productive economy, I think we will need to emphasize education and training in a wholly new and more serious way than we do now.

The great (but one time) unlocking

How much of US economic growth over the past few decades has been from one-time unlocking of previously frozen assets? I'm thinking home equity loans, unsecured borrowing, etc. And how much of Wall Street's income has been from finding this untrapped value and monetizing it? If we are largely unlocked (and we seem to be - we've borrowed against every asset I can think of, including future personal income all the way from the federal level to the personal by federal debt through credit cards), then growth from spending and growth from financial services income would seem to be over. Yikes.

Monday, July 20, 2009

street grids

Infrastructure seems to have some role to play in the success of cities (a less macro version of guns, germs and steel), and so I wonder if a grid pattern close to an ideal for city streets? After returning to New York and seeing how traffic generally moves, even when the streets are apparently full, I wonder if the combination of multiple paths moving in the same direction with smallish streets and smallish blocks is actually quite efficient where there is no pricing or limited access.

A grid would be somewhat self-balancing (as a street backs up, traffic naturally diverts to parallel streets if there are "block-the-box" rules, have some redundancy (with no absolute bottlenecks, no one point locks up the system or cuts off an area), and deliver some information (although not information rich, a quick glance at a street suggests is somewhat predictive of local and even less local traffic - in part because of the self-balancing aspects).

And this is most interesting as it isn't clear that the road designers were worried about traffic.

Thursday, July 16, 2009

Is it clear something went wrong?

The leader in the Economist this week is "What Went Wrong With Economics". The alliteration notwithstanding, is it really clear that something went wrong? I thought there were many calls for pricking the asset bubble over the prior years (including from the Economist). Also, doesn't standard economic theory predict that where incentives are not properly designed (for example, mortgage originators are seeking one-time initial fees rather than a reliable stream of income payments; bond raters are paid by the issuer rather than the purchaser; etc.) that you will have poor results?

Monday, June 29, 2009

New Haven Firefighters

"Daniel P. Westman, a Washington-area lawyer who works extensively in labor and employment law, said: “This is a ruling that every business covered by Title VII will need to take into account. Some companies may have thought this was just a public sector firefighter case that would not apply outside the government employment context, but that is not the case.” Mr. Westman said the decision could affect hiring, firing and discipline in the workplace, as well as promotions."

I find this baffling - doesn't the ruling confirm that an employer should not consider race (which is the simple lay interpretation of current legal obligations) when making hiring, firing and discipline (and other) decisions? I would think the ruling makes no change to current decisionmaking except those who WERE considering race when making decisions.

Wednesday, June 24, 2009

multi-tasking smartphones

I sort of get it but don't really. Separate from battery life/heat, I don't see any downside to multi-tasking on a phone but, with the limited screen real estate and what multi-tasking truly means, I don't see much upside either.

If multi-tasking is simply returning to where you were, I don't get it at all.

If multi-tasking is notification, I think notification is the important point.

I think multi-tasking is really only useful in the phone context for non-visual applications that require being always-on. For example, listening to music, beaming location information, etc. And note that beaming location information can probably be handled through a subset of notification (rather than flashing a box with the notice to the user, have the phone respond when pinged from the outside).

At the end of the day, I don't really "multi-task" on my computer either - I work on one application at a time and only keep more than one open simultaneously because I have the screen real estate and start up of each program is slow.

Thursday, June 18, 2009

fund management and alternatives

This week's Economist has an editorial regarding funds that says:

"A survey by Watson Wyatt, a consulting firm, found that the cost of running a pension scheme increased by around half between 2003 and 2008. That was because schemes allocated more of their portfolios to hedge funds and private-equity managers, which charge much higher fees. Chasing performance by paying higher fees might work for individual investors, but in aggregate it is doomed to fail. The return to the average investor is the market return minus costs; if costs rise, returns must fall."

I don't think this is quite right if hedge funds and private-equity managers are investing in under-represented parts of the market. In that case, although the statement "The return to the average investor is the market return minus costs" is true, it unfairly treats the "market" as being the entire market even where it is not.

Wednesday, June 17, 2009

"Police" ?

Why do the police uniforms in Iran say "police"? And only "police"? Weird to use the english language at all, let alone exclusively.


I'm sure it's been written before - I don't understand "tiger-proofing" a course. Not the desirability of it. That makes sense. But the method doesn't. If the concern was that his drives are generally longer (thus turning par 5s into par 4s), wouldn't it be better to shorten the holes so that more golfers could turn the 5s into 4s? That would even the playing field just as much.

Tuesday, June 9, 2009

DirectTV and iPhone

DirecTV should release a (free) app for iPhone (especially the new 3Gs, given the compass) that helps to orient and point the dish. With the tilt sensor, mapping, internet access and now compass, it's the perfect tool (and avoids the "how is the signal now?" shout-a-thon).

Wednesday, June 3, 2009

The unbelievable has become the everyday

The Air France disaster shows how what was unimaginable only a few years ago (in an area of 100s of square miles, to find wreckage in less than a day) has become possible. And so, while I believe the sincerity of statements that the black boxes may never be found, I suspect we will be surprised in short order by their recovery.

I feel terribly for the families and hope some future tragedy can be avoided by review of the event.

Wednesday, April 22, 2009

Freddie - what is going on here?

Something must be horribly wrong at Freddie.

Friday, April 17, 2009

Yay for efforts on Cuba!

This is really positive news. I've been dreaming about Cuba and the US opening up again. Not because I am so passionate about human rights and such (although I do feel strongly about the injuries created by socialism and failure to respect the concept of private property), but because the re-opening should completely change the vacation equation for people on the Eastern half of the US. Cuba is incredibly close. Cuba has farms (i.e., no more island economy type food pricing). Cuba has miles and miles of beaches (which I understand are better than almost anywhere else in the Caribbean). A high quality medical system. Cuba is a chance to do development right (of course, also a chance to do it horribly wrong - as government control won't fall away overnight, development will be very guided by government). This could cut the price of vacations in half. Or become a haven for retirees. Sorry everyone else in the Caribbean.

Monday, April 6, 2009

Swiss Central Bank is how big?

I should know this but don't: Why is the Swiss central bank so big? Is it because Swiss banks have massive deposits? And the banks have some obligation to place a portion of those deposits with their central bank?

Wednesday, March 25, 2009

Web ≠ Technology

I wonder when the web will no longer be treated as technology. For example, when printing was introduced, it was likely considered "technology" but, at some point, the medium was no longer interesting in and of itself. Right now, changes to facebook's home page are treated as a tech news item. At some point, I assume they will be covered the same way that a change in a newspaper's format is covered. Or, will it be the case that, because the internet permits interaction, the web will never be fixed and so will be fairly treated as technology for years to come?

Tuesday, March 24, 2009

How do bond funds work?

Or, more accurately, how do bond funds manage to avoid depressing their returns when investors stream in (invariably at the peak, rather than at the bottom)? When new money comes in, the funds need to purchase more bonds - but if money comes in when bonds are expensive, won't that hurt historic investors?

Tuesday, March 17, 2009


We should really stop calling the AIG payments a bailout of AIG - more honest (and perhaps actually more politically palatable) to describe it as the CDS bailout. AIG, as the largest seller of CDSs, was simply a conduit for the payments to the purchasers of CDS protection - that money did not stay with AIG or go to its executives or shareholders.

Wednesday, March 4, 2009

AIG CDS scandal

Again, when will the counterparties to AIG's CDS contracts be named? I believe they were paid out at face with the bailout money. We should know to whom this direct transfer of taxpayer money was sent.

It would have been fair for those counterparties to be stuck (they could sue, there would have been some compensation) or, to cut to the chase, they could have agreed to a negotiated amount equal to their expected litigation proceeds. And, perhaps if there truly was systemic risk, the government could have funded some of that negotiated amount as an advance to AIG.

For the government to have bailed out the counterparties (I'm guess GS for a lot of it) at FACE is wrong wrong wrong.

Friday, February 20, 2009

telecoms x1000?

I vaguely recall during the telecom/dotcom bubble that many hardware companies were reporting huge sales but most were financed by the manufacturer and so there were crushing losses when buyers evaporated (doubly so because the equipment was often outdated by that time). Today's crisis feels like a giant version of that: manufacturing centered economies financed purchases by debtor/consumer economies. And gains from those purchases built up the capital to provide more financed purchases. Until the purchasing stopped...

natural resources

when does the paradigm shift from competing for resources by spending money (which seems positive and appropriate) to military action (destructive and wrong)?

Wednesday, February 4, 2009

$1b fraud?

Who is Markopolos's mini-Madoff?

Wednesday, January 28, 2009

I don't really understand those ubiquitous ads - why would not knowing my credit score result in working as a minstrel (or singing waiter, etc.)? Not being able to buy a home, get a credit card, or finance a car, sure. But have employment trouble?

Friday, January 9, 2009

NYC/DC isolation

Watching the recent press conferences of President-Elect Obama, one imagines how much more anxiety-provoking a similar conference would be if held by John McCain. In hindsight, I wonder how much of the election was based solely on the economy much earlier than people in NYC and DC realized (given their isolation from the economies of the rest of the country). As job losses and the recession started in earnest some time ago, I suspect that the bulk of the population was more nervous about the economy than those in NYC and DC. Especially DC as a change in administration has a much bigger effect on jobs than change in the economy.