Monday, December 31, 2007

Book of the Day: The Third Wave

Alvin Toffler's classic, 'The Third Wave' presents a fascinating study of the forces that shape society today and will reshape the future. If you're wondering what the waves are, the first was agriculture, the second was industrialization and the third is the knowledge revolution. Even though it was written back in 1980, it offers a convincing argument for the shape of things to come. While Toffler's predictions aren't always spot on, the general principles are seen to be in play. Best of all, once you read this, you can read his later work, especially his latest book called 'Revolutionary Wealth'.

Footnote: The challenge if you plan to buy this book is finding a classic edition. The mass paperbacks available in B&N features much too small a print for my liking!

Gimme a Break: It's Illegal to backup your CD on your comp!

This the latest from the Recording Industry Association of America (RIAA). It's illegal to copy a music CD you purchased onto your computer or iPod, even if it's for personal use. I say, gimme a freaking break! I'm all for copyright protections, but the benchmark has always been that you weren't allowed to distribute the music. The theory was that if you spend a good bit of money buying a CD, you were within your rights to make a backup to protect your investment from scratches, but now the RIAA argues in court that that is illegal.

Here's to betting the RIAA will become irrelevant in 10 years!

Geek Tip: Extreme Makeover Desktop Edition

If you are using Windows XP and are ready for a new look, envious of your Mac-owning yuppy friends who have neat graphics and superior rendering, here are two tips for you.

One, don't be. The Mac is cool for those who want something that looks cool. But all those animations (when you start a program, you actually have the icon bounce!) and other gizmos exact a cost on performance.

Two, having said that, you can get a Vista-like feel to your desktop using the Vista Transformation Pack. Below are four plates showing the boot sequence, the login interface, and two screenshots. I personally don't care for the sidebar, and will do a post some other time reviewing different sidebar options available, but for now, here's to a cleaner UI (that's user interface, for you non-geeks)

Thursday, December 27, 2007

Pic of the Day: Goodbye Benazir

While she may not have been all she's been cut out to be now in obituaries, Benazir Bhutto represented an important part of post-Zia Pakistan. With her death, there is definitely a power void in the PPP, which is a little scary as they might have been the party to win.

This is the last picture ever taken of a living Benazir. Goodbye Benazir, we'll miss you!

Monday, December 24, 2007

Why Rudy Won't Be President

While he's no longer considered the front-runner, Rudy Guiliani has been topping national polls for the Republican ticket for a while. However, an analysis of the primaries show just how long a shot his winning the ticket is. Let's us walk through this...

(I'm using the numbers from RCP)

Jan 3, Iowa: Guiliani comes in fifth.
Jan 8, NH: Guiliani comes way behind Romney and McCain.
Jan 15, MI: Rudy comes in fourth, behind McCain.
Jan 19, SC: Rudy comes in fifth. That's four down in a row.
Jan 19, NV: Rudy has the first chance of winning. But then again, with 3 down, and he's currently tied with Romney, he might lose the chance to win.
Jan 29, FL: So Rudy leads in opinion polls here right now. But with that kind of drubbing, it's hard to see how he can maintain that lead.

So Rudy could well enter Super Tuesday with no wins, and at most 2. Admittedly, the field's diverse, and others could be in the same situation. But Huckabee, Romney and McCain have a lot more 2nd and 3rd place finishes than Rudy.

Kiva Update

Wow, looks like a Web 2.0 day. I had written previously about microloans using Kiva. Well, I'm happy to report I just had one of my lenders completely repay the loan. Sergei Borodzhayev of Ukraine just repaid $1,200 he had borrowed for buying construction supplies 6 months ago. I'm not free to roll my $75 loan into a new loan to a new entrepreneur. Both Shahin Novruzov of Azerbaijan and Mahbuba Ahmedova of Tajikistan have been paying in a timely fashion.

To learn more, visit Kiva.

Nifty Website of the Day: Mint

Have trouble keeping track of exactly where you're spending money? Enter Mint. Mint directly obtains information from you bank accounts and credit cards and categorizes your spending patterns. It can recognize a charge under 'Taco Bell' to be in the 'Fast Food' category, but you can also develop rules to classify expenses to one category or the other. It also makes recommendations for changes you can make to save more money, such as (in my case) switching to Verizon from AT&T. There is still a lot of functionality to be built in, but for a free clean website, it's gets 2 thumbs up!

UPDATE Lifehacker has a more comprehensive review on Mint, including screenshots. Also, after having played around a little more, I think the best part of using Mint is tracking your budget.

Thursday, December 20, 2007

McCain is Back, and He's Gooooood!!

From the start of the presidential race, one candidate has had my hypothetical vote (as a foreigner, I don't get to vote) since the start. John McCain doesn't align with me perfectly, but he represents the kind of politician I would be - fiscally conservative but supporting regulation in some areas, socially conservative on some issues and liberal on issues. But above all, an ethical one.

That McCain seemed almost to be gone when he was an establishment candidate and a front runner. While I did realize the need to embrace the powerful interest groups such as the evangelists, it seemed like the McCain I loved was morphing. Well, no more! The kickass McCain is back, as Time magazine put it and he's super! So super that you even have the Weekly Standard, a prominent conservative outlet, writing quite glowingly about him.

Dissing corn subsidies in Iowa ... now that's a political slogan that will get him support nationally. It helps that he was right on Iraq ... a surge has helped and made Gen Petraeus the 'Man of the Year' (never mind what the folks at Time think!) in my book. But above all, it helps that he's genuine.

To be fair, he's trailing big-time. But I think at some point, people are looking for a candidate who's genuine. I dare say that's why W. won in 2000, and that's why Obama's doing so well in the Democratic circles.

Saturday, December 15, 2007

Eau d'asparagus

You know you're a dork when you're drunk at a bar, walk past a room of attractive women, enter a crowded men's room and wonder why asparagus makes your urine smell funny. Well, this time I was sober enough to remember the next day, so here's the answer from WebMD:
it's the result of a simple chemical reaction. Asparagus contains a sulfur compound called mercaptan... When your digestive tract breaks down this substance, by-products are released that cause the funny scent... But not everyone has this experience. Your genetic makeup may determine whether your urine has the odor -- or whether you can actually smell it. Only some people appear to have the gene for the enzyme that breaks down mercaptan into its more pungent parts ... The ability to smell the by-products may also be genetic. Another study published in the same journal found that 10% of a group of 300 Israeli Jews could not detect the odor. In other words, a person's urine could smell, but he or she might not know it.

Tuesday, December 11, 2007

Dissing Iowa

I learned recently that Iowa has NEVER elected a woman as Governor or to the US Senate or Congress. Never! Ever! Great, we give first dips on our president to a bunch of mostly-white male-chauvinists!

Huckabee Watch

So far, it was all about how Huckabee was "folksy", but now the dirt starts flowing.

In a response to a questionnaire when he was running for US Senate, Huckabee has this to say:
It is difficult to understandth e public policy towards AIDS -- it is the first time in the history of civilization in which the carriers of a genuine plague have not been isolatedf rom the generalp opuiation,a nd in which this deadlyd iseasefo r which there is no cure is being treated as a civii rights issue instead of the true health crisis it represents.

This four years after the surgeon general clarified that AIDS is not spread by casual contact.

But the saga goes on ...

Turns out Huckabee was one of the signatories of a Southern Baptist Convention ad that has this to say:
You are right because you called wives to graciously submit to their husband's sacrificial leadership.

(To be fair, the next line says that husband and wife are equal before God)

I'll keep my eye out for more zanies from Mike.

Chart of the Day: Median Home Price to Median Income

Courtesy of GMO, the ratio of median home price to median income. Anyone who thinks this real estate slump is over (like the snake-oil charmers at the National Association of Realtors) are going to be sadly mistaken!

Sunday, December 09, 2007

Website of the Day:

The website of today is Prosper. Started by the founder of E-LOAN, the idea of the website is to leverage the power of the Internet to allowing individuals to lend and borrow to each other. If you want to be a lender, you can search for individuals based on credit quality and loan size, or any of many other metrics. You bid on an interest rate, and can place a bid for as low as $50. The idea is very similar to Kiva, about which I have previously written, except for the lack of philanthropic intentions and the profit.

Monday, December 03, 2007

Stunning Prediction of the Day: Lending in a Credit Crunch

I read this in John Maudlin's latest piece
Jan Hatzius of Goldman Sachs forecasts a recession and that the growing credit crunch will reduce lending by about $2 trillion

Wednesday, November 28, 2007

I'll Pass on Smart Phones, Thank You!

Jack Trout has a great piece in Forbes magazine about why convergence is a pipe dream. Convergence refers to the idea that we will eventually have a single device that handles all our needs. The iPhone has been labeled a giant leap for convergence. Trout argues that the idea of getting something without a tradeoff is impossible. An excerpt:
Palm was wildly successful with organizers; then they introduced the unreliable and unremarkable Treo, essentially an organizer that makes phone calls as well ... BlackBerrys are great at e-mail, but the phone is barely adequate. The Motorola Q crashes almost as often as the Treo. The Apple iPhone is terrific for music and media, but lousy for e-mail and phoning. For marketing reasons, everybody is trying to cram all these complicated features into ever-sleeker, ever-thinner boxes, while also adding longer battery life, and so on. Invariably, smart-phone designers have to make compromises that mean some functions don't work especially well.

Tuesday, November 27, 2007

Google Censorship

This is troubling - evidently Google doesn't bend over just for China. YouTube has censored a video by a human rights activist in Egypt showing the torture by the local police. This was supposed to be the great promise of the Internet - the ability to share not only the meaningless garbage that fill the bandwidth, but to expose and educate. And yet YouTube decided that it wasn't up to that mission. Of course, as Michael Goldfarb at the Weekly Standard pointed out, YouTube had no trouble showing graphic videos of the Abu Gharib scandal. That was the right decision - after posting a warning and ensuring that viewers were over 18 years old, YouTube allowed you to see the videos. We don't need Big Brother censoring us, and we certainly don't need corporate America doing so! Shame on you, Google!

Saturday, November 24, 2007

Photo of the Day: A Spinner in Action

Many of you probably know nothing about cricket. Greatest sport ever. Truly. A type of bowler (similar to a pitcher in baseball) is a spin bowler, and we all tend to think of them as crafty with their fingers. I loved this pic because it emphasizes the concert of different muscles coming together - look at the tension in the legs, abs, all over.

Friday, November 23, 2007

History Flashback: Time mag cover from April 1984

Picture of the Day: Iceberg!

A Liberian-flagged cruise ship after hitting an iceberg in Antartica. Thankfully, no one was hurt!

Random Thoughts on Black Friday

It was my first time in several years buying anything on Black Friday. There were quite a few deals - the one that got me to Walmart was this Kodak ZD710 digital camera with a 7.2MP resolution and 10X optical zoom. There were some other spectacular deals, and definitely some crowds, a topic supported by early news reports. But looking at people's shopping carts, and the vast stacks of unsold specials in my city's Walmart, I wonder if this is indeed an indication of a retail slowdown. It does appear to me that people in at least my town seem to be getting much more conscious of expenditures, possibly due to the housing slowdown and rising oil prices? I'll be curiously waiting for the final numbers ...

Speaking of shopping, be sure to check return policies! I haven't purchased too much more than books online, and as I was considering buying a camera (yes, I'm probably the LAST person to still be using a film point and shoot!) I decided to peek at the return policies. Amazon gives you a 30 day return period (although there's a grace period around the holidays), and any opened item loses 20% of its value. On, it's 14 days and a 15% restocking fee. If you think you're not sure about the quality of the product you are buying, favor the traditional retailers - a purchase at Walmart can be returned to a store for no extra charge, even if you bought it online.

Speaking of cameras, shopping for one is a bit like going to the gym. In the gym, there's the ridiculous emphasis on the bench press even though it is not a decent metric of fitness. In the camera world, it appears it's all megapixels and megapixels (ok, there are times when two seemingly identical cameras are vastly different in prices, but not for any reason a novice like me can figure out) Here's a tip: think what you'll use it for. I talked to a few friends savvier about these gizmos than I (hey, I still use a film camera!), and it seemed evident to me that if your application is mostly for travel, a good optical zoom is far more important than MP. If you plan to make posters, or make prints from portions of your photo (i.e. you crop out part of the picture) then MP are much more important.

Sunday, November 18, 2007

Dem Debate: Turn off the Commentators

Anyone else tired of the crap political commentators put out after every debate? After the last edition, one I watched because I was finally done with my doctoral defense (yes, yours truly now has signatures approving his Dr.-dom!), I couldn't help but notice how disparate my views were from those of the "experts".

Hillary, they told us, put in a stellar performance. Really? I must have missed that. What I saw were soft questions (including the most ridiculous question about diamonds or pearls, one it turns out CNN encouraged an audience member to ask), and a failure to commit to specific policies. Sen. Clinton is best when she has to play the old pol's game of being everything to everyone.

Obama, we are told, stumbled. I'm not that impressed with him, but at least he did on occasion commit to where he stands on issues. Of course, that was few and far between, as the top tier candidates largely deflected every question to a beration of the Bush administration.

The sidelined candidates, on the other hand, did a stellar job. Richardson and Dodd were very good in talking about specifics, and Biden had flashes of brilliance when asked about foreign policy. But the media just writes a few brief lines about them - after all, a Pakistan policy isn't as exciting as how Hillary snapped at Edwards!

Monday, November 12, 2007

Sunday, October 28, 2007

Friday, October 19, 2007

Picture of the Day: Lake Lanier

The drought in Georgia is very worrying - estimates are that Atlanta has less than 60 days of water supply left. This picture (courtesy USA Today) is of Lake Lanier in Cummings, Ga. where the drought has exposed several docks.

Thursday, October 11, 2007

No no Grandpa, Don't Overload Stocks!

This morning, as I chowed down my Raisin Bran, I happened to catch a personal finance "expert" who recommended that even people in their 60s should have 70% of their financial assets in stocks. 70 percent!! That's the highest I've ever heard, and while I have no readers that old that I know of, I hope younger readers can be the light and advice Grandpa and Grandma against this foolhardiness.

I've ranted before that any asset is only worth the price you pay for it. There is no such thing as a free lunch, and those who thought there was now make up the numbers in the foreclosure listings. But since I'm way too busy writing that epic called a dissertation (seriously, at times it does feel like one!), I'll leave you with this one great article from the one great magazine called the Economist. An excerpt (emphasis added):

Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School examined the record of 16 stockmarkets which were in continuous operation over the course of the 20th century. In itself, this selection showed survivorship bias by excluding the likes of Russia and China. The academics found that only three other countries could match the American record of having no 20-year periods with negative real returns. Other investors were far less lucky. Japanese, French, German and Spanish investors all suffered instances where they had to wait 50-60 years to earn a positive real return; in Italy and Belgium, the waiting period stretched to 70 years. It was no good following the famous advice to “put the shares in a drawer and forget about them”; the furniture would not have lasted that long.

My point isn't to stay away from stocks. It's just that stocks appear kind of pricey to me. If not for some special circumstances, I'd probably invest mostly in high quality issues, or better yet market-neutral funds which invest in these issues (actually about half my money is in one such fund), and overweight TIPS and cold hard cash (paying attention to yield, of course)

Monday, October 08, 2007

Big Brother Is Indeed Watching You

Washington has been swamped with talk of legal and illegal wiretaps and other intrusions on the privacy of individuals who, depending on who you believe, may or may not be related to terrorists. But the media has largely ignored the much greater story of surveillance on US citizens who are most definitely not involved with terrorists. The latest camera law in Baltimore is a troubling new trend of cities that are using CCTVs to intrude on the privacies of ordinary citizens. While the National Security Agency is not incorruptible, I'm much more disturbed (even as a foreigner) with surveillance by local officials, where I'd suspect the checks and balances are much weaker.

At what point are we going to discuss this issue without using it as an opportunity to take potshots at the Bush administration?

Sunday, October 07, 2007

And the IgNoble goes to ...

The Ig Noble awards are out! If you have never heard of them, where have you been? Here is the Wikipedia article on the awards.

Here are some of my favorites from this year's award winners (here is the story)

  • Brian Witcombe of Gloucester and Dan Meyer of Antioch, Tennessee, for their report in the British Medical Journal, Sword Swallowing and its Side-Effects

  • Mayu Yamamoto of the International Medical Centre of Japan, for developing a way to extract vanilla essence from cow dung

  • Juant Manuel Toro, Josep Trobalon and Núria Sebastián-Gallés, of Barcelona University, for showing that rats cannot tell the difference between a person speaking Japanese backwards and a person speaking Dutch backwards

  • The Air Force Wright Laboratory, Dayton, Ohio, for instigating research on a chemical weapon to make enemy soldiers sexually irresistible to each other

To be fair, I think some of the research is useful - a previous awardee, for example, studied why woodpeckers don't get headaches. That could be a blockbuster drug of the future.

Wednesday, October 03, 2007

The Terror Democracy Dilemna

Now that Iranian President Mahmud Ahmedinijad is safely back in Iran and the excitement (and not in a good way!) surrounding his visit has subsided, it's worth considering one little detail that has been routinely ignored by the press, and even an academic such as the President of Columbia University. Read this line ....

Mr Ahmedinijad is not a dictator

That's right - despite all the brouhaha over Mr Ahmedinijad, he is many things but not a dictator. Rather, he's been elected in relatively free and fair elections. That's the little detail everyone seems to be ignoring - Iran is a democracy. Now, I have no love lost for Mr Ahmedinijad, and I do think his rhetoric is unfortunate, but I think the hype's getting ahead of him. He actually doesn't really have that much power, and certainly there's enough reason to believe his sabre-rattling is to boost his popularity that's taking a beating thanks to an economy that's tanking despite soaring gas prices.

But this presents a dilemna for our idealist leaders. We'd like to believe democracy goes hand in hand with all we hold good, but this is hardly the case. Remember Adolf Hilter was a democratically elected leader. Ditto Russian President Vladimir Putin, who despite his oppressive rule seems to have record-breaking popularity. It just doesn't fit. In fact, a failing democracy is more likely to have leaders whip up sentiments to distract the electorate.

That's not to say we should not support the installation of democracy globally. Let's just not be so idealistic to believe that democracies are good for us in the absence of taking other steps to deal with real issues. Oh yeah, and dial down that rhetoric - we don't need a war with Iran!

Wednesday, September 26, 2007

A Secondhand Perspective on a Health Care Crisis

I was at my mechanic today, chatting up with the owner's daughter, only to learn the owner had been hospitalized today for a diabetic condition. Turns out the owner did not have health insurance, as the soaring costs of premiums had resulted in a tab of $2,400 a month for the four employees in the business. Why? Insurance companies do not want to accept customers with pre-existing conditions, and hence such patients are forced to fork over exorbitant premiums to participate in plans will allow them in.

Here is a businessman whose family has run this shop for decades, long enough to qualify to be a historical feature of the city. And yet we have a health care system than endangers the well-being of such a model citizen! For politicians to pretend that there isn't a crisis is disingenous, and while I don't believe in a huge government solution like some, government's got to be part of the solution.

Sunday, September 23, 2007

Tough Questions on Free Speech

It was a remarkable week for the idea of freedom of expression, and yet you saw precious little analysis of some of the tough questions surrounding free speech in the media. This should be a week we're all contemplating the limits of this issue, so I thought I'd open the floor to thoughts.

The first case involved a student who broke protocol and jumped ahead of a line after question time to ask a question of Senator John Kerry. While the senator appeared to be willing to answer the question, police attempted to escort the student out, and in what seems to me like antics for the camera, the student resisted and was Tasered.

The second case was an MIT student who wore what looked like a bomb under her dress to the airport to pick up her boyfriend, when she was instead picked up and arrested.

The third case is the brouhaha over Iranian President Ahmedinijad's scheduled talk at Columbia.

Depending on your political persuasion, some of these are slam dunks. Well, I beg to differ.

Start with the MIT student. It's obvious she was stupid to arrive in an airport posing what could be perceived as a security threat, and it's obvious that the TSA were quite right in arresting her. What we do need to think about is how far we'll take that argument in the future. A friend of mine told me some time back about a "Politically Incorrect" Halloween party they had, where one of the characters was dressed as a suicide bomber. May that be perceived as a threat when such a person walks on the street? My own university had an issue with a student facing civil and administrative penalties for practicing for a play with a fake gun.

My view on the Tasering of the student is that it was quite the right course. After all, here was a student who was being disruptive to an event and resisting eviction. But even that isn't as cut-and-dry in my mind. After all, this was a public university, and it's certainly worth discussing how appropriate it is to attempt to censor or regulate speech in such an institution.

Then to Mr Ahmedinijad. On the one hand, this is obviously a guy who could be our #1 enemy, and we are providing him with a platform for propoganda. And yet, how could we censor a man who we are critical of because he's against free societies. I actually applaud Columbia for negotiating the terms so that the Iranian president will have to answer any questions from the audience - sometimes the best disinfectant is sunlight!

But those are my views. You may have others, and I'd love to hear from you.

Friday, September 21, 2007

Opinion of the Day: Ritzholtz on Social Networking

I'm waiting for a model to finish running, and need something to keep me awake, so here was an interesting piece from Barry Ritzholtz on why to pass on social networking sites. For full disclosure, I do participate in social networking sites.

Monday, September 17, 2007

Photo of the Day: China Congestion

Quote of the Day: Hamburger Offsets

Environmental humorist Lou Bendrick on the idea of buying carbon offsets to compensate for the global warming pollution caused by our actions:
You get to sin, but you get to buy your way out of it. It's sort of silly. It's like buying tofu offsets to be able to eat a hamburger.

Sunday, September 16, 2007

Rant of the Day: "Self Help"

One of my favorite places in the world is a bookstore, but if there's one gripe I have, it's the section titled 'Self-Help'. I mean, don't get me wrong, I have no problem with books from Dr Phil being labeled such, but the issue with this big sweep was that all manner of books are tagged as such. So you read a book on improving your productivity, getting more from life, being a better person ... Self-Help, Self-Help and Self-Help.

Now, I'm not normally one for tags. Readers of my ramblings know I'm not particularly PC. But I do object with the self-help tag. It suggests people who read these books are somehow flawed. Well, it's true, we're all flawed and imperfect, but that leads me to my gripe. By using a demeaning term as "self-help", it drives so many people from seeking to become better people. And thus, we have a society filled with people who are convinced they are perfect; that seeking to discover your flaws and insecurities is somehow an indication that you aren't quite right ... I've even had people brag about how they haven't changed since they were a teenager! Well, newsflash: if you aren't changing, you aren't growing!

A Lesson in Grit

Here's something you don't find a lot of on this blog - a personal story. I try to stay away from them, partly because I prefer my deepest emotions, thoughts and insecurities are better a private affair, and also because I think they have no meaning or relevance in another's life beyond watching a freak show. This time however, I was moved by the grit of an elderly lady to make my reflections public.

I injured my thumb last Saturday with an embarrassing fall on a dance floor caused by way too many inebriating fluids, as I took down a rather attractive lady who has innocently mistaken my newfound confidence as a measure of competence. The thumb swelled up, and as I struggled with the pain all night, I was in a rather whiny mood Sunday morning. I was staying with a friend's grandparents, and his grandmom did what all grandparents do - try to make me feel better both about the injury and the incident that caused it.

A little later though, she herself took a fall, and came crashing down. She was unable to get up, and we called the paramedics for help. As we waited for relief, here was on old lady with artificial hips, who could barely move her legs and who was clearly in pain, still laughing and joking, teasing me for rubbing off on her, and being so incredibly jovial. Through it all, not once did she complain, beyond calling herself a little silly; there were no screams of pain, and in fact there was a deliberate effort to conceal any she may have been feeling.

I wish I could say I was transformed instantly. Chances are I still will be a wimp the next time I injure myself. Maybe someone should show me this post when I do.

Thursday, September 13, 2007

Say No to Biofuel

It's 3 am here at Portland airport, and even this cup of java can't trigger a very eloquent essay, but on my drive here, I heard a story I felt compelled to post here. Turns out rising commodity prices have caused rising pasta prices in Italy. Add that to the soaring prices of corn that affect the poor in Latin America, and you have a problem. While biofuel is not the only problem, this story emphasizes why biofuel is a sinful fuel, maybe even more than the much maligned petroleum sources.

Seriously, if you truly care about global warming, skip the touted technological solutions and focus on good ol' conservation. That's not to say solar and wind and whatever else don't have a place in society - just that it's silly to think they'll make a big dent in our "dirty" energy consumption or greenhouse gas loads any time soon.

Wednesday, August 29, 2007

Video of the Day: CAUTION Stupidity may be Contagious!

If you haven't watched Ms Teen South Carolina, where have you been? God, it is the most amazing video ever! I first thought she froze under pressure, but after catching her on the 'Today' show (no, I don't usually watch the show, thank heavens, just collateral damage from channel-surfing!), I decided this was the real deal!

I never understood why paegents even care to ask these silly questions, which expose participants as stupid brainless bimbos! Does anyone really believe one of these good-looking clowns is going to solve world hunger?

Sunday, August 26, 2007

American Wars: Death Tolls

Death Toll of US Troops in Major Wars of the Last 100 Years

World War I116,708
World War II131,028,000
Iraq3,278 and counting

This is not to underplay the dealth of over 3,000 of our finest. But it is worth putting that toll in perspective - American troop casualties are still a lot smaller than in previous wars, and indeed despite the negativism of the media, the mission's in better shape. Iraq has a democratically elected government, as inept as Washington, for starters, and a people who seem committed to democracy, judging by the turnout at the last election. That's more than we could say about Korea or Vietnam.

Tuesday, August 21, 2007

The Abuse of Math

Economist magazine had a wonderful series of stories on the recent financial crisis. Wall Street forgot the lessons of Long-Term Capital Management and embraced math in a big way. Unfortunately, they forgot that all models are based on something called assumptions, and any model is only as good as its assumptions. How way off base were the models?
Goldman Sachs admitted as much when it said that its funds had been hit by moves that its models suggested were 25 standard deviations away from normal. In terms of probability (where 1 is a certainty and 0 an impossibility), that translates into a likelihood of 0.000...0006, where there are 138 zeros before the six. That is silly.

Friday, August 17, 2007

"The Fed Rescues the Market, It's Safe to Play Again"

If you believed the hype in the media and the much of the financial world, the Fed has saved the world. By cutting the discount rate by 1 percent, financial Armageddon has been saved, and we can all go back to how well stocks will do. The media's largely been pushing this idea, the idea that somehow everyone got a little excited, so there was a correction, but now the Fed has acted and all's well.

It's easy to forget what started this in the first place. Financial institutions have a ridiculous amount of risky financial assets that have been blessed as risk-free, and the realization that the blessing was from a charlatan might mean at some point we have to realize the reality. In a classic problem of game theory, everyone's ok as long as no one brings the system down, but if the system were to collapse, it's best to be the first out of the building. So institutions and brokers and the press try to play down the CDO scam (for more on CDOs, read my previous postings, here and here)

And yet it's worth asking what indeed a Fed discount rate cut means (mind you, this is not a Fed Funds rate cut which would lower the rate consumers pay). If anything, it's cause for concern that the Fed, uptil now so concerned with inflation, suddenly perceives threats so great that it could substantially affect growth. And if the US and the world is indeed so robust, why should changes in a discount rate affect markets so radically? I would argue it's because investors today are asked to place their faith on a string on tenous assumptions, the failure of any one of which could produce severe consequences.

But ignore the killjoys like me. Believe the fantasy - the Fed has rescued the world. We can all go back to watching Cramer now. Thank you.

Tuesday, August 14, 2007

Sickened by the Xenophobes: Fact Check!

Suddenly, a bankrupt Republican party is trying to capitalize on immigrant-hating to drum up a base that feels defeated without a single vote being cast. Just today, political architect Newt Gingrich, a potential candidate for the 2008 Presidency, said he is "sickened with Bush and Congress" for going on vacation while "young Americans are massacred" by illegal immigrants. Presidential hopefuls Guilani and Romney weighed in too, with the former referring to an invasion, all alluding to the high crime these immigrants bring along.

Unfortunately for them, it's a myth! The Immigration Policy Center at the American Immigration Law Foundation reviewed 2000 Census data and came up with some pretty interesting (and inconvenient, for the xenophobes) findings:

  • A native-born man, ages 18-39, is 5 times more likely to be incarcerated.
  • Foreign born incarceration rates are 2.5x less than the native white man and 17x less than the native black man.
  • Across ethnic groups, the incarceration rates for the foreign-born men are less than those for the native-born men.

But then it gets even more interesting...

  • Incarceration rates of foreign-born men, as well as other issues like family disintegration and drug and alcohol addiction, increase with duration of stay in the US, although still less than comparable rates for native-born men.
  • Immigrants, especially from Latin America, give birth to fewer underweight babies and have lower rates of adult and child mortality despite poverty and barriers to proper health care.

Wow! That stunned me, and it should serve as a wake-up call to the populace that hate is not the answer. Their positions on immigration are a large part of why Guilani, Romney, Gingrich and others won't get my symbolic vote this election cycle. (Symbolic because I'm not a US citizen)

Sunday, August 12, 2007

Go Diego Go

Turns out all those kids' "educational" programs aren't that great after all. Time magazine reports on a latest study that programs like "Baby Einstein" cause more harm than good. Turns out that video learning is overstimulation, and doesn't affect a kids' learning in the same ways as personal interaction. This is consistent with an earlier study on the detrimental effects of outsourcing child learning to Sesame Street. The good news? Turns out reading to your kids helps them develop language skills far superior to the control group.

This raises an interesting question, one I discussed at some length with the friend who sent me the story. Does this story basically call you to re-visit the stay-at-home parent concept? It isn't simply about the quality of daycare. After all, the explosion in educational TV is partly because two parents tired from a days' work don't have the mental strength to engage a baby.

If you have views on the subject, I encourage you to use the comment feature of this blog to let them be known. As with so many things, I'm weighing the pros and cons, and I always love hearing other points of view.

Let the Foreclosures Begin!

Many politicians are complaining about the rising wave of foreclosures, and insisting that government needs to step in and stem the crisis. Thankfully, President Bush has decided to do so such thing. Why not, you ask? Well, it simply isn't the government's place in a free-market system to insulate individuals from risk; such a practice simply encourages greater risk-taking and creates ever-greater bubbles until the protector is no longer able to be a hero.

Housing prices must correct! I hope to be financially in a position to benefit from a substantial correction down the road, but this isn't simply about the value investor in me who's hoping in asset price corrections to give me goods at bargain prices. We have frequently heard complaints that housing in most big cities is unaffordable. The Housing Affordability Index put out by the National Association of Realtors declined from a high of 133.2 in 1998 to 113.9 in March 2007, thanks to the housing boom. But even that understates the problem because it considers home prices across the US - the median price, for example, is $215,300 - good luck finding a home for that price in almost any decent-sized American city.

A real estate correction then is appropriate, and may be desirable in the long-term. Despite all the huey, one could argue that indeed price appreciation in excess of wages is rather undesirable, and if anything, government should consider tweaking tax policy to dissuade rampant speculation, including measures such as limiting the number of times you can flip a house before you lose capital tax gains.

This is hardly a popular position. We tend to get really excited when stocks or houses skyrocket in price, even if it means that the early buyers are being rewarded, while younger entrants are forced to pony up. But unlike stocks, housing affects livability, and government support of speculative efforts would be rather undesirable.

A side note You may have read that the Fed Reserve has been using something called repo agreements to purchase mortgage securities. Lest you think of it as a bail-out, here's a clarification I needed, from John Hussman of Hussman Funds:
Contrary to the apparent belief of investors, the Fed did not shift its policy, nor did it “bail out” the mortgage-backed securities market by “buying” them from banks. What actually happened is that the Federal Funds rate shot to about 6% on Friday morning, and the FOMC brought it down to its target rate by entering into 3-day repurchase agreements . The banks sold securities to the Fed on Friday, and are obligated to buy them back from the Fed on Monday at the sale price, plus interest. Such open market operations are designed to ease the immediate demand for liquidity, and to give the banks and dealers more time to find buyers in the open market for the securities they are trying to liquidate.

Friday, August 03, 2007

The Giant Insurance Fraud!

Bloomberg had a story about how insurance companies have been defrauding policyholders by underpaying on their claims, even when the claims are within coverage limits for their homeowners' insurance. Here's an excerpt:
Kevin Hazlett, a lawyer, sued Farmers Group after an April 2006 tornado struck his home in O'Fallon, Illinois. Farmers had offered to pay him $470,000 to rebuild the house. Royal Construction Inc., based in Collinsville, Illinois, estimated the cost at $1.1 million. Hazlett, 52, accepted a settlement for an undisclosed amount.

Bo Chessor, owner of Royal Construction, says he sees insurers refusing to pay coverage limits all the time. ``Most people just roll over and take it because they don't have the money to fight it,'' Chessor says. ``What the insurance companies are doing is purely robbery.''

It may be robbery, but it's rarely a crime. State insurance departments don't prosecute insurance companies, and the federal government has no oversight. The insurance industry wants to keep it that way.

I'm all for making a buck, but this is not capitalism, it's fraud! The only reason insurance companies get away with it is the $98 million they spent on lobbying last year. Hopefully, Sen Trent Lott (R-MO) will succeed in getting legislation passed to regulate the industry - he's pursuing this after the insurance companies tried to screw him over after Hurricane Katrina (he eventually settled his personal claim, but has seen first-hand the unscrupulous attitude the industry takes)

Sunday, July 29, 2007

Pick and Pan of the Week: American History

Pick of the Week

Why do high school students hate history so much? Author James Loewen argues it's because our presentation of the material is so sanitized, so heroificied (he made that word up!) that history becomes not the story of real events past, but rather an attempt to force a recitation of cherry-picked, or sometimes invented, facts. The author argues that every college professor, and several high school teacher, knows that history is about controversy, the clash of ideas, of tortuous opposing viewpoints, and yet the presentation of this information is so distorted as to make a realtor proud!

But worse, it may be racist. Loewen argues convincingly that there is an inherent tendency to ignore the contributions of non-whites and overplay those of Europeans, even in the face of tremendous historical evidence to the contrary.

As someone who loathed history in high school and now am discovering a love for it, I concur! So it does excite me to learn (not in this book) that, for example, that George Washington likely defrauded his fellow veterans of the French and Indian War to obtain their lands for dirt cheap - it doesn't diminish, in my view, his very important contributions to the America we cherish today, but does make him more human, and me more optimistic.

Pan of the Week

I have a confession to make - I did not finish watching this film. Actually I didn't even come close. Ken Burns is an acclaimed film maker, but sometimes I wonder if he had learned his trade from Communist propaganda training schools. All the criticisms from Loewen apply to this film. The last straw was when a discussion of slavery came on, and they somewhat brushed Jefferson's hypocrisy on this issue as somehow that he realized he was ahead of his times, and chose incremental change over substantial reform.

Wednesday, July 25, 2007

Real Estate Bloodbath

From American Public Media's program, Marketplace:

This year alone, [Cayahoga country treasurer] Rokokis expects 17,000 foreclosures in his county. He blames careless, even abusive mortgage lending. According to Cayahoga county statistics, just one lender, Argent Mortgage, has seen about 25 percent of its loans in Cleveland go under.

Countrywide Financial CEO Mozila seemed to be overstating things when he talked about the worst housing slump since the Great Depression, but stats like this make you sit up. And keep in mind Ohio is supposed to have one of the more "affordable" housing markets.

Incidentally, one of my friends in Arizona has been texting me about great deals she's been finding in the overheated (in more ways than one!) desert, including a 5 bed, 3 bath house for 189k! If there is a good news in this bloodbath, it might be that those of us who don't work on Wall Street may finally be able to find a place to live and own.

Thursday, July 19, 2007


If you're into politics, definitely check out the Candidates@Google forum, with videos on Youtube. Unlike the usual sound bite nonsense that you see on the TV channels, a candidate who has to talk for an hour has to get into the details. So, in this video, for example, Bill Richardson has to argue why he's for a cap-and-trade policy for controlling global warming rather than a carbon tax, the use of tax incentives to achieve policy goals, his health care plan or his energy policy initiatives, or of course, Iraq and foreign policy. I disagree with some of his ideas, as I did when watchhing Congressman Ron Paul earlier, but I know where they stand. And they educate you on fascinating aspects of public policy. Ron Paul may be perceived as a lunatic by many mainstream voters for his extreme conservative views, but his discussions of history and the constitution make you sit up.

Wednesday, July 18, 2007

Sunday, July 15, 2007

Thank You, Lady Bird!

Yesterday was a gorgeous day, and I drove up the Shenandoah mountains with my windows down, I couldn't help but reflect on the contributions of Claudia "Lady Bird" Johnson. The former First Lady, who recently passed, was instrumental in the beautification of the nation's capital and national highways. I confess having been raised outside the US, I knew little about Lady Bird - in fact, I didn't initially recognize her to be Mrs LBJ. However, her passing has made me ponder just how big her contributions to landscape beautification are. I don't know that road trips would be quite the same without the wonderful plantings and the limitations on billboards that Lady Bird was instrumental in bringing forth. Goodbye, Lady Bird, we'll miss you!

Tuesday, July 10, 2007

Book of the Day: All Over But the Shouting

The Pulitzer-prize winning journalist talks about his growth from Ricky of rural Applachia, born into poverty of an alcoholic father and a mother who did her damnest to do right by her kids, to become a famous (ok, he later became infamous, but that's another story) writer for the New York Times. This story will move you, make you laugh but also paint an incredible picture of what the rural South is. Ricky's honesty at times in unnerving, and sometimes finds a quest for your own true emotions that can at times be discomforting. A must-read!

Amazon link

Sunday, July 08, 2007

Quote of the Day: Chris Rock

Comedian Chris Rock about the over-hyped urgings of hypocritical stars:
I pray that this event ends global warming the same way that Live Aid ended world hunger.

Video Calls in Korea

Anyone else think the American cell phone industry sucks? It's one of the least innovative industries in this country, and when we do get a decent product, it comes with a fair bit of sticker shock! What precipitated this not-quite revelation on a Sunday morning was a news story that Korea's largest provider, SK Telecom would allow video calls between mobile phones and Internet phones. But what amazed me wasn't the technology (I for one would never really want to use a video phone), but the price tag - at W30 per 10 seconds (about 18 cents a min) it's cheaper than US cell subscribers pay for going over their minutes!

Tuesday, July 03, 2007

Outsourcing Child Care - Onion Alert!

People are always telling me to lighten up. Since I have trouble doing that, I'm outsourcing it to the Onion.

Report: Many U.S. Parents Outsourcing Child Care Overseas

Thursday, June 28, 2007

Video of the Day: Mac v PC

Revenge of the PC! For full disclaimer, I use both, and while I think there are some cool features in a Mac, but the Mac World is a bit too full of hype!

Quotes of the Day: Gas Prices

National Review Editor Rich Lowrie on the Newshour with Jim Lehrer on PBS:
There are also some doubts about how much [higher fuel efficiency standards] will actually do to reduce greenhouse emissions, because there are all sorts of strange incentives where you -- if you make cars -- if you basically make it more efficient to drive cars, people will drive more. And the horn of dilemma of energy politics is what really drives concern about this energy in this country, at the gut level for most people, is high gas prices. And if you really want to fight global warming and try to reduce our carbon emissions, the cleanest, easiest, most rational way to do it would to make the price of gas even higher through very stiff gas prices. And, of course, that's what no one is willing to contemplate or talk about.

David Frum of the American Enterprise Institute, with a great op-ed piece on American Public Media's Marketplace program (listen to the piece)
[Presidential candidates Clinton, Obama, Romney are] all echoing President Bush. At the start of the year, the president told a Delaware audience that he thinks it appropriate to spend taxpayers' money on new energy technologies. Does anybody remember that we've been here before? In the 1970s, the Carter administration spent — sorry, invested — tens of billions of dollars to develop alternatives to imported oil. The results? The Synfuels Corporation — one of the most flagrant boondoggles in American economic history. A market-flunking exercise that made even the farm program look like sound public policy. Why would anyone want to go down that road again? ...
There's only one way to bring oil alternatives to market: keep energy prices high, with tax increases if necessary. Under that price umbrella, entrepreneurs, firms, and consumers will develop their own next-best solutions — cutting back on consumption, devising substitutes and so on. ... But no politician wants to tell voters that they have to pay more for fuel to achieve energy independence. Instead, they offer delusions that government investors can somehow do what trillions of dollars in private capital cannot: discover a cheap and abundant alternative to oil that will deliver cleaner fuel at lower prices.

Tuesday, June 26, 2007

A Potrait of Lee

Interesting article on how the Confederate general, Robert E. Lee wasn't quite what he's made out to be. He did believe in slavery and was quite harsh with his slaves. Hmm, add one to list of books to read.

Incidentally, a very good historical piece is Setting the World Ablaze, John Ferlig's bio of the real George Washington, Thomas Jefferson and John Adamns.

I'll Pass On the IPhone

Ok, so that wouldn't have been a huge surprise for those who know me. I'm cheap, and tend to hate overpaying for brand name. I bought a much-cheaper Sandisk MP3 player rather than an iPod (hmm, I was meaning to write a review about Sandisk's FANTASTIC customer service). I often buy clothes from Walmart or other discount stores, and don't mind a gloomy grocery store if it can save me bucks.

But now the first review is out - Glenn Fleishman provides some persuasive reasons for waiting for a later version for the iPhone. I'd like to add another - sweat and scratches! Yep, you read that right. Anyone who's regularly used a touchscreen will now the wear-and-tear from sweaty fingers and nails. I'd suspect for a real user (i.e. one who doesn't treat their phone like their baby) an iPhone just wouldn't last that long.

Speaking of which, do people really use their phones to surf the web all that much? I mean, I can see checking directions or looking up a number, but reading the NY Times? Come on, people, get a life!

Sunday, June 24, 2007

Reader Question: Leave the Stock Market?

In response to a previous post on 401k allocations, one of my readers, Jason asked if the author of a website I mentioned was suggesting avoiding stock allocation altogether. I do not know if that was Rob Bennett's point - in my reading, I didn't necessarily get that impression. But I do know a few things I'd consider.

The first is Benjamin Graham's counsel. Graham is the father of value investing, whose followers include a laundry list of super-investors including Warren Buffett (the world's third richest man), the Schlosses, the folks and Tweedy Browne, Seth Klarman and many others. Graham, in his book The Intelligent Investor, a classic investing text, ranted against paying too much for stocks and poor performance that ensued. And yet, Graham acknowledged that there was a significant element of performance that may not be captured purely by valuations, and that because of market action, it might not be desirable for an investor to stay out of markets until the next bear market. His preference was instead to reflect those inflated prices in an adjustment in equity allocation, with a 50-50 stock-bond mix in normal times, and going down as low as 25% in either asset when it was inflated.

This is precisely the tactical asset allocation many institutional investors pursue. The best, in my mind, is Jeremy Grantham of GMO. Grantham's commentaries, available for free with registration, are a must-read. In his latest piece, he points to a global bubble in every kind of asset, and GMO's own 7-year forecasts predict that based on average conditions, we can expect poor returns from our stocks, bonds, real estate, whatever. And yet there's enough variability that you wouldn't want to sit on cash. While that risk profile would justify increasing allocations to near-cash instruments, (i.e. money-market funds) yielding over 5%, a 100% allocation would be a mistake!

Also, even within the stock market, there might be reasonable investments. The one promising asset Grantham finds is "high quality" stocks. This is consistent with the opinion of others like John Hussman, who points out that quality stocks are cheap relative to garbage. He points out that the median P/E of the largest 50 stocks in the S&P 500 is 17, down from 35 in 2000, while that of the smallest 50 stocks in that index is 20, up from 10 in 2000. So people are paying more for riskiest assets than stable giants. By the way, the median P/E on the small cap universe is somewhere around 35, if I remember correctly (source forgotten).

So what's an investor to do? Well, if you're an active investor, you could reduce your stock allocation, keep your bond durations relatively short (the US bond market is going to see some blood), and focus on a bottoms-up stock picking. If you're a passive investor, focus on cutting your stock allocations, increase your short-term allocations, and hoard some cash. Sprinkle in TIPS or I-bonds. Rebalance if you haven't been doing it!

Oh, and either way, maybe pay off your debt - that can give you a guaranteed "rate of return" of anywhere from 6-9% for your mortgage, to 10-20% for credit card debt.

UPDATE: COMMENTING CLOSED This is a first for me, but as I've followed this debate, and glanced at other forums where this debate has continued, I've decided that most of the quality information has been revealed in the post and comments so far, and we're getting a combination of regurgitation of the same facts and personal attacks. So I've decided to close comments on this post. This isn't intended as censorship or bias - simply a decision to prevent this blog from getting hijacked by a rather vitriolic battle I've seen at other forums. Thank you all for your participation - heaven knows I haven't had 11 comments on too many other posts before!

Friday, June 22, 2007

Defrauding the Public

Add this to your list of requirements for the next President - a financial savvy. Then again, scratch that. Our politicians get big bucks from these firms precisely not to look too hard at what they do. So the next time someone complains about oil and gas companies getting rich, hit them in the head and ask them to stop fighting yesterday's villians. You thought the Enron mess cleaned up Wall Street - think again!

Bloomberg reported on the ridiculous defrauding of public authorities by collusion among investment banks, insurance companies, underwriters and attorneys. Municipal agencies pay through their nose in fees to float a bond issue to build low-income housing or improve schools, then the companies collude to make sure the money is never spent, instead using the money to invest and generating fat fees for the investment banks, minimizing risk for the insurers. And in the end, little, or often no, money goes into schools or housing, the municipal authority just buys back all the bonds and ends up poorer for the experience.

If this doesn't make your blood boil, you must be dead or an investment banker! I'm all for capitalism and even greed, but this isn't that - it's FRAUD!

Enough, Cheney ... enough!

Mr Dick Cheney's claims that the Vice-President's office is not an entity within the executive branch just makes you sit up. Seriously, Mr Cheney and his clones have been running roughshod with the rules for a while now. But while it's permissible in my mind to have a few temporary exceptions soon after 9/11, I always thought the administration needed to quickly evolve a framework of checks and balances that would fix the issue of oversight, while still respecting security considerations. But it increasingly appears Mr Cheney is rather intent on creating a super-executive branch, out of bounds of the framework developed in our constitution.

Which is something to keep in mind when you think about the next president. I think this poses a problem especially for Mr Rudy Guiliani, who's tempermentally pre-disposed to a humungous power-grab like the present administration. I think it emphasizes the need to vote for someone with congressional experience and hence respect for the body - so that rules out Mr Guiliani and Mr Romney, among the front-runners. (Of course, I also think you need experience in politics, so I would think Mr Thompson, Mr Edwards and Mr Obama are gonners!)

Wednesday, June 20, 2007

Your 401k is All Wrong!

Sorry I haven't blogged in a while. I've been swamped, between family visits and working on a journal article. Hopefully I'll find more mental energy to blog - that's the key, not time, but just the ability to sit and pen my thoughts.

Meanwhile, I'm quite excited to report about a website that has captured some of my concerns about average Joes and Janes and their saving for retirement. I haven't read the entire Passion Saving website, but have liked a lot of what I read. The website talks about valuations and how they affect future investment returns.

What do I mean? Ok, so if you have a 401k or ever read a financial advice column, they would advice you to follow a certain asset allocation. Maybe you're 30 years old. Maybe you are told to do 80% stocks, 20% bonds (Nowadays, there are more exotic choices than the two, but let's stick with those two) Why? Well, stocks return more than bonds, so as a younger person, you should be willing to load up on riskier stocks.

But wait, that tells you nothing about the value. Think about it this way. Tom Brady is a great football player, but you wouldn't be betting the club on him. An investment is only good when the price is right - buy low, sell high.

"But stocks are cheap" comes the chorus. According to data from Standard and Poor's, the P/E on the S&P is 17 - that's down from over 46 in 2001, just when the market crashed. Two problems with that. One - why look at 2001 as the base year? The median P/E of the S&P since 1936 has been 15.4, so stocks certainly don't look cheap on that basis. But that's only the beginning ...

Unfortunately, the P/E doesn't correct for the cyclical nature of earnings. I have previously pointed to the work of John Hussman, manager of the Hussman Funds (my fav fund) talk about this issue. What's nice about the Passion Saving website is that it uses a much simpler way to bring the valuation issue to focus. By using a 10-year moving average of earnings for the P/E, Prof Robert Shiller of Yale, of "Irrational Exuberance" fame, shows that the P/E10 of the stock market is close to 30, the highest level with the exception of during the dot-com boom. The median value historically has been closer to 14. The value in 1982 at the start of the great bull market in stocks was under 6.

Click on the return predictor, and you'll see that based on historical valuation models, the expected real (i.e. adjusted for inflattion) return over the next 10 years is about 0.5%, which is much less than available on government bonds and inflation securities. What if the P/E10 was at its historical median. Then we could expect a 10-year return of over 6%, a pretty handsome return.

Valuations matter, and in an environment where real estate and stocks and longer-term bonds have been pushed up, the best an investor can do is to select a flexible bond fund or keep money in a short-term bond fund yielding about 5% until better options emerge.

Monday, June 11, 2007

Be a Banker to the Poor

The website of the day is Kiva (thanks to Nicholas Kristof at the New York Times!). No flashy graphics or cool gizmos - just a real cool concept. Kiva allows you to make loans to poor farmers and entrepreneurs in Third World countries to help get their businesses going. Studies have repeatedly shown that micro-credit is far more successful than foreign aid in uplifting these communities, and now Kiva provides a platform for you to participate with loans as small as $25. The default rate for most of the Field Partners - the agencies that actually disperse the money and audit the businessmen is ... take it slow, zilch, nada. At the end of the term of the loan, you get your money back and retain the option of either taking the money or rolling it into another loan. Great stuff!

Monday, June 04, 2007

The CDO Mess Waiting to Happen

If you haven't heard of CDOs, you haven't been paying attention to what might be one of the great financial crisis of our times. A CDO, or a collaterized debt obligation, is essentially a collection of poor quality mortgage loans that have been packaged together by the rating agencies like Moody's and blessed with a credit rating like a bond. I have blogged before about this topic. Bloomberg had a fantastic article that deals with the issue. Here's something that stunned me:
Corporate bonds rated Baa, the lowest Moody's investment rating, had an average 2.2 percent default rate over five-year periods from 1983 to 2005, according to Moody's. From 1993 to 2005, CDOs with the same Baa grade suffered five-year default rates of 24 percent, Moody's found.

Thursday, May 24, 2007

India's Traditional Knowledge Digital Library

I found this story very interesting: tired of American companies applying on patents for indigenous knowledge, the Government of India is building a Traditional Knowledge Digital Library, a giant database of indigenous knowledge from the medical traditions of Ayurveda (in Sanskrit), Siddha (in Tamil) and Unani (in Arabic, Urdu or Persian). This is a phenomenal effort in which some 30 million pages of ancient texts will be converted into digital data.

Quote of the Day: Angela Kelley

Angela Kelley of the National Immigration Forum on the Newshour, addressing criticism that the new immigration bill on the Hill amounts to amnesty:
What's the alternative, Ray? We deport 12 million people? We spend $240 billion a year over the next five years to do that? That's more than the DHS [Department of Homeland Securitty] budget.

Wednesday, May 23, 2007


Some links to stories that caught my eye ... with of course my 2 cents!

Forget all you know about the income gap between rich and poor. USAToday analyzed the data and found the income gap is a generation gap, where the baby boomers are prospering, while the younger among us are suffering. If true, this should strongly influence policy. Social security and Medicare reform, anyone?

American Public Media's program Marketplace reported the UK government is introducing Sharia bonds, bonds that steer clear of un-Islamic enterprises like gambling, to attract the untapped Muslim financial enterprises. There are some interesting issues, but this led me to think of a crazy idea. The story interviewed a lady called Ms Thorneycroft of Lawyers Christian Fellowship, who protested that the government could be attracting money with strings attached - say, no funding for media purposes. Bad, right? Well, what if we embraced that principle partly - say, cut taxes in general, but allow taxpayers to allot upto a certain percentage of their tax revenues to certain causes. Think we need more education funding - fine! But then you have to cut out spending on other causes. I think allowing the taxpayer to be much more involved in spending will lead to a citizenry much more cost conscious than what we have now.

Got to love the double standards politicians have. So workers coming together in a union to negotiate higher wages - good. Oil producers trying to make sure they generate adequate revenues for their masses - bad. Anti-trust lawsuits, screams the US House. Well, phooey! It's amazing what passes for leadership when gas prices are high. Here's a suggestion to those respected members - if you want to solve economic threats, develop some vision. But seeking to break the oil cartel is not only beyond your abilities and bad policy, it also pushes poor people on the brink further down to subsidize a rich nation addicted to consumption.

Mr John Edwards has been in the news recently for receiving $55,000 in speaking fees to address a group of UC Davis students. Of course, he's hardly the only one - the story points out former President Bill Clinton pocketed $100,000 while Mr Rudy Giuliani charged Oklahoma State University $100,000 for a speech -- and $47,000 for the use of a private jet. So, setting aside partisan rhetoric ... why should schools spend those superbucks on attracting candidates and the like? Doesn't that account to a misuse of public money? How come there aren't equal access clauses like there are with the public airwaves. Not that that is the solution. In the end, we should do with politicians what we do with musicians - if you want to hear them, you can pay out of your own pocket!

Monday, May 21, 2007

Damning Testimony

I have not been following the news very actively recently (and probably won't for the rest of the month), so it came as a surprise when I heard about Jim Comey's testimony to the Senate Judiciary Committee on Face the Nation. I pulled up the video from YouTube. This is a MUST WATCH, 20 min long but a real outrage.

Here are the Cliff notes version: Jim Comey was acting Attorney General when John Ashcroft was hospitalized. Comey and Ashcroft had decided that the terror spying program wasn't strictly legal, so Comey as acting AG refused to certify the program's legality. White House officials including then-counsel Gonzales then try to take advantage of an ailing Ashcroft by heading to the hospital and making him sign a document he no longer had the authority to. The details are shocking and makes me a little sick to the stomach!

Friday, May 18, 2007

Socialized Medicine

Just heard a clip of Congressman Ron Paul, presidential candidate, pointing out that the quality of care at Veterans Administration hospitals is what you can expect from government medicine. At a time when people are happy to criticize the VA and yet want more government involvement in healthcare, this helps put things in perspective. Think VA, think DMV, think any of the myriad bureaucracies we deal with - do we really want more of that crap?

Thursday, May 17, 2007

Paul and Moore are Good for American Democracy!

Recently there has been a lot of heat on two individuals from opposite ends of the spectrum. On the one end is film maker Michael Moore, superhero to the left, whackjob to the right. His latest movie, Sicko praises the socialized systems of Canada and Cuba, and has got him in trouble with the law for violating a trade ban. On the Republican side, Ron Paul, candidate for president is facing heat from his party for saying that 9/11 was the fault of American interventionism in other countries' business. There is a temptation to cast both aside as looneys, but maybe we shouldn't.

First Moore. His movies are biased and predijucial, and frankly often dishonest. And yet they're powerful. I hate Moore's politics, and him personally, and yet would never turn down the opportunity to see a Moore flick, simply because he has a way of putting his viewpoint in perspective. I have read that in Sicko, Moore deals with the death of an 18-month old who was denied access to the ER. Inflammatory? You bet, as it should be when an infant dies. Of course, Moore papers over the flaws in the Canadian and Cuban systems, but then again, no one in their right mind would consider Moore balanced.

Ron Paul is less famous, but I think he does more to uplift the Republican debates than so many of the candidates out there. Don't get me wrong - I principally oppose many of his viewpoints. And yet, there is something to be said for a candidate who believes in what he does and is willing to stand by it, who doesn't answer by opinion polls or pander to a base. Here's what I believe - take it or leave it ... that's an exciting credo. And it brings focus to issues rather than personalities. Indeed, I find myself waiting for his turn, even if I shake my head when he talks of disbanding the Department of Education or essentially abolishing a foreign policy.

Thursday, May 03, 2007

A Garbage List

What does it mean when a list of Top 100 most influential people excludes the most influential person in the world? It means it's garbage, nonsense, not worth the paper it's printed on (hmm, someone needs to come up with a phrase more appropriate for our cyberage). Which is what Time magazine's latest Time 100 list is. Evidentally, Oprah Winfrey and Tina Fey are more influential than President Bush. So what if the latter controls the most powerful nation, has the most imposing military in the world, has to ensure the continued success of the global economy and has at his disposal to blow up half the world. Tina Fey is funny, and evidentally that makes her more important.

Wednesday, May 02, 2007

Wednesday Morning Ramblings

Some of the things I'm looking at or thinking about as I work on my models (computer models, silly!) ...

A sign that things in the Middle East aren't as simple as fundamentalist or liberal - Iranian President Mahmoud Ahmedinejad is being attacked for indecency after he embraced and kissed the hand of a former teacher. A fully gloved hand, mind you. Interestingly, the article points out his previous trangression among conservatives was to suggest that maybe, just maybe, women could be allowed to attend football games! Shocker!!

Rupert Murdoch wants to buy the Dow Jones company, meaning the Wall Street Journal would be his. The family is reported to be not interested, but it gives you pause. Could Murdoch take over the entire Fourth Estate someday?

The American Research Group's new poll shows McCain leading in all 3 vital primary states - Iowa, New Hampshire and South Carolina. McCain has gained 6% in New Hampshire in the last month, but in Iowa, the story is of Guilani losing a solid 10%. No idea why that happened! So maybe McCain isn't quite down and out. Of course, with the front-loaded primary schedule, these states may not be as important as before.

On the topic of McCain 2008, here are some thoughts for his campaign. While he's still my pick for President, I think it might be time for his campaign to think what it reflects of his performance as a president. He's spent too much money too ineffectively, hardly a prescription for appealing to conservatives. Conservatism is about smart investments, and right now, McCain's return on investment is pretty poor. Also, while he has correctly chosen to focus on Iraq, there are other issues he needs to address. How about railing about runaway spending? Entitlement reform? Taxes?

And finally, at a time we are obsessing about our increasingly violent society in the aftermath of the Virginia Tech shootings, this figure helps us relax a little more. Turns out we are getting less violent after all ...

courtesy: DOJ Bureau of Justice Statistics

Monday, April 30, 2007

Pressure Maliki, for Heaven's Sakes!

Today, there was a story about how Iraqi President Maliki has been sacking senior officers who have been too aggressive on the Shiite militia's like al-Sadr's Mahdi army. This is starting to get old, and it's high time the US started to put more pressure on him. Not just pressure that US forces will leave if there is little political progress, which is useful to a point, but also maybe we need to start talking partition. Democratic presidential Joe Biden is the only one who has seriously pushed this idea, and there certainly are numerous challenges, but as the alternatives dry, it might be a good option to keep pushing if for no reason that to keep Maliki on his toes.

A few thoughts on partition, by the way. The common response is Turkey would never allow an independent Kurdistan, and the rest of the Iraqis wouldn't accept a breakway republic with most of the oil. Maybe so, but as I see it, Turkey has little leverage in this debate - the US could "accept" a Kurdish offer for permanent bases that would deter any Turkish aggression. The oil is trickier, but is precisely why the US needs to start considering this option more seriously - it sends a message to Shiites and Sunnis that a prolonged stalemate could be the equivalent of singing sayanora to their oil riches.

Our Dishonest Gun Debate

It has been two weeks since the brutal murder of several Hokies by a deranged student, and now I finally post on the issue. My silence was not based on a lack of interest, but rather on a desire to avoid pronouncements during an emotional state. (Living but a few hours from Blacksburg, and almost having gone to VT, having actually met one of the professors who was killed, it certainly was a bit overwhelming!)

No, I'm not going to delve into Cho or his history. Nor will I talk about what Tech officials could or couldn't have done, beyond saying that the criticism of the administration soon after the incident was somewhat misplaced. What matters most to me is the longer structural question of gun control. I have tried to form an opinion on just where I stand on the issue, but that effort has been frustrated by the phenomenal dishonesty by both sides of the debate, seeking to prop their interests by skewing or outright lying.

The most prominent example of that dishonesty was a column by former Senator and presidential hopeful, Fred Thompson, of Law & Order where he argued that gun-control reduces violence. A well argued point, except he used as an example the fact that Great Britian, with the strictest gun-control laws in the planet, had higher gun-related deaths per-capita than the US. I knew that wasn't true, so I turned to peer-reviewed literature (the advantage of being in academia). Hmm, at least this one paper showed it not to be true....

I first thought Thompson had used a clever trick - by lumping terrorism-ridden Northern Ireland with England & Wales, the number of gun deaths would be artificially inflated (of course, you could add American soldiers who died in Iraq in the US toll to skew American numbers!) But an analysis by Dr Martin Killias at the University of Lausanne in Switzerland reveals the per-million gun homicides rates in England & Wales was 0.8, Scotland 1.1, Northern Ireland 21.3 ... and the US 44.6. So it's possible Fred Thompson just flat out lied.

And yet the claims that gun control works are just as dishonest. Cook and Ludwig found in a study published in the Journal of the American Medical Association in 2000, little impact of the gun-control law, the Brady Act in reducing gun violence. This is something much of the mainstream media doesn't seem to acknowledge. Gun control doesn't really always work - it appears to have in tiny UK, but in a country as large as the US, there seem to be ways around it.

What then to make of a gun policy? If the statistics are inconclusive, we need to turn to moral arguments. Here too, I'm torn between the two sides. I do believe every person needs the right to own a gun and defend him- or herself - if I lived in a big city, I do not want to rely on the police when travelling through a violent neighborhood. And yet, I don't find the need to undergo a background check or register my weapon unnecessarily intrusive - after all, I do have to jump some hoops before I can operate a vehicle - why should a killing weapon be any different?

And then there are philosophical questions to answer. What happens when there is a military coup, or we have an government that is unresponsive to the people? As ridiculous as it sounds, this would hardly be the first time. Or what if we have a Holocaust-style effort at ethnic cleansing. Private militias would protect the interests of the people when existing systems break down (yes, it's true that right now, private militias are a bunch of crazy zealots who want to cause anarchy even if it means killing innocent civilians)

And then the talk of guns used as a deterrent in situations such as VT. Do we really want untrained members of the police trying to handle a situation when police officers undergo hours of hostage training for this purpose?

When all is said and done, it appears there is still a lot to think about when we talk guns.

Postscript You probably have thought a bit about Columbine in the last couple of weeks, and probably Michael Moore's interesting movie, Bowling for Columbine. James Tucker wrote a fascinating (and non-political) critique of the movie in the journal Global Crime, that you can read here.

Quote of the Day: Thomas Jefferson

First up, sorry for not blogging more often. Personal circumstances have prevented me from being as active as I'd like, and it's likely my blogging might remain spotty for the better part of the next month.

I was in Washington, DC with my parents last weekend, and was really struck by the following quote by Thomas Jefferson. At a time when we seem to obsess about what the Founding Fathers had in mind, it's interesting that one of those men certainly hadn't intended the stubborn dedication to their thoughts and views. This inscription is on the Jefferson memorial, along with more famous quotes:
I am not an advocate for frequent changes in laws and constitutions, but laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as new discoveries are made, new truths discovered and manners and opinions change, with the change of circumstances, institutions must advance also to keep pace with the times. We might as well require a man to wear still the coat which fitted him when a boy as civilized society to remain ever under the regimen of their barbarous ancestors.

Thursday, April 05, 2007

Coming Clean ...

NPR's Opinion Page had a recent piece on how bloggers need to come clean just as professional journos do. While I certainly don't have the audience to have companies send me free products to review (although I am available for anything free!), I thought I'd take a couple of minutes to review any conflicts of interest I may have.

First off, politics. I was a Communist growing up, and it's only when possibilities arose when India opened up did I realize how screwed up leftist ideologies are, and the potential markets have to unleash individual creativity. I have definitely moved far to the right, but I'm still a tree-hugging, pro-immigration (duh!) conservative who tends to be a social moderate who wants government out of people's lives, except when they need to be there. Hmm, this isn't going so good...

I think the real estate market is due for a crash, and worry about the common man and about friends. At the same time, I have recommended home ownership to some people based on their particular circumstances, and I myself wouldn't mind finding a bargain.

I think the stock market is overvalued, but I own my share of stocks and mutual funds. I have recently exited positions in mutual funds in small caps, emerging markets and some fixed-income, but I still have investments in the market.

I am not sure global warming is a crisis, but I think we can't afford to wait to find out. But I still drive a car (it's a fuel-friendly Honda Accord!) I invest in companies that are proactive in global warming such as Duke Energy, but also in those that aren't, including Ford and oil & gas companies.

I think people eat too much crap, and I sure rant about nutrition, but I eat a bowl of ice-cream every day. And if something is free, I'll eat it. Unless it's a doughnut ... I don't do doughnuts!

I'm sure there are others I can't think of now, but let's just say, my disclaimer policy is ... "do as I say, not as I do!"

Pelosi Alert!!

Always watch out for a politician who has too exaggerated an opinion of him or herself! The latest victim to this self-indulgent think is Speaker Nancy Pelosi, who seems to think that just because she's the first speaker of the House, she needs to try and be a pseudo-president. Her latest escapade was a damaging trip to Syria, where she conveyed a peace message from Olmert and "determined the road to Damascus is a road of peace". Except that Olmert's office denies it ever sent a peace message, and Syria is hardly a peaceful country, implicated in the assasination of the former Lebanese prime minister and supporters of the malicious Hizbollah.

What Ms Pelosi did achieve was to perpetuate a sense of American weakness - the idea that the insurgents in Iraq have used to egg each other on - that democracy weakens the spirit and that when the going gets tough, America gets going. I'm all for negotiations with all parties, but when a speaker of the House choses to subvert the elected leader of the free world, it makes you shake your head in disgust. But forget me, even that liberal bastion, the Washington Post had a damning editorial on Pelosi's foolish shuttle diplomacy.

Wednesday, April 04, 2007

Start the Cuts!

A day after the Supreme Court ruled that it was within the EPA's jurisdiction and responsibility to regulate greenhouse gas emissions, President Bush assured the public that he takes climate change very seriously. A sign of change? I was hoping so until I saw this:
... anything that happens cannot hurt economic growth. I care about the working people of the country but also because in order to solve the greenhouse gas issue over a longer period of time, it's going to require new technologies, which tend to be expensive.

Being a hard-core capitalist myself, I appreciate not affecting the economy, but I think there has been enough done by companies such as Duke Energy and Toyota, to suggest that a proactive approach to global warming could be an opportunity rather than an obstacle to greater growth. The US, with its technological prowess, is uniquely capable of leveraging its assets to be the climate change solution provider of choice for much of the world.

But waiting for technology is a mistake! The reality is that the solution is conservation and energy efficiency, not in supporting ludicrous ideas like embracing ethanol (about which I have ranted before). A good start would be a fuel tax or some increase in CAFE standards. Indeed, transportation is the one of the most inefficient segments of our energy market. The chart is from the Department of Energy, and shows that the transportation segment accounts for under 30 quadrillion BTUs of energy consumption, but produces about 500 million MT carbon equivalent! A progressive taxation system, where gas sippers are exempt while guzzlers are heavily taxed would encourage energy efficiency.

It does seem strange for a market-solution lover to be embracing taxes, but that is the only situation when markets don't reflect the true costs of doing business.

Tuesday, April 03, 2007

Quote of the Day: John Mackey

John Mackey, CEO of Whole Foods Market in a conversation with Kai Ryssdal in the program Marketplace on American Public Media:
Well, in the United States, the average individual in America, we spend about 8 percent of our income on food. They spend about 15 percent in Europe, and about 20 pecent in Japan. So if you've been to Europe and you've been to Japan the quality of their food on average, in my opinion, is higher than it is in the United States. Americans make a tradeoff; we trade off less expensive food and it's not as good and we're also if you look around we're suffering an obesity crisis in the United States; we eat a lot of crappy food in the United States.

And we could afford to eat better. But we are . . . we have come to believe that we're entitled to cheap food, not understanding that there's a direct relationship between quality and how much something costs. We don't make that . . . if you think about the other parts of our lives, we know that automobiles vary tremendously in quality as does computers, as does stereo equipment as does cameras as does every other part of our lives, but in food we somehow or another think God, we really need to buy the cheapest stuff possible and we kind of treat our bodies not very respectfully.

It is an extraordinary interview with a man who dropped out of college 6 times, studied philosophy, not business, lost half of the seed capital of $45,000 in his first year operating an organic food store, and came on to build the nation's largest organic food store. Listen to the interview or read a transcript.

They Have Their Models!

I was watching a very interesting interview with Mr James Grant, editor of the Grant's Interest Rate Observer and a truly brilliant forecaster, and was stunned by some of what I heard. For all we have heard on the subprime mortgage market risks, most articles have focussed on the revenues of individual subprime mortgage providers. We have never really heard just how significant the subprime market is, and many articles have alluded to the subprime being a small fraction of the overall mortgage market.

Sub-prime and Alt-A [better than subprime, but below prime] represent 40% of the $8 trillion mortgage market. Hundreds of billions of dollars of CDOs were sold... You take 70% of a pile of BBB- (marginal)... 70% of this junk, is AAA. [How do they do that?] They have their models!

What is a CDO? CDO is a collaterized debt obligation - basically a package of mortgage loans that has been studied by credit rating agencies and assigned a certain risk. So basically agencies have used mathematical models to study recent correlations between the securities in that portfolio to classify the collection of junk as equivalent grade to a US Treasury. The problem, as Mr Grant points out, is that these models are based on what can be considered an anomalous recent period of lax lending, and the model predictions will turn out to be wrong. Indeed, a caption during the story pointed out that about 10% of subprime mortgages are delinquent by 90 days as of December 2006.

Mr Barry Ritzhold takes the focus to the effects on the economy, and the effect of the reset of interest rates on $2 trillion dollars worth of mortgage debt, that will result in monthly payments rising 10-50%. He cites a study by a title insurer, First American Corp., that projects that one in eight ARMs (adjustable rate mortgage) will end up in default. That's a stunning number, and in an economy that's already a little overstretched, may well cause a recession, in his opinion.

The risks associated with computer modeling though stretch further than the mortgage market. A bevy of hedge funds and "quant" investors have increasingly been relying on mathematics for investing. As one of my professors who teaches a water quality modeling course keeps reiterating, creating a model without the right data to support it is an exercise in academic gymnastics ... and foolhardiness.