Quote of the Day: Judge Gung-Ho

While trying to tag my old posts (something I've been putting off for a while), I came across an old post on Judge Gung-Ho, a bankcruptcy court judge and anti-credit card advocate. The post I liked then really struck a chord, and so I chose to post it as today's Quote of the Day:

The rule that I like to use is if it's $10 or $20, pay cash for it. If you can eat it or drink it, pay cash for it. And the best example of that is reported in the Wall Street Journal. When McDonald's started to allow people to use credit cards instead of paying cash, the average sale went from $4.75 to $7. Need I say more?

Travolta and the Celebrity Guidance

I'm tired of Hollywood types asking us to change our lifestyles. The latest in this lunacy is a string of celebrities pitching for modifications in our lifestyle to reduce global warming. First, there was former VP Al Gore, touring the world raising awareness while actually increasing his energy consumption since the movie came along! Tsk tsk, just purchasing credits doesn't allow you to come clean, Al! Now, there's John Travolta doing what Hollywood does best - lecturing us to reduce our carbon footprint, while himself being responsible for 800 tons of CO2 emissions, 100 times that of the average Briton. He owns and operates 5 jets, clocking in at least 30,000 flying miles in the last 12 months. Yeah, we need to cut our electricity consumption down, John - thanks for setting us straight!

I think we need to tell Hollywood types to just shut the f*ck up and stop using their public image to wax on topics unless they are prepared to make real sacrifices.

Think NFL Players Make Too Much?

Some random facts I chose to look up on a Saturday afternoon ...

The average NFL player makes $1.1 million a year. Seem like a lot? Well, the average NFL player only lasts just over 3 seasons, so if he doesn't have another profession lined up, he's guaranteed not that good a life. Oh, and by the way, only 0.2% of high school seniors who play football ever make it to the NFL. All said, maybe NFL players don't get paid all that much?

OUTRAGE! Politics at the GSA

This video of the congressional hearings on the General Services Administration, the purchasing department of the Federal government, is deeply troubling as it indicates that taxpayer money was being used to discuss how to use GSA resources to help Republican chances in '08. The politicization of our government continues ...

Firefox Add-On of the Day

If you're like me, you surf the web a fair bit. Some are reputed sites, some not so much. Some sites install spyware software, others (especially a lot of Indian sites, for example) just have plain annoying adware to get around pop-up blockers. Say goodbye to all your problems with the Firefox add-on of the day ... one of my favorite add-ons and enough of a reason to switch to Firefox if you still are on that dino called Internet Explorer ... drumroll ....

NoScript

NoScript disables all scripting until you specify that the provider is a truster provider (similar to your pop-up blocker) What is nice is that most sites keep their servers clean and any ad- and spyware is run from different servers, so I can (if I need to) allow the main server while continuing to forbid other servers.

In this day and age, I think security trumps most other considerations and NoScript goes a long way to making the Internet a much safer place. Find out more at the NoScript homepage.

The Big Ethanol Lie

Yesterday, President Bush and Detroit's Big 3 automakers touted cars running on ethanol, or E85, as the future. You know the spiel - reduce dependence on foreign oil, defend our national security interests, yada yada. Of course, the cars would be flex fuel, meaning they could run gasoline, but let's focus on the fuel of the future.

Well, it's a damned lie! Bush and his buddies in Detroit want you to think they went green, while doing not a damn thing (and this isn't even a partisan rant, for my readers know which way I slant!) But better than I could ever argue, I'll excerpt quotes from Robert Bryce, managing editor of Energy Tribune magazine, from a discussion on the Newshour yesterday. Here are some snippets:

The reality of the ethanol business now in America is that a lot of this rhetoric is simply being used to propagate more subsidies for this industry. The creation of corn ethanol is simply -- it borders on fiscal insanity. We're making subsidized motor fuel out of the single most subsidized crop in America. That's corn.

Second, when you look at the contribution now that corn ethanol is making and ethanol overall to the American oil mix, the ethanol industry produced about five billion gallons last year. That's the equivalent of about 200,000 barrels a day of oil equivalent. That's 1 percent of America's overall energy consumption.

If you took all of the corn in America, Ray, and converted all of that corn into ethanol, you'd produce about the equivalent of about 1.3 million barrels a day of oil equivalent. That's equal to about 6 percent of America's total oil consumption.

There's this idea somehow that, in the Renewable Fuels Association and these other ethanol boosters, that America can solve its oil imports and become more energy secure with ethanol. I think it's largely just a canard. This is just cover for propagating more subsidies for this industry.

Is ethanol really that green? Mr Byrce points out that the energy consumption in making ethanol means that there may be slim, or even negative, net energy produced by corn ethanol. So a lot of this is huey! Why are the Big 3 automakers behind it?

... the automakers are on board on this is that, by building E85 vehicles, what they are allowed to do is artificially inflate their CAFE numbers. They are actually able to artificially inflate their fleet efficiencies, and that is why they're so pro-E85. Last month, U.S. News and World Report estimated that, between 2001 and 2008, this CAFE credit loophole that they're exploiting is actually resulting in the U.S. burning something on the order of 17 billion gallons of additional fuel than they would otherwise.

And the solution. Mr Bryce is bold in calling for a motor fuel tax. Look, as a conservative, I don't like taxes, but I'm not dogmatic about them. But I would also cut the ridiculous subsidies provided to traditional energy companies, and impose a carbon-based tax on fuel.

Firefox Add-On of the Day

I love Firefox - I think it's simply the niftiest browser, and being open-source allows many users to address real issues. Unfortunately, most people don't recognize just how nifty some of these add-ons are, and to them, it appears like there isn't that much different from Internet Explorer. To encourage migration to Firefox, I'm starting an occasional post called the 'Firefox Add-On of the Day'.

And the Firefox Add-On of the Day is ...

CoolIris

CoolIris allows you to preview links before you open them. This is cool because it loads faster than clicking the page, and allows you to quickly navigate a page with multiple links, much faster than clicking each link and then hitting the back button would. You can select a phrase, and right click to look up its definition in the directory, or look for a Wikipedia entry on the phrase (something I do a lot), or instantly e-mail web pages. All this makes CoolIris the Firefox Add-On of the Day.

Learn more and download here.

Hillary and the 1984 Ad

If you haven't seen it, you must watch the anti-Hillary viral video put out by a supporter of Barack Obama. It is based on doctoring Apple's original ad, that was based on a Orwellian vision of the world. This is truly brilliant, and demonstrates how a little creativity (and not even that much - mind you, this was an existing ad!) can go a lot further than millions of dollars of ad-spending.

Airline Diets

During my recent trip to India, I flew United from Washington, DC to Frankfurt and then Lufthansa from there to Chennai. During my visits, it struck me how much airline food might reflect how the cultures eat. (Ok, so I don't really know how Germans eat!) A disclaimer - I ate vegetarian meals on both legs. The United meal was fatty and sugar-laden - breakfast was something like a Honey bun, and certainly something that would make a cardiologist see plenty bucks! The Lufthansa meal, on the other hand, was tasty, made with obviously fresher ingredients including olives and artichokes (YUM!). But the meal was also a lot lighter (bad for a big eater like me!). Even their soda cans are smaller! Maybe flying the national airline reflects a lot about the national diet?

Not Made in China

I heard this on a PBS program on China, and was so stunned I had to google it. Here's a factoid for you ...

China is losing more manufacturing jobs than the United States. For the entire economy between 1995 and 2002, China lost 15 million manufacturing jobs, compared with 2 million in the U.S.

source

That's quite a stunning revelation indeed, and should give pause to those politicians and commentators who claim an artificially deflated yuan is responsible for US manufacturing job losses!

DOJ Mess: Now Fitzgerald's No Good?

The Department of Justice mess continues. There's been a lot of outrage over how 9 US attorneys were sacked after the 2004 election. Attorney General Alberto Gonzales first claimed they were fired for poor performance, something that was decried by their recent performance evaluations. The incident has raised Congress' ire and there have been calls for investigations. That led to a document review, which produced this gem:

US Attorney Patrick J. Fitzgerald - co-prosecutor for the trial of Mafia boss John Gotti, prosecutor in the case against 12 accused of the 1993 World Trade Center bombings, who has served on a team of prosecutors investigating Osama bin Laden in 1996, chief counsel in 1998 US embassy bombings, who successfully exposed a bribery scandal involving then-Gov George Ryan of Illinios, a Republican, and indicted Mayor Richard Daley of Chicago, a Democrat, who won the AG's award for Distinguished Service in 2002, and successfully prosecuted former VP chief-of-staff "Scooter" Libby, has achieved a ranking of "not distinguished themselves".

Wonder what it takes to distinguish yourself if Fitzgerald hasn't done it. The scary part is not that someone made up a memo like this ("not an official position") but that people with similar status were fired! This administration has seemed to specialize in this kind of whimsical behavior.

But as the mud-hurling (justified, I might add) at the administration and the AG (who it seems has made it a regular habit to mislead Congress) continues, it would do us well to question our system. Why should it be ok to fire US attorneys to make way for partisan appointees, something Republicans and Democrats have consistently done? Why should it be ok to appoint judges on partisan lines? Heck, why do we appoint AGs on partisan lines? The consequences are a skewed justice system, where belonging to the wrong party gets you hounded while the right party can smooth away those ethics questions.

Author's Note

If I haven't been blogging much, it's because I was away in India. I just returned from a fabulous trip, and had much to write about before I got buried in work. So keep the faith that my brain will hold all that information ...

The Correction is Just Starting

If you believe the hype in most of the financial press, the "correction" last week was just the market needing some breathing room, because it got a little ahead of itself. All week, I've been subject to the same nonsense that "fundamentals are good" and that now is the time to go "bargain-hunting" (hmm, stocks were up 15% last year, but a sudden drop of 3% suddenly makes them bargains?) All week, I intended to pen a piece on why this was garbage, but the latest weekly commentary of John Hussman, fund manager of the Hussman Strategic Growth Fund helped explain a lot of what was on my mind (no accident since I'm a HUGE fan of Hussman - reading his weekly commentary is usually a Monday morning ritual for me!)

Needless to say, last week's decline had virtually nothing to do with China. While the decline in China (reflecting similarly overvalued, overbought and overbullish conditions) may have been a catalyst, blaming China for the U.S. decline is like having an open can of gasoline next to your fireplace and blaming the particular spark that sets it off.

What is the issue? It's valuations, silly! But what about those stories talking about how cheap stocks are relative to 2000. First, why is the year 2000, at the height of a ridiculously inflated stock bubble, a benchmark? Going across history, stocks aren't cheap. But they're even less so when you account for the historically high profit margins.

But isn't that touted as a good thing. The graph is courtesy of William Hester of the Hussman Funds, who showed that historical profit margins are rarely sustainable. Also, he showed that investors consistently overpay for those profit margins - the market has returned 3.45% annual return over 5 years when the margins when in the top 20%, and 15.69% when the margins where in the bottom 20%. Value investing - buying when no one else wants to - works!!

Additionally, Ben Inker of GMO, the investment firm that manages high net-worth individuals including Vice President Dick Cheney, points out that the surge in profitability has been in capital-intensive industries (see figure).

Hussman also takes on the popular talking points such as this nonsense of how the M&A boom means that stocks are a value - something I've ranted about previously:

A related theme is the notion that stocks must be good values because of the private equity buyouts we've been observing. It's important to understand that these buyouts are being done with OPM – other people's money – and that the main factor driving them is not low stock valuations but low risk premiums. Risky debt can currently be issued at interest rates barely above the low yields on default-free Treasuries. This will certainly end badly for investors in low-rated credits (as companies that issue sub-prime mortgages are beginning to realize). It is no indication of attractive stock market valuation. Investors should be skeptical enough not to draw conclusions from transactions that use OPM. It's interesting, for example, that analysts wax rhapsodic about corporations repurchasing their shares, while ignoring the fact that sales of personal stock by corporate insiders have rarely been higher (recently at rates of 8-10 shares sold for every share purchased). What people do with their own money is much more informative than what they do with someone else's.

So what's an investor to do? Ignore the press. Pare down stock allocations to no more than 50%, load up on high-quality debt (using a bond fund for most readers), focus on quality in stocks (harder to do if you use a mutual fund) and bonds (low duration, Treasuries or investment-grade). An investor is simply not being paid enough to take risk, as this chart from GMO shows.

The Iranians Love the US!

I was listening to NPR a couple of days back when Abbas Milani, the director of the Iranian Studies Program at Stanford University made an interesting observation: Iran is an interesting case in American opinion in the Middle East. Across the region, we have governments that are somewhat friendly to Washington, while the people hate the US. Iran is the oddball where the government hates the US, describing it as evil, while public opinion of the US is indeed very high. He cautions that in our efforts to contain Iran, we would do well not to damage that public opinion.

Meanwhile, a second aircraft carrier has moved to a strategic position relative to Iran. While this is possibly posturing, the risk we face is that if the Iranians make a "wrong" move, we might find an escalation on our hands.

Quotes of the Day

I haven't had a lot of time to blog recently, so in a coming-back event, here are not one but multiple quotes of the day, spanning a variety of topics.

Richard Russell, editor of Dow Theory Letters, on January 31, 20007, in what now looks remarkably prescient given today's stock market carnage:

China is in a stock-buying super-frenzy with people mortgaging their homes, taking out loans, doing anything and everything to get in on that wild ride on the Shanghai Exchange. From below 1,000 in June of 2005, the Shanghai Composite has tripled to a current 3,000. The Composite has gone parabolic ... The price of the composite is an astounding 36% above its 40-week moving average. If you're looking for international trouble, you might start looking here. The Shanghai Exchange is on fire, and it's hard to know what to expect next. What would a stock crash in China mean? It would have worldwide implications, and it would be deflationary, particularly for commodities. By the way, the Chinese authorities are now actively warning the populace about over-speculating ("irrational exuberance"?)

Wendy Wright, President of Concerned Women for America, a conservative group that focuses on women's rights, on the Newshour on PBS about the new trend for states to mandate HPV vaccines on kids as young as 11 to eliminate their risk of cervical cancer:

About a little less than 4,000 women a year die from cervical cancer. About 36,000 people a year die from the flu, but we don't mandate that each person get a flu vaccine.

P.J.O'Rourke, author of "On the Weath of Nations" speaking in a must-watch interview with Paul Solman of the Newshour on PBS:

I've never been able to get it straight about what these people who are worried about the trade deficit are worried about. When they say that we're buying too much from overseas, that we're sending too many dollars overseas to get all these goods and services they got, they're saying that the American dollar is too strong and that is hurting our economy. And the result of this will be that the American dollar will get too weak, and that will hurt our economy. Well, make up your mind! What are you worried about? Are you worried that the dollar is too strong? Or are you worried that the dollar is too weak?

Myths about the Bush Tax Cuts

The conservative Heritage Foundation takes on myths about the administration's tax cuts in a piece titled Ten Myths About the Bush Tax Cuts. While you should read the whole article, here's a sampling to whet your appetite:

MYTH: Tax revenues remain low.
FACT: Tax revenues are above the historical average, even after the tax cuts.

Tax revenues were 18.4% of GDP, much higher than the 20-, 40- and 60-year averages. We're getting enough in taxes ... deficits are because spending is out of control. And the spending we need to be concerned about isn't just defense spending, it's mostly entitlement spending. Here's another chart from Heritage Foundation, from a different source.

MYTH: The Bush tax cuts substantially reduced 2006 revenues and expanded the budget deficit.
FACT: Nearly all of the 2006 budget deficit resulted from additional spending above the baseline.

In fact, 90% of the deficit is attributable to spending increases. Take that, John Edwards and other tax-increase craving liberals!

MYTH: The Bush tax cuts are to blame for the projected long-term budget deficits.
FACT: Projections show that entitlement costs will dwarf the projected large revenue increases.

Here's another version of the entitlement chart, but showing how little tax cuts matter in the deficit picture:

Oh, and save the best for last ...

MYTH: The Bush tax cuts were tilted toward the rich.
FACT: The rich are now shouldering even more of the income tax burden.

I have complained previously that the rich pay a disproportionate amount of their income in taxes, but turns out the tax cuts have actually exaggerated that further (never have guessed from the populist rhetoric, would you?) For the record, I'm one of the impoverished taxpayers who contributes relatively little to the Federal revenue stream.



So the next time a populist politician like John Edwards or John Kerry tells you that the tax cuts helped only the top 1%, tell them you're too smart to be fooled by their dishonest propaganda!

Contemplating Death ... and Life

The last 24 hours have been filled with thoughts on the end of the road. No, I'm not suddenly missing my Prozac or any such event that may cause concern. Rather the current state of introspection has been triggered by the news of the passing away of a former fellow graduate student, who I'll refer to simply as L for privacy.

L was a charming young girl from Africa, greeting whom was part of my morning ritual when I got in to work. That someone in that position, a seemingly heathly woman no more than a few years ahead of me, could have her presence so suddenly terminated is enough to jolt you. And that got me thinking, if I could look back at my life, in some other world, if you will, what would I see? I remember reading somewhere that death is a funny event, because you know it will come, and yet you're never ready for it. But at least people of a certain advanced age spend time contemplating the issue. Here I am, in what might consider the prime of my life, and yet who knows what fate awaits me.

No, this isn't some depressed cry about not wanting to go. Rather it is a realization of the somewhat sober fact that my life hasn't amounted to that much. If I were to pass, how would the world be without me? Save my family, I dare say not by much. To be sure, friends will expend some tears remembering how life was, but as time goes by, I wouldn't expect too many people to notice much of a change.

And maybe that's how it's supposed to be. People die all the time, life is about moving on. I try to live my life trying to make sure that people never shed a tear on my account, so why should death be different? Ah, but I think that's where some of us have the same affliction as presidents, the need for a legacy!

Knowing death is coming has an interesting effect - it gets you to contemplate life. This idea is not new; in fact, it's one of the reasons I love the book 'Tuesdays with Morrie' (which you have not read is an absolute must-read!) But the death of someone so much like you tends to get your attention and make you focus. There's a Hindu prayer that seeks the Knowledge to transcend from death, not in a bodily sense but rather to transcend the body. So maybe in that spirit, it's only fitting that death of a body becomes a catalyst for renewal. What more fitting memorial than a pledge to reform your life?

"Reform your life" sounds like something an evangelical might say in a religious context. And yet the reality is that the vast majority of us, including yours truly, are living immensely mediocre lives. Now the vision of a reformed life might differ - reactions to the impending mortality of our existence triggers pronouncedly different responses. Some choose to embrace their passion, be it art of sport, choosing to leave their imprint for generations to come. Others opt instead to live every remaining moment seeking out the greatest joy that can be sought, in the form of food, spirit, adventure, or embracing the unaccepted.

The way forward for me, I believe is to try and improve my societal footprint. That word has been used in an environmental context, and certainly that is important, but the idea that mortality could come sooner helps me realize all those aspirations I once had, eventually consigned to the heap of impractical, as I embraced society's ideas on money and love, and the sensual paradigm (our contemporary emphasis on sense pleasures, rather than higher ideals). The character Justin Moreward Haig, in the not-truly-fictional novel 'The Initiate', advises a man who has left his wife of many years for her infidelity, that a fool is one who, because of his vanity, doesn't mind being considered a hero, while a hero is one who, because of his lack of that attribute, doesn't mind being considered a fool. What then do you call a man who throws his beliefs for the voice of "reason"?

Of course, the great challenge is memory. Moved by the death of a close friend or loved one, it's easy to pledge action, but as anyone who has ever made a New Year's resolution knows, a pledge isn't really that much...

Book of the Day

Just yesterday, I recommended Ruby Payne's A Framework for Understanding Poverty to a former student and now fellow grad student (hmm, when your students become your peers, maybe it's time to graduate already?) Payne's extraordinary book is aimed at middle-class teachers to understand that poverty is much more than a lack of money, but I think the book does an extraordinary job of understanding the choices people, and not just those in poverty, make based on the resources at their disposal. I'm a strong believer that people are shaped by environmental cues, and this book helps remind me that people's behavior isn't always an indication of a rational choice, but often a function of learned behaviors (in the book, Payne talks about the "rules of being poor", but you could extend this to just about any situation)

Unhappy Meals

You've got to love an essay that starts like this:

Eat food. Not too much. Mostly plants. That, more or less, is the short answer to the supposedly incredibly complicated and confusing question of what we humans should eat in order to be maximally healthy. I hate to give away the game right here at the beginning of a long essay, and I confess that I'm tempted to complicate matters in the interest of keeping things going for a few thousand more words.

What follows is Michael Pollan's brilliant (and humorous) essay in the International Herald Tribune, titled Unhappy Meals. But before you shut your browser and head out to snack on your favorite brand of potato chips, consider this:

And you're much better off eating whole fresh foods than processed food products. That's what I mean by the recommendation to eat "food." Once, food was all you could eat, but today there are lots of other edible foodlike substances in the supermarket. These novel products of food science often come in packages festooned with health claims, which brings me to a related rule of thumb: if you're concerned about your health, you should probably avoid food products that make health claims. Why? Because a health claim on a food product is a good indication that it's not really food, and food is what you want to eat.

In a piece that spans 14 pages, he turns to expose why our nutrition system is quite so confusing, exposing the politics and the economics of making things that way.

It's hard to imagine the low-fat craze taking off as it did if McGovern's original food-based recommendations had stood: eat fewer meat and dairy products. For how do you get from that stark counsel to the idea that another case of Snackwell's is just what the doctor ordered?

And fundamentally points to getting back to food, rather than nutrients in processed foods:

Of course it's also a lot easier to slap a health claim on a box of sugary cereal than on a potato or carrot, with the perverse result that the most healthful foods in the supermarket sit there quietly in the produce section, silent as stroke victims, while a few aisles over, the Cocoa Puffs and Lucky Charms are screaming about their newfound whole-grain goodness.

Here's another classic paragraph on why you should ignore the scientists and focus on what has worked for centuries:

Also, people don't eat nutrients, they eat foods, and foods can behave very differently than the nutrients they contain. Researchers have long believed, based on epidemiological comparisons of different populations, that a diet high in fruits and vegetables confers some protection against cancer. So naturally they ask, What nutrients in those plant foods are responsible for that effect? One hypothesis is that the antioxidants in fresh produce — compounds like beta carotene, lycopene, vitamin E, etc. — are the X factor. It makes good sense: these molecules (which plants produce to protect themselves from the highly reactive oxygen atoms produced in photosynthesis) vanquish the free radicals in our bodies, which can damage DNA and initiate cancers. At least that's how it seems to work in the test tube. Yet as soon as you remove these useful molecules from the context of the whole foods they're found in, as we've done in creating antioxidant supplements, they don't work at all. Indeed, in the case of beta carotene ingested as a supplement, scientists have discovered that it actually increases the risk of certain cancers. Big oops.

My intent is not to present too much of the article, for really it is best read as the author intended, in one piece, but I leave you with one last tidbit:

For reasons of economics, the food industry prefers to tease its myriad processed offerings from a tiny group of plant species, corn and soybeans chief among them. Today, a mere four crops account for two-thirds of the calories humans eat. When you consider that humankind has historically consumed some 80,000 edible species, and that 3,000 of these have been in widespread use, this represents a radical simplification of the food web. Why should this matter? Because humans are omnivores, requiring somewhere between 50 and 100 different chemical compounds and elements to be healthy. It's hard to believe that we can get everything we need from a diet consisting largely of processed corn, soybeans, wheat and rice.

Also, if you don't have the time to read the whole article (shame on you!), at least skip to page 12 to look for Pollan's tips on how to restructure your diet. You will lose a lot, but I guess it's better than losing it all!

Quote of the Day

Stephen Colbert, comedian and host of the Colbert report, on Bush's healthcare proposal to allow tax deductions to encourage greater access to health insurance among the uninsured:

It's simple. Most people who can't afford health insurance also are too poor to owe taxes. But if you give them a deduction from the taxes they don't owe, they can use the money they're not getting back from what they haven't given to buy the healthcare they can't afford.