Monday, December 31, 2007

Random Bullets of New Year's Resolutions

by Tom Bozzo


Happy New Year!

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93 Banks are not Rational Actors -- or they have just been subsidized

by Ken Houghton

I've been trying not to think about this quote from CR:
The Federal Reserve said on Wednesday that it had collected bids from 93 financial institutions in its first auction of short-term credit, a turnout that suggested banks might be more inclined to borrow from the Fed under its auction-based system.

And the more I don't think about it, the more my shoulder hurts.

Because despite the NYT's attempt to paint it as a positive, the results were ugly:
Winning bids were awarded at a 4.65 percent interest rate, lower than the Fed’s so-called discount rate, which normally regulates borrowing from the central bank. The discount rate was lowered to 4.75 percent last week.

Now, that's nice, but the "discount" rate, since the advent of the Bush Administration, has been higher than the Federal Funds rate, currently by about 50 basis points (1/2 of 1%).

In the grand tradition of the Spherical Cow joke, "Assume a bank is a rational investor." But wait; isn't that a tenet of economics?

So we have to assume these investors are rational. Which means that they knew what they were doing when they bid 40bp above the Federal Funds rate (higher yield, that is, they are taking a lower price) to lend securities to the TAF.

Let us assume, for the sake of argument, that there is an "anonymity premium" (though how much anonymity there can be when the NYT says "93 banks"—not 92 or 94 or some other number—is left as an exercise). It's not going to be 40 basis points. So there is, theoretically, money being left on the table—by precisely those institutions that know when money is being left on the table.*

Unless it's not.

And in that case, we can easily construct the equivalent pricing in the market. The formula is straight algebra: Principle * Interest Rate * (Number of Days)/360.

The banks borrowed $20 billion for 28 days at 4.65%. They're spending $72 1/3 million dollars to exchange some securities for cash. If those securities had been traded at those same prices, at the Federal Funds rate of 4.25%, the banks would have spent $66 1/9 million.

The banks, in theory, left $6 2/9 million on the table.

So, if we look at economic reality—in which a bank would not do that—we have to come to the obvious conclusion: the value the Fed was willing to place upon those securities was at least 8.6% higher (40/465) than the price those securities would have fetched were they used as collateral in the open market.

The "technical" term for the TAF is "corporate welfare." Anyone who tells you otherwise is trying to sell something—probably overvalued securities.


*I'm belaboring this point, but it's central. This is not a consumer hoping to spend $1 on a present and finding out that the present costs $1.01 or even $1.05. This is a financial institution that survives based on not paying $1.01 for an asset that is worth $1.00. While Homo economicus has always been a simplifying proxy for consumers, it's a fundament for financial management.

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Saturday, December 29, 2007

Sweet, Sweet Wi-Fi

by Tom Bozzo

Suzanne and I went for a walk this morning in Wilmington in shirtsleeves (though I wished for my lobster gloves a couple times), then landed in Minneapolis this afternoon after a small ATC delay caused in part by the bit of fresh snow on the ground amid subfreezing but not-too-cold-for-Minnesota conditions. I wouldn't go so far as to say that I'm back — I have to recover from 2-1/2 hours in a middle seat between the children with Curious George videos playing on the laptop — but I am trying to catch up with the world via Jon Swift's big blog post roundup [*], and it wouldn't be a bad thing for you to do so too.

[*] Our contribution (nominated by me) is Kim's blockbuster post from June on scientific knowledge by religion as measured by the GSS.

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Wednesday, December 26, 2007

Inadvertent Quote of the Day

by Ken Houghton

Louis Hyman sends a shudder through Ken Lewis's heart:
Homeowners cannot build equity in an overvalued house, no matter what the terms of the mortgage.

In the "ownership society," equity is all, and voting with your feet becomes the right thing to do.

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We Are Tagged, and Tom Seems to be Away

by Ken Houghton

UPDATE: Let's do this the easy way. Please feel free to Tag YOURSELF, and note it in comments.

Cactus at AngryBear tries to get into the holiday season by continuing a meme. The problem is that he does it so well that my usual answers would seem pale imitations. So I'll try to play this straight.

1. Wrapping or gift bags? Gift bags are even more suboptimal use of resources than wrapping paper, plus they cost significantly more.

2. Real or artificial tree? Artificial trees are a far superior use of resources, plus they are reused and therefore economically efficient, even including the nominal storage cost. My personal preference for the Silver trees with the light from below with the tri-color (none of them green) filter shining up from below has been vetoed for the past several years.

3. When do you put up the tree? I don't; it goes up whenever Shira finds it in the attic (q.v. storage costs, above) and decides it needs to be on display. The relationship of this timing and the persistent requests of small children is left as an exercise to the reader.

4. When do you take the tree down? As soon as possible. I presume it will be down before Pesach this year.

5. Do you like egg nog? No, I'm human. And rather lactose-intolerant anyway.

6. Favorite gift received as a child? Probably a bicycle, certainly not for Xmas.

7. Do you have a nativity scene? Uh, no. What does that have to do with celebrating the Solstice anyway?

8. Worst Christmas gift you ever received? The day off, since consultants don't get paid.

9. Mail or email Christmas cards? Mail, of course. Have to keep Tom's consulting business going.

10. Favorite Christmas Movie? Anything other than Sophie Marceau is not Enough.

11. When do you start shopping for Christmas? I don't, though I did have a few years of sending holiday cards out annually on December 28th.

12. Favorite thing to eat at Christmas? This is a family blog, so let's just leave the answer at "Food, Glorious Food!" Or, in honor of a Season One Torchwood episode, bananas.

(FYI to cactus: Pomegranates were still available at Costco in NJ a few weeks ago.)

13. Clear lights or colored on the tree? Whatever. Probably colored, since the tree is small.

14. Favorite Christmas song(s)? Robert Earl Keen's "Merry Xmas from the Family," which appears to now be available as a book and CD set.

If it has to be a "traditional" carol, then "I Saw Three Ships," since the Nina, the Pinta, and the Santa Maria arriving at landlocked Bethlehem must have been quite a sight.

15. Travel at Christmas or stay home? I married into what is now a 20-year tradition of a party for "Jews and Orphans" on 25 December. So while I might prefer to travel, I cannot and stay married.

16. Can you name all of Santa’s reindeer? No, and not just because the bit players and taxi squad are never named. By the way, now-F&SF editor Gordon van Gelder's first professional story sale was "Santa's Tenth Reindeer." Gordon was a teenager at the time.

17. Angel on the tree top or a star? I am told that Shira put a Star of David on top. The Eldest put an angel on top of that, so I suppose the answer is both. (The angel, in the TMI category, is as large as the tree itself.)

18. Open the presents Christmas Eve or Christmas Morning? Shira's birthday is December 27th. I really need to go shopping.

19. Most annoying thing about this time of year? End of Year donation solicitations to those of us not independently wealthy enough to have an equivalent of the Samwick Family Fund.

20. Do you decorate your tree in any specific theme or color? See above answers, especially to questions 3, 13, and 17.

21. What do you leave for Santa? Nothing; I tried to file a restraining order, but couldn't get Shira to co-sign it.

22. Least favorite holiday song? If I can only pick one, I would follow the crowd and select "Last Christmas." But in trying to find the appropriate blog link, this one made it clear that, as with greasy, tasteless, potato chip, no one should pick just one. (Though I like The Kink's "Father Christmas," which at least captures the spirit of the season appropriately.)

23. Favorite ornament? Ornaments impede gas mileage, so I really don't have one. The discussion of the BMW ornament in Sean Connery's last great movie indicates some incidental value to them.

24. Family tradition? Good song, but I prefer the work of the Hanks on either side of Bocephus.

25. Ever been to Midnight Mass or late-night Christmas Eve services? Usually during a pub-crawl.

Tom will tag people when he gets back.

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Sunday, December 23, 2007

"I Am Not Left-Handed"

by Ken Houghton

I haven't fallen in two runs, and am less than 100 yards from the end of a third. The snow has stopped, the cover is good, and the rest of the day can be spent experimenting. It will be a good season for the first time in years.

I hear POPping before I realize I'm face-down in the snow. I get up about ten minutes later, but any sense of mobility formerly associated with the right arm is long gone.

The good news is that The Eldest finished her lesson and is eager to go back.

The bad news: I tell Shira that we have made tentative plans to go again New Year's Day. Her response, "After the X-ray?"

The better news: Range of motion is back to almost 60 degrees. A few more days improvement and I may not have to find out how good University Health Services is during the intercession. But blog posting will be intermittent, which is good since I've been looking at house prices in Barstow via redfin, and most of our readers can evaluate those as well as I.

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Friday, December 21, 2007

Low-Hanging Fruit

by Ken Houghton

The Sainted Tanta decides not to pick just on "Relitters," and goes after a senior fellow in economic history at the Council on Foreign Relations" who writes an op-ed for Bloomberg "which may possibly be one of the most ridiculous things I've read in nearly a whole week."

I make the mistake of following the link, wondering if, for once, I was going to defend an economist.

Then I found out it was Amity Shlaes.

Never mind.

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Thursday, December 20, 2007

The Perfect Gift for a Certain New Aunt

by Ken Houghton

Via the Social Science Statistics Blog, a flyswatter for the happy Milanophile.

As a bonus, the same post leads to (and features a picture of) a graphic-laden representation of What Georgie Wanted the US Budget to Be.

Which, given my recent obsession, leads to the obvious question (zoom in on the penny in the lower right corner): If "the cost growth per beneficiary in the Medicare and Medicaid programs has tracked cost trends in private-sector health-care markets" (h/t DeLong; the original is WSJ subscriber-only, though it was probably Digged), why was the Medicare budget only projected for a 5% (nominal) increase? Or does that question answer itself?

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'Wisdom of Crowds' Watch

by Tom Bozzo

When last we checked in on the prediction markets, there was evidence of Peak Rudy! in the air. At his peak, he wasn't quite evaluated as the near-lock the crowd had once considered Hillary Clinton, but he's now set to be swallowed by at least the next four of the however many dwarves there are in the field:

'Wisdom of Crowds' watch

If not for the Actual Voting that will soon commence and throw some Actual Information into the market's maw, I'd say that things were converging on the Wisdom of Crowds deciding to shrug its shoulders rather than try to sharpen its pencil and figure out how the Republican nominating electorate really viewed the candidates. [*] Though it doesn't (or shouldn't) take a PhD in political strategy to figure out that "America's New Yorker Asshole" isn't a strong pitch. Dick Cheney may no longer care if people know what he's up to in his ceremonial offices in the OEOB, but the George W. Bush Experiment was (after all) to take an Actual Asshole and sell him as the Guy You'd Rather Have a Beer With.


[*] Yes, I'd rather be subjected to the Total Perspective Vortex myself.

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Wednesday, December 19, 2007

My Eldest is a Published Author

by Ken Houghton

Nine years in age before her father's first publication, Valerie has her first published, (mostly*) self-illustrated story:




*Illustrations altered for content changes

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Monday, December 17, 2007

Give Maria Cantwell Some Credit

by Ken Houghton

Cantwell (D-WA) gets clobbered in progressive/liberal circles a lot, but she stood up to be counted today, at a time when candidates RepublicanwithOvaries and ObamaNation were AWOL, and Chris Dodd was doing his job and probably losing whatever chance he had at the next one.

UPDATE: At least Connecticut has one Senator who did his job this year!

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Sunday, December 16, 2007

First Romney, now Huckabee

by Ken Houghton

What is it about Republican Presidential candidates and the inability to treat a dog humanely?

Update: I see that Digby was on this Thursday, and both she and Lambert at CorrenteWire has an update.

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Saturday, December 15, 2007

I Have the Flu, so it's time for another thought-experiment

by Ken Houghton

Let's take some disparate pieces of data and see if someone can build a model out of it:

  1. The price-rent ratio should be approximately 1.00 (the tax gains from owning a house are mitigated by the cost of maintenance—trust me on this one). Yet the ratio was running around 1.6 recently, meaning housing prices were significantly higher, to the extent that Robert Poole and Randal Verbrugge attempted to explain the divergence, which appeared to level off but not decline coming into 2007.
  2. There are two ways for convergence to occur. Either the housing price declines, or the rental price rises (link to Dec 2006 data). (The third possibility is that both move at once; this is, of course, the most likely in a rising-asset environment.)
  3. We know that housing prices are declining, and Dean Baker noted back in July that the OER differential was declining.
  4. There are also signs that rental prices are being pressured in some areas by increased supply, whether people who moved to Denver and held onto their California-based not-a-quick-asset-except-in-David-Malpass's-delusions albatross or other, even less encouraging, reasons.
  5. Home ownership is at roughly the same level as it was when "subprime" lending took off [PDF link] (h/t Dr. Krugman). So all things being equal, demand for demographic reasons shouldn't be changing much in the near term.

Don't get me wrong. There are still areas where rents are rising significantly, though many of those are traditionally and well-identified "bubble" areas. (It seems not untoward to suspect that the renters in Miami who are paying that 7.3% will find better deals when their lease is up, should they choose to look.)

But, looking at the broader picture, the numbers that have been thrown around as the decline range from 15% (GS) to 30% (Krugman).*

Speaking as a long-time owner (10 years in less than two weeks) in a "bubble" area that has some intrinsics going for it, I look at the 15% figure and say "Yours!" to the extent that, if you guaranteed this house wouldn't drop in price more than 15%, I would be happy. (30% is more worrisome, but we're still talking something resembling a positive NPV, I think, maybe.) So I don't think I'm the marginal case in this decline.

But I'm not sanguine about either number. As Barry Ritholtz noted here, that OER ratio is moving slowly back toward any convergence.

Some of that is due to sticky prices (or, as those who speak Business-English refer to it, "the inability or unwillingness to sell due to negative equity"). But it still looks as if the graph in Ritholtz's piece needs to drop another 21-23% just to get back to the previous high area of ca. 2.5. And it's fairly clear that the graph doesn't move in a 1:1 proportion with pricing changes.

So the question is: can anyone build an equilibrium model in which (1) house prices decline by at least 15% but no more than 30% [UPDATE: This is too restrictive; let's just make it less than 30%], (2) OER returns to reasonably normal levels (you can set the level higher than 2.5, but you have to explain why it should be so, and (3) median rental rates do not exceed 25% (or, at least, all in housing costs, including utilities, does not exceed 33%) of median Gross Domestic Income?**

For a closing paragraph, I return to Dean Baker, who put an estimate on the breadth of the convergence required:
In fact, while real house prices rose by more than 70 percent, real rents rose by less than 10 percent. And now rents are falling in real terms, making the divergence even greater (at least until house prices start plunging). This fact warrants some attention from the media -- even busy reporters should have time for $8 trillion in housing bubble wealth.



*CR at CR discusses the posisble results of those projections here.
**Again, if you want to vary from those assumptions, feel free to do so, but please explain why you choose to relax the constraint, and what people will sacrifice (or have to pay less for on an absolute basis) in a basic income model for more housing.

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Here we thought Weeds was Fiction

by Ken Houghton

Calculated Risk (via Dr. Black) notes that supplemental income can pay your mortgage:
"It appears they've been financing the houses with the cultivation and sales of marijuana," [Sgt. Steve] Carney said.

And I'll bet they maintained their property well, too. Six months from now, the Sentinel will run an article about how those same houses have become an eyesore.

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Minimal Original Content! (Quotes of the Day)

by Tom Bozzo

1. Molly I. at Whiskey Fire, while filleting inside-the-Beltway media pricks:
Gore looks at America and sees the ugly stepsisters in charge, with their greed, selfishness, and shortsightedness, and indeed, who can blame him [for not running for president]? They do seem to rule the roost these days. Like many others, I have referred to Gore as "my president"--every day, the contrast between his decent concern for genuine issues and the criminal cabal determined to bring down not only America, but the planet, is more striking.
2. Maynard at Creative Destruction:
[I]f you believe Romney believes that Jesus and Satan are brothers, then he must be a crazy cultist, because the truth of course is that Satan is a fallen angel while Jesus is the son of God and a virgin girl. How about if I call you all crazy cultists because you believe in angels and devils and pregnant virgins? How about if I say I don't care if you're a crazy cultist one way or the other - just know something about war and taxes and health care and global warming, and you've got my vote.
3. Jon Swift, after reminding me why I can only be thankful that Peter Angelos and Bud Selig beat the love of the game out of me years ago:
There is already a word for people like the baseball players who refuse to take steroids, people who would rather play by the rules than win, people who are so afraid of what journalists might say about them that they aren't willing to take any risks. They are called Democrats.

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Thursday, December 13, 2007

Defining the Middle Class Up

by Tom Bozzo

It's been interesting to see the Alternative Minimum Tax fix and the hoopla over Harvard's new undergrad financial aid policies framed as middle-class issues. This may be true in some technical sense, but it's misleading.

A lot of Googlers used to find their way here searching for definitions of "upper-middle class." As far as I recall, we never really provided a definition, though my informal economist's take is that the upper-middle class is basically the upper-working class. That is, in contrast with the "rich," the upper-middle class depends on a flow of wage income to maintain its standard of living, etc. For instance, the 95th percentile net worth in the 2004 Survey of Consumer Finances data, $1.43 million, would buy a $57,300 joint life annuity with some inflation adjustment for a 50-year-old and spouse at the terms offered by the Thrift Savings Program; that's roughly a 65th percentile income.

It follows directly that Harvard's more generous financial aid policies only benefit the upper end of the income distribution, since the Harvard endowment isn't going so far to remedy the institution's "Upstairs/Downstairs" problem as to put the keys to late-model BMW M cars into the hands of kids from actual middle-income families. [*] That is, students from families with incomes under $60,000 get nothing more than before, and that's roughly the median income for families whose heads are old enough to send kids to college. [**] The real action is between the 85th to 95th percentile of the general income distribution and still a lofty slice of the families-with-college-age-kids distribution.

A W$J article (no link) reported that about half of Harvard's undergrads receive grant aid, and about a third of those get the under-$60,000-income free ride. So the national median (or maybe a bit better) income puts a kid at the 17th percentile or so of the Harvard undergrad distribution, and the 90th-95th percentile nationally is something like the Harvard median. So while Megan McArdle may not be quite on the money in characterizing the beneficiaries of the new policy as "actual" "working and middle class students," I can't disagree with her that the implied distribution is interesting if maybe not surprising.

The issue may be one of scale as much as anything — in a population the size of the U.S., being in the top percentile of something puts you in an exclusive club of some three million members. [***] So out of the top couple of deciles of U.S. households by income — the top 25 million or so — there will be smart teenagers far in excess of Harvard's modest undergrad enrollment. Of course, the same goes for the bottom half. In this regard, Felix Salmon is right to say, "I simply don't buy this idea that there's a limited pool of 'top students' which all top universities want." At least, if that's how elite schools' admissions officers view things, then they should sharpen their pencils.

In any event, I can hardly object to more generous aid terms, even though a really bold policy could spend a little more of the Harvard endowment's returns to a more conspicuously anti-elitist effect. If they wanted to do so, they could afford to match the income distribution of the general public.

The AMT discussion is less innocent. This morning, as many others recently, I've groggily heard NPR announcers telling me how an unfixed AMT will ensnare 22-point-something million "middle income" taxpayers. For actual middle-income taxpayers (q.q.v.), it takes very special circumstances to end up with an AMT bill of any size. The typical AMT relievee, in fact, looks quite a bit like me — decent income, couple dependents, relatively large deductions for state and local taxes — and I could not tell you with a straight face that it would cause substantial hardship to pay another grand or two to the Feds.

Middle-income "victims" of the AMT are easier to find than family farmers put out of business by the estate tax, but again the issue is that the moderately-well-heeled are numerous in a big country. There's no doubt that politicians of both parties wouldn't care to annoy tens of millions of taxpayers from high-voting-rate demographics, but by and large the issue is an annoyance rather than an injustice. As it happens, the annoyance could be resolved justly by closing some prominent tax loopholes and modestly increasing rates for high-income taxpayers, but the Republicans who engineered the problem in the first place [****] have decided to circle the wagons around not raising any tax for any reason.


[*] Maybe tooling around Cambridge and Brookline in such vehicles is more of a BU thing. No matter.

[**] The income distribution shifts upwards with age, up to a point, reflecting the progress of typical career paths.

[***] So the answer to questions like "how many people can afford those megabuck lakefront houses and McMansions" is "more than you'd perhaps think," Big Shitpile issues notwithstanding.

[****] That is, the AMT problem was known when the Bush tax "cuts" were pushed through; taking away the cuts for upper-middle-income taxpayers was a means of keeping the official effect on the federal deficit small enough that fiscal conservatives could close their eyes and think of England while voting for it.

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Tuesday, December 11, 2007

Meanwhile in Happy Real Estate News

by Tom Bozzo

I've heard that a third major condo project in the city has bitten the dust — the residential component of the Heights at Hilldale. Apparently the building, originally to have had three floors of office space and 8-9 of condominiums, will scale back to five stories of offices. Purchasers of certain views at the neighboring — and still quite empty — Weston Place condo may be pleased. If confirmed, the Heights condos would join the Centric Metro Lofts, also part of the Hilldale redevelopment at one point (to be an upscale hotel) and a building in the Capitol West development (ditto) in Big Shitpile oblivion [*].

This is something of a shame, since the University-Midvale corner is shaping up as a good walkable area with solid bike and transit connections to campus and downtown Madison. But there are enough potential infill sites in the vicinity to make up for it later as market conditions permit.


[*] I don't count the Camp Randall-area Fieldhouse Station proposal, since intense opposition from the neighborhoods and their Alderoids gave the project zero chance of approval.

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Expletive Deleted

by Tom Bozzo

...THE MADISON CLIMATE SUMMARY FOR DECEMBER 11 2007...

CLIMATE NORMAL PERIOD 1971 TO 2000
CLIMATE RECORD PERIOD 1871 TO 2007

SNOWFALL (IN)
YESTERDAY 5.1 [Record] 5.3 1904 [Normal] 0.4 [Departure from normal] 4.7
SINCE DEC 1 21.1 [Normal] 3.8
[Departure from normal] 17.3 [Last year] 2.6
SNOW DEPTH 12

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Saturday, December 08, 2007

Milo LOLCat Version 2

by Tom Bozzo

funny pictures
moar funny pictures

...may make more sense if you are familiar with the port arrangement on the PowerBook G4 (Titanium).

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Zoom zoom doom

by B. Strong

J & I test drove a 2008 Passat wagon with <40 miles on it. We turned it off so that we could switch drivers. It wouldn't start again.

Glad to see you have a firm handle on those reliability issues, Volkswagen.

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Help Blogger During the Holidays

by Ken Houghton

Not a blogger--though that's a good idea, too--but Blogger itself is in need.

Kathryn Cramer has more.

For those not clicking through, I borrow the most important sentence from her, and urge others to do the same (crediting Kathryn, please):
I link to THE WORLD'S MOST LOATHSOME BLOG so that you can all click on the FLAG BLOG tag in order to flag it for "objectionable content."


Pass it on. Do something positive for the holidays: make the Internet a little less ugly.

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Brad DeLong Notes a piece of Literary History

by Ken Houghton

But then, as is his wont, contextualises it in an interesting manner:
May I just say that mainstream "orthodox" Calvinist Protestantism contains things orders of magnitude more bats--- insane than any of the "special" doctrines of the Book of Mormon?

And proceeds to post an excerpt from six books before the greatest piece of English literature ever written, wherein it is explained (roughly, colloquially) that salvation is only achieved by making mistakes, being saved, and understanding that one has been saved.

I don't understand the problem. Surely this is to be preferred to the subsequent "Straight is the gate/And Narrow the Way."

At any rate, this seems a good time to note, again that the film adaptation of (almost all of) the first book of the trilogy based on that strongly parallels that piece of Christian literature is in wide release now, and well worth seeing on the big screen.

One sentence, Mannion-like review: "The polar bears are great, the girl is marvelous, Nicole starts a long arch from a high point, and the Church may well wish it had been allowed its other trappings, instead of reduced to buggery and opposition to human inquiry."

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Dispatches from the Horsepower Wars

by Tom Bozzo

The latest sign things are totally out of hand, from a Motor Trend comparison of family sedans with V-6 engines:
Truth is, each of these family sedans is intimidating, at least when looking back 20 years at our "Top-Speed 10" test from September 1988, in which we pushed 10 of the day's fastest sports cars to the limit. Turns out every one of these household heroes is quicker to 60 and the quarter mile than seven of those sports cars, including the Nissan 300ZX Turbo, BMW M6, and Chevy Camaro IROC-Z. Want more? The Altima and Camry outpace the Porsche 928 S4 and the Ferrari Testarossa, respectively, to 60. So when Dad says, "Hold on," he means it.
The good news for GM's Bob Lutz is that the Chevrolet Malibu was cited for the "ergonomically sound layout of the luxurious interior," non-ironically!

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Friday, December 07, 2007

QOTD (Waldmann vs. Worthless Democratic Strategists Edition)

by Tom Bozzo

Robert Waldmann, who clearly would be a higher-valued recipient of the money paid to Democratic "strategists":
I do not understand why the Democrats didn't make the Republicans actually filibuster this one. Delaying the AMT patch and the mailing out of refunds to protect the interests of a small number of hedge fund managers and private equity partners can't be popular can it ? The Democrats seem to have just decided that they will be blamed if the Republicans block them from doing what the public wants. Given the rules of the Senate, if the majority makes it clear that it is willing to cave to get things done on time, the minority can become more powerful than the majority. I really don't see why Reid caved so quickly on this one. A few days of denouncing the Republicans for blocking the AMT patch to serve the super rich who pay 15% of their income in taxes would have made the claim that "we have tried every alternative possible," a lot more convincing.

Given who pays the Republicans' bills, they may have been operating a little bit short of political suicide, but they were clearly willing to spin the barrel for some Russian Roulette. Why the eagerness to snatch the guns out of their hands?

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Friday Critter Nonrandom Fourteen

by Tom Bozzo

1. A.R. Kane, Sperm Whale Trip Over, Sixty-Nine
2. Air Miami, Dolphin Expressway, Me Me Me
3. Julee Cruise, The Nightingale, Twin Peaks soundtrack
4. The Bats, Drive Me Some Boars, Silverbeet
5. Big Dipper, Loch Ness Monster, Heavens (plus 'Boo Boo' EP)
6. A Certain Ratio, The Fox, The Old & The New
7. The Clean, Slug Song, Compilation
8. Colourbox, Hot Doggie, Lonely Is An Eyesore
9. Damon & Naomi, Laika, More Sad Hits
10. Heavenly, And The Birds Aren't Singing, Le Jardin de Heavenly
11. The Higsons, I Don't Wanna Live With Monkeys, Attack of the Cannibal Zombie Businessmen
12. The Field Mice, Sensitive, Snowball + Singles
13. The Family Cat (w/ PJ Harvey), River of Diamonds, Furthest From The Sun
14. The Jazz Butcher, Love Kittens, Cake City

Dedicated to Milo — have fun chasing mice on the farm, old beast!

Milo

(Disclaimer: Actual feline computer skills middling at best.)

...and here's the LOLCat version; thanks to Dean for the caption.
funny pictures
moar funny pictures

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Thursday, December 06, 2007

Dep't of Just Wondering: Big Sh*tpile in Little Madison?

by Tom Bozzo

The story so far...

Rich Guy invests in wife's toy business. Wife sells business to Mattel, making Rich Guy a Super-Rich Guy. Now-Super-Rich Guy donates $205 million to turn Madison's dowdy Civic Center into the Overture Center.

Super-Rich Guy establishes financing scheme that purports to be able to pay for the Overture Center's construction and contribute significantly towards its operation and maintenance even though the construction tab is approximately $205 million. An assumption is that the trust will earn 9% average annual returns from stock market investments. The year is 1999 — oops.

In late 2005, the Overture Center's construction debt is refinanced in a controversial deal that involved the City of Madison guaranteeing a portion of the debt and possibly being on the hook for Center maintenance should the fund's balance fall below $104 million. (It was $109.3 million as of the refinancing.) The expectations for the fund's returns are shaved by 0.75% and the investment strategery is meant to emphasize "diversified investments that limit short-term volatility."

At the time, we were not impressed:
Now, I couldn't tell you whether the Overture trust will clear its rate-of-return hurdle even if I knew the details of its investments. As was seen in the Social Security privatization battle, predicting forward-looking returns is unavoidably contentious, and even if you could reliably predict expected returns, the realized returns' deviations from expectations matter — as Mayor Cieslewicz and the council's fiscal hawks emphasized. (And, echoing a point I made yesterday, he had stressed results from the city's fiscal efficiency auditor that the city bears especially large risks from poor near-term returns.)

What's basically incontrovertible is that the trust is undercapitalized. I'm inclined to agree with David White of AFSCME, who according to the Cap Times:
Reject[ed] claims that it would be easier to raise money for the facility if it were not part of the city as nothing more than "a talking point," White also said he did not trust markets in the next few years to deliver returns consistently above 8 percent.
Assuming the plan goes forward, the ball is in the foundation's court to put some action behind the assertion that the existing structure can do more for Overture than city ownership, raise some money, and thereby reduce the taxpayer's risk the old fashioned way.

So how did they do with that short-term volatility? Here's the Wisconsin State Journal account from early October, via Emily Mills:
The trust, which must be at least $104 million to meet all commitments, sank from $105.83 million on July 13 to $100.86 million on Aug. 15, doubling any prior decline and nearly forcing the district to tap other sources to meet debt payments.

The fund recovered to $103.31 million -- still below the $104 million mark -- by Sept. 28, according to the latest report by Madison comptroller Dean Brasser. The trust has since added another $400,000, the Overture Foundation said. [Emphasis added.]
Some timing, there. Looks like the Overture Foundation got into Big Shitpile with the impeccable timing for which it is becoming best-known. The question is, what's happened to the trust in the last few weeks?

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Wednesday, December 05, 2007

Tom Maguire's Optimism is Quickly Discredited

by Ken Houghton

Chris Suellentrop—not Tobin Harshaw—tried pushing the Tom Maguire line yesterday:
Tom Maguire, who blogs at Just One Minute, has perhaps the most novel theory: it helps John McCain, Rudy Giuliani — and Hillary Clinton. Maguire writes:

Dare we state the obvious — this news takes the wind away from the Dems who have been asserting that Republicans will lead us inexorably to war with Iran....Meanwhile, insinuations that McCain or Giuliani (or Huckabee!?!) will take us to war with Iran have been dramatically undercut. [emphasis mine]

Unfortunately for the NYT and especially Maguire, the Rudy and his Advisors Are Not Insane Defense has already been undermined (h/t Sadly, No, of course)
But I entertain an even darker suspicion. It is that the intelligence community, which has for some years now been leaking material calculated to undermine George W. Bush,* is doing it again. This time the purpose is to head off the possibility that the President may order air strikes on the Iranian nuclear installations. As the intelligence community must know, if he were to do so, it would be as a last resort, only after it had become undeniable that neither negotiations nor sanctions could prevent Iran from getting the bomb, and only after being convinced that it was very close to succeeding.** How better, then, to stop Bush in his tracks than by telling him and the world that such pressures have already been effective and that keeping them up could well bring about "a halt to Iran’s entire nuclear weapons program"—especially if the negotiations and sanctions were combined with a goodly dose of appeasement or, in the NIE’s own euphemistic formulation, "with opportunities for Iran to achieve its security, prestige, and goals for regional influence in other ways."

Someone is still saber-rattling, and Tom Maguire should already be regretting his optimism.


*Either "Facts are stupid things" or W has been saying things that he should have known were not true, since "leaked" information has been distributed throughout the Administration already. Which is more likely is left as an exercise to the reader.
**Just as he was with that other I-r-a country.

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Tuesday, December 04, 2007

Holiday Season: Please Hit Blogger Tip Jars

by Ken Houghton

I'm slightly beyond tapped out right now, so the best I can do is make everyone else feel guilty.

Please hit the tip jars of Gary Farber (who is in long-term need) and/or Lance Mannion (whose squeeze may be more temporary than Gary's, but is still a squeeze—and one that can also be ameliorated by using his Amazon store link, making both of you happier).

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Truckageddon IV: The Truckageddoning!

by Tom Bozzo

Looking at the U.S. auto sales figures for November, out today, the general picture is that things could be a lot worse. While the Detroit Three's sales look to be down a few percent percent over 2006 after next month's figures are in, that has to be put in the perspective of constant fire sales borrowing retail volume from the future, the industry's efforts to avoid stuffing unlovable cars into rental fleets, and the still-dire need to realign product assortments for a world of expensive oil.

While the month wasn't bad overall, down 1.6% year-over-year, it was a bad month for big trucks almost across the board. The behemoth end of the market has been up and down a bit with fuel prices and new-model introductions, but some clearer trends do seem to be shaping up. Sales of GM's full-size SUVs (ex Hummer) are down about 25 percent, or roughly 100,000 units annually, in 2006-2007 from the 2001-2004 plateau. GM's "midsize" truck-based offerings are down more than half, or the better part of a quarter-million units. Ford's truck-based SUVs are likewise down some 150,000 units from the peak. To the extent that headline truck sales numbers aren't terrible, it's because the reported figures include the array of tall "crossover" wagons that are "trucks" for U.S. regulatory purposes only.

Headline car sales, meanwhile, look worse thanks (in addition to the crossover classification game) to the effects of axing some car models that were sold mainly to rental fleets — notably the old Ford Taurus, which singlehandedly accounts for two-thirds of Ford's 2007 car sales decrease to date. OTOH, it follows directly that the Detroit Three were (and still are) more exposed to the truck market than it seemed. So while it's sensible for them to have "surrendered and declared victory" over fuel economy standards, they'll have their work cut out for them as trucks become even more car-like and cars become more European car-like.

Update: Prof. Hamilton has mostly concurring analysis and graphs here.

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Question: How Much You-Know-What Will the Republican Electorate Eat?

by Tom Bozzo

Given recent news that would convert the campaigns of politicians without infernal contracts in their filing cabinets into flaming wreckage, the question arises, "That's all well and good, Mr. Smarty Pants, but what does the Wisdom o' Crowds have to say?" Well, here it is via Intrade:
Wisdom o' Crowds
So it looks like there's been some reaction to the news, but only to the extent of returning the "market" assessment of Giuliani's campaign to where it was a month ago. Candidate answer to the post title's question: plenty, yum yum!

What of the surging Huckabee, whose genial insanity is raising concern around the blogs? He's clearly broken out of the pack into a solid 3d place in the prediction markets' account, though the contract to look at for an explanation is that for Grampa Fred. Think of Thompson's support as partly reflecting the ABFF [*] vote, especially seeing as it was based almost entirely on a Platonic ideal of a campaign rather than the Is This Thing On? reality. (Remember, once upon at time you could see MSM pulling quotes from the field to the effect that people could convince themselves that the actor-lawyer-lobbyist with the much younger spouse was a Godly Conservative.) And given the religious right-wing component of the nominating electorate, it would be more remarkable if there weren't a Huckabee in the field. He seems to be the most prominent beneficiary of the Thompson collapse, but not the only one.

The interesting issue is whether the current Republican rift Huckabee has exposed would be healed if Giuliani implodes and the money vote doesn't migrate to Slick Mitty. You've seen Novakula, but here via some wingnut spam I receive for no apparent reason is Dick Viguerie. Granted, Wingnuttia is adept at patching things up, but the median pocketbook voter should take Rubinomics 2.0 via Hillary Clinton without blinking. [**]

Meanwhile, for those of you who didn't see it via Atrios, this is Teh Funny:


[*] Anybody but the Front-running Freaks.


[**] Famous Last Words risk noted.

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Monday, December 03, 2007

Quote of the Day

by Ken Houghton

Amidst some great competition, this one stands out as being (1) accurate and (2) topical in so many ways (and not just because the Pats won):

Mario @ 4:
Rudy wouldn't be elected dog catcher today in NYC if he was running vs Michael Vick.

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Tell Me Something I Didn't Know

by Ken Houghton

via Susan.

The Dante's Inferno Test has banished you to the Sixth Level of Hell - The City of Dis!

Take the Dante Inferno Hell Test

Could have guessed that from having gone to see The Golden Compass on Saturday night—at least as contextualised by Christianity Today, which seems to have the strange delusion that C. S. Lewis presented a worthwhile template for fiction instead of self-righteous delusion. (h/t Brad DeLong)

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Saturday, December 01, 2007

Political Connections save Householders

by Ken Houghton

In the midst of claims that Northeast real estate is going to drop 15-40%, some transactions are off-market:
As for Hazleton,[Pennsylvania,] the Giulianis are buying more than gas there these days. On Nov. 1, records show, the couple purchased Nathan's childhood home from her parents for an unspecified sum.

There is, of course, no reason to believe there would be anything suspect about such a transaction. Contrast, for instance, this statement:
"Nobody was trying to hide anything."

with the reality:
One document dated June 26, 2000, shows how money from five such offices - the Mayor's Office of People with Disabilities, the Community Assistance Unit, the Assigned Counsel Administrative Office, the Loft Board and the mayor's liaison to the United Nations - was used to prepay an American Express account to the tune of $60,000...

Carbonetti said that the document - dated four days before the end of the city fiscal year - simply showed how unused money from agencies was being used to prepay bills. [emphases mine]

And the follow-up statement to it:
"It's fiscally responsible to anticipate predictable expenses and prepay them," he argued.

It's also fraud.

Then again, it's the lovable and much-loved-by-the-Beltway Rudolph, so it must not be important.

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