Thursday, January 31, 2008
Bob Cesca can Kiss My ProgLib Bum
UPDATED BELOW, 2 Feb 2008, ca. 6:22pm CST.
He doesn't mean his title, and spreading lies and kneecapping your future is a good way to get me to vote for Crazy John.
(via Dr. Black)
Reg at Beautiful Horizons, on the other hand, believes Jon Chait:http://krugman.blogs.nytimes.com/
Paul Krugman - Op-Ed Columnist - New York Times Blog
In recent years, "bipartisanship" and "national unity" have usually meant meeting the GOP halfway, regardless of how far right it veers, with agreement an end in itself.
But this is not Obama's meaning of national unity. Substantively, he has not embraced many conservative ideas. And he has explicitly repudiated the notion that unity is an end in and of itself--the purpose is to bring in non-Democrats to enact liberal goals. "If you know who you are, if you know what you believe in, if you know what you are fighting for," Obama says, "then you can afford to listen to folks who don't agree with you, you can afford to reach across the aisle every once in a while."
UDATE: Paul Krugman notes, to no one's great surprise, that Chait is an idiot. Even the Sainted Battlepanda is horrified, though it appears she may hold her nose and still send in an absentee ballot for the ObamaNation, whose plan as presented raised average costs by about $1,700 per person per year without providing an iota of additional utility* (unless you're Tyler Cowen [h/t DeLong]).
*I have a copy of the Gruber paper. More on it maybe next week. E-mail if you need a copy.
Labels: 2008, Health Care, ObamaNation, Politics
The "Washington Consensus" doesn't apply to Washington
Ricardo Hausmann body-slams the absurd Fed actions and silly stimulus package.
Returning to a sustainable path is good for the US and the world economy over any horizon that assigns some value to what happens after 2008. Sustainable growth is not the consequence of an unsustainable consumption boom but of the progress and diffusion of science, technology and innovation – which show no sign of slowing down.
An efficient adjustment to the US over-consumption imbalance (and Chinese under-consumption) in a way that does not hurt longer-term growth should be based on compensating for the decline of US consumption with an increase in domestic investment and in consumption abroad. It should not be based on giving the US consumer more rope with which to hang himself.
My HELOC is now 151 bp below my mortgage. Time to draw down again, especially given other circumstances. But at least I know this is unsustainable in the long-term.
(Via Dani Rodrik), who pulled the most damning quote.
Labels: Dani Rodrik, Economic Development, FRBOperations, monetary policy, Politics
Wednesday, January 30, 2008
This will be important later
Tanta Explains It All to You:
Options theory is applied to mortgages in order to price them as investments. (Strictly speaking, this is a matter of analyzing them so that a price can be determined.) [bold mine; italics hers]
We'll come back to this, and it relates to my previous post on measuring uncertainty, but meanwhile RTWT.
Labels: Calculated Risk, financetheory, mortgage, optionpricing, Risk Management
For those who play video games
Cool Wii tricks.
Labels: technology, Video
Tuesday, January 29, 2008
Reputational Risk, in Two Modes
The headline news is that fraud may have destroyed a company.
The largest creditor of Axium International Inc. sued the company's former principal owners on Tuesday, alleging massive fraud and theft a week after the Hollywood payroll service provider filed for liquidation bankruptcy.
In a lawsuit filed in federal court in Los Angeles, investment firm GoldenTree Asset Management said Axium's former principals, John Visconti and Ron Garber, treated the company "as their own personal piggy bank to finance their extravagant lifestyles."
The undercurrent is that one of the company's subsidiaries provides payroll services to a lot of companies and agencies.
Also on Tuesday, Ehrenberg, the bankruptcy trustee, said he had identified potential buyers for the assets of Axium and one of its subsidiary companies: Ensemble Chimes Global, or ECG, a provider of contract workers and other personnel services.
ECG's assets will be auctioned in U.S. Bankruptcy Court in Los Angeles on Jan. 23, Ehrenberg said. The opening bid for the company is $7.5 million. Last year, Axium paid $80 million in cash to acquire Chimes Inc., which was combined with another Axium subsidiary to form ECG.
Now, there are two things a company working through Chimes/Axium can do at that point. So let us compare examples. The first was sent in early January, within a day or two of the bankruptcy announcement:
I wanted to update you on a situation that has recently arisen. As of yesterday, CHIMES has filed for bankruptcy and has closed their doors at all their clients, including ******.
I am writing this email to let you know that while this situation is being sorted out, your assignment at ****** is still intact and you will continue to be paid weekly by *******. We are a large company that can afford to pay employees.
Please continue to focus on your assignment and if you have any questions, please direct them to me and not your ***** manager.
****** will continue to partner with ****** and provide them our assistance as they work through this situation.
As more information becomes available, I will be sure to reach out to you directly to provide you with any relevant updates. [emphases mine]
That is proactive management. There are quick assurances of the strength of the company, the strength of the contract, and ability of the firm to manage the risk it took on.
The second company's e-mail was sent several days later, without warning, and did not necessarily reach all of those affected in a timely manner (i.e., before they expected to receive a check). Let's do this in parts:
By now you are no doubt aware of the recent developments regarding Ensemble Chimes Global's Chapter 7 filing. We are currently in touch with each client that has been using Chimes as their consultant payment system. They have each told us that they are in the process of evaluating the situation and have asked us to please allow them time to determine how to move forward.
So far, so good. So why are several of us reaching to make certain we still have our wallet?
However, we feel that we must inform you of the possibility that monies caught in the gap of being paid to chimes and not paid to ****** or monies not paid yet to Chimes prior to the time of their Chapter 7 filing are in some jeopardy. We sincerely hope that this jeopardy will be eliminated as soon as possible.
Let us remember that agencies are generally paid net-30, net-60, or net-90, and build that into their cut of the rate. And they extract concessions from consultants (who often work through an agency primarily because they want to smooth cash flows) on the basis of assuming that risk.
Therefore we are encouraging our clients to pay ****** directly and pay Chimes ONLY the fee that they are entitled to and nothing more. This would enable ****** to keep all payments due consultant contractors up to date.
That "would" is worrisome, since any reasonable firm has alternative means of covering the gap—and any other one is suggesting that their risk-management skills, for which they are being compensated by their consultants, is not so good as advertised.
They will keep us abreast of all decisions, and we in turn will contact you with the updates. Our payments to your firm are "based upon remittance of funds to ****** from the client covered by that Purchase Order". ****** has reached out to each client for them to provide a guarantee of payment, so that our future payments to your firm will not be held up.
There was, you will note, absolutely nothing in this note so far indicating that the currently-expected payment was not being made. Nor, given the normal timeframes of payment, would there be any expectation that checks in January for December work would be withheld.
We are committed to partnering with you to minimize the impact of this sudden event, while at the same time ensuring that the client's operations are not adversely affected.
I believe this translates to "you should keep working, but we won't pay you."
The reputation of Chimes may be salvageable.* That of the second company appears to be another matter.
*As part of a larger organization, now:
Richard White, president of Beeline, said in a statement that the firm will work closely with Chimes' customers. "We are aware that many Chimes' clients have suffered recent disruptions to their operations due to Axium's bankruptcy filing. We are ready and able to jump in and provide the resources and solutions necessary to get these clients back online and operating efficiently."
Labels: labor, Risk Management, TheoryoftheFirm
Does Business Confuse Economists?
Thorsten Beck is smarter than I am. But he appears to be surprised by something I would consider intuitive:
Fourteen percent of firms in this sample rely exclusively on informal finance and the percentage goes up as corruption, complexity of taxation (but interestingly not tax rates) and property registration increase. [emphasis mine]
Why would this be confusing? Tax rates may change, but they are fairly stable for planning ROI. Confusion—additional uncertainty—makes rudimentary ROI calculations more problematic (if not more difficult).
It seems evident that, at the margin, a firm would feel more secure making an investment decision based on a known, say, 30% effective tax rate than making a decision that depends on subsequent rangling, even if the most probable effective tax rate is slightly lower than 30%).
What am I missing?
Labels: Economic Development, investment strategies, Tax Incentives
The Greater-Fool Theory in a Desert: When the Music Stopped
With all the talk of California, Illinois, and Florida, it would be easy to overlook the massive speculative building in the Lost Wages area.
More than 1 percent of all U.S. households were in some phase of the foreclosure process last year, up from about half a percent in 2006, RealtyTrac said.
Nevada, Florida, Michigan and California posted the highest foreclosure rates, the company said....
Other states in the 2007 foreclusure top 10 were Colorado, Ohio, Georgia, Arizona, Illinois and Indiana.
Michigan, Ohio, and Indiana are perennials on this list. Georgia overbuilt from Atlanta to Athens for nearly a decade.
The three deserts—Nevada, California, and Arizona—hint that a lack of water may actually impede residential development.
We still cannot explain Shaker Heights, though.
Labels: conspicuous consumption, High Finance, mortgage
Jessica Hagy Explains why most Labor Utilization Models are Flawed
Read the whole thing. (It won't take long.)
Labels: Economics, full employment, lump of labor
Credit Where Due, McMegan Edition
9:24 Okay, I love me some trade deals. But even I find it hard to believe that the greatest threat to human liberty today is the specter that Panama may not be able to sell us handmade hats.
9:58 Oh. My. God. As soon as the Bush says the word "African", CNN cuts to apparently specially staged woman in full African gear, with a child wrapped in a leopard print throw. "Cue human props!"
10:02 Let us go forth to do their business? Was that seriously the last line of his final State of the Union speech? Are we toilet training them? Who's writing his speeches these days--the copywriters for Charmin?
Labels: Bushonomics, Democracy, policy wonk, Politics
Chris Dillow notes that the alleged feedback loop between "capitalism" and "democracy" is dependent on a very loose definition of the former—and possibly the latter as well:
Brad Setser estimates that a $50 rise in the oil price, if sustained for a year, gives $250bn to just four or five families. They get this not on account of their ownership of capital, but because of their inherited land. That's feudal.
It is left as an exercise to reader to realize why "inherited land" is not necessarily a form of capital.
Labels: Democracy, sovereignty
Monday, January 28, 2008
Pawn to King Whale
d sends a fan letter to crazed author.
Sunday, January 27, 2008
Did Manny Legace just lose two games in two days?
Nice to know the sport still exists, even if there was no promotion of its All-Star Game or the night before's skills contest.
Note for the record: Nabokov threw shut-outs in both. Keep worrying about the Sharks, both of you.
Saturday, January 26, 2008
"A Job-Killer for the Auto Industry"
Treading on Tom's bailiwick, James Inhofe (R - CloudCuckooLand) argues that selling cars internationally is not a good idea:
The lone Republican senator to attend the hearing, Sen. James Inhofe of Oklahoma, was the only one to come to the administrator's defense. Inhofe dismissed the proceedings as "more theater" and called California's law a "job killer" for the auto industry.
California's first-in-the-nation tailpipe rules would force automakers to cut greenhouse gas emissions by 30 percent in new cars and light trucks by 2016, with reductions starting with the 2009 model year.
Twelve other states have already adopted those rules - Connecticut, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington - with others preparing to do so.
Let's see if we have this straight:
- There is increasing world-wide demand for more cost-effective cars
- The mileage and emission standards required by California are remarkably similar to those required by Europe
- Cars can be sold internationally.
- Designing a car to fit two different standards is more expensive than designing it to fit one; economies of scale is still a truism.
- Economies grow, per Brad DeLong's favorite dead economist, through "creative destruction":
- That implies that producing the same product ten years later while everyone else—e.g., Toyota—has been innovating and changing the model will lose you mark share.
- Losing market share generally reduces demand (or at the least, doesn't allow it to keep up with the natural expansion of the population.
- Not keeping up means that you have to cut costs.
- Cutting costs eventually means cutting jobs.
- That implies that producing the same product ten years later while everyone else—e.g., Toyota—has been innovating and changing the model will lose you mark share.
- The preceeding notes (and remedial subnotes) do not jibe with Inhofe's "do nothing or it will cost jobs" argument.
Why does James Inhofe hate American automobile workers?
Labels: Brad DeLong, creative destruction, environmentalism, policy wonk, Politics, Trains Planes and Automobiles
Via Dr. Black, family values at work at the FCC:
The [FCC] said [NYPD Blue] was indecent because "it depicts sexual organs and excretory organs, specifically an adult woman's buttocks."
The agency rejected the network's argument that "the buttocks are not a sexual organ."
Presumably, since NYPD Blue became famous for showing Dennis Franz's naked buttocks (and was not fined for same), the FCC has decided that a woman's buttocks, but not a man's, is a sex organ.
The ramifications of this decision are left as an exercise to the (adult, consenting) reader.
Labels: Current Events, mass media
Friday, January 25, 2008
The $600 Mortgage Multiplier
The CFO at Los Angeles-based KB Homes (KBH) sums up the conflict of interest by saying the stimulus package “[is] a shot in the arm to the market. It’s going to spur people to move up to a more expensive home, and that’s going to get the new and used markets moving again.”
Yep, the market for KB Homes especially has always been driven by people who make less than $75,000/year, and who think that $600 justifies adding mortgage debt.
Not even a hedge fund can make that math work.
Labels: Housing Bubble, mortgage
Wednesday, January 23, 2008
Why I Was Thinking about Barstow
Dilbert Dogbert, in comments to an old post, noted the glory of Barstow:
Barstow is high desert and may not see snow for decades but it is high and therefore colder than hell, California style, in the winter. Other than that the wind can blow like hell too. High winds mixed with sand!
It's not just that my college girl friend* is Barstow High Class of 1976, which, iirc, was the last year that high school was open. It's for precisely those reasons that I was looking at Barstow.
Anyone can want to live on Newport Beach, or in Miami. And you can rationalize building up the suburbs of Chicago.
It takes something else to move to Barstow (good luck with the $4.8million offer). Or Xenia, OH. Or even, say, Southfield, MI.
So I've been looking at Barstow to remind myself that, while there may be areas where the drop is more than 30%, the national average may not get that high. Because I really don't want to be correct that 30% is optimistic.
And I was almost there. until I read this post at CR today.
That "six trillion dollar" figure—first heard, to my knowledge, from Robert Shiller's lips at the AEA two and one-half weeks ago—is now coming reportage.
With the worst yet to come.
*who has been AARP-eligible for the past two months and thirteen days, not that I'm counting.
Labels: Calculated Risk, Housing Bubble, mass media
75 Basis Points, A Day Later
We didn't discuss the interest rate cut here yesterday (though Felix Salmon understood the impact of my one related comment at MarketMovers*), partially because I assume everyone who isn't here for the Legos and kid pix and cars and religion and SFWA went to Mark Thoma's blog and found all the links they could want.
Today, we still don't need to say anything, because Steve Randy Waldman's analysis says everything I would have yesterday, and gives it a context that will stand the test of time.
UPDATE: Felix Salmon appears to agree. So that's two people on two continents. Get thee to Interfludity!
*It will interesting to see if people who want to refinance now, solely to reduce rates or terms (i.e., even excluding MEW) will be able to do so.
Labels: FRBOperations, Moral Hazard, mortgage
'Twas the Night Before Tax Day... or is that Happy Helicopter Day?
A correspondent asks:
I'm searching for economic advice. If I were to create a national holiday meant to coincide with the stimulus package being planned in Washington, when would be a good time to have the holiday?It's not so much an economic question, and I dunno. Perhaps, like "Love Day" from The Simpsons [*], it should fill in the gap between established spending opportunities. In one of many cases of life imitating The Simpsons, many of those gaps have been filled — as Easter, for one thing, is being marketed increasingly as Christmas II rather than Chocolate Bunny Time. Otherwise, I don't think windfall opportunities for the Mobility are consistently timed enough to locate the day that's the statistical middle of them.
(Cross-posted at Scatterplot)
[*] Not to be confused with "Love Day" (2004) from Blue's Clues [**], though I've wondered whether that's a deliberate wink at parents trapped in front of the Tube with their toddlers.
[**] And I never thought I'd say it, but Dora the Explorer makes Blue's Clues look like Twin Peaks.
Labels: Bushonomics, Tax Incentives
Tuesday, January 22, 2008
There Are Probably Worse things than ODing* in Mary-Kate's Apartment
But I can't think of many.
(Self-correcting blogithingy in action: Apparently not, says TMZ.com — probably the most reliable source for this sort of news -ed.)
UPDATE (6 Feb 2008): Hillbilly heroin claims another victim:
Hydrocodone and oxycodone are painkillers. Diazepam is an anti-anxiety drug commonly sold under the brand name Valium; alprazolam is also an anti-anxiety drug, sold under such names as Xanax. Temazepam, sold under such names as Restoril and Euhypnos, is a sleeping agent, as is doxylamine.
*I hasten to note that I'm hoping that it wasn't an OD [as well]. Just doesn't seem the way to bet.
When You Know Your World Is Too Small
A Google search for "Warren Spector"—looking for the former Bear Stearns leader who was ousted by Jimmy Doobie-Doo—produced a full first page--of Caroline's (of EOB fame) husband.
Labels: Eat Our Brains, The Old Firm
It Depends on your definition of "U.S. Bank"
Via Mark Thoma, "don't worry, be happy" from John Berry at Bloomberg:
With all the large writedowns and losses announced for the fourth quarter, hardly any attention is being paid to just how profitable U.S. banks really are.
That inattention has raised unnecessary concerns that the banks may be so crippled by losses that they will cut lending to the point it might undermine the U.S. economy.
Some commentators have said the banks are in the worst shape since the Great Depression. That isn't close to being correct.
Nor is it strictly correct that the bank all were profitable in the United States. Citigroup, for instance, only made money due to its international presence (PDF link).
Why is this important? Because if you're going to claim that banks will not "cut lending to the point it might undermine the U.S. economy," then you have to show that it is in their best interest to make those loans.
In Citi's case, the overall answer was clear: It's not. It might be a little better 75 bp lower—or it just might be less of a case of "making up in volume what we lose on price."
Labels: banking, FRBOperations, High Finance
Math for Newspapers
Via Dr. Black, an article on Florida real estate and rentals gives us this blooper:
Most new condos, he said, were purchased to generate rental income.
"They're getting $1,200 a month in rent, tops," Painter said. "It's hard to keep a cash-flow property when you paid $500,000 and can only get $1,200 a month rent."
There are so many things wrong with these two paragraphs. Dr. Black trashes the first 'graf, so let's deal with the second.
"hard to keep a cash-flow property" doesn't even begin to cut it. If the mortgage is at 6.5%, your cost is just over $3,600*—three times the market rent. You're losing about $2,400 a month, before taxes and maintenance and any housing association fees. That's $30,000 a year in carrying costs.
Why don't you take the loss? Because, at 6.5%, the break-even sale price for a $1,200 month payment (1:1 rent equivalent, again excluding those other costs) is $189,000.
You need an interest rate of approximate 0.95% per year to be breaking even on $1,200 of income and a $500,000 exposure.
So the choice is: do you want to lose $30,000 a year, or between $250,000 and $310,000 upfront?
*All calculations on my HP12-C, rounded, based on monthly payments and a 30-year fixed rate mortgage.
Labels: Housing Bubble, mortgage
A Picture Would Be Worth A Thousand Words, But For the Death of 'Fair Use'
In the absence of an easily-linked image, here are my first, second, and pretty much third thoughts on today's big Federal Reserve move:
Pathetically small umbrella.
Wile E. Coyote.
Labels: monetary policy
It's looking hard to resist rubber-necking at the expected stock market carnage, even though it's probably best to whistle past the graveyard. It's more fun to follow the FBTB.net Steam-Wars contest, no? What's not to like?
Need I say more?
This is a blog, who am I kidding? Here are my favorites so far.
Funniest Translation Between the Star Wars and Steampunk Universes: "Astro the Navigation Monkey," from Mark Stafford's Royal Naboo AirForce 1. Some of you may recall Stafford's widely-linked Cthulego creations.
Looks Like It Really Could Work: Flickrite Monsterbrick's AT AT ELE walker. See the Stokertrooper (or is it the Stormstoker)!
The New Old Gilded Age Award: Thwaak's Imperial London Shuttle. Again, someone has to keep the fires burning; things are better up front.
Labels: divertissements, LEGO, Star Wars
Monday, January 21, 2008
One More for MLK Day
From Keith Knight in 2006:
The Aspect I Don't Want to Discuss
The January 25th issues of The Chronicle of Higher Education features an article on democracy:
Americans were shocked at the photographs of tortured Iraqi prisoners incarcerated at Abu Ghraib. They were horrified by the assault on Abner Louima, the Haitian immigrant molested with the broken end of a broomstick by New York City police officers in August 1997. A decade earlier, they were horrified by revelations that New York police officers had used stun guns to coerce confessions from young Hispanic and African-American suspects in 1985 and 1986.
Our outrage is predictable because we reject the idea that democracies engage in torture. That's something authoritarian states do — in the words of a World War II poster, "the method of the enemy."
So far, this sounds like a Jonah Goldberg book. But the article has a better grasp of the history of democracies:
[D]emocracies often set the pace in torture innovation. Legalized torture was a standard part of Greek and Roman republics, our ancient models of democracy. Roman judges used various tortures, most famously the short whips, ferula and scutica, to coerce confessions and get information. Torture was also a standard part of Italian republics like Venice and Florence, our other historical models of democracy. Those city-states adopted some of the same techniques as the inquisitors of the Roman Catholic Church. They often used the strappado, a technique in which guards tied a victim's hands behind his back, hoisted him from the ground by means of a hook and pulley, and repeatedly dropped him to the floor. The political theorist Niccolò Machiavelli was subjected to that process thrice. Before World War II, the British, the Americans, and the French all practiced torture: the French in Vietnam, the British in their mandate of Palestine, the Americans in the Philippines, not to mention what our police were doing in cities large and small. Police in democratic states used electrotorture, water torture, painful stress positions, drugs, and beatings. They did so sometimes on their own, sometimes in collusion with local citizens, and sometimes with the quiet approval, if not explicit authorization, of their governments. All this before the Central Intelligence Agency [if not the OSS--kh] ever existed.
As I said, I don't want to discuss torture per se as part of democracy. But the sidebar is too interesting to ignore. Read the whole thing, as they say.
Teaching the Children about MLK Jr. Day - An Exercise in Democracy Post
The songs played in the car:
Randy Newman, "Sail Away" (video, from this disc)
Billie Holiday, "Strange Fruit" (video)
U2 - "Pride (in the Name of Love)" (video)
Song #4 (which I have only on cassette) would have been Run-DMC, "Proud to Be Black" (video)
Essay Question: Would "By the Time I Get to Arizona" be appropriate between songs 3 and 4? Why or why not? Does its exclusion (or inclusion) provide evidence (either way) for Gary Becker's famous 1957 argument?
Oprah & Orman's Housing Advice
I spent the usual ca. 90 minutes in the doctor's office Friday night (follow-up to this, which appears to be "just" a sprained shoulder). Most of that time was an Oprah episode that visited three families (and re-visited a fourth) that were overextended.*
Now this was a fine set of interviews, I have to tell you.** The returnees (saved for the end) were a couple where he worked full-time and somehow they didn't have health insurance for their children.*** There was also the couple with two SUVs, the second of which they describe as "an impulse buy" due to "pressure from the salesman"—who apparently sold them two SUVs on the same day, so they now have three cars and two drivers.**** And there was the couple making $6,600/month (not certain if that was net or gross) who spend $1,800/month on child care. And there was another, whose details I probably slept through.
They were all interchangeable, so I have no memory of anything that distinguished the fourth couple. Their common claim: Our marriages are falling apart, and we would do anything to keep them together.
And who knows more about finances and marriage than famed lesbian Suzie Orman?*****
There was one piece of advice that was given to all four couples: sell your house(s). You cannot afford it (them).
Think about that in the context of this (h/t Dr. Black). And I don't have the impression these people were in a bubble area, though at least one may have been in the suburbs of Chicago.
Note the plural above. This is because one family—the one with the SUV "impulse buy" above—got into their dire straits because three things occurred in rapid succession: (1) the bought the new house without being able to sell the previous one, (2) the bought the new SUVs, and (3) he was laid off, turning a dual-income family into single-income.
Now, don't get me wrong. It is likely that, even if the first house had been sold, then would have had some troubles paying for two cars, a house, and children on a single income. But it's difficult to avoid the reality: the inability to sell the first house triggered their problems.
So telling them "sell your houses," as if those are liquid assets, isn't the best idea in the world.
This was made most clear by the "returning" couple. The wife's hair was cut.****** And they had moved into an apartment, and were trying to maintain a budget.
But they haven't sold their house yet.
So, basically, they're covering a mortgage, property taxes, and an apartment rent now. Or maybe they're not covering a mortgage; maybe they're just moving closer to foreclosure.
One way or another, this appears to be poor financial planning advice—or at least poor execution of same.
But in Oprah-world, they're "trying to stay together," so everything is great.
Meanwhile, there are four houses on the market, and at least one spare SUV for sale, and people are thinking they should make their carrying costs even higher by renting an apartment as well.
What did I learn from Oprah? Houses are not quick assets. But I knew that already; it just seems that Suzie Orman and her clients don't.
*Wait! Didn't we just have six years of prosperity. How do they find these people?
**Not fine enough to keep me fully awake, so I may mix up a few people.
***They declared that this was because the wife spent all their monies on Starbucks and her hair (without noticeably good results), but this does leave one to wonder about the "good job" the man supposedly has "full-time" that did not offer health insurance for his family.
****Keep this couple in mind.
*****That she is gay relates to the link, since straight people don't have to worry about "losing 50%" of their inheritance. Otherwise, let us be generous and assume her knowledge of finance and financial planning needs is accurate.
******To her benefit, I think. Not that that means much.
Labels: conspicuous consumption, Economics, Housing Bubble, mass media
Sunday, January 20, 2008
How to Turn about $600 into $60 - First of A Series?
Following the tradition of Patri Friedman, I have been attempting to downsize my (large majority) portion of our home library. And sorting meant that Round One was several dozen Scientific American and New York Academy of Sciences volumes.
The standard question of economics is "Is that a consumption or an investment" purchase?
The problem is that even things originally believed to be investments eventually turn into consumption in an environment where storage costs != 0. And I have gradually come to allow that, while several of the NYAS volumes are still relevant (and not likely to be readily available, even in a large library), maintaining them in a reasonable state is beyond our current ability.
So I have to view the outcome as a gain: at least $600 (in 198x-199x US$) has become about $60 in 2008 dollars. But the question remains: was an Investment that (by any economic reasoning) has a large, negative NPV really "investment"? And if it was not at the time, what would have made it so?
(Yes, I'm going somewhere with this, but—unlike the democracy posts—I'm not yet certain where.)
Labels: conspicuous consumption, Economics, investment strategies
Friday, January 18, 2008
Stop Thinking about Tomorrow: the DGA and NYT agree that the Internet isn't Important
The NYT tells us that the writers were worrying their pretty little heads over nothing:
After months of informal talks, Hollywood’s movie and television directors agreed Thursday afternoon to a new contract with production companies. The accord would appear to send a none-too-subtle message to striking screenwriters: This is not the time to get hung up on new media....
Over all, the agreement — which also increases minimum compensation rates and other gains for the union — was meant to reflect the directors’ belief, bolstered by an independent study of industry economics, that digital media will provide a negligible amount of revenue during the life of the contract.
In the directors’ opinion, digital media revenues will become significant only after 2010. [emphases mine]
For a slight counterpoint, let's look at the overview of the summary from United Hollywood:
For the first 100,000 downloads of a TV show, the payment is the DVD rate: 0.3%. After the first 100,000, it rises to .7%
For features, the rate is 0.3% for the first 50,000 downloads and 0.65% thereafter.
The good: It's more than twice what we had before.
The bad: What we had before was based on the miserable DVD formula. WGA, SAG and DGA had all agreed that that number really should be 1.2%, and the unions have actually sued the congloms over it, claiming that the use of the DVD formula for downloads is a misinterpretation of their respective MBAs.
So the 0.7% and 0.65% numbers are still terribly low. In addition, many downloads will not reach the 100,000 or 50,000 threshold, and will generate only the abysmal 0.3%.
It's frustrating to us that the DGA couldn't increase that number out of the DVD range. The DVD formula was based on the notion that "home video" meant a bulky plastic VHS tapes with enormous manufacturing and transportation costs. Those costs decreased dramatically over the years. But no increase in residuals. They decreased dramatically again with birth of DVDs. (You can slip them under a door!) But no increase in residuals. With downloads, the manufacturing cost is exactly zero dollars. And terabytes of storage are getting cheaper by the hour. But we still can't improve that DVD formula? Really?
Anyone who believes that the savings here will be passed on as consumer surplus is either lying or Greg Mankiw (if I'm not repeating myself).
It takes only a moment to realise why the DGA has the wrong idea. Look at what happened with VCR royalty rates, right after the Sony decision and over the following 20+ years:
The 0.3% and 0.36% home video residual formula was negotiated in 1985, when the cost of manufacturing and distributing videocassettes was a significant factor in the cost structure for the studios. The AMPTP companies argued that they “needed a break” in order to develop this “unproven business model.” In the years since, as the cost of manufacturing and distribution declined to become a negligible factor, and the business model proved to be one of the most profitable of any of the segments of the entertainment business, the companies have fiercely resisted any change in this formula. Industry analysts predict that home video will continue to be a very important revenue stream for years to come, and it is clearly long past time for an improvement in the home video residual formula.
Just change that first date to "2008," update the modes of distribution accordingly, and this 'graf will be valid for the next twenty years.
Labels: labor unions, mass media, movies, writing
Thursday, January 17, 2008
Why Dani Rodrik Has the Right Idea: One-Sentence Version
I believe in the Efficient Frontier, and I believe in the Edge of the Universe, but I don't believe they are coterminous (spelling corrected).
Labels: Economic Development
Baseball Rewards Steroids Cover-Up Team Leader
Following in its grand tradition of assuming the players are solely responsible for the MLB incentive system, MLB acted in completely expected fashion today:
Bud Selig was given a three-year extension as baseball commissioner through the 2012 season.
The unanimous decision made at Thursday's owners' meeting came two days after Selig and union head Donald Fehr testified before a congressional committee that both criticized baseball for its steroids problem and praised it for strides made the past two years.
That's two days after his "we weren't responsible, even though I 'take responsibility' schpiel:
As I said in my statement, I’ve thought about this thousands of times. I’ve been in this sport all my adult life. I agonize over that, because I consider myself, at the end, a baseball man. In the ’90s — you know, hindsight is always very beneficial. I watched things. I re-read all the articles that Senator Mitchell had. I take responsibiility for everything, let’s understand that. I take it –- for all the good things that have happened to make the sport as popular as it is today, and when we talk about something negative, there’s no question about that. I’ve agonized.
But I would also remind you, and who knows how long this has gone on –- the Senator said over 20 years –- we have come a long way in a difficult environment. My minor league program is going into its eighth year. So all of the great players in this sport have been tested eight years.
Do I wish we had reacted quicker? Should we have? Yes, one can make a compelling case. And I do a lot of introspective thinking, and I’ll second-guess myself. As far as responsibility, all of us have to take responsibility.
Yep, "all of us" have to take responsibility. The buck stops...with Barry Bonds? And there's good reason to doubt that those "thousands of times" have been for more than a millisecond:
2005 (March 17): “Do we have a major problem? No.”
2008 (Around 1:05 p.m.): “As far as I’m concerned, I don’t have a scintilla of doubt that the use of performance-enhancing drugs is a very serious matter for this sport — at its core. At its core.”
...Selig was asked if baseball could change its culture, in which players may be tacitly encouraged to do steroids, if only to stay competitive with those who already have. He responded: “I have a lot more confidence than I did three years ago.”
Fortunately for Bud S., but not for us, Congresscritters ask questions the same way they are asked them by the Tim Russerts and John Kings of the world:
He was not asked in follow-up questioning how that statement could square with the one before.
The late Doug Pappas's countdown clock needs to be updated, and we are all the poorer for that.
Labels: baseball, Risk Management
Human Capital Pushes, History and Lack of Planning Pushes Back
NYT article #1 (United States, early in the process):
Those efforts, and others across the country, reflect a growing sense of urgency among educators that the primary goal of many large high schools serving low-income and urban populations — to move students toward graduation — is no longer enough. Now, educators say, even as they struggle to lift dismal high school graduation rates, they must also prepare the students for college, or some form of post-secondary school training, with the skills to succeed....
By contrast, many urban and low-income districts, which also serve many immigrants, are experimenting with ways to teach more than the basic skills so that their students can not only get to college, but earn college degrees. Some states have begun to strengthen their graduation requirements.
“This is transformational change,” said Dan Challener, the president of the Public Education Foundation, a Chattanooga group that is working with the area public schools. “It’s about the purpose of high school. It’s about reinventing what high schools do.”
NYT Article #2 (India, further in the process):
Sixty years after independence, with 40 percent of its population under 18, India is now confronting the perils of its failure to educate its citizens, notably the poor. More Indian children are in school than ever before, but the quality of public schools like this one has sunk to spectacularly low levels, as government schools have become reserves of children at the very bottom of India’s social ladder.
The children in this school come from the poorest of families — those who cannot afford to send away their young to private schools elsewhere, as do most Indian families with any means.
India has long had a legacy of weak schooling for its young, even as it has promoted high-quality government-financed universities. But if in the past a largely poor and agrarian nation could afford to leave millions of its people illiterate, that is no longer the case. Not only has the roaring economy run into a shortage of skilled labor, but also the nation’s many new roads, phones and television sets have fueled new ambitions for economic advancement among its people — and new expectations for schools to help them achieve it.
That they remain ill equipped to do so is clearly illustrated by an annual survey, conducted by Pratham.... The latest survey, conducted across 16,000 villages in 2007 and released Wednesday, found that while many more children were sitting in class, vast numbers of them could not read, write or perform basic arithmetic, to say nothing of those who were not in school at all.
Among children in fifth grade, 4 out of 10 could not read text at the second grade level, and 7 out of 10 could not subtract. The results reflected a slight improvement in reading from 2006 and a slight decline in arithmetic; together they underscored one of the most worrying gaps in India’s prospects for continued growth. [emphases mine]
The boost in high school graduation rates was the revolution that sparked the 20th century U.S. economy.* If you want a bigger piece of the pie, you don't stand still. Otherwise, you end up with the Indian economy—skills short, training deprived, and unprepared to take the next step.
*It is certainly true that the destruction much of the established non-US infrastructure from 1939 to 1945 helped set the table for the post-WW II boom—but it is even truer that it is only because the U.S. was prepared to take advantage of the opportunity (unlike, say, in 1918) that it worked as well as it did.
Labels: Economic Development, education, human capital
Wednesday, January 16, 2008
Why I Love NYC
This last week before school starts again is the time to get in some play going. So Monday night I walk over to 45th Street and get tickets for August: Osage County, which a friend of Shira's says is the play to see if you're seeing only one. And there are $25 tickets available.*
Turns out that Tom Stoppard's "Rock 'n' Roll"** is playing right across the street, and they have student tickets for available for the same $25.
Which was cool enough in itself.
But at intermission of the Stoppard last night, while standing in the lavatory queue, I hear a voice saying "You gonna be all right, hon?" And since it's a voice I've been listening to for around 33 years, since slightly after the Chilean "Experiment" began,*** it only takes a quick glance to see that, indeed, there is a dark-haired, medium-height man with a small goatee coming down the stairs.
This medium-height man with a small goatee (though with somewhat better clothing):
(image from here).
*Plus a "facility charge" that is uniform for all tickets of $1.50. This is the definitive regressive tax, but we decided not to spend an extra $50/ticket just to reduce the "rate" of the service charge.
**Which turns out—I had forgotten—to be among other things, a discussion of democracy, more Churchillian than Utopian.
***Coincidentally, the day this was released.
Our frequently-inactive game may never end
While looking for the Tom-Cruise-defends-Ron-Hubbard's-poker-game-idea video at Gawker, I find that the world of Facebook may be about to get a little less interesting, if that's possible:
Hasbro and Mattel, co-owners of Scrabble, asked Facebook to remove its one good app, "Scrabulous."
It's time for everyone to SuperPoke all the Hasbro and Mattel people—with what is left to your imaginations.
Personally, I'm with Gawker commenter Voxpopuli:
Scrabulous is the only reason I log into facebook daily, instead of weekly, so they'd better not shut it down.
God, I am such a geek.
Tom Adds: Interestingly, a U.S. Copyright Office page linked by one of the Save Scrabulous Facebook groups points out that games receive little protection under the otherwise content-provider-friendly U.S. copyright law:
Copyright protection does not extend to any idea, system, method, device, or trademark material involved in the development, merchandising, or playing of a game. Once a game has been made public, nothing in the copyright law prevents others from developing another game based on similar principles.
Some material prepared in connection with a game may be subject to copyright if it contains a sufficient amount of literary or pictorial expression. For example, the text matter describing the rules of the game, or the pictorial matter appearing on the gameboard or container, may be registrable.
In short, merely knocking off a game's concept or even the full system described by its rules is legal. Mattel's case against the Scrabulous brothers, to the extent they have one, would be for misappropriation of Scrabble IP protected by trademark. Since the Agarwalla brothers don't republish the original rules or any distinctive gameboard artwork on Facebook, any copyright claims would appear to be weak.
Lots of commenters out there are suggesting that a settlement involving licensing of the Scrabble trade dress would be a reasonable outcome. Since nothing would really stop the Agarwallas from just changing the Scrabulous name and moving on, it's probably the profit-maximizing outcome for Hasbro and Mattel, too.
Labels: Intellectual Property, just life
Greg Mankiw has Fallen and He Can't Get Up
Felix Salmon delivers the death blow:
[M]aybe Mankiw is sophisticated enough to cope with such income volatility, unlike those poor people on food stamps.
Labels: Economics, PortfolioMarketMovers
Tuesday, January 15, 2008
Best Line of the Day
I wish I could write business documents as well as the person who prepared Page 16 of Citibank's presentation today (h/t CR).
You see, I did what I always do with presentations: looked at the numbers. So I looked at page 16 and saw that Commercial Business revenues were down 21% YOY, and Net Income for same was down 15%.
Then a coworker pointed to the text on the right-side:
– Average loans up 10%, deposits up 18%
– Margin compression
"Margin compression" apparently translates into English as: "Our business model doesn't work here."*
*I welcome any alternative description of the phrase that explains an 18% rise in deposits and a 21% decline in revenue.
Labels: banking, bankruptcy, High Finance, mortgage
30% Down looks harder to defend
Via Dr. Black, the Irvine Housing Blog revisits a property, now listed for 26.3% less than it was initially.
Citi (whose only capable high-level executive, judging by their presentation today, departed because of alleged relationships with Maria Bartiromo) is projecting a 7% decline in house prices over each of the next two years. That would leave the house in "deisrable Heritage Park" around the $388K level, or 31.2% down from its last actual sale—in May of 2005.
The plural of anecdote still isn't data, but induction may be gathering steam.
Labels: Housing Bubble, mortgage
Further on Democracy and Economic Growth
If you're inclined (as I am, no matter what I said earlier) to accept the old Winston Churchill declaration that "It has been said that democracy is the worst form of government except all the others that have been tried," then it becomes necessary to explain why democracy, in the British sense especially and the U.S. sense in large part, largely developed on the backs of colonization (extracting excess rents from people due to asymmetrical information at best, brute force at worst).
Mark Thoma points us to Eric Rauchway's review of Power and Plenty, and lays out the rules:
The logic of counterfactualism is simple, though it remains surprisingly controversial: If you want to say what's good and bad in history, you can't just apply your judgment, but must rather explain what the better or worse alternative might have been. It's not enough to declare that (say) the United States shouldn't have taken the Philippines; one has to argue that had the U.S. refrained, a better x would likely have happened and the worse y would not have. The counterfactualist argues not from absolutes, but from costs and benefits. Ferguson, for example, used the method to argue that the world was better off for the British Empire. (The crude version: You wouldn't want to get colonized by Germany, would you?)
Read the whole thing, but the money quote (for the current subject) comes here:
Even if elements of this story seem familiar, Findlay and O'Rourke tell their tale exceptionally well and give lively attention to alternate possibilities: What should have happened, according to theory? What could have happened, in the realm of plausibility? They find they can cede little to neoliberal economists: Power was generally necessary to secure plenty. "Adam Smith and his liberal followers to the present day, however, would, and have, argued that much of this [state] expenditure was wasted, unnecessarily crowding out more productive private investment. The assumption of course is that the markets and raw material supplies ... would have existed regardless"--which, history suggests, they would not have. Had your empire not secured them, your neighbor's would have, with lasting bad consequences to you. [emphases mine]
If I'm reading this correctly, the only way that economic growth thrives in a democracy is by exploiting an underclass, either directly (colonies, slavery) or indirectly (answering the age-old question of why tropical foods are underpriced).
The other way that worked for a while in the United States (and may still be) is expansion of human capital. The 20th century growth is the story of two things: a three-fold increase in high school graduation rates and the moving of women into the work force* (the latter paralleling but lagging the move from labor-intensive agrarian populace to manufacturing, to be certain).
But there are only so many women, and only so much education that can be viewed legitimately as "investment." Perhaps greater returns are realised from other forms of governance?
*It also reduced the Pigouvian Paradox—the man who marries his housekeeper reduces GDP, even though her efforts on his behalf likely increase.
Labels: Democracy, Economic Development
Does Anybody Remember White Powder
The Smoking Gun has the details on the "terrorist" who powdered Olbermann, Stewart, and Pelosi, to name three.
When will rounding up of California's "compulsive Republican voters" begin?
Or is this going to be presented as another case of IOKIYAR?
For anyone who has forgotten:
The New York Post on the "powder puff" spooking "Keith."
One Good Move posts Keith's great response.
Labels: Politics, Republicans, terrorism
...interesting to note that there's no hard disk option to the standard 80 GB (1.8") unit. Either supplies of the drive used in the 160 GB iPod are higly constrained, or they can't afford the extra 3mm of thickness, or maybe both. I suppose the smart money waits until Moore's Law sweetens the deal on the solid-state drive option, $999 for -16 GB.
Labels: computers, conspicuous consumption
Detroit Extinction Watch: NAIAS '08 Edition
In the spirit of almost keeping up with my New Year's resolutions, here are some almost timely observations from the Detroit auto show.
Two things I'd mostly expected, especially given the 35 MPG CAFE law, came to pass:
- Honda announced that its new, U.S.-emissions-legal, 2.2-liter diesel four would debut in a 2009 Acura, or perhaps in an Acura in 2009 (depending on how you parse the announcement). The car is likely to be the Acura TSX, since that car is sold as the Honda Accord in Europe and midsized "saloons" over there are sold without diesels at the manufacturer's peril. The current Euro Accord diesel gets around 40 MPG, and the predecessor engine also gets around 35 MPG in the aerodynamically challenged CR-V. I predict that the price premium for the Honda diesel will be substantially less than the $6,000 that Whinin' Bill Lutz of GM has been claiming.
- (Kim take note!) Toyota announced the please-don't-call-it-a-Camry wagon, a/k/a Venza, for sale in the fall. Call this a CAFE 35 transition crossover. Compared to the Camry, it picks up about 3 inches in ride height and five or six in overall height, which puts it at nearly the length and height of a Subaru Outback, and around 6 inches lower than the SUV-styled Highlander. I'd guess the Venza (V6) will pick up 2-3 highway MPG over the Highlander, depending on its mass, or about half the aerodynamic penalty the SUV has over a similarly-sized car. I predict other "crossovers" will gradually lose height as it becomes increasingly costly to maintain the fashion of sticking an upturned middle finger into the wind.
Meanwhile, proving that I'm not the only one without timely news, the Sunday NYT ran a lengthy article asking the burning question, Will Nardelli be Chrysler's Mr. Fix-It? I've at least hinted at my answer before, but the Chrysler appearance at NAIAS offers some additional hints. They have:
- A big pickup truck, which might be a coup of sorts except that Ford is also introducing a big pickup truck and that part of the market is contracting for obvious reasons. The truck's homoerotic undertones were underscored by some hot bull-on-bull action interrupting the opening publicity stunt.
- Three ostensibly eco-friendly concept cars without the slightest prospect of a production vehicle among them.
- Behind the scenes, one of its theoretically marketable concept cars, a small rear-drive roadster, actually will be built on a front-drive platform from Chery, a Chinese automaker. Is anyone else recalling the "bimbo boxes" from Snow Crash, with the additional wrinkle of outsourcing?
Labels: Trains Planes and Automobiles
Monday, January 14, 2008
On CNBC right now: my old friend Larry Kudlow speaking with Ben Stein on how the Fed is "saving" the economy.
Labels: Economics, Journamalism, The Old Firm
Marshall Jevons Throws Down the Gauntlet
We (by which I mean Brad DeLong and Tom, but possibly not Chris Dillow or I) believe that economic growth thrives best in a democracy, or at least a democratic republic.* Strong institutions, respect for the rule of law, avenues of redress, all that rot.**
Marshall Jevons notes the imminent death of Suharto (the man whose rule began with Mel Gibson getting a hard knock in the eye), and asks the obvious:
Here's someone who has embezzled huge amounts (15 to 35 billion) of money from state coffers, still loved by the people? Does it really truly reflect the view of the Indonesian people? What lesson can development practitioners learn from it?
With all the talk of Second-Best Institutions, is it possible that Not Being a Democracy is a better choice for economic growth?
*I would prefer to believe it, but do not see the supporting evidence. I can't speak for Chris Dillow's preferences.
**Of course, this requires one to presume that, for instance, 11 Sep 1973 never happened, except to create a Miracle(tm). But I sidebar, if not digress.
Labels: Brad DeLong, Democracy, Economic Development, Politics, the rule of law
You're Ugly, Your Mother Dresses You Funny, and You Waste Money
The Old Firm comes off poorly in a non-financial matter as well:
Even before the report gets much press, it's already having an impact. For example, Ceres gave the investment banker Bear Stearns a zero rating since the company did not respond to requests for information or have any material in its annual report.
"So far as we can tell, they have no policy, no board members responsible for climate change, and no metrics," says Lubber.
Yet the investment bank is proud of its new "Energy Star-labeled" building, says Monica Orbe, a spokeswoman for the bank. "I know it's very energy efficient," she says, "because when I don't move for three minutes, the lights go off."
Bear Stearns intends to participate in the survey in the future, Ms. Orbe says. [emphasis mine]
Most people at Bear who don't move for three minutes find the lights going out, all right. Just never heard anyone treat it as a badge of honor before.
Labels: environmentalism, The Old Firm
Sunday, January 13, 2008
Free Riding In Action
Having opened and done nothing with the Wordpress shadow of Marginal Utility, I'm crashing the sociology party at Scatterplot with their nicely tweaked template to express annoyance at a misuse of Econ 101 reasoning: the Reverse Mary Poppins incentive plan.
Labels: Bigger Places Than This on the Intertubes, Economics
My Seventh Post in a Row is a Blog-Pimping
The long-MIA Battlepanda has posted her greatest hits.*
*From a quick glance, I believe they are all Angelica's posts, which implies that the posts might be slightly more common than 1 in 100, though close enough the Washington Post's purposes.
Of course, I can't count, either
UPDATE: Brad DeLong and Scott at LG&M both point to Spencer Ackerman, who got all the way through the piece and found it even worse than I thought.
The New York Times Public Editor describes their editorial columnists:
I agree with their effort to address an Op-Ed lineup that, until Kristol came aboard, was at least six liberals against one conservative who isn’t always all that conservative.
Six liberals?? Bob Herbert, yes, in that he often speaks for the underrepresented. Krugman has been radicalized by the Administration's incompetence, which I guess in Clark Hoyt's mind is the same thing. (So has John Cole, and I doubt many would confuse his entire oeuvre as "liberal."). Frank Rich is more of a bloviator, but let's put him in the category as well.
That's three. Who are the other three? Maureen "Michael Douglas chose Catherine Zeta-Jones over me and I don't know why" Dowd? Roger Cohen and Gail Collins, who between them have never seen a civil liberty they liked or a country that shouldn't be invaded? Caitlin Flanagan, whose most recent piece will be dissected by Bean and Melissa and the Usual Suspects, so I don't have to? [UPDATE: Bean, as expected, was Already on the Case. And Scott had an early pointer.] Is Hoyt counting Olivia Judson, since she writes about science, and believing that the world existed before September of 4004 BCE has become exclusive to "liberals"? Or Tom "my brain is flat" Friedman?
We have to assume that Hoyt—who used to know better—considers Friedman, Dowd, and Collins to be "liberals," while former Weakly Standard columnist Brooks "isn’t always all that conservative" (a statement that, if it were true, would appear to speak ill of Mr. Kristol's perceptions, skills, and possibly hiring practices).
Can someone please define "liberal"—a word Hoyt also uses to disparage his commenters—in such a way that Hoyt's definition is both (1) viable and (2) not restricted to "would be able to be printed without editing in The Weekly Standard"?
Labels: Journamalism, NYT, Politics
Everything I Know about Statistics, and Probably Economics, is Wrong
By 1996 the percentage willing to vote for a black candidate reached 93 percent, so close to unanimity that the survey dropped the question.
Labels: analytics, Economics, Journamalism, Statistics
Friday, January 11, 2008
I Have a Data Point, and It's Not Pretty
A while back, I asked if anyone had a model that could support house prices only dropping 30%. This was after Paul Krugman called Goldman's 15% projection "improbable on the low side," and noted that a 30% drop would leave us at 2003 levels, which still strikes me as a rather high support point.
While 30% has become the standard assumption—at the AEA panel I missed most of, someone (
Via Dr. Black, we now have a piece of data. And it doesn't exactly support the null hypothesis:
Arsenault said he and his three partners may buy a block of about 50 new, unsold condominiums in Orlando, Florida. They have a price in mind and they're willing to wait until they get it: 40 cents on the dollar.
"There's a risk to buying too early in the downturn, but buying too expensive is our biggest pitfall," he said....
"They sold land at 40 cents on the dollar and they're happy to get it," Bryan said. "The value of land is eroding by the minute."...
The price, $70 million, or about $10,000 an acre, was lower than the sale price for the same land that Horton had in escrow six months ago, said Wolff Co-President Tim Wolff.
Forty cents on the dollar for land, forty cents on the dollar for homes. While I'll still grant that the plural of anecdote is not data, it remains to be seen if those points will be outliers. But the evidence doesn't favor the idea that they will be.
*This sounds as if it is a lot of money, but only partially because it is. There are two mitigating factors: (1) since it is only the appreciation, in absolute terms, over the past four to five years, it is arguably mostly froth on the bubble and (2) it assumes an overall decline in selling prices, but houses are not quick assets, so the "loss" will not be realised in any direct way, other than, for instance, a reduction in MEW.
Labels: Housing Bubble, mortgage
Wednesday, January 09, 2008
A Justification for the "Death Penalty," or Firing Colin Campbell
WARNING: VIDEO EMBEDS NOT SAFE FOR KIDS. OR MOST HUMANS.
No, not that one. It's time to end the Philadelphia Flyers franchise.
I say this with a heavy heart, knowing I have at least one relative who may never speak to me again. Knowing that the Devils have the best record in the conference (take that, Burnside), knowing that the Rangers have not won in 2008 yet. But when Bobby Clarke gets loose with this, it's clear there's GOOD reason that league games are more difficult to find than the English Premier League football:
"When he went after [Jason] Blake, I loved it," Clarke told The Sports Network of Canada.
What's Clarke's definition of "Went after"?? Here's Downie on Blake:
Downie punched Blake in the left eye as Blake was being held back by an official during a scuffle. [emphasis mine]
Here's Downie's hit on Dean McAmmond in the preseason, which may not quite reach McSorley or Todd Bertuzzi levels, but for which there is no excuse:
Well, unless you're Clarke:
Clarke said Blake deserved Downie's punch for saying Downie should have been suspended for more than 20 games.
"Blake was a guy who had no problem going out and saying [Downie] should be suspended for life or suspended for the year," Clarke said. "When you say something that stupid, why shouldn't this kid go after him for it?
"The kid did what every hockey player should do. If a player like Blake who's been around as long as he has wants to criticize a player, then he has to go on the ice with him and suffer the consequences."
"The consequences" = sucker punched while the referee holds him.
Here's that 25-game Boulerice hit (with the Flyer announcers trying to be nice):
Colin Campbell should resign in shame, having admitted that he "sells hate."
There is some justice, but even that's not the type anyone wants to see. Ken Campbell (presumably no relation to Colin, as he appears moderately sane) notes:
But perhaps the Flyers will learn something from the fact they’ll be without Joffrey Lupul for at least two weeks after he suffered a concussion and a bruised spinal cord. Because the only reason it happened was that he was decked by his own teammate’s illegal hit.
The only reason why it’s Lupul and not Maple Leafs winger Alexander Steen who is injured, is that Flyer defenseman Derian Hatcher’s classic headshot didn’t hit the intended target. On the play, Hatcher spotted Steen skating through the neutral zone, then came in with his elbows up and left his feet in an attempt to separate him from his senses.
Although Steen did get hit, he managed to avoid the brunt of it, but Lupul, who was skating right behind him, took his teammate’s elbows right to the head. Had that hit connected on Steen, there’s a good chance the league would have been reviewing two incidents involving the Flyers. [emphasis mine; think Downie's hit on McAmmond, and realise how well that "double secret probation" is working]
Enough is enough. It's intersession, and I was going to try to enjoy hockey. Instead, this coming Saturday features matches with Arsenal, Manchester United, and Juventus. None of whom employ Bobby Clarke or Colin Campbell.
Labels: hockey, mass media, real football, sports
How the AEA is like a Science Fiction Convention
- Gushy Personnel Sightings:
- Flying down, trying to keep eyes open (or possibly close them), but the gentleman next to me is working. On Stata code. That I can almost understand. Gradually realise it was Daniele Paserman.
- My earlier prediction turns out to be, unintentionally, correct. Walk into Krugman, Blinder, Roubini, and Shiller during the Q&A session, taking a just-opened seat in the back. Find self next to Joseph Stiglitz, and about five feet from Avinash Dixit.
- Flying down, trying to keep eyes open (or possibly close them), but the gentleman next to me is working. On Stata code. That I can almost understand. Gradually realise it was Daniele Paserman.
- We Don't Need No Stinking Badges - many prominent signs indicate that badges are required, but very rarely does anyone check. I carry mine in my pocket most of the time.
- The Irrational Badge Exception—the Book room. The one place where the participants want as many visitors as possible is restricted.
- The Book Room II: Last-day sales. Andrew (who interned there last summer) picks up multiple CATO books. I get a copy of this for half-price. An electronic publisher is giving away copies of Greg Mankiw's textbook (link h/t DeLong) in electronic form.
All in all, it reminded me of a World Fantasy Convention. But someone really needs to do a study of why the book room—the only exemplar of a free market in the convention—is Members Only.
Labels: Economics, rational expectations, sf
Thomas Schelling on the Price of Do-Nothing
Sir Nicholas Stern isn't the only Nobel Prize winner arguing, effectively, that Arrow-Debreu likely undervalues risk in large systems too much to make decision avoidance practical.
Labels: Dani Rodrik, Economics, environmentalism, Global Warming
Confidential to the Superintendent
As luck would have it, tomorrow I'll get to spend around 7 hours on this car and that car. Whee!
Labels: Trains Planes and Automobiles
Tuesday, January 08, 2008
Dani Rodrik has posted a link to the paper that went with his AEA presentation referenced here.
So my comments are on hold not only because I'm spend too much time working and in doctors's offices, but also because he may have addressed the major issues.
Labels: Dani Rodrik, Economic Development
VRWC Theory Note
UPDATE II: Well, that didn't last long.
If I were an Active Republican (instead of one spurned by the Ancestral Party's strange delusion that my bedroom is its business), I might look at the data from Iowa and the anecdotal evidence from New Hampshire and assume that the Republican Party was making an all-out effort to keep Hillary Clinton from gaining the Democratic nomination.
Update: Glenn Greenwald notes possible Unintended Consequences of the Early Obama-nation. And I couldn't be happier.
Labels: 2008, Hillary Clinton, Politics
CAFE 35 Claims a "Victim"
GM has canceled its V8 engine for luxury cars, i.e., Cadillacs. I'd always thought putting 300-hp engines in cars that senior citizens drive 15 miles per hour under the speed limit was a gross waste of resources.
As the story notes, Cadillac already can't sell its existing V8 in the model where a V6 is offered as the base engine — the six and the eight offer very similar performance but dissimilar cost and fuel economy. This is somewhat true of other manufacturers' product lines, too: a BMW 550i barely outruns the 535i and gives up 3 MPG or so for $8,000. Uptake on the 550i peaked under 15% of U.S. 5'er sales before the late run-up in fuel prices.
In bread-and-butter markets where fours are the sensible alternative to increasingly overpowered sixes, something like 75% of buyers take the four, but status races are driven by the upper fractiles of the distribution.
Labels: Trains Planes and Automobiles
Saturday, January 05, 2008
AEA Highlights III - An ExtraPresentation Interlude
Not certain if this counts as a highlight (more of those tomorrow):
- We are at the dinner for Economists for Peace and Security, honoring Paul Krugman. There have been e-mails from Robert Solow and Paul Samuelson, a live commentary by Maurice Obstfeld, and now Joseph Stiglitz is talking.
For some reason (bad eyesight all day), I am looking at Robin Wells (a.k.a. Paul Krugman's wife) as Stiglitz says, roughly, "Paul told the truth in 2000, 2001, and 2002, not without a price."
Ms. Wells reaction at that point, even though it was as guarded as possible, could be expanded into a novel, but it would be a depressing one.
The coda would be when Duncan Foley asks Krugman not only about bipartisanship, but also extended the question to whether Krugman himself has been contacted by anyone from the other side.
The answer, not surprisingly, was no.
Friday, January 04, 2008
AEA Highlights II - Death Be Not Proud
We got our luggage, so I'm going swimming. Meanwhile
- Paul Krugman: "I'm going to take some time away from economics tomorrow and go down to the Ninth Ward."
- Sir Nicholas Stern, giving the Richard T. Ely Lecture on the Economics of Climate Change, taking a moment at the beginning to note that Andrew Glyn was interred just a few hours before. (He followed that up by noting, in effect, that, even in his best case scenario, coral reefs are going to be significantly destroyed. Time to plan that Australia trip.*)
*And, while I'm on the subject of Australia, condolences to "Mr. Mochi-Tsuki," whose father died a few days ago and who cannot go to the funeral because he has applied to be a U.S. citizen.
AEA Highlights I
Ignoring that our luggage was lost and my IRS interview tonight may have to be done in tennis shoes and two-days-worn clothing...
- Ed Glaeser (having presented what seems to have been a fascinating paper) responding to the question "Why didn't you include the current Iraq war in your discussion?" by noting that he stopped with Vietnam because "we have the LBJ tapes as evidence." And noting the point to which many of us return: It's possible that this entire cf is because GWB believes Saddam Hussein really did try to kill his father.
- Dani Rodrik (following a presentation by William Easterly) by declaring that his presentation should be though of as "Easterly on Prozac"—and then proving it by attempting to embed YouTube clips into his presentation.*
More on the Rodrik presentation later.
He was sadly unsuccessful. I encourage everyone to go over to his blog and ask him to post the links. And while you're there, read this post, which dovetails nicely with that presentation. UPDATE: Dani Rodrik has posted those links, and summarized his presentation here.
UPDATE 2:Felix Salmon piles on, as it were, adding a clip via Infectious Greed to the mix.
Labels: Dani Rodrik, Economic Development, Economics, Iraq, PortfolioMarketMovers
Bring Out the Circular Firing Squad of Flying Attack Monkeys!
Courtesy of my wingnut spam feed, Richard Viguerie's ConservativesBetrayed.com, I woke to an e-mail with the subject line, "Huckabee Win is Bad News for the GOP."
I would certainly like to think that. Viguerie's indictment:
Mike Huckabee is a Christian socialist.I seem to have missed the parts of the New Testament where Jesus offers tax-avoidance advice.
He is a good man, but with a Big Government heart. He is the most liberal of all the Republican presidential candidates on economic issues.So he thinks that Soylent Green isn't an efficient solution to the overpopulation problem? Who'da thunk?
I'd like to know just what segment of the 25 percenters this is meant to influence:
If you like President George W. Bush, you’ll love Mike Huckabee.
Meanwhile, Robert Waldmann considers the actual substance of Huckabee's candidacy:
Of course no pundit mentioned that his only policy proposal is to take from the poor and give to the rich.The obvious basis for Robert's worry is that George W. Bush is POTUS.
The man bases his campaign on his persona.
I'm worried. Only a total idiot would vote for someone who has no policy proposals. Does Huckabee have a majority?
Minor Mysteries of the I-90/94 Corridor
Why are there so many fireworks stores in the middle of nowhere? How do they stay in business (that is, their parking lots appear to be plowed despite the absence of customers)?
Apart from pesky dangerous-product-retailing considerations, the pattern of demand — one big week followed by just enough business to keep the Brat and Punk divisions of police departments from Lake Windsor to Menominee occupied — would seem to make the optimal fireworks-selling arrangement a mall kiosk or transactions out of the back of a fly-by-night trailer. Granted, these businesses aren't located in high-cost areas of the state, but there is such a thing as opportunity cost; the adult novelties stores among others appear to be doing brisk businesses.
Labels: Modern Retailing, Wisconsin
Thursday, January 03, 2008
Another AEA Panel
Peter Klein was the Economics Professor for my MBA class at Georgia.* During that period (ca. 2000-2001), it is safe to say that some file downloading was done by students, even during his class. Several of the, er, more capable downloaders were among the most devout of students.
I wonder if he will discuss this.
*He is also the only one I know who is on the Academics for Ron Paul list, which surprises me more than it probably should.
Everything Old is "New" Again
Via Mark Thoma, the Tax Foundation discusses the timing of births (somehow without considering that eighteen years out might be a better time in one's earnings life cycle to take a deduction).
But the 'graf that catches attention is this one:
A similar issue is scheduled to take place 23 months from now with the estate tax. Under current law, it will be nonexistent in 2010, but will come back in full force in 2011. This could possibly lead to some difficult decisions having to be made in December 2010 regarding the value of one's living a few extra months or years relative to the financial gain to heirs of a zero estate tax bill.
Now where have we seen that before?
Paul Krugman in the NYT 30 May 2001 ("Bad Heir Day," via the PKarchive):
There's a scene in the 1966 British comedy "The Wrong Box" in which the son of an irascible plutocrat pushes his father's wheelchair along the top of a cliff, responding with a dutiful "Yes, father" to each outpouring of verbal abuse. Then the old man waves his hand at the industrial landscape below, and declares, "When I'm gone, all this will be yours." "Yes, father," replies the son — and pushes him off the cliff.
That scene came back to me as I delved further into the absurd piece of tax legislation that a House-Senate conference devised and that George W. Bush triumphantly signed last weekend. The Bush tax plan was always peculiar: in order to hide the true budget impact, its authors delayed many of the biggest tax cuts until late into the 10-year planning period; repeal of the estate tax, in particular, was put off to 2010. But even that left the books insufficiently cooked, so last week the conferees added a "sunset" clause, officially causing the whole bill to expire, and tax rates to bounce back to 2000 levels, at the beginning of 2011.
So in the law as now written, heirs to great wealth face the following situation: If your ailing mother passes away on Dec. 30, 2010, you inherit her estate tax-free. But if she makes it to Jan. 1, 2011, half the estate will be taxed away. That creates some interesting incentives. Maybe they should have called it the Throw Momma From the Train Act of 2001.
UDATE: Anonymous in comments notes that the Tax Foundation has been hitting this issue since late 2005, with this giggle, and three substantive pieces.
Labels: Bushonomics, life cycle, Tax Incentives
Wednesday, January 02, 2008
Specious Reasoning as Journalism
Via Infectious Greed, Breaking Views argues that privacy is dead.
Now, don't get me wrong. Charles Platt has been making this argument for over a decade. But Robert Cryan and Jeff Segal resort to a strange argument to "make" their point:
Just look at Google's free e-mail service, Gmail. Google mines messages so that it can insert context-related advertising. Just a few years ago, this seemed like an outrageous incursion into privacy. Now, Gmail is common, and the number of accounts doubled in the past year. [emphasis mine]
What else happened in the past year? GMail became available to anyone, not just people who were recommended to the service.
What should be amazing is if GMail only doubled in the past year. If it was already reaching 50% of its near-term potential audience before "going public," then there is good reason that Google now depends primarily on non-US sources for its revenue.
Labels: Journamalism, technology
The Place where Homeowners Go to (Want to) Die?
I've been trying to get through the 232 pages of preliminary AEA programming. I may just decide to sleep in Saturday morning:
Jan. 5, 8:00 am
The Subprime Mortgage Crisis
Presiding: To be announced.
ALAN BLINDER, Princeton University
PAUL KRUGMAN, Princeton University
NOURIEL ROUBINI, New York University
ROBERT SHILLER, Yale University
Tuesday, January 01, 2008
Really Shallow Thought of the Day
If I were running for President, I might not try so hard to distinguish myself from the two people who got the second- and third-highest total of the U.S. popular vote ever. (h/t Dr. Black)