Wednesday, July 30, 2008
Because if people CAN vote for both, they should and will vote for Obama. The Daily Show with Jon Stewart had a sketch where a "black leader" said an Obama presidency would be bad since the rap music industry and professional sports teams would have trouble recruiting; - the punch line was "Do we want black kids growing up thinking they could be President"? It got a few nervous twitters, but it was not a laugh out loud comedy sketch, and understandably so. It's something that's desired too seriously by fair minded people. The election of Obama would be an inspiration to minorites not just in the US but around the world. This fervert wish should not be disappointed without good reason and it reflects well on Americans that they should be looking for that good reason as opposed to voting for McCain without much inquiry. It does not diminish Obama to make this suggestion so long as Obama is not making it himself: as I noted here on Saturday, Obama has been praised as an intellectual by conservatives who know him personally as well as liberals. Likewise his natural gift for communication is broadly acknowledged.
During the primaries, Jay Leno joked about what he suggested was on the Democratic candidates' podiums: Hillary had a can of beer and a gun, Barack had a glass of white wine and hors d'oeuvres. Now that's funny, if you can tell it like Leno. The ground breaking nature of Obama's candidacy is not.
Obama is such an early adopter of trendy technologies, he's even on Twitter. Meanwhile, McCain doesn't even do "the Google".
If this were a beauty contest, it would be a blow-out. But it's an election, and while low profile elections often do end up being Prom King or Queen popularity contests, this isn't low profile. McCain is still close in the polls because many fair minded people don't believe that they can vote for Obama. It's not because McCain is so much more attractive. It's because of Obama's rejection of the expert consensus on things like trade, rent controls, and taxes. There is a real concern that Obama's history as a left wing "community organizer" will mean he will be inlined to pursue policies despite non-partisan evidence against them.
Monday, July 28, 2008
Economists are overwhelmingly opposed to rent controls, which would go a long way towards explaining why many "liberal Democrats' would share that opposition. Even Paul Krugman, who boldly describes himself as "liberal", calls rent control "a textbook case of economic stupidity" and goes on to note:
The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that "a ceiling on rents reduces the quality and quantity of housing." Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.
I might add that in a poll of 211 economists published in the May 1979 issue of the American Economic Review, more than 98% of U.S. respondents agreed with the statement and the June 1988 issue of Canadian Public Policy reported that over 95% of the Canadian economists polled agreed with the statement.
I disagree with Zweig's reasoning. I add the word "reasoning" here because when it comes to the stock market, it is not only possible but common for logic to call for stocks to go one way while they end up going the other. This is especially true when bubbles or crashes are underway, since when the top or bottom is finally reached, you'll find the voices of reason were calling for a top or bottom long before. While I happen to believe financials and stocks generally are a better value and/or safer bet than they have been for months, that doesn't mean they couldn't go lower yet this year. There was a head-fake last fall when it looked like the subprime problem might just be a summer of 07 crisis, and then again in the spring when stock prices suggested the worst was over. This could be another dead cat bounce.
In any case, Zweig begins by drawing on Benjamin Graham's value investing book to define "speculative" trades as trades that don't promise "safety of principal and a satisfactory return" (although Zweig adds that even trades that promise both are "speculative" if they aren't the product of "thorough analysis" as well). This "either risky or unsatisfactory return" definition simply equates speculative trades with bad trades; however, since it's a starting point of modern portfolio theory that risk and return are inversely related.
If a 2% annual return is "satisfactory", then, yes, buying the stock of a financial, or any stock, is "speculative" since the principal is not as safe as if one just bought a Treasury bill.
I would rather define speculation as trading which is made in anticipation of reversing the trade later such that the expectation of profit is entirely limited to an expected change in the price of the security. An investment, in contrast, is the purchase of an asset for the income that asset is expected to generate.
By this definition shorting stocks and playing options are speculative, because these activities cannot generate income except by a change in the price of the security. If you can't find someone later to trade with and reverse out of your position, you'll lose everything. That's not the case with true investments. I hold a number of stocks where my cumulative dividends are greater than my initial investment, for example, such that I'd be up even if no one would give me a cent for those shares today.
A stock could be non- or low dividend paying such that the firm's income is reinvested for growth, meaning shareholders nominally profit by way of capital gain instead of by received dividends, but that just goes to the form of the income, not to the importance of the income. It is always possible for a shareholder to receive dividend income, and indeed a stock that can never pay a cash distribution from the issuing firm is ultimately worthless in terms of fundamental value.
In his attached video interview, Zweig takes issue with the accounting book values of financials by arguing that their assets are not as liquid as their liabilities, and I'll certainly grant that this characteristic is fundamental to deposit taking institutions. But to the extent this mismatch is a timing of cash flows issue, it is a duration mismatch that can be "immunized". I've generally made money in the market by buying from people who sell the stocks of companies with good assets because they don't believe the companies could realize that good value if they had to monetize those assets overnight. Their belief is entirely true, of course, but the liquidity fear is typically overdone. This too shall pass. If a firm's long term prospects are sound, it is unlikely to be undone by short term tactical problems. This is the 21st century, and investment bankers have been working for decades to engineer financial instruments that make concrete assets fixed in time and place into abstract assets. If nobody wants an underlying asset right there and then, that doesn't mean some financial measure won't be available to "departicularize" the asset's value.
In countries without developed financial systems, yes, liquidity crunches can be very dangerous because risks can't be diversified. But in the developed world, a major financial institution is unlikely to go down without taking much of the rest of the economy with it. Indeed, what's happening now is what is supposed to happen, in that everybody in the US and even outside the US is sharing in the pain; if this wasn't the 21st century we would have likely had a spectacular bank failure by now.
Zweig's points about real estate prices still falling in the US and an absence of share buybacks by executives are well taken, but the meltdown in financial shares has been global, and the exposure of a lot of international financial institutions to US real estate is relatively remote. Yes, I've just argued that the whole financial and even economic system is connected. But non-US banks can afford to wait out US real estate prices for so long as the major US institutions can remain nominally afloat. Zweig calls for diversification, but if you are going to diversify, why not buy the closest thing you can to the global stock market? If one is making a speciality bet on the financial sector, then make it on individual financials. The whole idea here is that some particular babies are being thrown out with the general bathwater because people afraid of nasties in the water aren't inclined to be especially discriminating when they are in a panic.
If you don't want to buy financial stocks at this juncture, do so because you believe they won't realize good values on their current assets over an extended period in the future as opposed to overnight.
Saturday, July 26, 2008
He's much more intellectual, much more thoughtful, much more interested in discussion, debate, and dialogue than the typical politician. And that gives me some confidence about him, even though from my perspective he's much too liberal. I've never voted for a Democrat in my entire life. He's the first one I might vote for.
Mankiw says the remark "captures well" his own "ambivalence" and I agree. It is with considerable reluctance that I oppose someone who is so strongly supported on campuses, given my largely unsuccessful efforts to introduce more academic considerations into public policy debates in Alberta. McCain, for example, is solid on free trade but available information suggests that he's so simply because he considers it consistent with his political identity.
In the vacuum that followed the Apollo programme, Griffin says America squandered a unique chance to push on to other planets. The error, he believes, was the Nixon administration's decision to focus on sending astronauts into orbit around the Earth.
"Working in low Earth orbit was not bad. Working exclusively in low Earth orbit was bad," [Griffin] says. "I spent some time analysing what we could have done had we used the budgets we received to explore the capabilities inherent in the Apollo hardware after it was built. The short answer is we would have been on Mars 15 or 20 years ago, instead of circling endlessly in low Earth orbit."
Many observers have questioned why manned space exploration dried up like it did after Apollo. I had concluded that it was because direct missions (i.e. missions that did not involve on-orbit assembly) would always be limited in their capabilities such that to really open the door to space, one had to concentrate on minimizing the cost of throwing stuff up to LEO. Achieve the technological breakthrough that gets us through the gravity well, and we're away. But then we found that the shuttle could never be run cheaply. Whatever the theory concerning the potential for a (partially) reusable launch vehicle, each launch required an enormous ground army of workers; the airline-like operations once envisaged were never realized.
Reusable SSTO was supposed to be the ticket. But reusable SSTO ultimately couldn't overcome the engineering challenges, which were extremely daunting in any case since the margins for feasibility were already very thin in theory. The death of the X-33 project meant that, in essence, we could not innovate our way into space, at least not in our lifetimes.
If you can't innovate your way into lower costs, your only other option is the economy of scale approach. Go back to the big dumb Apollo system. And, indeed, that appears to be what has happened, with the phasing out of the Shuttle in 2010 and the development of the Apollo-like Orion system.
Griffen's comments underline the contention that both Shuttle and the Space Station were essentially enormous boondoggles that delayed a human voyage to Mars by decades relative to an extrapolation of Apollo systems beginning in the 70s. Either that, or Shuttle and Space Station were necessary diversions that proved that manned space flight is simply too difficult or expensive to make any rational sense, the resulting inference being that robotic exploration is the way to go.
As an aside, I can't help but wonder at Griffen's seven degrees... I'd thought I'd gone a bit overboard with just four! I have to agree with him about global warming, in any case:
I have no doubt that ... a trend of global warming exists. I am not sure that ... it is a problem we must wrestle with. To assume that it is a problem is to assume that the state of earth's climate today is the optimal climate, the best climate that we could have or ever have had and that we need to take steps to make sure that it doesn't change.
Thursday, July 24, 2008
Before clicking on the link to play, I'll give you a helpful question to ask yourself: what is the difference between Monty opening another door after you've picked one and another door being opened randomly?
Saturday, July 19, 2008
Put your loving hand out, baby
Ridin' high, when I was king
Played it hard and fast 'cause I had everythang
Walked away, wonderin' when
But easy come and easy go and
it would end
So why [is it that] anytime I need, you let me go?
Anytime I veek [send mobile video], you get me know
Anytime I seek, you let me know
but I plan and seek to just let me go
I`m on my knees while I`m (beggin')
'cause I don`t want to lose (you)
I got my arms on spread
and I hope that my heart gets fed, [as] a matter of fact, girl, I'm beggin'
I need you (yeah!) to understand
[that I] Tried so hard (hey!) to be your man
The kind of man (ho!) you want in the end
An empty shell, I used to be
Shadow of my life was hangin' over me
A broken man, that I don't know
Won't even stand a devil's chance to win my soul
Why we chewin' [on this]? Why we chasin'?
Why the bottom? Why the basement?
Why [when] we got good sh*t, don't embrace it?
Why the feel for the need to replace me?
You're on a "wrong way" track from the good
I'm only paintin' a picture tellin' where we could be at
like a heart in a dash way should [like a living heart should]
You hadda give it away, you had it 'til you took the pay
But I keep walkin' on, keep open doors
Keep hopin' for that the cord is yours [I hope there is still a bond between us]
Keep close at home, 'cause I don`t want to live in a broken home
girl, I'm begging you
I'm fighting hard
to hold my own (hold my own) [to maintain my position]
Just can't make it
all alone (all alone)
I'm holding on
can't fall back (no, I'm fallin'!)
I'm just a-callin' but to fade to black!
(and I can't come on to go) (4x)
The lyrics for Back on the Road will have to wait...
Friday, July 18, 2008
After graduating from Queens in Kingston, Maynard went to Japan in 97 to teach English and decided to stay . His younger brother then followed him in 2000 and they formed "Monkey Majik".
Together is their current single of note, although Around the World (or its anime version) is what brought them heavy rotation on Japanese music video TV.
One of the biggest Japanese bands for many years running is the "Southern All Stars." While some songs are better than the video, in other cases the opposite is true.
Thursday, July 17, 2008
Sunday, July 13, 2008
- Barack Obama
"Acorn and its affiliates have pulled some real stunts in recent years. In Ohio in 2004, a worker for one affiliate was given crack cocaine in exchange for fraudulent registrations that included underage voters, dead voters and pillars of the community named Mary Poppins, Dick Tracy and Jive Turkey. ..."
- "The Acorn Indictments"
Aside: this should be taken as a humour piece as opposed to a hit job
Saturday, July 12, 2008
If one looks at the larger context of Obama's remarks, he speaks eloquently and uncontroversially, as usual. But since when is "get a job" a "myth"?
In this same, December 1995, Chicago source, Obama discusses "the Christian right":
The right wing, the Christian right, has done a good job of building these organizations of accountability, much better than the left or progressive forces have. But it's always easier to organize around intolerance, narrow-mindedness, and false nostalgia. And they also have hijacked the higher moral ground with this language of family values and moral responsibility.
It's interesting how close Obama came to remaining in obscurity. With just a month to go before the 2004 Illinois Senate primary, polls showed Obama with just 15% of the vote. However, he hoarded money for "a burst of television advertisements in the final weeks" and that, combined with the news that the divorce file of front-runner Blair Hull, who spent $29 million on the race, revealed allegations of domestic violence, gave Obama the primary win. After his speech at the Democratic national convention that summer before a national TV audience, Obama was up and away.
Friday, July 11, 2008
Wednesday, July 9, 2008
The fact that a CAPP representative has said, "I see our members showing an interest in this," doesn't challenge my contention that business is skeptical of carbon capture as an unsubsidized business plan: Epcor CEO Don Lowry maintains that implementing carbon capture would push "the current $1.6-billion price tag for the state-of-the-art Keephills Three to as high as $5 billion". A Transalta spokesman goes on to effectively admit that without "government", CCS projects are not "commercially viable". The energy industry, of course, has no complaints about a scheme with a potentially negative return on investment when they can always just walk away and leave taxpayers with the tab.
I can only agree with Calgary Herald columnist Don Braid: "This is a recipe for expensive disasters such as the infamous Gainers, NovAtel and MagCan scandals of the 1980s and 1990s."
Sunday, July 6, 2008
This graph, stolen from here, is a useful starting point for addressing the question of how the cost of a tax is distributed. Note how both consumers and producers have their surplus reduced by a tax.
Now suppose we adopt Premier Ed Stelmach's plan of a "made in Alberta" approach involving carbon capture. Consumers outside of Alberta no longer help pay, because the burden is either all on Alberta suppliers with Alberta employees (costs they cannot pass on to consumers for competitive reasons because consumers both in and outside the province remain free to buy from non-Alberta suppliers) OR the burden is all on the Alberta taxpayer, with said taxpayer footing the whole bill for an Alberta supplier subsidy.
Stelmach's rhetoric about how a multilateral approach to emissions mitigation would entail a "wealth transfer" to other jurisdictions only makes logical sense if mitigation generates wealth instead of costing it. If that's so, why isn't the private sector already mitigating like mad? Fact is, it COSTS money, which is why Albertans should be trying to bring as many other jurisidictions into any mitigation scheme as possible, instead of pushing them out.
It might be objected here that under a federal (or better yet, a North American or even global) carbon tax, tax revenues would go to the federal government instead of the provincial government. My first response would be that, since both producers and consumers pay, although more of the producer cost would be Albertan because more producers are Albertan, more of the consumer cost would be non-Albertan because more consumers are non-Albertan. My second response would be that the proposals for a multijurisdictional carbon tax have been revenue neutral, whereas Stelmach's carbon capture spending would be a new (and large) line item on government expenditures unassociated with any tax reductions. My third response would be to remind the reader that non-renewable energy is a commodity with a world price, meaning that a shift along the Canadian demand curve will have limited impact with respect to the global demand curve for Alberta's energy, and, to the extent that there would still be an impact, what I am talking about here is relative to a serious provincially mandated carbon capture program, not to the "do nothing" scenario where Alberta becomes an emissions haven.
So what does he support? What's Ed's answer to the gathering storm of a US boycott of oil sands energy (a group of US mayors has already called for a boycott and Barack Obama says that, because of environmental concerns, the oil sands are not part of his energy plan)? Will Ed simply ignore the growing criticism (like he's simply ignored the OECD report that attacked his squandering of Alberta's natural resource wealth)?
The premier has two answers, evidently.
Answer #1 is that "We're protecting each other in the Middle East and Afghanistan. We've been together in both world wars."
So according to Ed's first sentence, the US is protecting Canada (and the world) with its actions "in the Middle East" excluding Afghanistan, such that Canada's involvement in Afghanistan is not only a favour to the US (as opposed to a NATO obligation), but a returned favour.
The second sentence is essentially, "you owe us." So not only is Canada's involvement in Afghanistan a quid pro quo to the US, according to Stelmach, but he'd like to officially acknowledge, and call in his chips on, the additional quid pro quo of of overseas military action and commercial energy contracts.
Can we get a show of hands from all activists who have been de-motivated by the premier's remarks?
As one might expect, Stelmach's handling of the cross-border issue has not gone over well with the Canadian diplomatic community.
Answer #2 is that the premier is calling for carbon capture and storage (CCS) technology. To begin with, there is nothing multilateral about this approach (the Calgary Herald reports that the competing alternative of an emissions trading market remains something that "Alberta strongly opposes", despite the fact that it is something "a group of U.S. states, as well as B.C., Manitoba and Quebec, have signed on for"). Secondly, carbon capture is either A) not going to be seriously pursued or B) absurdly expensive, something I've noted before. Contributing to the costs is the fact that CCS requires a lot of energy itself, a negative feedback loop noted by the IPCC's 2005 special report on CCS, amongst others.
It appears that Stelmach has not only bought into the narrative of the left with respect to role of energy and geopolitical horse-trading in foreign wars, but into the US left's longheld (pipe) dream that America's dependency on foreign oil is but a technological breakthrough away. Premier Ed is going to seize the reins of America's hitherto futile quest for "clean" domestic energy and apparently deliver emissions-free, water use-free, land use-free, oil sands energy, by the magic of more efficient production technology.
Right wingers are usually skeptical of such pie-in-the-sky programs and their ballooning costs. Indeed, although many economists are amenable to carbon trading, seeing it as a promising supplement or even alternative to a carbon tax, it's my real world experience with markets that makes me somewhat dubious of carbon trading. It's one thing in theory, and another thing in reality. Markets can be abused enough when politics aren't directly involved never mind when the price of a carbon credit would ultimately be entirely derived from what the government's emissions cap is. If you thought the complaints about government interference in the Canadian income trust market were serious, you ain't seen nothing yet, compared to an emissions market where essentially all of the fundamentals behind market moves would be directly attributable to government policy. Remember these emissions instruments would have no intrinsic financial market value at all, but for government demands. Traders will have a convoy of metaphorical trucks lined up to drive through every crack of difference that exists between the policies of different jurisdictions.
Most concerning, however, is the fact that Ed's insistence on a unilateral "made in Alberta" solution means there is no one to share the costs with. Where is the money for CCS going to come from? I'll address that in a second post.
Thursday, July 3, 2008
That's true, mostly because of Reynolds' observations that the speculators (those with no position in the underlying) are going short.
But that doesn't mean I agree with Krugman's suggestion that prices reflect fundamentals (Krugman called it "The Oil Nonbubble" in May). If prices reflect fundamentals how did every bubble in market history come about?
If oil prices reflect fundamentals, then either they were well off fundamentals six months ago or fundamental global demand has risen 50% so far this year, with not only no counteracting additional supply coming on, but no additional supply expected. It is simply too difficult to believe that there has been a fundamental demand increase of this magnitude and with such inelasticity of supply over mere months.
If there is a villian in this piece it's the analysts. A Goldman Sachs report says oil is going to $200. This Associated Press story says a "prediction by Morgan Stanley analyst Ole Slorer that oil prices could reach $150 by the July 4 weekend caused the Nymex contract to jump nearly $11 in a single day." The story then goes on to quote a Swiss analyst who calls this week's rise "the Morgan Stanley self fulfilling prophecy."
I sold my energy exposure years ago because of analyst reports saying oil would fall. Of course, when they did the opposite, the herd eventually came around and now say they they will go to the other extreme. Had I recalled that the analysts were still cheering on the longs at the height of the tech bubble in early 2000, I might not have taken their prognostications so seriously. But, obviously, some people do, as the $11 one day jump by one guy's prediction proves. Recall that $11 a barrel was the price of oil in 1999! Now, of course, this same Morgan Stanley analyst looks like a genius.
If it's so obvious that oil was going to hit $150 by mid-2008, where were these people in 2007? If you ask me, the typical analyst just takes the given price and extrapolates its momentum: e.g. if it's going up, it'll go up another 10% in the near term. They are right again and again as it keeps going, and then when it turns around they are wrong. But then they were only wrong once after a string of correct calls, right?
Every increase probably does mean the next move will be another increase. But it also increases the possibility of a crash. These aren't incompatible, because it concerns short term vs long term.
Wednesday, July 2, 2008
"As McCain headed abroad, Democrat Barack Obama repeated his vow to renegotiate NAFTA..."
Note McCain's observation that Latin American development will reduce immigration pressures in this TV ad.
US protectionists who claim their concern is for protecting the Colombian people from the depredations of international capitalism should consider the fact Colombian president Uribe was re-elected in 06 with 62% of the vote and has an 80% approval rating.
Meanwhile, Obama would raise the federal marginal tax rate for a high income entrepreneur from 37.7% to 53%, the highest since 1971.