Tuesday, February 10, 2009

Job Losses During Recessions

From FlowingData.

From this perspective it doesn't yet look worse than a number of other Post WWII recessions.

Negoiating with "moderate republicans" is foolish

It seems to me that it was stupid to negotiate with the "moderate" republicans as a way to break the filibuster on the stimulus package. The compromise was not worth it. It would have been much smarter simply to put the republicans on the spot. Let them filibuster until the country was completely fed up with them.

When the republicans want the democrats to do something, like support some war effort, they say that if the democrats don't support it and the country is invaded it will be on the democrats heads. The republicans don't compromise. They simply threaten the democrats with political suicide. The democrats should do the same thing. Stop giving away the store for minimal republican support.

Sunday, February 08, 2009

Stock analyst recommendations

Amazingly optimistic. They don't ever seem to recommend selling anything!

Tuesday, February 03, 2009

Stimulus Package: If You Jump Halfway Across a Chasm You Fall Into the Abyss

Great piece by Arianna Huffington on the Stimulus Package
Obama has added or talked about adding several new cabinet-level positions, such as chief technology officer, climate czar, and car czar. How about an advisory cabinet of economic thinkers who can offer the president big ideas for a 21st century economy?

A good place to start would be among those who sounded the alarm about our current financial crisis -- all of whom are critical of the short-sighted, ad-hoc nature of the stimulus bill. People like Nouriel Roubini, the New York University economist who was so prescient about the collapse. Lawmakers, he says, are 'injecting populist politics into economics decisions. Companies and sectors that should be left to drown are being floated lifeboats.'

Jeffrey Sachs, the Columbia University economist who was instrumental in transitioning the economic system of the former Soviet Union, is also no fan of the stimulus bill, calling it a 'a fiscal piñata,' an 'astounding mish-mash of tax cuts, public investments, transfer payments and special treats for insiders,' and 'a grab bag of hasty short-run spending.' He warns that 'without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good.' This is especially true, he says, 'if we allow further tax cuts during a timeof fiscal hemorrhage, or give into 'bipartisan' demands to make the Bush tax cuts permanent."

Joseph Stiglitz is equally leery of the tax cuts that have been included in the stimulus package. "We are in uncharted territory in this crisis," he says. "But household tax cuts, except for possibly the poorest, should have no place in the stimulus. Nor should business tax breaks, except when closely linked with additional investment... Increased investments in infrastructure, education and technology, relief to states, and help to the unemployed need pride of place."

Sunday, February 01, 2009

Bad banks

I must be completely confused about the bad bank idea. Here's one version as explained by Max Holmes in a NYT op ed piece. Holmes' idea is that the
banks would … convey [their toxic] assets at year-end, audited book values. … [After such a transfer] the stock prices of the good banks are likely to soar, as they will be the … best capitalized and cleanest banks in the world.
Here's what I don't get. If the banks are going to sell their toxic assets at "year-end, audited book values" why don't they just do that now and sell them in the market at that price? If those are real values, there will be buyers. On the other hand, if these "year-end, audited book values" are unrealistically high, the taxpayer is getting screwed, and the bankers, who should be paying the price, get off free.

Worse, the toxic assets are probably not assets at all but liabilities. Otherwise, banks could simply give them away and have clean books. But if they are liabilities, why should the government (or anyone else) pay anything at all for them? We, the taxpayers, should be paid to take them. The minimum we should be paid to take them is ownership of the banks that are holding them as liabilities. That may not cover the liabilities, but it's probably the best that can be done.

Holmes is not a stupid guy. According to a brief bio, "He holds a BA degree from Harvard College, a JD degree from Columbia Law School, and an MBA degree from Columbia Business School." So what am I missing? The only thing that occurs to me is the disclosure Holmes made in his article.
The government could hire professional money managers, working under an incentive-heavy compensation plan, to oversee the liquidation. (Disclosure: firms like mine might be potential candidates for such a job.)
So is that it? Is this all a con to get a lucrative money management contract? I'm normally not that cynical. But I sure can't think of any other explanation. It seems that the only people who are pushing the bad bank idea are those (like bankers and now potential money managers) who will make lots of money from it. Will someone tell me why I'm wrong.

Book Review - 'Lewis Carroll in Numberland,' by Robin Wilson.

In a review of a biography of Charles Lutwidge Dodgson, better known as Lewis Carroll, John Allen Paulos quotes this puzzle from the book—and from Dodgson's lessons.
A cup contains 50 spoonfuls of brandy, and another contains 50 spoonfuls of water. A spoonful of brandy is taken from the first cup and mixed into the second cup. Then a spoonful of the mixture is taken from the second cup and mixed into the first. Is there more or less brandy in the second cup than there is water in the first cup?
This is a nice example of a problem that's trivial if you know how to look at it and more complex if you approach it in a straightforward, brute force way. One could do the calculation. It's not that difficult. But the easy way to see that the amount of brandy in the water cup is the same as the amount of water in the brandy cup is to realize that both cups end up with the same total amount of liquid—the same amount as they started with, 50 spoonfuls. A certain amount of brandy is in the water cup. The amount of water that was displaced was transferred back to the brandy cup. Therefore, the two amounts are the same.

This is related to what has come to be called point free programming, which is programming by composing functions rather than by describing the effect of functions on their arguments. For example

f(x) = 2*x +3

is the same as

f = (+ 3) . (2 *)

The second defines f as the composition of the two functions that, in order, double the argument and add 3 to the argument.