Monday, August 25, 2008

Buy!/Sell! #3: Investing


+ Pacific coast real estate, specifically:

  • BC: All along the Sea-to-Sky highway from Vancouver to Whistler
  • SoCal: San Diego, Ventura, Santa Barbara, and San Luis Obispo counties
  • NorCal: Mendocino and Del Norte counties
  • NW: Vancouver and San Juan Islands, WA and the rural Oregon coast
  • Downtown LA

+ Index Funds (Warren agrees!)

+ Vanity Funds (green, carbon neutral, sociallly conscious, fair trade, etc)

+ Bank Stocks (especially the most battered such as WaMu and the most profitable such as Goldman)

+ The US Dollar

- Inland Cali real estate:

  • Inland Empire (overbuilt Riverside and San Bernardino counties)
  • Orange County
  • Silicon Valley

- Hedge Funds

- Oil

- Gold (for now)

- The Euro

Sunday, August 24, 2008

Getting What We Pay For

Is this really the best we have to offer?

BROKAW: The latest Gallup poll shows that, in the universe of American voters, 14 percent expressed their approval of Congress.

PELOSI: ... I think the main issue in the last election in November '06 was to end the war ... the president won't sign any bills that would allow that to happen. So from my standpoint, I disapprove of the way Congress functioned ...

BROKAW: ... Congress is bearing the responsibility in the eyes of the American public ... for not doing something about gasoline prices.

PELOSI: That's that poll, and--but the fact is, is that the, the, the oil companies, the, the administration, they all ranked higher than Congress in most of those polls. But the point is this. People--we have to look after the consumer, we have to increase the supply of energy. And the president, even as recently as yesterday, said if you drill offshore, you're going to bring down the price at the pump. It is simply not true ... this oil belongs to the American people. It has been--the big oil is making profits from it, they're not paying royalties to the taxpayer, and they're asking--and the taxpayer is subsidizing it.

Earth to Nancy: California may seem like it's part of socialist Mexico sometimes, but it's still part of the US, where oil is owned by whomever buys the rights to it.

Perhps Nanse should have also paid attention to my recent blog shout-out to professor Perry. I think she has it backwards ... the numbers show that "big oil" is "subsidizing" (just to re-use her inflamitory terminology) taxpayers to the tune of more than $150 billion this year alone. They're simultaneously enriching millions of middle-class taxpayers via their 401(k), pension, and/or mutual fund accounts. For example, funds such as these own well over half of Exxon. There are few industries more liberal than teachers and public sector workers. The pension fund managed by their union, TIAA-CREF, holds:

$3.3 billion in Exxon (it's largest single holding!)
$1.4 billion in Chevron
Another $1 billion each in Occidental Petroleum, Slumberger, and Conocophillips
That's only the beginning. They hold well over $30 billion (25% of their total fund) in commodity, energy, and utility companies.

But that's not what I came here to talk about today ;-)

Depending on your blind political allegiance, you can apply the rest of this blog to Nancy and the bed wetters or Bush and the blood suckers. In either case, what the poll REALLY shows is clear: we almost all agree that we're not getting satisfaction from our current gaggle of beloved leaders.

The current reality is that government officials wield over sized power over our daily lives. They're encroaching further by the second, and with ever-increasing velocity. If you don't believe that, read the chilling Analysis piece in last Friday's FT. Then read the Cliff's Notes of Atlas Shrugged. I guar-on-tee, suddenly Rand's dystopia will not seem so far-fetched.

Here's an idea that kills a whole flock with one stone: Quadruple their compensation. Sinful for a philosophical libertarian to say such a thing? Hey, if you want the best, you have to pay for it. Perhaps this will bring financial incentives more in-line with the value (in terms of impact) which the jobs currently carry.

But that's not all. These folks should work on commission. Give me a second to explain.

The governed should be able to put forth a public agenda at each level of government. No, silly, not Clinton-esque shucking and jiving with every poll. Think along the lines of a nonbinding "steering" version of the California proposition system, conducted online prediction-market-style. This is neither new nor novel ... Professor Robin Hanson at George Mason University has been questing after this grail for nearly a decade. Take a look at his prototypical Foresight Exchange. In a paper last year, he opened with the following hypothesis:
Democracies often ... adopt policies that in effect hurt most voters. If these policies would not have been adopted had all voters known they were bad policies, and if someone somewhere did know or could have known they were bad policies, we can say that such democracies failed because they did not induce people to acquire and share this information. If speculative markets do very well at inducing people to acquire and share information, but are little used in current governmental institutions, then we should consider changing our government institutions to rely more on speculative markets.

He explains the mechanics of his design as follows:

We might instead still have democracy say want we want, but let speculative markets say how to get what we want. That is, elected representatives might
define a formal measure of “national welfare” (analogous to GDP) and manage
its measurement after the fact. Market speculators would then say which
proposed policies they expected to raise national welfare as so defined.

To me, there seems a more direct way of integrating markets into democracy. Just like any prediction market, each voter would have an account. However, this account would contain not money but votes. In democracies, each voter is allocated one vote per issue or elected office. Mapping this model onto prediction markets would be simple. The government would deposit an allocation of votes into each account at the beginning of the year, following one of the following models:
  • The boring yet egalitarian way would be to give every eligible voter the same number of votes each year.
  • A more libertarian approach would be to allocate one vote per ten dollars paid in taxes the prior year.
  • More novel (trendy?) would be to base it on the success record of the voter's prior choices. This would have the nice side-effect of encouraging participation.
  • It's probably too soon to suggest such nuances as the giving people on guest-worker visas some fraction of the votes of a regular citizen.
Voters could then have the opportunity to allocate votes among the available proposals. Yes, this means I could throw my full allocation of votes at a single issue ... or I could spread them across several proposals I like.

What about these proposals? To be eligible, each would have to be backed by a full-term and detailed financing program, as well as solid success metrics. This makes the process objectively measurable, and thus not victim to the same ills as an opinion poll.

This, in turn, allows us to put in the lynch pin: Let us not forget about those elected officials. They still would have the job of legislating. The success ratio of public agenda items effected into law would determine the officials' compensation. If they accomplish 4 out of 10, they get 40% of their (potential, nominal) salary. To take the idea one step further, individual officials might draft or endorse the proposals. Those who back winning proposals would get a worthy financial reward.

Additional reading:

Thursday, August 21, 2008

Follow Up: Yeah, What HE Said!

Fear mongering, China style:

“I have lived for three-fourths of the last century, and I can tell you with certainty: should China embrace the parliamentary democracy of the Western world, the only result would be that 1.3 billion Chinese people would not have enough food to eat.”
– Jiang Zemin, President of the People’s Republic of China (1993 to 2003)

I guess Greenspan and Jiang will just have to agree to disagree.

Tuesday, August 19, 2008

Grumpy Old Men Quotes

And I don't mean McCain this time ...

I'm sure the following could have just as easily come from the grumpy old men in your family:

Fosters is Australian for beer. Crocs are Australian for birth control.

Hey look at Prius boy ... thanks numbnuts for looking dumb-butt so we don't have to.

Yeah, that's art. The art of imitation. All's an artist has to do today to get attention is to put some trash in his art and call it recycling.

Tuesday, August 12, 2008

Follow Up: Talk Amongst Yourselves: Unlucky Numbers

The Earth, she is a changin'

Not sayin' ya otta think about your vacation plans ... but Alaska Airlines has cancelled dozens of flights this week due to volcanic ash from the Kasatochi Volcano in the western Aleutian islands between Alaska and Russia. The poor airline is particularly prone to seismic/geologic disruption since it's routemap pretty much mirrors the North American faultline map all the way from Fairbanks to Cabo.

Not sure whether Mama Earth is warmin' up or coolin' down, but the West Coast is not the only area with indigestion recently. Geologic activity is on the rise throughout vast parts of the world, predominantly in the Pacific:

8/12 - 5.9 mag quake in South Pacific
8/11 - 6.0 mag quake off West African coast
8/10 - 6.2 mag quake in Indian Ocean
8/9 - 6.5 mag quake off Antarctic coast
8/9 - Tungurahua Volcano exhaltations in Ecuador
8/8 - 5.8 mag quake in Indian Ocean
8/7 - Kasatochi and Okmok Volcanoes erupt in Alaska
8/7 - 5.8 mag quake off Alaska coast
8/7 - 5.4 mag quake in Baja California MX
8/5 - 6.0 mag quake in Sichuan, CN
8/4 - 6.3 mag quake in South Pacific
8/4 - Mt. Saint Helens WA, Fuego Guatemala, Popocatepetl Mexico, Rabaul Paupaua New Guinea, Chikurachki and Karymsky, Russia volcanoes increased exhaltations during the week
8/2 - 5.5 mag quake in Fiji
8/1 Chaiten Volcano erupts in Chile
8/1 - 5.7 mag quake in Sichuan, CN
8/1 - 5.6 mag quake in Phillipines
7/29 - 5.4 mag quake in Los Angeles CA
7/29 - 5.8 mag quake in Souh Pacific
7/28 - 6.0 mag quake in Souh Pacific
7/27 - 5.9 mag quake in Mid-Atlantic
7/25 - 6.2 mag quake off Alaska coast
7/24 - 5.7 mag quake in Sichuan, CN
7/23 - 6.8 mag quake off Honshu JP coast
7/23 Mt. Cleveland Volcano erupts off the coast of Alaska
7/23 - 5.5 mag quake in Sichuan, CN
7/22 - 5.6 mag quake in Sichuan, CN
7/21 - 6.0 mag quake off Honshu JP coast
7/20 - 5.8 mag quake off Bonin JP coast
7/19 - 6.6 mag quake in South Pacific
7/19 - 7.0 mag quake off Honshu, JP coast
7/17 - 5.7 mag quake off Oregon coast
7/16 - 5.7 mag quake off New Zealand coast
7/14 - 5.7 mag quake in Indonesia
7/5 - 7.7 mag quake off Alaska coast
6/14 - 7.2 mag quake in Japan
6/13 - Stromboli Volcano in Italy (who knew?) erupts
6/12 - Sakurajima Volcano emits ash 7,000 feet in the air
5/12 - 8.0 mag quake in Sichuan, CN
3/21 - 7.2 mag quake in Sichuan, CN

Check it out live at:

Interactive volcano/earthquake map:

Monday, August 11, 2008

Follow Up #3: You've Heard of the Illuminati ...

This one's just for fun ... I've said it before and I'll say it again. Goldman is a financial institution in a league of its own. Consider it the Lance Armstrong of Wall Street.

Oh, and the Federal Government sucks.

As it turns out, the majority of readers who bothered to opine agree with me on both points. From their Deal Journal blog a month ago:

"Deal Journal readers overwhelmingly support a Goldman Sachs takeover of the U.S."
The authors placed their tongue firmly in cheek before chasing the idea that where there's a will there's a conspiracy. They went on (in the above blog post and several others) to raise the notion of a long-standing conspiracy by Goldman to "decide what you eat for breakfast and when."

Who knew Goldman was the new Illuminati? Or are they the new Kevin Bacon?

So hard to tell these days.

Sunday, August 10, 2008

Meet the Whaa?

I recall being a high schooler trying to make my first presidential ballot choice and realizing I had no context for the decision. Print news was arcane and wordy. TV news was superficial. Reporters and pundits seemed unreliable sources. I wanted to know, from the horses' mouths what was important. It was an age at which the press was only present when invited. I found that very thing early on Sunday mornings. Not much gets a teenager out of bed before noon on Sundays, but I was hooked. Watching Meet the Press and Face the Nation has been one of my most persistent habits.

I've always appreciated the relative lack of punditry: the ability to raise contentious issues without political agenda, the ability to and ask uncomfortable questions with respect and civility. The gentleman's agreement seemed to be: we will ask you pithy, direct questions about weighty current issues. We will not engage in gotchas. We will give you time to fully answer the question without shouting or interruption. We will not allow you to misdirect the conversation.

Apparently Brokaw didn't get the memo when he recently took over MTP. In a few short weeks, he has dumped the show's winning format as if to pay homage to Tim Russert by showing no one else could fill his shoes ... kinda like saying the JV pays homage to the Varsity team by sucking. Certainly, it's still civil ... to a fault. He makes sure he won't offend his guest by asking only milk-toast softball questions. He's done away with such trifles as requiring on-topic answers. Indeed, he doesn't even bother to quote the press anymore, substituting nice platitudes like "people I talk to are saying..." or "my friends have asked me ..."

He'd best be careful, lest NBC get sued for false advertising. Perhaps they should pre-emptively change the show's name. They could go with a nice unoffensive "Meet Tom Brokaw" or "Talk to Tom" ... but my personal preference: "Softball with Tom Brokaw."

Thursday, August 07, 2008

Yeah, What HE Said!

I'm sure some days Alan Greenspan misses his job as Chairman of the Fed. Other days he certainly doesn't. But either way, how could he not be frustrated by the recent ridiculous gyrations of our federal money folks in the Fed, Treasury, and financial regulators.

Monday he spoke:

The economic edifice – market capitalism – that has fostered this expansion is now being pilloried for the pause and partial retrenchment. The cause of our economic despair, however, is human nature’s propensity to sway from fear to euphoria and back, a condition that no economic paradigm has proved capable of suppressing without severe hardship. Regulation, the alleged effective solution to today’s crisis, has never been able to eliminate history’s crises...

The remarkably strong performance of the world economy since the near universal adoption of market capitalism is testament to the benefits of increasing economic flexibility...

It has become hard for democratic societies accustomed to prosperity to see it as anything other than the result of their deft political management. In reality, the past decade has seen mounting global forces (the international version of Adam Smith’s invisible hand) quietly displacing government control of economic affairs...

The danger is that some governments, bedevilled by emerging inflationary forces, will endeavour to reassert their grip on economic affairs. If that becomes widespread, globalisation could reverse – at awesome cost.
- Editorial in the Financial Times, 8/4/08

Yeah. What he said.

Wednesday, August 06, 2008

残奥会倒计时一周年晚会 刘德华演唱 ... Inharmonious, Even in Chinese

My second-ever blog post talked about what I thought was wrong and right with China. Eighteen months later I visited the country for the first time and posted a follow-up blog based on what I saw.

Now, more than 3 and a half years later, they've made incredible and undeniable progress, as we all knew they would ... It's the old "damn the torpedoes, full steam ahead!" Unfortunately, those torpedoes are bigger, more numerous, and closer than ever before. Every day, with every move, a few more torpedoes crash into the Chinese hull. From time to time, they wander into storms and scrape reefs, but for now their charge is relentless, most visibly over the upcoming weeks as we all watch their Olympics. We will ooh! and aah! and some will whisper "they've beat us!"

But hold! Each impact, scrape, and squall takes its toll. We need look no further than Newtonian Law (applied to Economics) to know that SS China's rate of progress necessarily and permanently slows every time it runs across resistance. Each battle scar makes the craft slightly less hydro-dynamic. At some point, the Chinese people will tire of the turbulence and demand a smoother ride. Eventually, they'll realize that they need to modernize and reinforce their craft to make it long-lasting. All of these will inevitably slow their progress.

At the end of this blog, you'll find a table of the main torpedoes currently in the water and pinging. I list what's wrong and what's right with their response to each over the last few years.

As I've said before, it will take China a hundred years to fully recover from their current barrage-laden charge, to repair and upgrade their craft, and to find the safe, stable, deep and open waters where "We" (the US, Japan, and Europe) spend most of our time. We've been through the gauntlet already. We've forged much new territory and it has never been a smooth ride. Today, our people want a cautious hand at the wheel in order to foresee and prevent disturbances. We want a sure financial return on our investment. Plus, we want low costs (financial, political, ecological, and human). All of which explain why we no longer have China's appetite for showing off.

Chinese may think they can "control" their way to a permanently elevated cruise speed. Millions of ex-Communist technocrats have found that they can apply old Marx and Engels to a concept very de rigeur in Western business: performance metrics and control. This has been employed to tremendous fanfare in preparation for the Olympics ... and also to impressive effect. Today, those directing the Chinese economic ship are not in it for the money, but for the power and the growth.

At some point the populace will demand a bigger and more assured share of the spoils. Maybe even a say in how things are done. Someday, China's government will have to start listening to their people and considering the human side of their choices ... So far, they've shown their tone-deafness in this area. No wonder: these are "softer" criteria. It's tough to measure, control, and set targets for national unity or happiness. ISO has no international standard for maximization of human potential ... yet these are all critical once the voice of the people must be considered.

What are these soft criteria? I'm giving a stratospheric view of very human-level concepts. Let's swoop down and get a little more concrete with a few very human tales:

  • Wu Ping and the Nail House: The story of a government-anointed real estate developer's battle against a peasant family for their hovel and land, complete with scandal and standoff. It ends with a wrecking ball for the hovel and a phantom payment for the peasants. Phantom because they mysteriously disappear before the money can be paid.

  • The Journalists, the Censors, and the Spies: Before they even arrived, foreign journalists had something to gripe about. It came to light that China (with the complicity of the IOC) would be censoring their Internet connections, in contradiction to earlier promises. More insidious, perhaps, is the US Government's warning that visitors should avoid taking their cell phones and laptops to the games to avoid the risk that their devices might get infected with government-sponsored invisible spyware.
  • China's Special Woebegone Games: (finally, an explanation of the blog's title!) The stereotype is that disabled people in China are hidden to avoid shame. There is no ADA in China. Worldwide, Paralympic athletes will take every opportunity to tell you they want no special treatment. Their event is about self-sufficient, highly trained athletes in ruthless head-to-head competition. It is NOT about creating a fantasy land of love and self-esteem where everyone is a winner. That's the Special Olympics. Which is why they're none too excited about the Chinese Paralympic Committee's official theme song "Everyone is Number One" ("残奥会倒计时一周年晚会 刘德华演唱"). Not to mention they've one-upped our cultural icon Garrison Keillor's Woebegone Effect ("Welcome to Lake Woebegone where ... all the children are above average.")

Torpedoes in the Water!!

If I were captain of SS China, these are the issues I'd be losing sleep over:

Tuesday, August 05, 2008

Talk Amongst Yourselves: Unlucky Numbers

I guess Mother Earth isn't so happy with this summer's lack of global warming ... earthquake in China, then one in California, now another one in China ... oh, and I flew over mount St. Helens yesterday ... the smoke/steam cloud coming out of her must have been 100 miles long.

A while back, I read anecdotal evidence that geological shifts often have impacts on diametrically opposing sides of the globe (ahem ... China/Cali). Now that China has taken it's turn ... is Cali in for another shake-up?

Friday, August 01, 2008

Blog Shout Out: Mark J. Perry's Carpe Diem

Shout out to Mark J. Perry, a professor of economics and finance, for the following chart he posted on his great blog today.