Rasmussen Reports did a telephone poll of Americans and they found that 57% of us want to take military action against North Korea as a response to their test launch of a rocket.
Are we nuts?
Have 57 out of every 100 Americans completely lost their minds?
North Korea poses absolutely no threat to American land or people. They are barely capable of threatening Japan or South Korea.
Is it not enough that we have destroyed the lives of most Iraqis and most Afghanis, and put ourselves on the edge of bankruptcy in the process?
Why is our gut reaction to any attempt of any 3rd world country to provide some defense for itself to punish them with bombs?
The poll also found that 73% of Americans are somewhat worried that North Korea will use nuclear weapons against the U.S.
Has anyone thought this out? Kim Jong Il may be a strange, crazy, egomaniac but he is not an idiot. Nor will be any of his successors. In 50 years the North Koreans have never had the guts to attack the U.S. or its South Korean client. They have no motive. They do not have the means, with or without a nuclear arsenal, to emerge victorious. They do not have any desire to get involved in any type of hot confrontation.
If you are going to worry about North Korea sending a nuclear bomb this way, you might as well fear an invasion of Topeka, Kansas by Iceland.
If we invade North Korea, we'll suffer huge losses. If we bomb them, we'll kill thousands of people who struggle to EAT FOOD every day.
This is not an issue of war and peace. It is about recognizing the humanity in ourselves and in people who, though their lives may be incomprehensible to most of us, nonetheless constitute lives.
Wednesday, April 8, 2009
Sunday, April 5, 2009
Life At The Margin Heads for Buenos Aires
A couple short flights from Seattle and now I live in Buenos Aires. In a few months here I hope to learn the language, improve my tango, and simplify.
In a few days here I have learned the following:
1) Though I thought I would buy a cheap bicycle to get around the city, I realize that I am not yet emotionally qualified to bike in Buenos Aires. I can barely make it through some of the cab rides.
2) In Spanish, the word 'pare' means 'stop;' however, when written in big white letters and put on a red octagon on top of a pole, it apparently means something else.
3) A short blast of a car horn means something like "yes, of course it is okay to cut in front of me. You must be in a hurry. I know in my heart that you would let me pass if I were in a hurry."
4) A long blast of a car horn means "Oh, you are stopping to let out your passenger. That makes perfect sense."
5) Porteña must be the Argentine word for German woman. My goodness there are a lot of Germans here.
6) Practica X is the real deal.
In a few days here I have learned the following:
1) Though I thought I would buy a cheap bicycle to get around the city, I realize that I am not yet emotionally qualified to bike in Buenos Aires. I can barely make it through some of the cab rides.
2) In Spanish, the word 'pare' means 'stop;' however, when written in big white letters and put on a red octagon on top of a pole, it apparently means something else.
3) A short blast of a car horn means something like "yes, of course it is okay to cut in front of me. You must be in a hurry. I know in my heart that you would let me pass if I were in a hurry."
4) A long blast of a car horn means "Oh, you are stopping to let out your passenger. That makes perfect sense."
5) Porteña must be the Argentine word for German woman. My goodness there are a lot of Germans here.
6) Practica X is the real deal.
Penn State are NIT Champions
The PSU men's basketball team won the post-season National Invitational Tournament, a monstrous achievement at a school where the b-ball players are valued somewhere below the most recently born dairy cow*.
It is likely that their late-season loss to Iowa pushed them out of the big-deal NCAA tournament and into the lesser NIT, which makes me wonder which is the better accomplishment: to make the NCAA field or to win the NIT.
Here at Life At The Margin we believe the NCAA tournament is an over-rated goal. Now, I am not trying to say that it is better to not make the tournament, rather that being invited is not, in itself, an accomplishment.
The best examples of this are the champions of the minor conferences. To illustrate my point, I arbitrarily selected the America East conference. The champion of the America East conference tournament, this year, was Binghamton. But you are not likely to hear or see this event reported as such; instead, the media announces something like "Binghamton Earns NCAA berth" or "Binghamton Headed for the Big Dance."
For Binghamton, though, the berth in the tournament is ceremonial; winning the America East, on the other hand, is a real accomplishment that required real work. The invitation to the NCAA tournament is merely a trophy.
Some would say that Binghamton was given an opportunity to win the national championship. Hogwash. 65 teams were invited. Realistically, maybe 15 or 20 had non-trivial chances of winning. Even Purdue, the 2nd best team in the Big Ten, probably had to experience strange planetary alignments to win. Binghamton was sacrificed to Duke in round 1.
A few years back, the University of Washington won the PAC-10 tournament. A big deal. A real accomplishment. It received significant media attention in Seattle. Nowhere near, however, the attention the team got when they were "awarded" a number 1 seed (one of the top 4 positions) in the NCAA field. So why do I put awarded in quotation marks? Well, anyone paying close enough attention saw that the award meant the Huskies would play Louisville in the 3rd round.
A #1 seed should be a reward for a well-played season. It should mean a relatively easy road to at least the 4th round. Playing Louisville so early meant the Huskies got screwed. Louisville and UW were probably the 5th and 6th best teams in the country that year. Neither should have had to play a team as good as the other until at least the 4th round, but they met in the 3rd round and one had to lose. Washington would have been much better off with a #2 seed, but the Seattle sports media were fawning over the "accomplishment" of a #1 seed. Many called it "historic." Strange word, historic.
Back to Penn State. Had they won that game against Iowa, they would have likely been invited to the NCAA tournament as a 12-seed. They could have realistically set 2 wins as a goal; they almost certainly would have lost in round 1. Instead they won a real tournament, emerged on top of 31 real basketball teams, and knocked off Florida and Notre Dame along the way.
I haven't answered the question that served as premise for this writing, nor will I. I will write this, however: The difference between selection to the NCAA and being relegated to the NIT, for Penn State had a lot to do with a bunch of out-of-shape guys in suits sitting around flipping various coins; the difference between winning a tournament and not winning that tournament... is obvious.
*Various dairy cows were emotionally scarred in the making of this piece of writing.
It is likely that their late-season loss to Iowa pushed them out of the big-deal NCAA tournament and into the lesser NIT, which makes me wonder which is the better accomplishment: to make the NCAA field or to win the NIT.
Here at Life At The Margin we believe the NCAA tournament is an over-rated goal. Now, I am not trying to say that it is better to not make the tournament, rather that being invited is not, in itself, an accomplishment.
The best examples of this are the champions of the minor conferences. To illustrate my point, I arbitrarily selected the America East conference. The champion of the America East conference tournament, this year, was Binghamton. But you are not likely to hear or see this event reported as such; instead, the media announces something like "Binghamton Earns NCAA berth" or "Binghamton Headed for the Big Dance."
For Binghamton, though, the berth in the tournament is ceremonial; winning the America East, on the other hand, is a real accomplishment that required real work. The invitation to the NCAA tournament is merely a trophy.
Some would say that Binghamton was given an opportunity to win the national championship. Hogwash. 65 teams were invited. Realistically, maybe 15 or 20 had non-trivial chances of winning. Even Purdue, the 2nd best team in the Big Ten, probably had to experience strange planetary alignments to win. Binghamton was sacrificed to Duke in round 1.
A few years back, the University of Washington won the PAC-10 tournament. A big deal. A real accomplishment. It received significant media attention in Seattle. Nowhere near, however, the attention the team got when they were "awarded" a number 1 seed (one of the top 4 positions) in the NCAA field. So why do I put awarded in quotation marks? Well, anyone paying close enough attention saw that the award meant the Huskies would play Louisville in the 3rd round.
A #1 seed should be a reward for a well-played season. It should mean a relatively easy road to at least the 4th round. Playing Louisville so early meant the Huskies got screwed. Louisville and UW were probably the 5th and 6th best teams in the country that year. Neither should have had to play a team as good as the other until at least the 4th round, but they met in the 3rd round and one had to lose. Washington would have been much better off with a #2 seed, but the Seattle sports media were fawning over the "accomplishment" of a #1 seed. Many called it "historic." Strange word, historic.
Back to Penn State. Had they won that game against Iowa, they would have likely been invited to the NCAA tournament as a 12-seed. They could have realistically set 2 wins as a goal; they almost certainly would have lost in round 1. Instead they won a real tournament, emerged on top of 31 real basketball teams, and knocked off Florida and Notre Dame along the way.
I haven't answered the question that served as premise for this writing, nor will I. I will write this, however: The difference between selection to the NCAA and being relegated to the NIT, for Penn State had a lot to do with a bunch of out-of-shape guys in suits sitting around flipping various coins; the difference between winning a tournament and not winning that tournament... is obvious.
*Various dairy cows were emotionally scarred in the making of this piece of writing.
Friday, March 27, 2009
Other People's Words And My Reaction: Part 1 of Many
Failure’s hard but success is far more dangerous. If you’re successful at the wrong thing, the mix of praise and money and opportunity can lock you in forever. – Po Bronson
Success and failure are judgments of results. I don't think it is possible to encourage or discourage either. Process can be encouraged or discouraged. Different people have different interpretations of results though, and there are varying degrees of measurement costs associated with those interpretations.
I viewed this quote in the context of my recent thoughts about external versus internal feedback. So if someone pays me $1 million to do a job that's a piece of feedback that says I'm a success. Or if someone I care about is proud of me
because I have "a good job" that is clear feedback. But those are arbitrary measurements of success and I might be miserable inside.
Things like salary, job title, employed vs. unemployed, married vs. single, academic degrees, awards won, etc. are all very easy to measure. That does not mean they are valuable or accurate measurements, however.
An individual can get caught up in these easy measurements and ignore more important ones, and the problem comes when easy measures of success are followed and the more meaningful ones get ignored.
It is also difficult to place more weight on one's own judgement than other people's, even though one's own judgement is almost certainly more meaningful. This is because a person is fully aware of his own doubts but others appear certain when they give opinions. For example, if I ask you if I should take a CEO position at AIG or the store manager job at a local coffee shop, you'll give me some answer and sound sure of the answer, but in reality you probably put almost no thought into it and in any case its a judgement based on your values and your perception of what is best for me. I'll feel uncertain of the right decision but to you it was a no-brainer so I take the AIG job and before you know it I'm getting yelled at by idiot Congressmen.
Success and failure are judgments of results. I don't think it is possible to encourage or discourage either. Process can be encouraged or discouraged. Different people have different interpretations of results though, and there are varying degrees of measurement costs associated with those interpretations.
I viewed this quote in the context of my recent thoughts about external versus internal feedback. So if someone pays me $1 million to do a job that's a piece of feedback that says I'm a success. Or if someone I care about is proud of me
because I have "a good job" that is clear feedback. But those are arbitrary measurements of success and I might be miserable inside.
Things like salary, job title, employed vs. unemployed, married vs. single, academic degrees, awards won, etc. are all very easy to measure. That does not mean they are valuable or accurate measurements, however.
An individual can get caught up in these easy measurements and ignore more important ones, and the problem comes when easy measures of success are followed and the more meaningful ones get ignored.
It is also difficult to place more weight on one's own judgement than other people's, even though one's own judgement is almost certainly more meaningful. This is because a person is fully aware of his own doubts but others appear certain when they give opinions. For example, if I ask you if I should take a CEO position at AIG or the store manager job at a local coffee shop, you'll give me some answer and sound sure of the answer, but in reality you probably put almost no thought into it and in any case its a judgement based on your values and your perception of what is best for me. I'll feel uncertain of the right decision but to you it was a no-brainer so I take the AIG job and before you know it I'm getting yelled at by idiot Congressmen.
Thoughts on Warren Buffet's Op-Ed
Buffett is an interesting character. There is a lot to learn from him; beyond that it would be folly to emulate him. I lost a lot of respect for him in late 2008 for two reasons: First, I think that op-ed was irresponsible. No one else on earth lives in his world. His advice is perfect for him, probably, but he can afford to lose a few billion. In fact, this man's marginal utility of money is zero.
For a typical American his advice was horrible, even without today's hindsight. (I submitted a piece to the P-I in response; they, of course, declined to publish it). Though he didn't explicitly tell people to buy U.S. stocks, the fact that he is publishing his own actions in the Times makes it a recommendation. There are people, like my Dad, who see him as an icon, and assume he must be right. Most of that audience is unaware of the work that goes into separating value from refuse. They still believe that the stock market only goes up. His piece reinforces the (unfortunately) widely held belief that the market must go back up to its recent highs.
Furthermore, if one wants to evaluate Buffett as a model, one must understand his position. I don't. Why does this guy invest? He doesn't consume anywhere close to his earnings. He doesn't give it to family and friends. He doesn't control his charitable projects. If wealth is accumulated saving and saving is future consumption, this man should have no incentive to increase wealth. That is not the case for those who read the article.
Buffett's most famous quotation is repeated here: Be fearful when others are greedy, and be greedy when others are fearful. This is bad advice, and I don't believe he follows it. Fear and greed are pathogens. They do not balance each other; each reinforces the ills of the other. The key is to keep one's head when fear and greed surround, see value where other's don't - if it is there.
It is certainly true that there is value to be found in the U.S. stock market. Finding it is another matter. If one buys an index as a proxy, he will buy into many failing enterprises. Last March I predict that 20% of the DJIA would be gone by the end of 2010. I don't mean a 20% decline in valuation; I mean 6 of the 30 companies will cease to exist. AIG is now dead, we are just waiting for the funeral. GM, Citigroup, and Bank of America have no chance for survival. Their names might live on, but neither their business model nor their equity will.
There will be great opportunity to pick through battered stocks; I don't believe that opportunity has come. The battering will continue. Right now, buyers are only guessing. Some of those guesses will be large winners, others will lose everything.
In 20 years we will read an article in Fortune explaining that if you bought XYZ Enterprises in 2011 you'd have made a return of 100,000 percent. But for every XYZ there are 249 Pets.coms out there and most people have no clue how to tell one from the others.
For people like you and I to find it worthwhile to devote scarce resources to investing we have to beat the averages. That means taking chances. I believe that, more often than not, taking a chance should mean holding back on buying something of value because it might be cheaper later. If we believe in our own abilities, then future opportunities will offset missed opportunity.
More egregious though, in my opinion, was Buffett's rent-seeking behavior. He bought his stake in Goldman Sachs not because he saw a good business but because he saw an opportunity to take advantage of government action. He made that
clear to his investors. Then he lobbied the government on his own behalf. I think he may have been an Obama campaign advisor.
Like my dad, the American people and their elected officials do not understand Buffett's position. They see his success as an indvidual investor as cause to grant him authority on how to manage the macroeconomy. So his "suggestions" hold weight and they influence policy.
There was one great paragraph in his op-ed, but most people would not even read that far let alone remember it. Here it is:
"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash
accounts."
The 1999 article, by contrast, is fantastic, with some great insights that few understand. I've gone on long enough though so I won't comment on that.
For a typical American his advice was horrible, even without today's hindsight. (I submitted a piece to the P-I in response; they, of course, declined to publish it). Though he didn't explicitly tell people to buy U.S. stocks, the fact that he is publishing his own actions in the Times makes it a recommendation. There are people, like my Dad, who see him as an icon, and assume he must be right. Most of that audience is unaware of the work that goes into separating value from refuse. They still believe that the stock market only goes up. His piece reinforces the (unfortunately) widely held belief that the market must go back up to its recent highs.
Furthermore, if one wants to evaluate Buffett as a model, one must understand his position. I don't. Why does this guy invest? He doesn't consume anywhere close to his earnings. He doesn't give it to family and friends. He doesn't control his charitable projects. If wealth is accumulated saving and saving is future consumption, this man should have no incentive to increase wealth. That is not the case for those who read the article.
Buffett's most famous quotation is repeated here: Be fearful when others are greedy, and be greedy when others are fearful. This is bad advice, and I don't believe he follows it. Fear and greed are pathogens. They do not balance each other; each reinforces the ills of the other. The key is to keep one's head when fear and greed surround, see value where other's don't - if it is there.
It is certainly true that there is value to be found in the U.S. stock market. Finding it is another matter. If one buys an index as a proxy, he will buy into many failing enterprises. Last March I predict that 20% of the DJIA would be gone by the end of 2010. I don't mean a 20% decline in valuation; I mean 6 of the 30 companies will cease to exist. AIG is now dead, we are just waiting for the funeral. GM, Citigroup, and Bank of America have no chance for survival. Their names might live on, but neither their business model nor their equity will.
There will be great opportunity to pick through battered stocks; I don't believe that opportunity has come. The battering will continue. Right now, buyers are only guessing. Some of those guesses will be large winners, others will lose everything.
In 20 years we will read an article in Fortune explaining that if you bought XYZ Enterprises in 2011 you'd have made a return of 100,000 percent. But for every XYZ there are 249 Pets.coms out there and most people have no clue how to tell one from the others.
For people like you and I to find it worthwhile to devote scarce resources to investing we have to beat the averages. That means taking chances. I believe that, more often than not, taking a chance should mean holding back on buying something of value because it might be cheaper later. If we believe in our own abilities, then future opportunities will offset missed opportunity.
More egregious though, in my opinion, was Buffett's rent-seeking behavior. He bought his stake in Goldman Sachs not because he saw a good business but because he saw an opportunity to take advantage of government action. He made that
clear to his investors. Then he lobbied the government on his own behalf. I think he may have been an Obama campaign advisor.
Like my dad, the American people and their elected officials do not understand Buffett's position. They see his success as an indvidual investor as cause to grant him authority on how to manage the macroeconomy. So his "suggestions" hold weight and they influence policy.
There was one great paragraph in his op-ed, but most people would not even read that far let alone remember it. Here it is:
"Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash
accounts."
The 1999 article, by contrast, is fantastic, with some great insights that few understand. I've gone on long enough though so I won't comment on that.
Why Is The Response So Bad?
I think it is possible that some people just are so conditioned to think a
certain way. They may not actually be trying to screw people for their own
purposes.
Bernanke, for example, is stuck inside the world of his economic models. He may
just be unable to think about more complex, or simply different problems.
It could be true of Paulson as well, though I place a relatively high
probability on Paulson being pure evil. He has been an investment banker for so
long, he may be unable to see the bigger picture.
It really comes down to a lack of creativity. They see the system as it was and
they believe that the essential components of that system need to be preserved.
But a better system may have different essential components.
Our nation's collective consciousness is concentrating all of its energy on the
non-existent past and the imagined future (which are both completely
irrelevant), and ignoring the reality of the current situation, which is nowhere
near as bad as advertised.
This is why the banking system needs a right-brained economist like me.
As Homer Simpson said when his ARM reset, "When you gave me that money you said
I wouldn’t have to repay it ‘til the future. This isn’t the future; it’s the
lousy stinking now."
certain way. They may not actually be trying to screw people for their own
purposes.
Bernanke, for example, is stuck inside the world of his economic models. He may
just be unable to think about more complex, or simply different problems.
It could be true of Paulson as well, though I place a relatively high
probability on Paulson being pure evil. He has been an investment banker for so
long, he may be unable to see the bigger picture.
It really comes down to a lack of creativity. They see the system as it was and
they believe that the essential components of that system need to be preserved.
But a better system may have different essential components.
Our nation's collective consciousness is concentrating all of its energy on the
non-existent past and the imagined future (which are both completely
irrelevant), and ignoring the reality of the current situation, which is nowhere
near as bad as advertised.
This is why the banking system needs a right-brained economist like me.
As Homer Simpson said when his ARM reset, "When you gave me that money you said
I wouldn’t have to repay it ‘til the future. This isn’t the future; it’s the
lousy stinking now."
Recessions Aint So Complicated
The best, simple explanation for the current recession is that interest rates have been, and are, excessively low. The best single policy to get out of it isto RAISE them.
This comes as a response to an interesting statement made by David Rosenberg of Merrill Lynch, brought to my attention by a friend:
"We do not aim to be critical, and we do not claim to be public policy experts by any stretch, but the reality is that the economy is in dire need of a major positive exogenous shock. Whether that means the Fed starting to buy Treasuries to pull down market rates even lower, the public sector establishing land banks to establish a floor under residential real estate prices, or the White House instructing Congress to dole out a $1 trillion zero percent long-term loan to the beleaguered state and local governments who are being forced to cut back services and raise taxes at the worst possible time, or all of the above, we will leave open for debate. What is not open for debate is the state of the economy, and we can no longer just label this a recession after the latest
string of shockingly negative employment reports. The government has to declare war right now ... against this modern-day depression."
This comes as a response to an interesting statement made by David Rosenberg of Merrill Lynch, brought to my attention by a friend:
"We do not aim to be critical, and we do not claim to be public policy experts by any stretch, but the reality is that the economy is in dire need of a major positive exogenous shock. Whether that means the Fed starting to buy Treasuries to pull down market rates even lower, the public sector establishing land banks to establish a floor under residential real estate prices, or the White House instructing Congress to dole out a $1 trillion zero percent long-term loan to the beleaguered state and local governments who are being forced to cut back services and raise taxes at the worst possible time, or all of the above, we will leave open for debate. What is not open for debate is the state of the economy, and we can no longer just label this a recession after the latest
string of shockingly negative employment reports. The government has to declare war right now ... against this modern-day depression."
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