Posts tagged ‘Update Oh’

Thoughts on the Greek Bailout / Debt Writedown

I am not at all a financial or Wall Street guy, but I had a few thoughts

  • I am amazed at the equity rally over this.   Writing down one country's debt, without fixing its underlying financial problem or dealing with all the other countries who have problems, seems a small win.  Particularly when this one country stretched European resources to the breaking point, and there are a lot of other lined up just behind Greece.
  • Its interesting to see how much everyone bent over backwards not to trigger payouts from credit default swaps (CDS).  If this is the wave of the future, I would be shorting sovereign debt at the same time I was writing CDS contracts on sovereign debt.    Maybe this is exactly why I am not a trader, but it strikes me that if you had an arsonist around burning down houses, while at the same time the government worked hard to let fire insurance companies avoid paying off on the fire damage, wouldn't you be shorting houses and long on fire insurance companies?
  • How smart does the UK feel right now for staying out of the common currency?  The anti-EU folks in the UK should be calling for that referendum on EU participation right now.   It would likely fail by a landslide.
  • The question that keeps nagging at me -- is it really worth as much as a trillion euros to keep Greece in the Euro?  Why?
Update:  Oh, and I left out the obvious take:  moral hazard
When sharing our kneejerk reaction to yesterday's latest European resolution, we pointed out the obvious: "Portugal, Ireland, Spain and Italy will promptly commence sabotaging their economies (just like Greece) simply to get the same debt Blue Light special as Greece." Sure enough, 6 hours later Bloomberg is out with the appropriately titled: "Irish Spy Reward Opportunity in Greece’s Debt Hole." Bloomberg notes that Ireland has not even waited for the ink to be dry before sending out feelers on just what the possible "rewards" may be: "Greece’s failure to cut spending and boost revenue by enough to meet targets set by the European Union and International Monetary Fund prompted bondholders to accept a 50 percent loss on its debt. While Ireland won’t seek debt discounts, the government might pursue other relief given to Greece, including cheaper interest payments on aid and longer to repay it, according to a person familiar with the matter who declined to be identified as no final decision has been taken."

Wow, Obama Has Inverted the Supply Curve

I am having a blast at the Change.gov transition site for Obama, now that I have satisfied myself it is not a fake.  Those who doubt that Obama has super-human powers should read this, from the Obama site:

The Obama-Biden plan provides affordable, accessible health care for all Americans, builds on the existing health care system, and uses existing providers, doctors and plans to implement the plan. Under the Obama-Biden plan, patients will be able to make health care decisions with their doctors, instead of being blocked by insurance company bureaucrats.

Under the plan, if you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year.

If you don't have health insurance, you will have a choice of new, affordable health insurance options.

Wow - so now you can go out purchase any care you want - any tests, any procedures, whatever - and no one is going to tell you no.  Everything is paid for.  You have a blank check to go spend.  And, by granting you an infinite supply of care, your cost is going to go down.  Obama is really superman, because no one else in history has figured out how to invert the supply curve or make 2x cost less than x.

You see, it's all about insurers' margins.  If we can just cut down on those fat margins, everyone can have full health care and a pony for less money.  You doctors who are worried about health care, you will have it better too:

Prevent insurers from overcharging doctors for their malpractice insurance and invest in proven strategies to reduce preventable medical errors.

All these years you thought malpractice insurance costs were high because of huge malpractice court settlements that usually bore little relationship to true malpractice, well, you were wrong.  Its because of the insurers and their margins.  We don't have to reform malpractice tort law (which is just as well since tort lawyers were so generous with donations to our campaign), we just have to get insurers to stop overcharging doctors.

To give you an idea of the absolutely huge amount of savings that can be extracted by just pounding on the insurers to give more coverage for less money, let's take a look at those outsized margins they are making.  These are net profit margins reported by Google Finance for 3Q2008 of the largest health care providers and insurers:

Cigna: 3.50%
United Health Group: 4.56%
Aetna: 3.64%
WellCare:  4.08%
Amerigroup: 3.51%
Humana 2.56%
WellPoint: 5.49%

Freaking robber barons!  Look at those outsized margins.  No wonder we have a health care crisis.  By cutting these guys margins in half, Obama expects to reduce the price of health care by 1-2%, which should be more than enough to pay for large increases in services and 30-50% price cuts.

Update: Oh, its magic.  That explains it.

Update #2: OK, the page has come down, as have most all the pages that had any kind of policy detail or promises in them.  I wish I had screen shots, but I can say everything above was cut and pasted directly form the web site.  Could I make that stuff up?  Too bad, there probably were another 10 blog posts in there somewhere.

Definition of an Activist

Activist:  A person who believes so strongly that a problem needs to be remedied that she dedicates substantial time to ... getting other people to fix the problem.   It used to be that activists sought voluntary help for their pet problem, and thus retained some semblance of honor.  However, our self-styled elite became frustrated at some point in the past that despite their Ivy League masters degrees in sociology, other people did not seem to respect their ideas nor were they particularly interested in the activist's pet issues.  So activists sought out the double shortcut of spending their time not solving the problem themselves, and not convincing other people to help, but convincing the government it should compel others to fix the supposed problem.  This fascism of good intentions usually consists of government taking money from the populace to throw at the activist's issue, but can also take the form of government-compelled labor and/or government limitations on choice.

I began this post yesterday, with the introduction above, ready to take on this barf-inducing article in the Washington Post titled " Fulfillment Elusive for Young Altruists In the Crowded Field of Public Interest."  Gee, who would have thought it difficult for a twenty-something with no real job experience to get someone like me to pay you to lobby the government to force me to pay for your personal goals for the world?

Fortunately, since it is a drop-dead gorgeous day outside, TJIC has already done the detail work of ripping this article apart.  Here is one snippet, you should read the whole thing:

So the best they can imagine doing is "advocating".

Here's a hint: maybe the reason that your "sense of adulthood"
is "sapped" is because you haven't been doing anything at all adult.

Adults accomplish things.

They do not bounce around a meaningless series of do-nothing graduate programs, NGOs, and the sophisticated social scene in DC.

If you want to help the poor in Africa, go over there, find
some product they make that could sell here, and start importing it.
Create a market. Drive up the demand for their output.

Or find a bank that's doing micro-finance.

Or become a travel writer, to increase the demand for photography safaris, which would pump more dollars into the region.

Or design a better propane refrigerator, to make the lives of the African poor better....

One thing that disgusts me about "wannabe world changers" is that
mortaring together a few bricks almost always is beneath them - they're
more interested in writing a document about how to lobby the government
to fund a new appropriate-technology brick factory.

Special mutual admiration bonus-points are herein scored by my quoting TJIC's article that quotes me quoting TJIC.

I will add one thing:  I have to lay a lot of this failure on universities like my own.  Having made students jump through unbelievable hoops just to get admitted, and then having charged them $60,000 a year for tuition, universities feel like they need to make students feel better about this investment.   Universities have convinced their graduates that public pursuits are morally superior to grubby old corporate jobs (that actually require, you know, real work), and then have further convinced them that they are ready to change to world and be leaders at 22.  Each and every one of them graduate convinced they have something important to say and that the world is kneeling at their feet to hear it.  But who the f*ck cares what a 22-year-old with an Ivy League politics degree has to say?  Who in heavens name listened to Lincoln or Churchill in their early twenties?  It's a false expectation.  The Ivy League is training young people for, and in fact encouraging them to pursue, a job (ie 22-year-old to whom we all happily defer to tell us what to do) that simply does not exist.  A few NGO's and similar organizations offer a few positions that pretend to be this job, but these are more in the nature of charitable make-work positions to help Harvard Kennedy School graduates with their self-esteem, kind of like basket-weaving for mental patients.

So what is being done to provide more pretend-you-are-making-an-impact-while-drawing-a-salary-and-not-doing-any-real-work jobs for over-educated twenty-something Ivy League international affairs majors?  Not enough:

Chief executives for NGOs, Wallace said, have told her: "Well, yeah, if
we had the money, we'd be doing more. We can never hire as many as we
want to hire." Wallace said her organization drew more than 100
applicants for a policy associate position. "The industry really needs
to look at how to provide more avenues for young, educated people," she
said.

Excuses, excuses.  We are not doing enough for these young adults.  I think the government should do something about it!

Update:  Oh my God, a fabulous example illustrating exactly what universities are doing to promote this mindset is being provided by the University of Delaware.  See the details here.

In Case You Thought Anti-Trust Was About Consumers, Part 2

In this post I said:

I could spend all day discussing the follies of anti-trust law.  But
one of the memes that still seems to hang on is that anti-trust was
designed as a form of consumer protection, with the government
protecting consumers from the monopoly power of consolidated
enterprises.

I am not enough of a business historian to comment on whether
anti-trust has ever been used for consumer protection, but it is clear
that it is not any more.  That has been one very expensive lesson we
can all learn from the Microsoft anti-trust cases, both in the US and
Europe.

Here is further proof.  NicSand, who used to have 2/3 of the retail channel for sandpaper locked up with exclusive deals, is complaining that 3M has usurped them and has taken their market share.   NicSand enjoyed monopoly margins for years, finally faced long-overdue price competition from 3M, and lost a lot of the business.  So they sued for anti-trust.

Between 1997 and 2000, 3M entered into contracts to supply automotive sandpaper
to Advanced Auto, Autozone, CSK and KMart and did so at prices ranging from 10%
to 30% over NicSand's costs. But nothing about this sequence of events suggests
an antitrust violation. As to the market share that 3M garnered over these
years, "it takes one to know one" is hardly an accredited hallmark of antitrust
liability"”particularly when NicSand's apparent solution to this problem is not
to encourage the entry of other suppliers to this lopsided market but to
preserve its 67% market share. As to 3M's discounting, NicSand of course has no
right"”under the antitrust laws no less"”to preserve 40"“50% margins on a product
that (so far as the allegations are concerned) does not take any ingenuity to
make. One can fairly doubt the size of NicSand's and 3M's R&D departments
for automotive sandpaper.

Unable to argue that 3M's discounting amounted to anything but legitimate (and
apparently long-overdue) competition, NicSand focuses on the fact that 3M
entered into exclusive contracts with the four large retailers that switched
from NicSand to 3M. Yet according to NicSand's amended complaint, the retailers
made exclusivity one of the preconditions for doing business with a new
supplier. The complaint says that the large retailers (1) choose to carry just
one brand of automotive sandpaper for sale to consumers, (2) re-negotiate these
one-brand contracts just once a year, (3) require a new supplier to purchase the
retailer's existing supply of automotive sandpaper, (4) require a new supplier
to provide racks and other display equipment, (5) require a new supplier to
produce a full line of automotive sandpaper and (6) require a new supplier to
provide a discount on the retailer's first order. NicSand of course complied
with these requirements in obtaining the supply business it held in 1997, and 3M
complied with them in winning some of that business away. If retailers have made
supplier exclusivity a barrier to entry, one cannot bring an antitrust claim
against another supplier for complying with that precondition. Put another way,
NicSand did not sue 3M insisting that it had a right to share shelf space; it
sued 3M because it wanted that shelf space all to itself"”just as it had it in
1997. This is precisely the kind of all-for-one-and-all-for-one competitor claim
that the antitrust laws do not protect.

Anti-trust is not about the consumer.  It is about one company trying to use the government to sit on its competitors.

Update: Oh, and in case you thought liscencing of professionals was about consumers rather than protecting incumbent competitors, example number 439,126:

If you've spent as much time on farms as I have, you may imagine that
floating horse teeth has something to do with a backup of equine urine. It
actually refers to the time-honored practice of filing horses' teeth to prevent
them from getting uncomfortably long. At the behest of veterinarians (who
else?), the state of Minnesota is trying to limit
the service to veterinarians, and the Institute for Justice (who else?) is challenging
the protectionist regulations in state court.

Should you balk at going to veterinary school just so you can file horse
teeth for a living (a technique veterinary schools don't even teach), Minnesota
will give you a pass if you 1) have more than 10 years of experience or 2) pass
an exam given by the Dallas-based International Association of Equine Dentistry.
"To qualify to take the IAED's test," I.J. notes, "you must float the teeth of
250 horses under the supervision of an existing IAED member. Not only are there
no IAED members in Minnesota, it is illegal to float without a license. So, to
abide by the law in Minnesota, you must break it."

Bureaucratic Nightmare

I have written before about the silliness of the liquor licensing process.  A regulatory procedure perhaps necessary when the government was trying to drive organized crime out of liquor in the 1930's, its insanely useless today.

For example, last winter we replaced a store building at the same address with a brand new building.  It did not even occur to me that I might have to make any changes to my liquor license.  Surprise!  Here is the paperwork required to activate my existing, already paid-for license at the exact same address, only in a newer building:

Application

Its hard to tell from the picture, but we are talking lots and lots of detail, much of it repeated several times through the application.  And most every page has to be notarized.  How much of this is new and not already on file with my current license?  Just one-half of one page, down in the lower right where I draw the floor plan of the new building.  Everything else is a total repeat of the information on file.

My favorite question I had to answer to move my liquor license to a new building?  They require I give them the date and location of my wedding.

Update: Oh, and it has to be approved by the County planning department, who for several days now have not returned my calls.  And it may have to go in front of the county commisioners.  And I am pretty sure it will have to be publicly posted on the new building for a 30-day comment period, and I will have to pay for an announcement for three weeks running in the local paper.  And then it will probably be approved, just about when it will be time to close for the season.  For those who have not been there, though, McArthur-Burney Falls State Park is gorgeous, and, if I can brag, I think our new building is a big improvement as well.

Phallocrats of the World, Unite

This letter to the editor at SIU about embattled professor Jonathon Bean is hilarious if parody, and even funnier if real.  The letter begins:

To the Editor:

My eyes were edged with tears as I read Caleb
Hale's article
in the Southern which exposed Southern Illinois University at
Carbondale history ("His-Story") Professor Jonathan Bean as a racist
hate-mongering phallocrat.

"Phallocrat" -- I love that term!  Great name for a new political party.  Stealing a joke shamelessly from one of the commenters:  "you are going to elect a dick anyway, so vote Phallocrat".

Backstory on the whole blowup at SIU is here, but the gist is that professor Bean is being excoriated for having the temerity to suggest one (1) piece of optional reading in his course (which has scads of required reading from African-American writers about white racism) about an incident of black racism.

Update:  Oh no!  The campus phallocrats are meeting stiff resistance in Rhode Island.