Nassim Taleb on leverage

On the subject of debt . . . .

"We cannot have both debt leverage and a hyper-efficient system—the volatility is just too great. What Taleb explains—which no one else does—is that efficiency is already a form of leverage. A highly efficient system removes slack and magnifies small changes. Think of the efficient system as a high-performance aircraft. Each minute of steering input creates a rapid and violent shift of course, speed, or altitude. The system itself is souped up even before you add the debt. Once you do, the pilot is equally jacked up and twitchy, creating an explosive combination. Now imagine that fighter jet trying to fly in a 1,000-plane formation, and you get an idea of the world financial system in the 21^st century.

We can’t erase the technology that created the planes, so we’ll have to make sure we fly sober, maybe even with an onboard computer that dampens the controls. That means getting rid of the debt. It’s that simple."

Alaskan volcanoe Mt Redoubt erupting

Learn all about Alaska's volcanoes here

Down and out in the unemployment line

Late last week a single morther of one was told her application was denied. Her monthly unemployment payments of $1,943 put her $36 over the federal income limit for food stamps. The monthly income limit for a family of three for CalWorks was even lower.

Video - Mork and Mindy get married

What a cast of characters in this skit.

Video - Mork and Mindy (Diablo Canyon)

I was searching through the Mork and Mindy shows on my DVR and found this cute little scene with Mindy indirectly commenting on a certain nuclear generation plant . . . . . now of course, this back in the '80s so it was politically correct to joke about nuclear energy.

Why some traders succeed

“Some traders are succeeding not so much because they are rational, but because they have certain biological traits, including confidence, an appetite for risk, search persistence, and speed of reactions,” all of which are derived from prenatal exposure to testosterone.”
-John Coates, University of Cambridge neuroscientist and former trader

Unfunded Pension update

Many pension funds decided a long time ago to be political machines and social engineer by their investment dollars (without the approval of the pensioners I might add); they directed a portion of their portfolio towards "socially redeeming" companies and away from others like tobacco. Selling tobacco interests was a big financial mistake which has caused pensioners greatly.

CalPERS sold off all tobacco related holdings from their portfolio and did little to affect tobacco growing, distribution, etc. but did cost themselves. Since then, the AMEX Tobacco Index has outperformed the S&P 500 by more than 250% and the Nasdaq by 500%. That one decision cost pensioners more than $1 billion dollars according to a 2008 report by CalSTRS.

I'm not sure what the current impact those decisions have had but it can't have been any better.

Winston Churchill quote

“’You are drunk Sir Winston, you are disgustingly drunk. ‘Yes, Mrs. Braddock, I am drunk. But you, Mrs. Braddock are ugly, and disgustingly fat. But, tomorrow morning, I, Winston Churchill will be sober.”

1st day of Spring

Today, the Sun crosses the celestial equator heading north at 11:44 UT. Known as an equinox, this astronomical event marks the first day of spring in the northern hemisphere and autumn in the south. It also marks the beginning of Norouz, the Persian (Iranian) new year. Equinox means equal night. With the Sun on the celestial equator, Earth dwellers will experience nearly 12 hours of daylight and 12 hours of darkness. Of course, in the north the days will grow longer, the Sun marching higher in the sky as summer approaches. To celebrate the equinox, consider this scenic view of the setting Sun from the island of Naxos in the Aegean Sea. Recorded last June, the well-planned image captures the Portara (big door) in a dramatic silhouette. Measuring about 6 by 3.5 meters, the Portara is the large entrance to the Greek island's ancient, unfinished Temple of Apollo.

Liberals vs Conservatives

James K. Galbraith has pinpointed the defining elements in his piece in the Washington Monthly

The deepest belief of the modern economist is that the economy is a self-stabilizing system. This means that, even if nothing is done, normal rates of employment and production will someday return. Practically all modern economists believe this, often without thinking much about it. (Federal Reserve Chairman Ben Bernanke said it reflexively in a major speech in London in January: "The global economy will recover." He did not say how he knew.) The difference between conservatives and liberals is over whether policy can usefully speed things up. Conservatives say no, liberals say yes, and on this point Obama’s economists lean left. Hence the priority they gave, in their first days, to the stimulus package.

American Express jettisoning customers ???

Chief Executive Officer Kenneth Chenault is shedding customers after efforts to expand backfired, and the company’s stock declined by more than two-thirds in 12 months. The firm is paying some cardholders $300 each to close accounts so the lender can reduce the risk of default as the recession deepens.

Darn, I meant to sign up for those puppies!

Setting the stage for INFLATION

By committing to buy Treasuries and double the purchases of mortgage debt, the Federal Reserve signaled it's determination to avoid a repeat of the Great Depression and it's willingness to pump as much cash into the economy as needed to end the current crisis.

This is called monetizing debt, the cause of currency devaluation. Take a look at what happened to the USD vs EURO yesterday after the announcement.

Fishing Knots

Ever wonder how all those great knots are tied? Well, click here and learn.

Video - Kali and the Hand Shadow

Kali belongs to our cousins the Wakemans and loves to chase shadows . . . . .

for some Madoff victims, this was the first time they lost in a Ponzi scheme!

Tragically, Mr. Breeden said, some people who had invested in the Ponzi scheme that he helped clean up turned around and gave their money to Mr. Madoff. Read the whole story at the Wall Street Journal online here

John Stewart to James Cramer . . . .

“It feels like we are capitalizing your adventure.” Perfect!

Madoffville

Hey, take a look at Bernie's new neighbors . . . . Madoff is joining a corps of aging white-collar convicts including former WorldCom Inc. Chief Executive Officer Bernard Ebbers, 67, now housed at the Federal Correctional Institution in Oakdale, Louisiana, and John Rigas, 84, the ex-CEO of Adelphia Communications Corp. who is imprisoned at the Federal Correctional Institution in Butner, North Carolina.

Crater Lake

If you've never been to Crater Lake in Oregon, it's a must. Here's a look from overhead in the winter.

Remembering Barney McCay

When I first began working at my family's company, American Hardwood, it didn't take too long before I met the Orange County salesman, Barney McCay. Barney was a former national badminton doubles champion. He knew Leo Fender and because of that, American sold all the hardwood lumber Fender Musical Instruments bought for decades, he was instrumental in the sale of spruce to make Howard Hughes' Spruce Goose. You could always count on Barney for a good joke or story. Barney passed away two weeks ago, living to the grand age of 93. Barney won't ever be forgotten by the many who worked with him.

All we need is >>>>>

"All we need to make us really happy is something to be enthusiastic about." Charles Kingsley

Great Image

TEN BEST CADDY REPLIES

#10 Golfer: "I think I am going to drown myself in the lake."
Caddy: "Think you can keep your head down that long?"

#9 Golfer: "I'd move heaven and earth to break 100 on this course.
Caddy: "Try heaven, you've already moved most of the earth."

#8 Golfer: "Do you think that my game is improving?"
Caddy: "Yes sir, you miss the ball much closer now."

#7 Golfer: "Do you think I can get there with a 5 iron?"
Caddy: "Eventually!"

#6 Golfer: "You got to be the worst caddy in the world."
Caddy: "I don't think so sir. That would be too much of a coincidence."

#5 Golfer: "Please stop checking your watch all the time."
Caddy: "It's not a watch, it is a compass."

#4 Golfer: "How do you like my game?"
Caddy: "Very good sir, but personally I prefer golf."

#3 Golfer: "Do you think it is a sin to play on Sunday?"
Caddy: "The way you play, sir, it is a sin on any day."

#2 Golfer: "This is the worst course I've ever played on."
Caddy: "This isn't the golf course. We left that an hour ago."

#1 Golfer: "That can't be my ball, it is too old."
Caddy: "It's been a long time since we teed off, sir

Best Comeback Line

If you ever testify in court, you might wish you could have been as sharp as this policeman. He was being cross-examined by a defense attorney during a felony trial. The lawyer was trying to undermine the policeman's credibility...
Q: "Officer -- did you see my client fleeing the scene?"
A: "No sir. But I subsequently observed a person matching the description of the offender, running several blocks away."
Q: "Officer -- who provided this description?"
A: "The officer who responded to the scene."
Q: "A fellow officer provided the description of this so-called offender. Do you trust your fellow officers?"
A: "Yes, sir. With my life."
Q: "With your life? Let me ask you this then officer. Do you have a room where you change your clothes in preparation for your daily duties?"
A: "Yes sir, we do!"
Q: "And do you have a locker in the room?"
A: "Yes sir, I do."
Q: "And do you have a lock on your locker?"
A: "Yes sir."
Q: "Now why is it, officer, if you trust your fellow officers with your life, you find it necessary to lock your locker in a room you share with these same officers?"
A: "You see, sir -- we share the building with the court complex, and sometimes lawyers have been known to walk through that room."
The courtroom erupted in laughter, and a prompt recess was called. The officer on the stand has been nominated for this year's "Best Comeback" Line -- I think he'll win.

Video - Craig and Sasha

When I was recording my first CD, I found a young girl who played fabulous violin. Sasha was still in high school when I heard her play and asked her to play on two of the songs on my CD and she did so perfectly. You can the songs at my website click here listen to Sashay on Down and Last Times, Last Storm from the MP3s Info on the left banner. Enjoy and thanks again Sasha, wherever you.

The list of failures continues to increase

Bombay & Co. Circuit City, Home Depot’s Expo Design Center, KB Toys, Steve and Barry’s, National Wholesale Liquidators, Linens ‘n Things and now Fortunoff’s, the 87 year old local jewelry and department store in NY. And these are only the big names. I try to look at the economic data dispassionately; we tend to ignore the real world stories beneath much of the headlines. It never hurts to recall every now and again that there are real human tragedies occurring in the economic maelstrom . . .

Retracement

Technically, 7,470 in the DJIA is the 50% retracement of the entire bull market that began in August 1982. At 7,100, we not only cut in half the October 2007 highs of 14,198.50, but we have given back 50% of the 27 year move from the start of the big bull market of the 1980s to yesterday. In addition to a 50% retracement in the DJIA from the 1982, we have also seen a 50% retracement of the move from 1932 low to the all-time high in 2007. 50% retracement of 41 - 14,164 = 7,103. Yesterday’s close was 7,115.

Academy Awards Highlight: Jerry Lewis

Easy for me . . . . Jerry Lewis receiving the Jean Hersholt Humanitarian Award. Who has done more for humanity than Jerry Lewis? He has helped raise billions of dollars for Muscular Dystrophy over the years. And he raised the bar for comedians along the way too.

The Alaskan King Crab Leg Indicator

Is this delectable seafood a test of the retail market for seafood? I decided that before watching the Oscars tonight, I'd drop by the local Ralph's Grocery Store to get some crab legs and have a nice dinner in front of the TV with some friends. Problem is they don't sell crab legs at the Ralph's near me. Why? They are too expensive for the store to speculate on . . . . that's right, the manager told me they used to stock crab legs up until about a week ago but they just went to waste as no one was willing to spend $20/lb for them. Is this a tell on the state of the economy? I think it is.

Golf Density - per capita players

Britain and Ireland have about 3,000 regular courses and 1.5 million affiliated players. Scotland has more golf courses per capita than any other country in the world, with about 9,000 people for each of its 550 courses. Ireland is second in Europe, with one course for about every 14,000 people, according to data compiled by Golf Digest magazine.

On the road to fuel efficiency . . . .

I just found out what happened.

In the Energy Independence and Security Act of 2007, Congress allocated $25 billion to "reequipping, expanding, or establishing manufacturing facilities in the United States to produce qualifying advanced technology vehicles or qualifying components." However, all of the $25 billion was subsequently relocated to provide bridge loans to the auto industry as part of their bailout announced on Nov. 20, 2008.

Video - Dave and Craig playing music

A few years ago, when I lived in Sacramento, I put on songwriter showcases for an group called Songsalive. During one of the shows, Dave Baldwin and I opened the show.

Clawing Back - it's time has come

Make bankers are accountable for the mess! They got rich HIDING RISK and put INNOCENT people in this mess. Join the "two horsemen" (Nouriel and Nassim) in extracting justice for the small guy.

At Davos 2009, one of the 2 horsemen was quoted as saying that people like Robert Rubin, who received over $100 million serving as chairman of New York-based Citigroup Inc.'s executive committee, need to be punished for their failure to understand the risks their institutions were taking. He said that unless Rubin and others like him are made to mandatorily return their bonuses or are given some other punishment, the system that regrettably emerges is one "in which it’s the worst of capitalism and socialism, a situation in which profits were privatized and losses were socialized. We taxpayers have the worst. This will stand as the biggest government-sponsored scam in history".

Bankers are way ahead; they MISPREPRESENTED their risks; the small guy is paying the price.

We cannot live in a society without accountability.

Note: Obama is "reducing" future bonuses after the recent scandal (they used the bailout money to pay themselves). This is outrageously insufficient. We need PAST bonuses to be returned to society --so we stop the cycle of moral hazard.

[Note: there are laws that make IRRESPONSIBLE persons in corporations liable for their sins against the public.]

[Note: the only country that clawed back bonuses so far is Switzerland, though by social pressure --the mechanism is certainly easy to implement].

Do you have an tax deferred annuity? Is it safe?

How Safe is an Annuity?

Your tax-deferred annuity is safe. A qualified legal reserve life insurance company is required to meet its contractual obligations to you. These reserves must, at all times, be equal to the withdrawal value of your annuity policy. In addition to reserves, state law also requires certain levels of capital and surplus to further increase policyholder protection. Legal reserve refers to the strict financial requirements that must be met by an insurance company to protect the money paid in by all policyholders. These reserves must be at all times, equal to the withdrawal value (principal plus interest less early withdrawal fees, if any) of every annuity policy. State insurance laws also require that a life insurance company must maintain certain minimum levels of capital and surplus, which provide additional policyholder protection.

Video - Tim Conway

Is there anyone more hilarious to watch than Tim Conway? Yes, Harvey Korman when he's in a skit with Tim Conway.

Breast Cancer prevention and reseacrch

The Love/Avon Army of Women offers a revolutionary new opportunity for YOU to partner with research scientists to move us beyond a cure.

Breast cancer has been around for decades, but it does not have to be our future. We can be the generation that eliminates breast cancer by identifying what causes this disease and stopping it before it starts. Sign up for your sister, mother, daughter, granddaughter, best friend, and the woman you met last week.

click here

Reducing Bloated Government

In a recently posted letter to the editor in my local newspaper, the writer says, "requiring multiple signatures for a decision is at the heart of "red tape". Only the last signature, the one who will take responsibility, is necessary. We could reduce government payroll and make government services more efficient if we used this test to get rid of managers."

Amen, we do have too many layers of management in government . . . . and don't get me going on public school administration!

How money gets transferred

"It is the markets’ job to reallocate money from the ignorant to the intelligent, from the lazy to the hard working and studious; from the naive to the educated, and from the speculator to the investor."

Barry Ritholz . . the big picture blog

Video - How one golf hole can ruin your day

Last year on the PGA Tour Dudley Hart was leading a tournament and then it all ended with this disastrous performance on one hole.

Video - Valentine's Day

Video - B2 Bomber over the Rose Parade 2009

During the Rose Parade there was a fly over by one of two B2 bombers of the USA. It was pretty spectacular and quiet!

Not the right spirit but who's surprised?

During a decade in Congress, California Representative Grace Napolitano has pocketed more than $200,000 of political contributions by charging as much as 18 percent interest on money she loaned to her own campaign.

The suburban Los Angeles Democrat made the $150,000 loan in 1998, when she was first elected to the U.S. House of Representatives. Through Dec. 31, her campaign committee has used donations to pay Napolitano $221,780 of interest while reducing the principal by just $64,727, a review of her Federal Election Commission filings shows.

The inauguration like you've never seen it before

This is a remarkable panorama of the inauguration. You can actually focus in on faces near the back of the crowd - nearly 1/2 mile away!

The control for the picture is in the upper left. Press the + sign to zoom in, or arrows to move right, left, up or down. If the picture is fuzzy, give it a second to clarify. The technology is truly amazing, and it's un-classified! Imagine what spy agencies can see with classified technology! Grab the photo to move left, right, up down.

Take note Obama (center stage) and then look behind him. There's Clarence Thomas, Dick Cheney in his wheelchair, Clinton, Gore, Bush and even the pathetic simpleton Dan Quayle! Justice Scalia is present. The clarity is amazing!

click here

Trading and Surfing

Trading is as exciting and difficult as any singular activity that I have attempted to master. I think a comparison to another activity I’ve mastered would serve to illustrate some interesting points. I love to surf as much as I love to trade. Surfing requires you to learn technical skills that must be mastered in order to perform well, have fun and be successful against “Mother Nature” (read - the unknowable future activity of the market) as does trading. Each activity requires you to have good tools so that you can take action when the time is right. Each activity has it’s own set of frustrations that can be anticipated but by no means predicted. Let me illustrate. Surfing requires an understanding of the ocean (very similar to understanding the ebbs and flows of the market). The tide comes in and goes out. And during each tidal advance and retreat, individual waves come in various forms, height and power. Wave heights can be anywhere between knee high and triple overhead and you have to decide how much is too much for your skill and comfort level (read - position sizing). The wind blows onshore, offshore or doesn’t blow at all, which affects the ocean surface and the ease of positioning yourself in the lineup. Positioning yourself in just the right place for the next wave is crucial to picking up the wave. Notice I haven’t said anything yet about riding the wave. OK, you’re comfortable with the size of the waves. You’ve paddled out to where you perceive is the lineup and you’re in the right place (read - you’re waiting for the proper setup); you see a wave coming and you turn, paddle and feel the wave lifting and propelling you down it’s face (read - entry). Now you must determine which direction to ride (read – long or short). As you’re pulling yourself up to stand, turn and trim the board, you quickly determine whether or not this wave is even rideable. In spite of the perception that it looked rideable when you were paddling for it doesn’t guarantee that it will be rideable after you catch it (read – unknown news event). Once you’re up and riding, many waves close out without giving you much warning and you have to be ready to kick out at an instant (read – stop-loss exit). Other waves continue to lineup ahead of you and offer options to ride through the next section and continue the ride (read – adding to your position/pyramiding). You know that ultimately the wave will end either on the beach or close out along the way and you will have to kick out or get wiped out (read - you know you will have to exit before you take off). There is no guarantee that the wave will be fun or long lasting with a nice exit giving you that accomplished feeling of success (read - profitable).
If you’re always ready for the opportunity and stay in the moment. If you keep reacting to everything that comes your way. If you keep your options open and have defined objectives, are prepared to kick out at any instant when you realize there is no more hope of succeeding, you can escape and paddle out to do it again (read – preserve your capital).

A gigabyte

The world's first one gigabyte disk drive was announced in 1980. It weighed 550 pounds and had a price tag of $40,000. Heck, most people have that much memory in the cellphones now.

Video - 100 Iron Men

During the Open Championship at Royal Birkdale in 2008 this was a special segment about an art project this is pretty interesting.

Video - Extras - timezones

Ricky Gervais created Extras and here is a funny skit between his character and his character's agent.

Defined-Benefit Pension Plan underfundednes

S&P companies are underfunded by $250 billion in their defined-benefit pension plans. Late last year, the Bush administration waived the requirement that companies fund their pensions to at least 92% of needed capital. It is now down to 80%. This says nothing of the public sector pension plan underfunding . . . . gulp.

More on Your Own Bliss

Ten Steps to Your Own Bliss:
1 Decide what kind of day you want and what kind of feelings you want to have. Tell yourself, “I will make no decisions by myself.”
2 Be still and listen for the answer you get. The answer may come in any form – a voice, a picture, an external sign, or just a sense of knowingness. The answer is everywhere and you may find it anywhere.
3 If you have a problem, then the answer you get may not resolve the problem in the manner you wanted. As a result, have no investment in the answer to any question you ask. Accept the answer you get and be patient. All things will aid you in discovering the truth. Keep an open mind.
4 Periodically, throughout the day think about the kind of day you would like to experience. And then say to yourself, “If I make no decisions by myself, then this is the day that will be given to me.” If in doubt, just listen. Allow the day to flow.
5 If you are unwilling to be patient for an answer, then you have already judged for yourself. If so, then realize that you have asked a question by yourself and determined the answer in your own terms. The right answer is not forced upon you. Instead, it comes with a willingness to listen. If you are upset, it is because your perception is wrong. When you criticize what you see, your bliss pathway will become invisible.
6 Once again, remember the kind of day you want and recognize that something has now occurred which is not a part of it. As a result, just let your question go.
7 If you can’t let your question go, then you can at least begin to change your mind by saying the following: “At least I can decide that I do not like how I feel now.”
8 As a result, realize that your judgment may have been wrong. This will remind you that internal guidance is not being forced on you. Instead, it is something you need because you do not like the way you feel.
9 Until you reach this point, you will think that your happiness depends upon your being right. But now you can discern that you would be better off if you were wrong. As a result, you can say in perfect honesty, “I want another way to look at this.”
10 The final step is to acknowledge that you are not opposed to being helped and ask, “Perhaps there is another way to look at this. What can I lose by asking?” Listen with assurance. You must desire to change your perception of the world and be willing to see another way.

This ten step procedure was adapted from A Course in Miracles and from Lee Coit’s Listening. To learn more about listening to your inner voice, I recommend the tape program, Listening, Accepting Being, by Lee Coit click here for more of his work

Following your bliss

Following your bliss essentially means doing what you are committed to do. Remember what W.N. Murray said about commitment: “The moment one definitely commits oneself, then Providence moves too. All sorts of things occur to help one that would otherwise have never occurred. A whole stream of events issue from the decision, raising in one’s favor all manner of foreseen assistance, which no man could have dreamt would have come his way.”

Unemployment Statistics

If you want to see the big picture on unemployment, check the U6 data here that's the one that more clearly describes total unemployment.

Batman and Robin quotes

Robin: "I guess you can never trust a woman."
Batman: "You've made a hasty generalization, Robin. It's a bad habit to get into."

Robin: "That's an impossible shot, Batman."
Batman: "That's a negative attitude, Robin."

Alfred Hitchcock's style

"My camera is absolute."

"I tell the story through that lens, so I need you to move when my camera moves, stop when my camera stops. I'm confident you'll be able to find your motivation to justify the motion. I'll be happy to work with you, but I will not change the timing of my camera."

"Either they wear the clothes and do the part the way I want or they're not going to be in it."

from Spellbound by Beauty by Donald Spoto

Video - The Boss was good but Prince was the best!

Many are saying the Springsteen's halftime show during Superbowl 43 was the best ever . . . . not. Check out Prince during the 2007 halftime in the rain and note that he didn't go overtime!

Video - The best catch ever

The touchdown catch to clinch Superbowl 43 was the best ever.

The passing of Lance McCollum

One of the finest luthiers I know has passed away very unexpectedly. Lance McCollum built some of the most amazing guitars. I own a Grand Auditorium that Lance built for himself many years ago and sold to me prior to the Healdsburg Guitar Festival in 2005. Click here to see his website.

Video - Dolphin Stampede

This is a remarkable video clip someone sent to me, looks like it might have taken place off the tip of Baja, California.

Why do you cry when you cut onions?

And more importantly, how can you prevent it from happening . . . if you can.

Onions contain a lot of sulfur. When you cut them, the cells burst and release enzymes. These enzymes turn sulfur into a gas. The gas into your eyes and forms sulfuric acid. One way to prevent the tears is to rub a cut lemon on the knife. Watch the Mythbusters prove it here on YouTube

Sports Trivia Question

Who was one of the most famous athlete's of all time to play a role in a movie and not play himself?






Wilt Chamberlain in Conan the Barbarian

learned this from the movie "Shotgun Solutions"

The insignificance of wine ratings

In 1978, a lawyer turned self-proclaimed wine critic, Rober M. Parker Jr. decided that, in addition to his reviews, he would rate wines numerically on a 100 point scale. Over the years most other wine publicaitons followed suit. From the theoretical view point, there are many reasons to quesiton the significance of wine ratings. For one thing, taste perception depends on a complex interaction between taste and ofactory stimululation. Strictly speakig, the sense of taste comes from 5 types of receptor cells on the tongue: salty, sweet, sour, bitter, and umami. But if that were all there was to taste perception, one could mimic everything, fortunately there is more to gluttony than that and that is where the sense of smell comes in. The perceived taste of wine arises from the effects of a stew of between 600 and 800 volatile organice compounds on both the tongue and the nose. That's a problem, given that studies have shown that even flavor trained professionals can rarely reliably identify more than three of four components in a mixture.

Let's just say that the quality of a wine's taste is pretty complex. Skeptical of the numbering system yet? OK, scientists have designed ways to measure wine experts taste descrimination directly using a wine triangle (each tastor is given 3 wines, two of which are idnentical). The mission is to choose the odd sample. In many studies over the years, experts could only do it only 2/3 of the time. "On many levels the ratings system is nonsensical," says the editor of Wine and Spirits Magazine. But why does the system endure? Because people are attracted to and have faith more in numbers than other systems of rating.

Ockham's Razor

There is a time-honored principle called Ockham's Razor, which states that the explanation for any phenomenon should focus only on the essential and relevant elements, avoiding as many unnecessary “second-order” factors as possible. Albert Einstein put it this way: “A theory should be a simple as possible, but no simpler.” From the standpoint of economic stimulus, Ockham's Razor suggests that we will fail as a nation to address the current economic crisis if we fail to address the source of that crisis. Again, this means focusing first on bank capital and mortgage foreclosures.

In short, the essential problem is not “insufficient aggregate demand” but rather risk-aversion and anticipatory saving triggered by fear of financial instability. Ockham's razor cuts straight to bank capital and foreclosure risk. We can address a much wider range of interests in the cause of economic stimulus, but if we fail to address the central cause of the present economic crisis, the attempt to increase “aggregate demand” will predictably fail.

Liz atop Arthur's Seat

Arthur's Seat is the main peak of the group of hills which form most of Holyrood Park, a remarkably wild piece of highland landscape in the center of the city of Edinburgh, about a mile to the east of Edinburgh Castle. Here's a photo of my niece atop the peak. Click here to learn more.

Playing for Change - a new way to create and collaborate

The ability to collaborate on music today is amazing. Musicians around the world don't need to be in the same place to make music together. Click here to watch the video "Playing For Change"

Human Perception

Perception requires imagination because the data people encounter in their lives are never complete and always equivocal. Human perception, according to Michael Faraday (inventor of the electronic motor and one of the greatest of experimental scientists) is not a direct consequence of reality but rather an act of imagination.

Video - Extras Favorite clip

Ricky Gervais created Extras and this is my favorite clip

Clan Kincaid

Here's a little family history click here

Agnotology

Agnotology: Culturally constructed ignorance, purposefully created by special interest groups working hard to create confusion and suppress the truth. What's going on? Normally, we expect society to progress, amassing deeper scientific understanding and basic facts every year. Knowledge only increases, right?

Robert Proctor doesn't think so. A historian of science at Stanford, Proctor points out that when it comes to many contentious subjects, our usual relationship to information is reversed: Ignorance increases. He has developed a word inspired by this trend: agnotology. Derived from the Greek root agnosis, it is "the study of culturally constructed ignorance." We need to fashion information tools that are designed to combat agnotological rot. Wikipedia is one of the solutions: It encourages users to build real knowledge through consensus, and the result manages to (mostly) satisfy even people who hate each other's guts. Because the most important thing these days might just be knowing what we know.

Read the full story on how this word came into being and it's impact on all of us click here

Mike Doyles says this too

Mike Doyles says

Geithner, the incoming Treasury Secretary ooooops

Treasury Secretary Geithner may be in some trouble, as he failed to pay taxes on his income from his stint at the IMF. This is not an "Oops, I forgot!" The IMF does not withhold income taxes from its employees. However, he was given a memo about the taxes he owed. And he did pay them for two years when he was audited and caught. He clearly knew the nature of the taxes due the two prior years, yet did not come clean on those years. Dumb move for someone on a fast-track career and who clearly has an impressive intellect. He has got to be kicking himself.

The creepy spider

Click here to go to a cool website where you can play around with spiders. Poke and prod the spider with your mouse, also 'grab' one of its legs with your mouse and drag it around the screen. Tell me it's not alive!

Put the cursor anywhere on the map and then hit the space bar and it leaves little bugs. Watch the spider go after them and when she catches them they disappear; this is totally crazy but fun to play!

How did golf get it's name?

In Scotland, a new game was invented. It was entitled Gentlemen Only Ladies Forbidden.... and thus the word GOLF entered into the English language.

The beautiful Ash Tree

In the late 1990s, a pretty, iridescent green species of beetle, now known as the emerald ash borer, hitched a ride to North America with ash wood products imported from eastern Asia. In less than a decade, its larvae have killed millions of trees in the Midwest, and continue to spread. They've killed more than 30 million ash trees in southeastern Michigan alone, with tens of millions more lost in Ohio and Indiana. More than 7.5 billion ash trees are currently at risk. During 1960's Ash was the predominant choice for kitchen cabinets. Click here and learn more about Fraxinus spp.

Don't believe every measurement you read about

like a particular vintage of Cabernet Sauvingnon Napa Valley wine whose grade is called out as 94. When we perform an assessment or measurement, our brains do not rely solely on direct perceptional input. They also integrate other sources of information - such as our expectation!

Video - from the Godfather - drugs are a dirty business

Don Corleone has to say no to a request.

Talk about scams . . . how about this one?

Nothing helps a fraudster more than a big name. Edward Chancellor, in his fine history of financial speculation Devil Take The Hindmost, records how His Highness Gregor, cacique of Poyais, a small territory on the border of present-day Nicaragua, arrived in London to encourage emigration and float a £600,000 loan. The issue was a great success, thanks in part to the services of the notable financier Sir John Perring, a former lord mayor of London.

Yet the country was fictitious and the emigrants found on arrival that the “capital” was a collection of mud huts surrounded by swamps and threatening Indians. For his part, the cacique – whose real name was Sir Gregor MacGregor, a Scottish adventurer and renegade general from Simón Bolívar’s army – fled to France with the bond issue proceeds.

It's all about confidence, isn't it?

“The key goes back to what Bear Stearns and Lehman Brothers seem to have forgotten, when your business model has some ephemera at its core and you are so reliant on other people’s good wishes and beliefs, you have to leave a big margin for error … you have to have the confidence of investors, clients and counter parties.”

Barry Ritholz Wall Street Journal 1/14/08

Principles

Principles only mean something if you stick by them when they're inconvenient.

The Year of Investing Dangerously

from Vanity Fair editor Graydon Carter . . . a pretty good summary of events

click here

Brokers are superstitious ???? puleeez

I found this curious reference while reading The Drunkard's Walk - -

10/31/03 (CNN/Money) - From wearing the same lucky tie or underwear every day to using the same brand of pen, some traders are very superstitious when it comes to trading. "I never, ever, ever write with a red pen -- red signifies losses," said James Park, senior trader at Brean Murray & Co. "I also keep my desk completely organized. I feel the more organized I am, the better my stocks trade." Park added that when the going gets tough, the tough get food. He said the group at Brean Murray orders a bunch of White Castle burgers with cheese and conducts an eating contest when the market tanks. And there may have been more than one day in the past two weeks that Park and fellow traders stocked up on White Castles. One stock trader said he's entertaining buying more pet fish. "I had fish for a while, and after they died the market didn't do so well," said Brett Gallagher, head of U.S. equities at Julius Baer. Gallagher said one of the portfolio managers in his group believes that a self-contained eco-system, including shrimp that eat plants and whose waste then fertilizes the plants, is key to his success so far. Bond traders may be even more ritualistic. One trader told CNNfn there's a bathroom stall he never uses. "It has a really good track record for losing money," said Alan Palmer, an independent bond futures trader at the Chicago Mercantile Exchange. Experts said that superstitions generally run high in jobs that involve risk. "Traders have a very high-pressure job and it's very intense," Dr. Bennett Leventhal, professor at the University of Chicago, told CNNfn. "I think that for many of them the superstitions and the little rituals help them decrease the level of the pressure, the tension and the anxiety."

Be hopeful your broker isn't superstitious about his trading . . . . if he is, move on.

What we spend on food . . .

Pundits have been comparing our current economic times to those of the Great Depression, and while food prices are on the rise, American spending on food today pales in comparison. In 1933, we spent 25 percent of our income on food; last year, only 9.8 percent. It's true - food prices are increasing, but when you look at the numbers, the growing cost may not be as significant as you might think. $719 The current U.S. median weekly income. $70.50 Current average weekly food expenditure in the U.S. 60% The increase in the prices of commodity foods - such as corn, wheat, rice, soybeans, etc. - over the last two years.

The first law of probability

The probability that two events will both occur can never be greater than the probability that each will occur individually. Why not? Simple aritmetic: the chances that event A will occur = the chances that events A and B will occur + the chance that event A will occur and event B will not occur.

Surprising Volatility Data Point

The S&P 500 Index rose or fell more than 5% on 17 trading days in 2008. Not impressed? You must have gotten used to it? Well, it only happened 17 times in the previous 50 years!!!

On chance or randomness or LUCK

"When we look at extraordinary accomplishments, we should keep in mind that extraordinary events can happen without extraordinary causes. Random events (luck) often look like non random event and in interpreting human affairs we must take care not to confuse the two." -----Leonard Mlodinow, The Drunkard's Walk

Real Estate Syndicate history time

My brother in law observed the following . . . . . Over my career I say many "investment" bubbles, almost all of which were attributable to the greed of Wall Street.

I first saw it with real estate syndicates. As originally conceived, they were carefully analyzed real estate projects, pieces of which were sold to a few investor partners. But when the big bokerage houses discovered this salable asset, their commission salesmen loved them. Not because they were good for their customers, but because they paid HUGE commissions, and were a relatively easy sell to high bracket customers. And so an enormous demand for product grew among the sales force, and the brokerages were determined to satisfy that demand. So the quality of the product declined dramatically, until lots of the syndicated stuff was trash.

But for a while, everybody loved it. The brokerage houses liked the commissions, and the real estate developers loved having an unquestioning market for their projects. And, as it turned out, the bigger the project, the better the brokerages liked it, because it saved them time in explaining the deal to their salesmen. And, of course, developers loved the bigger projects, because they made more money on them.

The reality, of course, is that there are a finite number of good real estate developments, and that if they are really good it is a lot better for the developer to sell it to one purchaser than it is to suffer the expense of marketing it to the public. And so, predictably, the quality of what the public could buy kept declining, even while the demand was growing.

Just as the girls all get better looking at closing time, deals that are clearly not up to standard start looking pretty good when the sales force is demanding more product. And so, with time, the real estate syndicate became a highly suspect investment.

Just so with bundled mortgages. Disinter mediation started out as a good thing. But once the brokerages discovered they could get IPO commissions by peddling packages of mortgages, even sub price loans started looking pretty good. So good that the brokers apparently took non-recourse, or at least limited recourse, assignments of junk mortgages, and dumped them into the public market--after fees and commissions, of course.

The results, just as with real estate syndicates, was that LOTS of really back bundles of loans were created for the public, while the good stuff was marketed to better informed buyers. Fannie and Freddie deserve blame for their failure to evaluate the junk they were taking, but they were certainly not the only market for the stuff that was being sold around.

Good Questions to ponder

Shouldn't the consumer, after decades of over-consumption, be allowed to digest the over-indebtedness and save, rather than be encouraged to take risk?

Shouldn't companies, no matter what state they reside in from a political point of view, if run poorly, be allowed to fail or forced to restructure?

Should taxpayer money be used to make up for the mishaps at financial institutions or should we allow them to wallow in their own mistakes?

Shouldn't free markets be free?

When did Socialism make its way to our shores?

How do we choose who is bailed out and who loses?

Shouldn't we place blame on the politicians, bureaucrats and other "decision makers" and put skilled people in place that know how to run the businesses?

Shouldn't investors, led blindly down the primrose path of "buy and hold, diversify and don't open your brokerage statement except once every 10 years" be allowed to follow the Prudent Man Rule?

What's the difference between Madoff and Satyam?

Nothing except that one is in India where they don't put up with that crap, the other in the US where everyone is presumed innocent and officials let the two brothers who are sons of the Bernie and most likely the ones who helped perpetrate the fraud go off to wherever? Now I don't know how correct it is to pursue the accountants as they are usually the last to know about a fraud taking place (people who defraud usually don't let their accountants know what they are doing, do they?).

here's what's going on in India . . .

Jan. 10 (Bloomberg) -- Satyam Computer Services Ltd. chairman Ramalinga Raju and his brother Rama were arrested and the remaining directors of the software exporter sacked, as India started investigating an alleged $1 billion fraud.

The brothers were detained on charges including forgery, breach of trust and criminal conspiracy, Inspector General V.S.K. Kaumudi told reporters in the southern city of Hyderabad.

Officials have seized documents and the nation’s accounting body is examining auditor PricewaterhouseCoopers LLC’s local unit, Corporate Affairs Minister Prem Chand Gupta said.

“The developments so far indicate that the current board of Satyam has failed to do what it was supposed to do,” Gupta told reporters in New Delhi. “The government is committed to punish everyone found guilty, including the auditors.”

Demand for crude oil storage is soaring

The world’s biggest owner of supertankers, said oil traders want to charter as many as 10 vessels to stockpile crude to take advantage of higher prices later in the year. About 25 supertankers were already hired for storage and there are enquiries for 5 to 10 more.

The traders would buy crude now and sell it for delivery later, profiting from a futures market situation called contango where prices are higher as the year progresses. The vessels could handle as much as 20 million barrels, or about what is produced by OPEC member Algeria in 15 days. They would add to as much as 50 million barrels already hoarded at sea, for a combined amount equal to almost five days of European Union demand.

“I’ve never before seen storage demand on this scale,” said Didier Labat, a Paris-based shipbroker at Barry Rogliano Salles who has worked in tanker markets for about 20 years.

Thirty-five supertankers represent about 7 percent of the global fleet of very large crude carriers, according to data from London-based Drewry Shipping Consultants Ltd. Storing oil in tankers may buoy rental rates that fell by a record 78 percent last year as slower economic growth sapped demand for energy. Traders are seeking to lease ships for three to nine months, Jensen said. Crude oil for December delivery traded at $61.90 a barrel as of 10:49 a.m. in London, $13.66 more than the February contract. Oil companies and traders may be able to profit from storing the oil, assuming shipping, insurance and financing costs are covered.

A supertanker would cost about 90 cents a barrel a month for storage depending on the length of the rental, according to data last month from shipbroker Galbraith’s Ltd.

Iran, the second-largest member of the Organization of Petroleum Exporting Countries after Saudi Arabia, idled as many as 15 of its biggest ships in May to store crude oil. That contributed to three consecutive months of higher rental rates for ships.

The cost of delivering Middle East oil to Asia, the world’s busiest route for supertankers, rose yesterday for the first time since Dec. 5, according to the Baltic Exchange in London.

Time Warner and AOL

It was January 10, 2000 when Time Warner bought AOL in an all stock transaction valued at $160 billion dollars. Time Warner traded as high as $90. Roll forward to today, Time Warner is trading at $10 and it's just announced a write down of AOL assets of $25 billion. This might eclipse the disaster merger of Daimler with Chrysler, don't ya think?

George Freeth update

from the Easy Reader in Manhattan Beach giving an overview of 2008 . . . "the iconic bust of Redondo's original surfer dude was stolen from the pier in August, police were unable to identify a suspect in the theft of the broze bust which had been a part of the pier landscape since 1977; the high price of scrap metal and high incidence of metal thefts maybe have been a motive to steal the approsimately 100 lb bronze bust. A native of Hawaii, Freeth came to Redondo in 1907, where he was acclaimed for both his many rescues as a life guard and for helping poularize surfing here on the mainland."

a replacement statue has been cast and the new bronze statue is in place!

Awful year for US Auto Makers

2008 will be the first year in which the U.S. automakers combined market share was less than 50% of total US auto sales

Left Brainer ????

People who are logical thinkers, prefer classical music, are good at math and like to read (preferably in total quiet), like dogs, read realistic stories but prefer to write nonfiction, can only remember things specifically studied, almost never absentminded, great storytellers, think better sitting down.

Right Brainer ???

People who are good at (or enjoy sports) or art, dream about things that will probably never happen, can be hypnotized, prefer visual instructions with examples, enjoy clowning around, prefer rock music, can listen to music or TV while studying, good at geometry, prefer to be in groups, like to act out stories and think better lying down; occasionally, they are absentminded, spontaneous, unpredictable and philosophical, solve problems intuitively and prefer to learn through free exploration.

Oh how we love to predict . . . .

on the subject of predictions . . . . click here

some great predictions from 2008

• Elaine Garzarelli, president of Garzarelli Capital, Business Week’s Investment Outlook 2008
Buy some of the most beaten-down stocks, including those of giant financial institutions such as Lehman Brothers, Bear Stearns, and Merrill Lynch.
As of January 1, none of these firms will still exist.
• James J. Cramer, “Future of Business” New York Magazine
“Goldman Sachs… finishes the year at $300 a share. Not a prediction — an inevitability.”
Goldman Sachs’ share price was $78, and the firm announced its first quarterly loss — $2.2 billion.

Figuring what happened using a physicist or an economist

It's time to realize that there is one very important difference in economics and physics. Faced with facts that don't match theory, physicists try to come up with alternative theories. Economists, on the other hand, try to change facts so that it matches their theory. So, today, economists on the left are arguing that defective regulation caused all the troubles. A year from now, I am sure conservative economists will come back and argue that government meddling post the Lehman crises is what has caused the recession to be as long as it is going to turn out to be. And it is not just economists. Almost all fund managers have one particular lens through which they want to view everything in the world. All stocks in the world need to fit their theory of how stocks should behave. And if they don't, it is just a short term disruption that will be corrected duly in the course of time. "In the long run, everyone is dead", as Keynes said.

What we can look forward to - stimulus plans

Examples of the kind of stimulus we can look forward to, according to the LA Times, are as follows:

Rather than rebuilding highways, a nonprofit group called Reconnecting America wants the government to focus on a "21st century national transportation system" of mass transit and walking and bike paths

The Air Transport Assn. is seeking $1 billion to upgrade airports and $3 billion to modernize avionics

Magellan Midstream Partners (MMP), owner of the longest refined-oil pipeline in the nation, wants to develop the first "dedicated ethanol pipeline" from Iowa to New York City. It's seeking a loan guarantee of $3.5 billion through the Department of Energy

The National Assn. of Railroad Passengers is pushing for $10 billion for intercity passenger rail project

The travel industry wants a "multimillion-dollar marketing and public outreach effort to educate visitors about changing security policies and promote the U.S. as a destination," according to the Travel Industry Assn. The group is seeking a start-up federal loan of $10 million

The business community is seeking a series of tax breaks that it says will foster growth and return money to the federal Treasury. It favors, among other things, a tax rebate to middle-class taxpayers, a sizable reduction in the corporate capital gains tax and a sharp reduction in the tax rate on earnings that firms in the United States get from foreign subsidiaries

The housing industry wants all buyers to receive a tax credit for a home purchase and to have the government subsidize mortgage rates through a "buy-down" program lowering borrowing costs

The National Retail Federation proposes that sales tax holidays be held during March, July and October 2009, each lasting 10 days. The cost of this program would be $20 billion

The National Automobile Dealers Assn. is seeking a tax break encouraging more people to buy cars and a "cash for clunkers" program that helps people trade in older vehicles for new, more fuel-efficient ones

"The catfish industry is on the verge of collapse," said Marty Fuller of the Catfish Farmers of America, citing high feed prices and an increase of imports. About 6,000 jobs are at stake, mostly in economically depressed areas in states such as Arkansas, Mississippi, Alabama and Louisiana. Officials are talking about seeking $50 million in aid as a stimulus.

Steering clear of the next Bernie Madoff

One of the firms which lost over a billion dollars of clients money in the Madoff ponzi scheme says it carries out “extensive” due diligence on the funds to which it allocates money, a process that can take as long as six months and cost $100,000. It also hires private investigators to run “extensive background checks” on fund managers, including searches on professional credentials, regulatory filings and bankruptcy, according to marketing documents dated September, 2008.

"Even if you tried, it might seem that Madoff would have been impossible to catch. But at least two warning signals flashed for anyone to see. First, Madoff’s accounting firm, Friehling & Horowitz in New City, New York, was a rinky-dink shop, as a simple Google search shows. The firm doesn’t have a Web page. I found it on a junky site that lists local businesses by type and address, along with the boilerplate comment, “rated as good by a New City citizen.” That’s an unlikely auditor for the $17 billion that Madoff claimed to have under management. When the fraud came to light, F&H turned out to be a tiny office which, neighbors said, wasn’t even open all the time. (The office didn’t answer its phone.) Second, Madoff held your securities (or what he claimed were your securities) in his own advisory firm. That’s not the way reliable advisers handle publicly traded investments. The custodian should always be a large, independent financial institution that reports cash flows and trading activity to you directly. When you invest new money, you should make out the check to that account."

Lawyers will gain the most

The Madoff debacle will once again prove profitable for only one group involved . . . lawyers.

Merry Christmas to all

Merry Christmas to all of you.

Video - Lights on Foothill Blvd

The other night I set up my digital camera on a tripod and took a series of images and combined them into a video.

Video - Revisiting the intersting way in which Gov. Palin uses the English language of Alaska

v