Thursday, May 31, 2007

Another Warning We Probably Won't Heed

I touched on this before, but it looks like the New Jersey state pension scandal is turning out to be a whopper. The state apparently failed to make payments into the system to the tune of $8.1 billion. In addition, it wasn't like they just, er, forgot, there was a chronic failure to contribute funds over ten years. The current funding gap could be as high as $56 billion. Turns out that the SEC is looking into it, as there may be some fraud involved in how the state represented its finances to prospective bondholders. Furthermore this is not the only public pension scandal around. If San Diego's $1.7 billion hiccup is "Enron by the Sea" how will we term NJ's $56 billion mess? This would make Enron look like a kid stealing a twinkie from the corner deli. Of course the MSM will never decry the public corruption and mismanagement of the state of NJ with the same fervor and volume as they decried the corporate cupidity ala Enron. Not only that, this will be seen as an anomaly, a strange occurence, when it is in fact the norm. This is not unusual. State pensions, city pensions, the federal budget, state budgets, Social Security, Medicare, welfare, Katrina relief, Iraq contracting, etc. All corrupted, all grossly mismanaged, and all completely foreordained - the increasing size and scope of the state will inexorably move toward greater instance of corruption (see the quote one paragraph down).

And we are dabbling with the notion of ceding our healthcare system to the government? It is an eternal mystery. Why do the majority of people demand more government?

Wednesday, May 30, 2007

Something About Pride and Falling...

Goldman Sachs made close to $700 million in fees in 2005 from its Global Alpha hedge fund. 2006 was not so good and 2007 is shaping up poorly too. Investors in this type of vehicle have little patience for poor performance and the article hints at the risk that the fund might have to be unwound if things don't pick up and enough clients head for the door. Doubtful that will happen. Goldman will cashier Carhart and Iwanowski well before that tipping point. They'll both walk away plenty rich, but somewhat humiliated. Serves them right for disparaging the master:

NEW YORK: Mark Carhart looked out over the packed New York conference room and told investors that Warren Buffett had it all wrong. Carhart, co-head of the quantitative strategies group at Goldman Sachs, used his speech in July to poke fun at the penchant of Buffett, the Berkshire Hathaway chief executive, for investing in market-leading brands like Coca- Cola. He cited study after study showing that big-name companies with high price/earning multiples or rapid growth rates make poor bets. Traditional stock pickers like Buffett, a fabled raconteur, do have one redeeming quality, Carhart joked: "They tell great stories."

Healthcare 2008

Greg Mankiw highlighted all the whiz-bang economic minds that are advising presidential hopeful Barack Obama. Obama's recently unveiled healthcare proposal indicates that either the candidate isn't listening to his advisors or they are not as impressive a bunch of economists as Mankiw seems to think. Beating down pharmaceutical companies for discounts, importing Canadian price controls, and taxing high-earners to subsidize universal coverage, gee, how...sensible and innovative.

Still, despite it having no chance to improve healthcare outcomes, it will sell. Remember that the essence of pure democracy is that 51% of the voters can pee in the cornflakes of the other 49%. But it won't be that tight. In modern day America, something like 80% of the voters would gladly vote to have the other 20% fork over cash to lower their healthcare bills. Unfortunately for healthcare outcomes, the transfer has to be laundered through multiple levels of government bureaucracy, so the cornflake despoilers might get 80 cents on their class warfare dollar. Then they still have to go out and buy insurance that is artificially inflated due to silly concepts like guaranteed issue and numerous onerous mandates, and they still have to try to buy drugs from Canada that are either not available or of suspect provenance.

The central problem is that the policy reform that would do the most good for healthcare outcomes and the economy is not the policy that is the most salable to the public. It will take no small genius to craft a free market-based policy that will do some good but that also will resonate with the voting public. Sadly it seems that the future of healthcare in this country is in the hands of political strategists and PR chieftains that craft the message that the voters will hear regarding healthcare. Sad.

WSJ Offers Weak Tea In Ginning Up Subprime Ire

The WSJ makes a page one attempt at drumming up some sympathy or ire or anything regarding the 'subprime mortgage crisis'. The media continue to try to pass this off as a story about corporate evildoers preying on the unsuspecting. As I have noted before, there were bad corporate actors in this whole mess - who are getting their comeuppance in the form of bankruptcies and ruined careers - but just as big a compenent of this story is personal greed, irresponsibility, and financial ignorance.

Check out the damning evidence that made it above the fold on the front page of the WSJ:

"Over the past several years, seven of the 26 households on the 5100 block have taken out subprime loans, typically aimed at folks with poor or patchy credit. Some used the money to buy their houses. But most already owned their homes and used the proceeds to pay off credit cards, do renovations and maintain an appearance of middle-class fortitude amid a declining local economy." (emphasis mine)

So it seems that "most" of the people in the subset of folks that the WSJ feels is representative of those that got caught up in the swirl of the subprime crisis are profligate, or in one way or another financial irresponsible. If you are dumb enough to pledge an asset, your home equity, to fund a lifestyle beyond your means, well...should we really feel sorry for these people? Should we crimp the risk-based lending industry, hurting only the largely prudent lenders who remain in business, because there high-living ignoramuses out there?

Here Here

Big Order For Airbus

But the question has never been 'will they get orders for the A350 XWB?' The question is 'can they build it on time given all that they have going on, namely salvaging the A380?' It will be a struggle to do it even unprofitably.

Tax Lessons...Again

A while back I discussed a small group of countries that seem to want (or don't seem to know any better) to crush their own stock markets. China had been hinting at it. Well, now they've come through and Chinese stocks took a beating today, down 6.8%. How many of these episodes do we have to see before we realize just how destructive and just what a bad idea it is to let the 2003 dividend and capital gains tax cuts expire?

Oh, and here is another story about the twists and contortions that businesses will go through in order to keep their hard earned dollars out of the taxman's hands. Given that Europe is lowering its corporate tax rates below US levels (see here), we'll see alot more of this. Just a few years back, US corporations repatriated billions of overseas profits to take advantage of a one-time low tax rate that was part of the 2003 tax cut legislation. Although the tax rate was low, 5% I believe, it created large tax receipts for the Treasury that would not have happened. Now that the opportunity is past, we see this type of transaction with IBM where the Treasury gets nothing. Simple, low, predictable tax levies bring more revenue than the beast of a tax code that the Great Sausage Factory has created.

Tuesday, May 29, 2007


Wow, cool layout!

Office Of Reputational Rehabilitation

Awhile back I expressed the hope that Reade Seligman would publicly reprise fellow New Jerseyan Ray Donovan's famous quote. Here's hoping that such an "office" can be found at Brown University. Hey, if actual criminals can make a comeback, why can't this kid?

The Laffer Wars?

Here's your double-take headline of the day: "Tax-Cut War Widens in Europe..."

The big European countries need economic growth badly. How badly? So, badly that they are tripping over themselves to cut corporate taxes. Maybe they know something? Even the Zapatero government in Spain is cutting the tax rate. Microsoft comes out and says that tax considerations are "key for us" in their investment decisions. Yet, there are still doofus economists at multi-lateral organizations who still are clueless..."Evidence on the links between taxes and investment is not fully conclusive," says Stefano Scarpetta, an economist at the Paris-based OECD." Yes, all these companies are lying when they say the link is about as direct as it comes.

So when will the US get in the game??????

And Utah Isn't a Marxist Thugocracy Either

There are so many ways to angle this story. I could make a snarky reference to a Roveian plot. Oh wait, already did that. Perhaps I should just say that this is an example of how technology and economics can work together to solve the problems that many people feel only government can solve (and certainly those deluded souls in government who feel they can solve such problems). Or as one of the best energy investors I know says, "High prices will cure high prices."

Friday, May 25, 2007

Raise A Glass To The Protectors of Freedom

Given that we are hours away from the Memorial Day holiday weekend, if you're like me, after you give thanks for our vets and all those who protected our way of life with their lives, thoughts (at least some thoughts among many) turn to, naturally, what to drink. On the wine side, I usually recommend a Spanish rose, although this year in honor of the election of Nicholas Sarkozy, I'll be quaffing some French coolers. For me, it's Muscadet, Sancerre and Provencal Rose.

As for suds, it's gotta be strictly American, no foreign brew can be as fresh as the local stuff; and, for most beer styles we do just as good a job anyway. A made-in-the-USA hefeweizen, kolsch, or pilsener will do you justice on a hot sunny day. As a matter of fact, it is almost time for that liquid lunch that signals the real start of the holiday weekend. I think the best lobster roll in NYC and a couple of these sounds good.

As always stay away from these, life is too short.

UPDATE: Whoops, maybe "not so fast" to uncork the Froggie juice.

Thursday, May 24, 2007

Michael Dell Should Run General Motors

So, Dell Computer has three quarters as #2 to HP and the management team takes action. Big action, slaying a giant taboo.

"The deal with Wal-Mart comes less than a month after Michael Dell, 42, told employees in an e-mail that the ``direct model has been a revolution, but is not a religion.'' "

Meanwhile the auto industry has bled billions of dollars for years and they can't seem to take anything but baby steps. If Dell can look beyond the direct distribution model, why can't GM, Ford and Chrysler look beyond the union labor-built automobile?

Fun With Media

According to the WSJ, stocks are down today due to fears of economic weakness, but according to Bloomberg, stocks are down due to surprising economic strength (that diminishes the odds of a Fed rate cut later this year). Go figure.

Rudy Is NOT 'Muddled' On Abortion

I swear, I have been formulating this post in my head for the last few days and then I notice this over at Powerline. I hate it when I get beaten to the punch. Anyway...

I find Rudy Giuliani's position on abortion entirely reasonable. Like Rudy, I don't like abortion. Not due to any high degree of religious zeal, not because the Pope or any other clergyman in a pulpit on Sunday told me to dislike it. Not because of the particulars of the medical procedure (although if you've ever seen an ultrasound of a second trimester fetus, well, let's just say it sows alot of doubts). Not for any of the reasons that you commonly hear or read. Simply, I feel my dislike for abortion viscerally as a conseqence of my own life. Biologically, I am the product of a college romance, perhaps even a one-nighter, decades ago. My biological father departed the scene or was never intending on sticking around in the first place. For whatever reason, my biological mother chose to have her baby despite the obvious strain (she came from a modest background and had little in the way of money or a familial support structure). She put me up for adoption and I was adopted into a loving home by deeply committed and wonderful parents. That was more than three decades ago, and I now have a wonderful family of my own. Not a day has passed in those thirty-plus years that I don't thank my lucky stars that my biological mom made her decision and that Mom & Dad Baseball were able to enter my life. Naturally, I feel "pro-life" deep in my bones, but I realize that my life may not be typical and that the outcome of my biological mother's decision was not foreordained and is not repeatable in many cases. While I would encourage it, I can't insist that others follow the same path. I certainly can't insist that others see it my way when I am certain there exist people whose experience might be the antitheses of my life. Surely, they feel quite differently deep in their bones. It is for this reason that I am comfortable being open to the legality of something that I do not like. Not the shoddy legal reasoning of Roe vs. Wade, not the phony and insulting elevation of abortion to a constitutional right, but the deep understanding that my own life, while blessed, could have been remarkably, and tragically, different. This position is not "muddled," as the MSM or the political strategists might label it. It is well-informed and not the least bit frivolous...and I don't think Rudy's is either.

The MSM is good at black vs. white. Not so with grey areas and definitely not so with grey areas that might inhabit the minds of anyone outside of the media-elite society bubbles. They simply can't cope with a political position that falls outside of their crude match-making paradigm between politicians and voter groups. Thus the lazy formulation of "muddled."

Bloomberg Misdiagnoses Michigan's Malaise

Michigan is going bankrupt. Although Bloomberg News is not so dishonest as to attribute the entire disaster on tax cuts, they do make the misleading claim that tax cuts had a big role to play in the fiscal crisis: "The revenue gap also is a legacy of two decades of tax cuts." Truth is that Michigan has done everything possible to make itself unfriendly to business and thus businesses have left, taking their job opportunities with them. Shortly after that, the actual people who filled those jobs took off too. In thrall to labor unions, the political class has ramped up government spending at an irresponsible pace. Just like our nation as a whole, Michigan could balance its budget with no problems if it would be only the slightest bit sensible on spending. Michigan's malaise cannot be pinned on tax cuts. Other states that have been cutting taxes are booming. Michigan's woes are directly attributable to union-inspired statist, anti-capitalist, anti-globalization government policy.

Wednesday, May 23, 2007

Broken Windows and Dead Terrorists

This illustrates a point I made a while back appliying Bastiat's Broken Window fallacy to fighting terrorists.

UPDATE: I left off the obvious conclusion, but some other obscure blogger didn't:
"Hey, I guess killing these guys does help."

Tuesday, May 22, 2007

Same As the Old Boss Yada Yada...

Here is a great CNN report on the incredibly expensive, yet typical, boondoggle trips that our elected Sausage Factory Workers take at our expense under the bogus pretext of government business. The report fingers Rep. Bennie Thompson for a trip to "the Caribbean" where he stayed at the posh Caneel Bay Resort. The reporter questions the propriety of this stay directly to Rep. Thompson, taking the view that it was excessively luxurious. Rep. Thompson responds that it was the only place on the island that had availability. That claim is exactly as risible as it appears to you and me and the reporter left it at that. However, what the report failed to tell us is what "island" in "the Caribbean" this Caneel Bay resort is on. It happens to be on St. John. St. John is a truly lovely place, but let's get serious, there is absolutely nothing going on there; and, there can be no possible way that any government business sufficient to require the close attention of a US congressman could take place there. No way, no how. This was a shameless boondoggle. Shameless and corrupt.

Inching Toward Iranian Implosion?

If you're like me, you are rooting for regime change in Iran, but not necessarily via a military invasion. Our greatest hope in this regard is the inherent confrontation that repressive, centrally-planned economies generally have with reality. Iran's dreadful economy is exacerbating the broader desire for political change. Here is some illustration of how this is unfolding.

Fortunately this is not something that we can only hope for, we can actually do something about it, through economic 'Cold War' tactics. Here's some heartening evidence of our Cold War tactics towards the mullahs.

Graham & Dodd in the NFL Draft

I read Michael Lewis's Moneyball way back when not because I was particularly interested in the Oakland Athletics but because it was recommended to me by a legendary investor, who deemed it, rightly, a management/investment book primarily, and only secondarily about baseball. The book essentially illustrates the "value investing" philosophy of Ben Graham and David Dodd applied to investments in baseball players rather than stocks. I am a devotee of the Gramham & Dodd school and happen to believe that it makes no less sense in building a sports team than in building a stock portfolio. Thus it makes happy, and keeps me ever optimistic, that my beloved New York Giants are devotees of the Graham & Dodd value investing approach. Great value investors exploit inefficiencies that can arise when the market unfairly devalues an asset for a superficial deficiency that it mistakes as more substantive. Here is a story about a Giant draft pick that may fit this theme. The heightened radioactivity of "character issues" may be the source of the inefficiency here, and the Giants' front office, like any good value investor, feel they have done the due diligence and found an undervalued asset. With Tiki gone, here's hoping they are right!

If you like this sort of thing, check out economist Kevin Hassett on the NFL draft.

Bypass the Bandwagon. This Is What a Real Leader Looks Like

There seems to be a market among a sizable chunk of white America for a nationally successful black politician, thus the Obama boomlet despite the fact that he is a lightweight that brings nothing new to the policy table. Still, it seems that America's craving for a young dynamic black politician to adulate will be around for awhile. So, to see what a real one looks like, bypass the Obama bandwagon and look to Newark, NJ. Check out Steven Malanga's piece in City Journal on Cory Booker. Booker's battle is just beginning and he hasn't achieved anything yet except raising a degree of consciousness over a tragedy of government. Still if he can pull it off, America will actually have that young dynamic black political leader worthy of adulation.

My previous posts on Booker here and here, here, here and here.

Friday, May 18, 2007

Greatness of the "Potomac Watch" Column Carried On

I think it is fair to say that Kim Strassel has emerged as a rising star of opinion journalism in the realm of political economy and public policy. Last week she uncovered the messy wreck that resulted when the bad idea of drug reimportation hit the brick wall of economic reality. This week she deciphers the collective "Whoops!" emanating from all those ethanol evangelists in Washington. If she keeps up she is destined for Crown Jewel status on the editorial staff of the WSJ.

Almost At Parity With the Loonie?

No, this does not entail reaching the same robust weight as Rosie O'Donnell. It is something else.

The World Bank Encourages Starvation in Africa

There are so many levels on which to attack this story, but since the World Bank is so much in the news, let's single them out. Given that Robert Mugabe had such good outcomes with seizure of farmland in Zimbabwe, South Africa is trying its hand at it as well, and is being egged on by the World Bank.

The inequality of land ownership poses a threat to political stability in South Africa, says Rogier van den Brink, a World Bank economist who helped the government select its target of redistributing 30 percent of arable land by 2014.

``Our story was and still is that the land problem of the magnitude of South Africa is like an accident waiting to happen,'' Van den Brink says. ``From world history, if you have an unequal distribution of this magnitude, at some point, some politician will run with it.''

This is the brand of economics that Mr. Van den Brink and the folks at the World Bank bring to the world, in which, apparently, expropriation of property is beneficial because "inequality of land ownership" just isn't sensible. Well naturally. As any student of economics will tell you, the works of all the great economists, from Ricardo and Smith to Marshall, Keynes, and Friedman, are simply littered with references to the racial makeup of land ownership. Obviously, you just can't understand the notions of efficient allocation of scarce resources without understanding what politicians tend to "run with."

Of course, I jest. It seems that Mr. Van den Brink is some sort of historian/political scientist/moralist rather than an economist; and, while he is safe in his mental cocoon convinced that he is sparing South Africans some sort of impending despotism, the likely outcome of these redistributionist policies will be food shortages at best and mass starvation at worst. Naturally, when people go hungry they get mad, so Mr Van den Brink is actually increasing the odds of political instability.

Joseph Stiglitz was right, the World Bank is full of relative dummies. It would be amusing if lives weren't in the balance. If Africa really wants to lift itself out of its vicious cycle of poverty and human suffering it might start by banning the likes of the World Bank.

More on how to manufacture starvation here.

The Market Works, But Not How Our Betters Would Like

Here is the type of story that just make my skin crawl. It tells of a vast difference between the types of food stores and food available for sale in two parts of New York City that are demographic polar opposites and sociological stand-ins for white/wealth and minority/poverty. To sum, the article refers to a report by the Health Department that poor, minority Harlem has more fast food stores than the Upper East Side, as well as fewer stores that sell fresh vegetables and other healthful foods than the UES. As if this is some conspiracy of the wealthy against the poor. This fact is the natural outcome of consumer preference, the demand for more healthful foods in poorer neighborhoods is low. If healthful foods were in high demand in Harlem, stores would respond by stocking them. If fast food were shunned as serving unfit food in poorer neighborhoods, such outlets would not proliferate there; just as fast food has limited appeal to the residents of the UES and healthful foods have great appeal. The headline here should be that the market works wonderfully, providing people exactly the type of food they want close to home.

Thursday, May 17, 2007

Venezuela Embarks On Well-Trod Path to Starvation

The WSJ has an excellent piece today on the front page that sheds some light on the agricultural collectivization that Hugo Chavez is inflicting on Venezuela. The article illustrates clearly the economic fundamentals of how collectivization results in failure - price controls induce supply shortages, inappropriate human capital is applied to the task, eroding property rights diminish the incentive to invest, etc.

History, not too distant history I might add, has stunning examples of the failure of farm collectivization and this article makes clear that Venezuela's experiment will be no different than Mao's or Stalin's. We can only hope for the sake of the Venezuelan people that the magnitude of the outcome will diverge from historical precedent. Having said that, let me repeat that I have little sympathy for the Venezuelan people, they have voted time and again for this fate, and are getting the government that they asked for. I'm afraid that the only way for them to get their country back will be through violent means. The only question is how much economic failure and loss of their liberty they will endure before they choose to adopt those means.

Wednesday, May 16, 2007

I'm Happy to Be Poorer, Just So Long As You Are Poorer Too

I still want to know what Robert Frank did in his career to merit the level of adulation and deference that he receives. My guess is that he is simply a reliable advocate for radical, collectivist economic policy with the gloss of an Ivy League professorship for cover. How else to explain that serious people listen to his theories.

Rudy Messes With Texas

Last time around I said that you would never know that Rudy was from New York F***kin' City. Well, that changed last night. People will point out that smacking down Ron Paul's absurdity, will burnish Rudy's national security bona fides, but I think the real value lies elsewhere. The chief virtue of the episode is not what Rudy said so much as that the whole thing was unscripted. It gave us a look at a real person, Rudy the un-politician. It allowed us to see him at his unphony best, which is, to my thinking, one of his chief virtues in this race where phonies abound on all sides of the aisle. Furthermore, to the extent that people around the country still see any virtue attributable to being a New Yorker, it must come from the perception that we are quick, savvy and tough. Rudy showed those virtues in spades.

I have always maintained that Rudy is what the Republican party needs - a conservative management philosophy without the moralizing tone that puts people off, essentially a more libertarian Republican without the kookiness of a real Libertarian. I think Rudy is hitting that sweet spot and will eventually confound the limited MSM worldview. They will be absolutely befuddled that a pro-choice Republican, or a Republican who is essentially indifferent to the abortion issue, can be successful. In their view, there ain't no such thing.

Tuesday, May 15, 2007

But We Always Knew This...

"LONDON (AFP) - French workers are the world's biggest whiners, according to a study published Monday which said the Irish complain least about their lot."

We need a study to tell us why most people would rather hang out with Irishmen?!?!

PBS Salutes Alexander Hamilton

I don't watch much TV at all because I think about 99.8% of it is crap, but once in a while I watch a show that does the medium tremendous credit. Last night on PBS I saw a documentary on my favorite founding father, Alexander Hamilton. It was excellent and worth your time.

Two points that the documentary brought out quite well:
1) "one of the greatest of history's ironies" was that Hamilton, the entrepreneurial, up-from-nothing immigrant, went down in history seen as an advocate of powerful, entrenched interests, while Jefferson, slave-owning, landed aristocrat, went down to posterity as a defender of the common man. The truth is the opposite.

2) Future grateful generations built monuments to the towering figures of the founding and early America. Our capital has major monuments to Washington and Jefferson but none for Hamilton. Historian Richard Payne ends the program with the observation that we live today in a monument to Hamilton. The America that we know today is more than anything Hamiltonian, and our experience is his monument.

Bite-sized wisdom from Hamilton on the 'real' path to tyranny here and supply-side economics here.

Monday, May 14, 2007

Is This The Begining of the End For the UAW

Chrysler goes to Cerberus. The UAW talked very tough, but there's only so much leverage you have when Daimler effectively had to pay somebody to take Chrysler off their hands. Now all the punditry can begin on how fast change will come and what it all means for American capitalism. My guess is that change will come quickly. No doubt Cerberus has studied the last decade of history in the auto biz and concluded that no easy-as-she-goes strategy is worth a pittance. Also, they are unlikely to tolerate any $ billion losses except for what is already in the pipe. I think the UAW will be given an offer they can't refuse right quick if they haven't been given it already.

Previous posts here and here.

Friday, May 11, 2007

A Visit to das Schlaraffenland

Let's check in on that German supply-side experiment that we highlighted back in March. Courtesy of Bloomberg, we get news that the tax revenue has been flooding in due to robust economic activity that was 'brought forward' from 2007 to 2006 via tax policy, just as supply-side theory predicted it would. Of course, very few in officialdom actually believe in supply-side theory, so they fail to see the little pothole that Germany has created for itself and are proclaiming Germany das Schlaraffenland. Thus begins the mad rush to spend it all based on the false rosy projections. The article points out that the Great Wurst Factory has proposed 50 billion new Euros of social spending, which, if passed, will throw the budget back into disarray when the German economy runs over the pothole in 2007. We'll stay tuned so you can pay attention, after all the US will go through the same thing roughly around 2011.

FT Dons the Euro Blinders for the World Bank

The chaps and chapettes over at a popular pink foreign newspaper have taken grave offense at the sullying of the World Bank's stature and lament that its mission is in peril of permanent impairment. In a classic exposition of the European mindset that values intentions versus the American mindset that values results, the editorialists at said pink newspaper make the courageous claim that Europeans don't like corruption either.

"Some of the Americans who want such a showdown see what is happening as a malevolent European plot to bring down their courageous warrior against corruption. But the notion that the US alone cares about corruption in development assistance is outrageous..."

As we know on this side of the pond, for them that suffices. For us, an historical track record of not doing anything about it cuts the claim to shreads. If you care, you demand results, intentions are not enough. Of course, we see this almost everywhere we turn from the stunning wimpishness with which the Euro-3 confronted Iran over its violations in seeking nuclear capability to the incessant lecturing we get from Europeans over global warming while they violate their Kyoto requirements. As usual Europeans care in the cocktail party sense, but have no desire to get their hands dirty. If they truly think Wolfowitz is such an execrable character based on his actions at the World Bank (and not actions in previous capacities) and they were as committed to anti-corruption as they say, they would put forward a replacement candidate that is committed to the Wolfowitz agenda but was free of whatever ethical taint they claim. Instead, as the WSJ pointed out the other day, a leading candidate appears to be Mark Malloch Brown, for whom there is a good case is either oblivious or indifferent to corruption. That's on a good day.

The thorny problem here for the Bush administration is a question of ends versus means. The World Bank is a failure and ought to be reformed or euthanized, but reform looks increasing impossible. However, the proper way to sunset the Bank is not to debilitate it through a crisis of confidence, but rather on the basis of the evidence of its failure and the affirmative merits of an alternative approach, perhaps on the model of Hernando de Soto's Institute for Liberty and Democracy. This is the way I would like to see the end of the World Bank, but the world doesn't always work that way; sometimes the right ends come about by the wrong means. I think here of that British civil servant who abdicated professional responsibility because he wanted John Kerry to be President of some other people's country.

UPDATE: George Will, as well, says pull the plug. On the Bank that is, not Wolfowitz.

I Can't Title This Wittily, I Can Only Hang My Head In Disbelief

I don't care how elegant of a writer you are, how adept and deft one is with the rich, expressive English language, there is nothing, nothing, nothing, no words, no possible articulation, no adequate way to capture the insanity, derangement, extreme folly and world-beating senselessness of the United Nations's latest example of standard operating procedure.

Final and definitive proof that the United Nations is the worst institutional body ever conceived and erected by humankind. This is making John "League of Democracies" McCain look great.

Thursday, May 10, 2007

Wanna See the World, Join the Navy; Wanna Know Poverty, Join a Hedge Fund!

Heavens to Mergatroid I can't believe I missed this...John Edwards, who we have documented here lives in a cocoon, has gotten a job with a hedge fund (read: been given a do-nothing job by the Democrat Sugar Daddies at Fortress) to learn about POVERTY. I kid you not.

As a reader of WSJ's BotW points out, you join the hedge fund industry to avoid poverty. For my part I learned exactly what the Last of the Red Hot Mamas taught us decades ago, that "... rich is better."

Maybe Edwards will absorb some economics and maybe do some traveling and learn something about poverty after all, specifically that we don't really have it here in the US.

New Zoo Opens in Boston

I thought Fenway was the place to go to see a genuine Massachusetts rube (known down here in Yankee territory as a Massh**e) in his natural habitat, but it appears that you can witness the same specimen at the Symphony Hall as well.

Pelosi: We Don't Need No Stinkin' Allies

Didn't somebody say something about being more respected around the world? I guess that means poking a stick in the eye of our #1 ally in South America. Don Luskin has the skinny.

More here.

Wednesday, May 09, 2007

Salmon As Pork

How could Prof. Reynolds possibly mention this without showing a picture or engage in a little mockery of the Salmon-Thirty-Salmon?

I commented back in April...of '06.

A Political Axiom To Bet On

Let's cut through the media and punditry rubbish and analyze the Presidential candidates through the prism of a very-close-to-rock-solid, non-partisan political axiom. Americans do not elect sitting Senators to the White House. Americans know that the Senate is a repository of megalomaniac mediocrities, worthless scions of great wealth or power, highly polished crooks, but mostly well-meaning mediocrities with limited worldviews. Not to say that every President we have elected is not those things, but we have the good sense to lower our chances of being stuck with one by avoiding recruiting straight from the Senate. However...

In modern times there is one exception to this axiom, John F. Kennedy. And it wasn't just an exception, it was a big exception. It proved that Americans were capable of going on a wingding, wot with Kennedy being a stinkin' Irish Catholic and all. Or did it? The election was veeeerrrryyy cloooooose and nearly 22% of the US population was Catholic in 1960. Nonetheless, it is this exception that keeps the likes of McCain, Edwards, Hillary and Barack Obama hopeful.

So, let's take the guy with the least chance of being the next exception (although with the most media attention) first, Barack Obama. He's a lightweight, that's fairly clear. And he's black, which makes him one of a group that constitutes 13% of the US population. So Americans would have to ditch their heretofore reluctance, inability, or whatever to elect a black candidate to a much greater degree than they got over their Catholic heebie-jeebies in 1960 to squeak Kennedy into office...for a guy who only just became a Senator and will have spent over half of his senatorial years campaigning rather than attending to his duties in Congress. Possible? Yes. Likely? No. Obama's least audacious hope is to get on the ticket as VP and play for 2012 and beyond.

Next, Hillary. Obviously she trumps Kennedy in that women are a much greater percentage of the population, but the dynamics of the gender question are not the same as the religious ones that Kennedy had to surmount. It is beyond my pay grade to sort out this psycho-socialogical question. That said, with a major character question - that she is a ruthless, lying, political automaton - hanging over her head, she doesn't have alot to help her overcome the Senate handicap. Her tenure as a denizen of the White House, although not as an elected official, may be enough for some, but here again the role of First Lady has never been seen as one that can impart the skills required of public office and would require a big shift in the mindset of the electorate.

Now on to John McCain. Regardless of his policy views or voting record, John McCain has already run for President as a sitting Senator and lost to a non-senatorial candidate (the then Governor of Texas who was, at the time, considered a weak candidate). McCain is facing two non-senate candidates this time around and there is nothing to indicate that the electorate has changed its view about him or the electability of Senators. McCain would have been smarter to go back to Arizona and run for Governor, as the presidentially ambitious Jon Corzine did.

Finally, John Edwards is not actually a sitting Senator as Harry Reid helpfully pointed out just last week. Could this help him as he has shed the burden of the Senate? I dunno. Still his only political experience has been as a Senator. History shows us that Americans generally want their Presidents to have done something besides just be a Senator, like run a state or be Vice President. Ditto for Fred Thompson, his blogosphere boomlet notwithstanding.

That leaves Bill Richardson, Rudy Giuliani and Mitt Romney as the only candidates who do not have a severe handicap keeping them from the Oval Office. The smart money would go with one of those three.

West Virginia Succeeds In Keeping Encoaching Economic Activity At Bay

Markets make judgments on local policy and governance all the time and often delight us with amusingly stark evidence of their judgments. Thus the curious disparity where it costs far more to hire a moving van to leave, say, Michigan, than it does to hire a van to move to Michigan. There is also the curious emergence of places like Singapore and Hong Kong when all around them has historically been economically barren. Today's delightful juxtaposition comes from Division of Labor. I give you the Kentucky/West Virginia border.

(HT: Andy Roth)

Tuesday, May 08, 2007

Attention Beer-Loving Canadians (is that redundant?)

If any of you dear readers reside north of the border, could I ask a favor? Check out this new beer and let me know what you think by posting a comment. I am not sure that it is widely available yet but you should start seeing it more as the summer approaches. Thanks.


Profiting From the Migration

Michael Barone does an excellent job in today's WSJ of laying out the tectonic shifts in the US population that will affect our political landscape years hence. This is George Will's famous observation that the epicenter of the country is moving south and west at a given rate. Given Barone's analysis you could update this to say that the epicenter of the country is moving inland over time.

I've noted this several times. What's the big deal? Firstly, it is important and interesting. Secondly, it spells opportunity. Land, obviously, in the right cities will become more valuable as this phenomenon plays out. Don't forget banks too. If Joe Jerseyan takes that job in Denver, packs up the family and skeedaddles, his bank deposits are coming with him. He'll likely need a mortgage when he gets there too. Small, customer-focused banks in these growth areas will pick up business (big banks may too, but small banks are a purer play on local growth). And with the yield curve flat these days, bank stocks are at cyclical lows. In each of the growth areas that Barone cites there is likely to be one or two dynamic, well-managed banks. Happy hunting.

Max Baucus Bribes the Investment Industry

The Great Sausage Factory, under the management of the Democrats, is contemplating revising the tax treatment of how a huge swath of the investment world gets compensated. The WSJ has the background here. The tax hit that private equity firms, hedge funds and other investment vehicles that earn a "carried interest" would take would be enormous. It is hard to understand why the Democrats would contemplate such a move given that private equity and hedge fund money went solidly for them prior to last November and helped put them over the top. Why they would then turn around and poke this industry in the eye with a stick is a headscratcher. I guess the Dems feel that they might lose this support for the all-important 2008 cycle unless they do a little arm twisting. Thus the kabuki dance that Sausage Factory Division Supervisor Max Baucus is conducting over the issue. This Bloomberg article refrains from saying baldly that the bribe is underway, but the upshot is pretty clear, Baucus's crusade could easily come to naught if the campaign contributions continue to flow healthily into Democrats' coffers.

Friday, May 04, 2007

Tell Me Again Why Latin America Is Poor?

Brazil just stole billions of dollars of US property. When will they ever learn down there in Sud America? This is why you are poor, amigos.

More UAW Boneheadedness

The Big Three are spiraling the drain and the UAW doesn't seem to get it or care. That's Doron Levin's view. I think he's right. Rule #1 of being a parasite - don't kill off your host.

News from Canada!

It seems that prior to 9/11/01 we Americans did not have a monopoly on terror prevention cluelessness. Our friends to the north have their own bungling scandal.

And, as if almost jealous that they don't have an Imus-type scandal of their own, Team Canada captain Shane Doan is coming under media fire for some type of slur against a French-Canadien referee.

Mitt, Rudy, the War Hero and the Seven Dwarfs

Mitt = Stud
Rudy = C'mon, you wouldn't know that you are from NY f**kin' City! Tighten it up Brother!
McCain = "Gates of Hell"? Wow!

Gilmore - Snoozy
Huckabee - Goofy
Paul - Cranky
Trancredo - Whiny
Brownback - Dorky
Thompson - Tilty
Duncan - Huffy

UNITY Owner?

Employees over at the WSJ have a ridiculous conundrum. They want to cash in on their stock and stock options, so they are afraid that the Bancroft family will scupper a deal and scare away all potential suitors and the stock will retreat back into the toilet. But they don't want Murdoch to own the WSJ, because, well, because he's Murdoch (and contrary to popular belief, most people who work at the WSJ are probably indistinguishable from most people who work at the NY Times). But on the other hand Murdoch is at least a journalist kinda owner. They'd rather have him than a private equity owner. Nobody wants a private equity owner. So what are they pining for as they gnash their teeth over two unpleasant options? What else, Michael Bloomberg. $70 per share from Bloomberg would be pure nirvana down at DJ HQ.

Republican Debate

Did anybody get the sense that MSNBC's production made watching the debate not much different than watching Jeopardy? I was waiting for one of the candidates to say "Chris, I'll take Iraq for $400."

Also, the Rs will debate on the Matthews/Olberman channel but the Ds won't debate on Fox? What pussies.

Wednesday, May 02, 2007

Edwards Chasing a Chimera

John Edwards has released his plan to end poverty. Don Surber (via Instapundit) thinks Edwards's plan rehashes stuff that has already been tried. I would agree with that, but the real problem with Edwards plan is that we have already ended poverty in the US. Real poverty that is, just not relative poverty. We don't have poverty in the US, we have income inequality. Whether we ought to use government to abate income inequality is another debate and good people can disagree, but that doesn't change the fact that Edwards is chasing a phantom, he's reading from a playbook that was valid in the 1930s but isn't any longer. It is like vowing to end commercial whaling.

I think he thinks this way because he lives in a cocoon. Notice that the other Democratic Party candidates, while they have similar idealogical bents and overlap on alot of policy views, are avoiding this core message. They are not flogging poverty as some big issue. Hillary, for instance, understands that while the nation may bristle at CEO pay or oil company profits (unjustifiably in my opinion) it does not follow that poverty exists. Her populism is not rooted in a structural indictment of America, made clear by the existence of poverty, but rather in a preference for rejiggering how our system allocates resources.

Duke Applications Down

I called it. The application numbers are the first indication. The acceptance numbers will be more telling.

Tuesday, May 01, 2007

Surely Kevin Hassett Can't Be Serious...

He's deadly serious. And stop calling him Shirley.

It is dictated in our by-laws here at NBfPB that we must link to any economist authored piece or any piece relevant to our main subject matter of economics/capital markets that references the movie "Airplane". Thus we bring you Kevin Hassett.